Notices to Krishna Jewellers stay: Telangana HC

The division bench of the Telangana High Court comprising Justice P. Sam Koshy and Justice N. Tukaramji made it clear that writ court cannot exercise its discretionary jurisdiction in entertaining writ petitions questioning a show cause notices issued by statutory bodies like departments of Customs, Central Excise, Indirect Taxes and such regulatory bodies. The court also said that the writ court may interfere unless the show cause notice being without jurisdiction or in excess of jurisdiction or violation of principles of Natural Justice.

The bench was dealing with two petitions filed by Sri Krishna Exim LLP and its group companies challenging the show cause notices issued to them under Section 28(4) of the Customs Act by the Directorate of Revenue Intelligence, after receiving certain information in respect of the misappropriation of duty free gold.

The DRI had conducted searches on the premises of the Sri Krishna group of companies and other entities along with the directors/partners, and it was revealed to the DRI officials that huge quantity of gold bullion imported by the Firms was being fraudulently diverted into the local market for delivery at the shops in Hyderabad and where the petitioners were required to export gold bullion jewelries prepared by them from the imported gold bullion. They were found to be sending fake gold jewellery showing it to be the export of the gold jewellery manufactured from the gold bullions imported by them. Similarly, it was also in the course of enquiry found that these gold bullions were being diverted into the local market by being given to different dealers operating in Hyderabad. Based upon all these fraudulent deeds on the part of the Sri Krishna Exim, DRI issued show cause notices dated 31.10.2022 and 29.11.2022 and which are under challenge in the two writ petitions, by the firm.

Atul Ch., senior counsel for the petitioner, argued that show cause notices are not sustainable for the reason that the same is barred by limitation and if the show cause notices have been issued under Section 28(4) of the Act, the period of limitation prescribed under the said provision is five years from the relevant date.

Dominic Fernandes, senior standing counsel for Central Board for Indirect Taxes and DRI argued that the nature of allegations levelled against petitioners is quite serious in nature. According to the senior standing counsel for CBIC, nothing prevents the petitioners from appearing before the authorities and submitting their detailed reply and based upon their replies, the authorities should be left to take an appropriate call.

Fernandes also said that on perusal of the explanation and reply of the Sri Krishna Jewellers, the authorities after due deliberation on the same would take a decision to either drop the proceedings or to further proceed with the show cause notices and to take to its logical conclusion.

The bench considered the contentions of Fernandes and made it clear that it is not justifiable to intervene in the show cause notices.