The Supreme Court today (November 7) held that officials of the Directorate of Revenue Intelligence (DRI) are empowered to exercise powers under the Customs Act, 1962 to issue show cause notices and recover duties.

The Court held that DRI officials are “proper officers” to issue show cause notices under section 28 of the Customs Act, 1962.

“Without prejudice to the observations made in the judgment, the officials of the Directorate of Fiscal Intelligence, the Customs Prevention Commissions, the General Directorate of Central Intelligence of Excise and the Central Tax Commissions and other officials in a similar situation are “officials competent” for the purposes of Article 28 of the Customs Law and are competent to issue show cause notices”, the Court held.

A bank composed of Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra allowed the review petition filed by the Customs Department against the Supreme Court Judgment of 2021 in Canon India Private Ltd. v. Commissioner of Customs, which had held that the officials of the Directorate of Revenue Intelligence have no powers under the Customs Act, 1962.

Judge Pardiwala, who delivered the sentence, read the following conclusions.

1. DRI officials were appointed as Customs officials vide notification No. 19/90 dated April 26, 1990 issued by the Revenue Department, Ministry of Finance. This notification was later superseded by notification no.17/2002 dated 03.07.2002 issued by the Revenue Department.

2. The petition seeking review of Canon India is allowed for the following reasons. Circular No. 4/99 dated February 15, 1999 issued by the Central Board of Excise and Customs empowering DRI officials to issue show cause notices under section 28 of the Act as well as Notification No. 44/2011 dated July 6, 2011 that assigned the functions of “own officials” for the purposes of Articles 17 and 28 to The DRI officials were not brought to the attention of this Court during the procedure in Canon India. In other words, tthe trial in canon india It was issued without consulting the circular and notification, seriously affecting its veracity. The decision in Canon India did not analyze the legal scheme.

How to decide pending challenges to show cause notices?

The Court stated that any challenges made to the maintainability of the said show cause notices issued by the above-mentioned particular class of officers on the ground that they are not proper officers, which remain pending before various forums, will now be addressed in the following manner.

to. Where the show cause notice has been challenged before the High Courts directly through writ petitions, the respective HCs will dispose of the WPs in accordance with the observations in this judgment and restore such notices for adjudication.

b. When the appeals in question have been resolved by the respective Superior Courts and appeals are pending before this Court, they will be resolved in accordance with this decision.

do. When the original orders passed by the authority are challenged before the HC on grounds of jurisdiction, the HCs will give a period of 8 weeks to the respective assessee to file an appeal before the concerned authority, CETSTAT.

d. Where the writ petitions have been disposed of by the HCs and the appeals are pending in this Court, they shall be disposed of in accordance with this decision and this Court shall give a period of 8 weeks to the respective assessee to prefer appropriate appeals before the CETSTAT.

my. When CETSTAT orders are challenged before HCs on jurisdictional grounds, they will be decided based on this decision.

Background

A three-judge court composed of then CJI SA Bobde and Justices AS Bopanna and V Ramasubramanian in canon india had held that in the absence of being entrusted with functions by the Central Government under Section 6 of the Customs Act, 1962, an officer of the Directorate of Revenue Intelligence (DRI) will not be competent to exercise functions under the Act. . Further, the court had held that show cause notice under Section 28 of the Act can be issued only by “the concerned officer”, i.e. the officer who had carried out the assessment in the first place and not by any other officer. that has concurrent jurisdiction.

The bank that includes CJI DY Chandrachud Justices JB Pardiwala and Manoj Misra listened in detail to the arguments contained in the review petition. The Customs Commissioner was represented by Additional Solicitor General (ASG) N Venkataraman. Senior Advocates Arshad Hidayatullah, Arvind Datar, S. Nandakumar, Nachiketa Joshi, Purvish Malkan presented arguments for various parties.

The defendants were represented by Advocate V. Lakshmikumaran, Senior Advocates Vikram Choudhary,. RK Sanghi.

The ASG argued that DRI officials can exercise the powers of Customs officials and from 1977 onwards have been part of the Ministry of Finance and the officials form a class of officials under the law. He maintained that the sentence suffered from at least six apparent errors recorded in the file.

Defendants argued that no case is presented for review and that a different opinion is not an “apparent error” that would justify the exercise of review jurisdiction.

Following the Supreme Court’s ruling in Canon India, many high courts in India quashed proceedings initiated by DRI officials as invalid on the basis of show-cause notices issued under section 28 of the Act. As a result, many appeals against the orders passed on the basis of the India Canon are pending in the Supreme Court.

In a related matter, the Union of India had filed a special leave petition before the Supreme Court against the order of the Punjab and Haryana High Court in M/S Godrej and Boyce Manufacturing Co. Ltd. versus Union of India (2021)where the High Court, following the judgment of the Supreme Court in Canon India, held the proceedings initiated by the Additional Director General of the Directorate of Tax Intelligence under Section 28 of the Act to be invalid.

In that case, the Attorney General had held that the Additional Director General (ADG), DRI, is an officer of the Customs Department and, therefore, the provisions of Section 6 of the Act requiring entrustment of functions by the Central Government are not relevant as the ADG has been authorized by the Central Board of Indirect Taxes and Customs (CBIT&C) under section 2(34) of the Act itself. It had held that as per the provisions of section 28(11), the ADG, DRI, will be treated as a “proper officer” irrespective of the requirement of section 2(34) of the Act. Further, it was submitted that Section 28(11) was not being considered in Canon India.

Details of the case: COMMISSIONER OF CUSTOMS vs. M/S CANON INDIA PRIVATE LIMITED| RP(C) No. 000400 – / 2021