Two Customs Show Cause Notices From Same DRI Investigation Retain Separate Legal Identity: Delhi High Court

The Delhi High Court has held that two show cause notices issued pursuant to the same investigation by the Directorate of Revenue Intelligence (DRI) retain their separate legal identity and can be adjudicated independently, even where they have been assigned to the same adjudicating authority and taken up together for hearing.

The division bench of Justices Anil Kshetarpal and Shail Jain observed that the mere fact that two SCNs emanate from the same investigation, or that they are entrusted to a common adjudicating authority and heard together for administrative convenience, does not convert them into a single composite proceeding.

“Merely because both SCNs originate from the same investigation, or because they were entrusted to a common Adjudicating Authority and heard together for administrative convenience, they do not lose their separate legal identity. No provision of the Act has been brought to our notice which mandates that such notices must necessarily culminate in one composite order or that adjudication of one cannot proceed independently of the other,” it observed.

The court was dealing with two writ petitions arising out of a common DRI investigation concerning allegations of misdeclaration and undervaluation of imported goods.

The first SCN, issued in 2017, concerned goods seized during the investigation and proposed their confiscation along with consequential penalties.

The second SCN, issued in 2020, related to Petitioners' earlier imports and proposed recovery of customs duty, interest and penalty under Section 28 of the Customs Act, 1962.

Petitioners contended that both SCNs were being adjudicated together by the same authority and, therefore, once the High Court stayed further proceedings pursuant to the second SCN, the adjudicating authority could not have proceeded with the first SCN.

The Court rejected this contention and noted that while both SCNs originated from the same investigation and were assigned to the same adjudicating authority, they related to different subject matters and had independent statutory foundations.

“It is not in dispute that the two SCNs were issued on different dates. They relate to different subject matters…Each SCN, therefore, has an independent statutory foundation and gives rise to a separate adjudicatory proceeding,” the Court held.

It added, “In the absence of any express restraint operating against the adjudication of the First SCN, the mere pendency” of the writ petition challenging the second SCN could not, by itself, prohibit the adjudicating authority from proceeding with the first SCN.

The Court also rejected the argument that the Customs authorities were precluded from subsequently segregating the proceedings merely because they had earlier conducted a common hearing.

“Administrative convenience in conducting a common hearing cannot override the statutory character of two independent proceedings. The appointment of a common Adjudicating Authority or issuance of common notices of hearing cannot create a legal bar against separate adjudication if otherwise permissible under the statute,” it said.

The court, however, directed that before passing any final order pursuant to the second SCN, the adjudicating authority must afford the petitioners an effective opportunity of hearing.

For Petitioners: Advocate Prem Ranjan Kumar

For Respondents: Senior Standing Counsel Anurag Ojha, with Advocates Dipak Raj, Aryaman Singh Chouhan and Aditya Chaudhary, for Respondent No. 1; Standing Panel Counsel Amit Gupta, with Advocate Vidur Dwivedi, for the Union of India; Senior Standing Counsel Gibran Naushad, with Advocates Suraj Shekhar Singh and Hasan Haider, for Respondents Nos. 2 to 4.