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Informist, Thursday, Nov. 7, 2024

 

--SC: DRIs "proper officers" under Customs Act, can issue showcause notice 

 

NEW DELHI – The Supreme Court on Thursday held that officers of the Directorate of Revenue Intelligence are "proper officers" under the Customs Act, 1962, and have the authority to issue show-cause notice to seek recovery of duties on goods already cleared for import by customs. The top court allowed a review petition filed by the customs department against its 2021 verdict, which had ruled that officers of the Directorate of Revenue Intelligence did not have the power under Section 28 of the Customs Act.

 

A Bench, led by Chief Justice of India D.Y. Chandrachud, said the circulars issued by the Central Board of Excise and Customs which empowered officers of the directorate to issue show-cause notices under Section 28 of the Act as well as a 2011 notification that assigned the functions of "proper officers" for the purposes of Sections 17 and 28 of the Act to them were not brought to the notice in 2021. "In other words, the judgement in Canon India(2021 judgement) was rendered without looking into the circular and notification, therefore seriously affecting the correctness of the same. The decision in Canon India failed to look into the statutory scheme," said the Bench, also comprising Justices J.B. Pardiwala and Manoj Misra. 

 

The apex court said that petitions challenging the Directorate of Revenue Intelligence-initiated show-cause notices in the high court will be resolved in line with the current judgement, and the notices will be restored for adjudication. The Bench said that the appeals pending before the Supreme Court will follow the new judgement, with the petitioners being given eight weeks to submit appeals to the Central Excise and Service Tax Appellate Tribunal. Cases questioning the authority of the directorate's officers based on jurisdiction will be reviewed under the Supreme Court's latest directions, with relevant extensions provided for appealing parties, the court said. This means show-cause notices with an estimated value of almost INR 230 billion will be decided afresh now, after the top court's verdict.

 

The court said that it has only dealt with the jurisdiction of Directorate of Revenue Intelligence officers to issue show-cause notices and not looked into the limitations aspect dealt by its 2021 verdict. The Bench also upheld the constitutional validity of section 97 of the Finance Act, 2022. Section 97 allows for the completion of pending proceedings after the commencement date of the Act. It also validated all proceedings taken by Customs officers before the Act came into effect. "Findings regarding vires of Finance Act, 2022 is limited to the review of Canon India," said the court.

 

The top court was hearing a review petition by the customs department against its verdict in 2021, wherein it held that the Directorate of Revenue Intelligence couldn't issue show-cause notice for recovery of duties which were not levied or paid under the Customs Act. The top court had then quashed the show-cause notices by the directorate to Canon India Pvt Ltd and other parties, seeking payment of duty and consequential confiscation of goods, demand of interest and penalty under the Customs Act.

 

In 2012, a consignment of cameras came to Delhi and the importer submitted a bill of entry. The customs department cleared the cameras after verifying the documents under a notification which provided duty exemptions. However, in 2014, the Directorate of Revenue officers issued a show-cause notice to Canon under Section 28 (4) of the Customs Act. The directorate said the clearance was secured btained through wilful misstatement and suppression of facts.

 

In its 2021 judgement, the top court ruled in favour of Canon and said only the original customs officers could review the assessment. The top court said that Directorate of Revenue Intelligence officers could not perform any functions in the Customs Act that were entrusted to a proper officer.

 

Thereafter, in 2022, the government diluted the top court's 2021 judgement by bringing certain amendments to the Customs Act. The new amendments updated the definition of "proper officers" to include Directorate of Revenue Intelligence officers. Even these amendments were an issue before the apex court.

 

Appearing for the customs department, Additional Solicitor General N. Venkataraman said that the case had significant implications for the revenue department. "We need to resolve the fate of 18 years worth of show-cause notices. The stakes are difficult to quantify, with the estimated value between INR 200 billion and INR 230 billion, although we lack complete visibility," he said. From 1977, the customs and the Directorate of Revenue Intelligence were part of the Ministry of Finance, "and their officers form a class of officers under the law", Venkataraman said.  End

 

Reported by Surya Tripathi

Edited by Avishek Dutta

 

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