Separate SCNs Retain Independent Legal Identity Despite Common DRI Investigation: Delhi High Court Rules in A V International Case

Background and Overview

The Delhi High Court recently delivered a significant ruling in A V International & Anr. Vs Additional Director General Directorate of Revenue Intelligence & Ors., disposing of two interconnected writ petitions — W.P.(C.) No.5024/2024 and W.P.(C.) No.16149/2023 — both stemming from a common investigation conducted by the Directorate of Revenue Intelligence (DRI) into the import activities of the assessee entities.

The assessees were engaged in importing signage materials, primarily from China and Taiwan. The DRI launched an investigation in 2016 alleging mis-declaration and undervaluation of imported goods. This singular investigation eventually gave rise to two distinct Show Cause Notices (SCNs), and the legal fate of these two notices — particularly whether they could be adjudicated independently of one another — became the central question before the Court.

The judgment carries important implications for customs adjudication practice, particularly on questions of:

  • Whether separate SCNs issuing from the same investigation form one inseparable proceeding
  • The scope and effect of interim orders staying proceedings under one SCN
  • The interplay between Section 28, Section 28(9), and Section 28(9A) of the Customs Act, 1962
  • The Call Book mechanism and extension of adjudication timelines
  • The appropriate forum for raising natural justice grievances against adjudication orders

Genesis of the Dispute

The Two Show Cause Notices

Following the 2016 DRI investigation, two separate SCNs were issued:

  1. First SCN No.11/2017 dated 27.03.2017 — Relating to goods seized during the investigation, proposing confiscation of such goods along with consequential penalties.

  2. Second SCN No.16/2020 dated 11.05.2020 — Relating to the assessees' earlier imports, proposing recovery of customs duty, interest, and penalty under Section 28 of the Customs Act, 1962.

On 13.10.2020, the Principal Commissioner of Customs (Import), ICD, Tughlakabad, was appointed as the common Adjudicating Authority for both SCNs. Common personal hearing notices were issued and proceedings in both matters were conducted simultaneously.

The Call Book Episode

Following the Supreme Court's decision in Canon India Pvt. Ltd. v. Commissioner of Customs — 2021 (376) ELT 3 (SC), the Central Board of Indirect Taxes and Customs (CBIC) issued an Instruction dated 17.03.2021 directing transfer of certain matters to the Call Book. Consequently, adjudication proceedings in both SCNs remained suspended for a period before being revived.

The assessees contended that even after revival, the adjudication timeline had lapsed. The Revenue, on the other hand, maintained that upon withdrawal of the matters from the Call Book following amendments introduced by the Finance Act, 2022, a fresh adjudication period became available under Section 28(9A) of the Customs Act, 1962, and that the competent authority had validly extended the adjudication period on 06.03.2023.

The Interim Order and Subsequent Adjudication

Since no final order had been passed in respect of the Second SCN, the assessees filed W.P.(C.) No.16149/2023 before the Delhi High Court. By order dated 14.12.2023, the Court issued notice and stayed further proceedings pursuant to the Second SCN.

Notwithstanding this interim stay, the Adjudicating Authority proceeded to pass an Order-in-Original dated 01.02.2024 in respect of the First SCN. The assessees took strong exception to this, contending that since both SCNs originated from the same investigation and were being heard together, the interim stay on one should have effectively frozen both proceedings. This led to the filing of W.P.(C.) No.5024/2024 challenging the Order-in-Original dated 01.02.2024.

Contentions Raised by the Parties

Submissions on Behalf of the Assessees

The assessees advanced the following principal arguments:

  • Common origin, common authority: Both SCNs arose from the same DRI investigation, involved substantially overlapping allegations, were assigned to the same Adjudicating Authority, and were heard together. It was therefore impermissible for the Revenue to adjudicate the First SCN while the Second SCN proceedings were under judicial stay.

  • Estoppel by conduct: The Revenue itself had treated the two proceedings as a composite adjudication by appointing a common authority and issuing common hearing notices. Having adopted that position, it could not unilaterally segregate the matters when it suited them.

  • Natural justice violations: Relied-upon documents were withheld despite repeated requests. Additionally, the proprietor of the first assessee was suffering from a serious medical condition, and the COVID-19 pandemic necessitated adjournments — circumstances allegedly not given due weight by the Adjudicating Authority.