Karnataka HC Allows Toyota Kirloskar to Reply to Customs SCN, Keeping Jurisdictional Claims Open: WP 9562 of 2021

The High Court of Karnataka, led by Hon'ble Mr. Justice S.R. Krishna Kumar, has issued a significant order in the ongoing legal dispute between Toyota Kirloskar Motors Pvt. Ltd. and the Union of India regarding a 2020 show-cause notice (SCN) issued by the Directorate of Revenue Intelligence (DRI).

While the court stopped short of quashing the proceedings outright, it provided a clear procedural roadmap for the automotive giant to engage with the customs authorities while preserving its right to challenge the underlying legal basis of the notice, including jurisdictional and limitation arguments.

The Conflict: A Challenge to Authority

The matter arose from a show-cause notice issued by the Principal Additional Director General of the DRI on May 28, 2020. Toyota Kirloskar Motors, challenging the jurisdictional validity of this notice in a writ petition filed under Article 226, sought an order to quash the proceedings entirely. The automotive manufacturer argued that the initiation of these proceedings by the DRI exceeded their legal remit.

The Court’s Balanced Approach

In a move that prioritizes the principles of natural justice, the court did not reach a final verdict on the legality of the notice at this stage. Instead, the court adopted a balanced approach, steering the dispute toward the formal adjudicatory machinery while ensuring the petitioner remains protected from procedural prejudice.

Justice S.R. Krishna Kumar granted Toyota Kirloskar four months to submit a comprehensive reply to the SCN, along with supporting documentation. Crucially, the court directed the Customs authorities (Respondent Nos. 3 and 4) to consider these submissions and grant a "sufficient and reasonable opportunity of personal hearing" before reaching any final conclusion.

Key Observations

The judgment explicitly ensures that the parties can continue their legal battle on the merits without having their rights truncated by the current order. The court stated:

• "The petition disposed of without expressing any opinion on the merits/demerits of the rival contentions."
• "All rival contentions on all aspects of the matter including the question of limitation, jurisdiction etc. are kept open and no opinion is expressed on the same."
• "Respondent Nos. 3 and 4 shall consider the said reply and documents produced by the petitioner and provide sufficient and reasonable opportunity of personal hearing to the petitioner and proceed further in accordance with law."

What This Means for Future Adjudications

By declining to quash the notice but ordering a fair hearing, the court has emphasized that the adjudication process must remain open-minded. By explicitly keeping the questions of jurisdiction and limitation “open,” the High Court has signaled that the petitioner is not precluded from raising these fundamental challenges during the departmental proceedings.

If the DRI or Customs authorities eventually rule against the petitioner, Toyota Kirloskar now has a protected record of having raised these critical jurisdictional objections, which will be vital should the matter return to the High Court in the future. For now, the engine of the DRI proceedings continues to run, but with the necessary brake of judicial oversight to ensure administrative fairness.