DRI Officers Can Issue Show-Cause Notices Under Customs Act : Supreme Court Allows Review Against 'Canon India' Judgment

The Supreme Court today (November 7) held that the officers of the Directorate of Revenue Intelligence(DRI) have the power to exercise powers under the Customs Act, 1962 to issue show-cause notices and recover duties

The Court held that DRI officers are "proper officers" to issue show cause notices under Section 28 of the Customs Act, 1962.

"Subject to the observations made in the judgment, the officers of the Directorate of Revenue Intelligence, Commissionates of Customs-Preventive, Directorate General of Central Excise Intelligence, and Commissionates of Central Excise and other similarly situated officers are "proper officers" for the purposes of Section 28 of the Customs Act and are competent to issue show-cause notices," the Court held.

A bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra allowed the review petition filed by the Customs Department against the 2021 Supreme Court Judgment in Canon India Private Ltd. versus Commissioner of Customs, which had held that officers of the Directorate of Revenue Intelligence do not have powers under the Customs Act ,1962.

Justice Pardiwala, who pronounced the judgment, read out the following conclusions.

1.DRI officers came to be appointed as officers of Customs vide notification no.19/90 dated 26.04.1990 issued by the Department of Revenue, Ministry of Finance. This notification came to be later superseded vide notification no.17/2002 dated 07.03.2002 issued by the Dept of Revenue.

2. The petition seeking review of Canon India are allowed for the following reasons.  Circular No.4/99 dated 15.02.1999 issued by the Central Board of Excise and Customs which empowered officers of DRI to issue show-cause notices under S.28 of the Act as well as Notification no.44/2011 dated 06.07.2011 which assigned the functions of "proper officers" for the purposes of Sections 17 and 28 to the officers of the DRI were not brought to the notice of this Court during the proceedings in Canon India. In other words, the judgment in Canon India 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.

How to decide pending challenges to show-cause notices?

The Court stated that any challenge made to the maintainability of such 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, shall now be dealt with in the following manner.

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

b. Where the writ petitions have been disposed of by the respective High Courts and appeals are pending before this Court, they shall be disposed of in accordance with this decision.

c. Where the orders in original passed by the authority are challenged before HC on the ground of jurisdiction, the HCs shall give 8 weeks time to the respective assessee to prefer an appeal before the concerned authority, CETSTAT.

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

e. Where CETSTAT orders are challenged before HCs on the ground of jurisdiction, they shall be decided as per this decision.

Background

 A three-judge bench comprising the then CJI SA Bobde and Justices AS Bopanna and V Ramasubramanian in Canon India had held that in the absence of entrustment of functions by the Central Government under section 6 of the Customs Act, 1962, an officer of the Directorate of Revenue Intelligence (DRI) will not have the jurisdiction to exercise functions under the Act. Also, the court had held that show cause notice under section 28 of the Act can only be issued by 'the proper officer', i.e., the officer who had done the assessment in the first place and not by any other officer having concurrent jurisdiction.

The bench comprising CJI DY Chandrachud Justices JB Pardiwala and Manoj Misra heard the arguments in the review petition at length. The Commissioner of Customs was represented by Additional Solicitor General (ASG) N Venkataraman. Senior advocates Arshad Hidayatullah, Arvind Datar, S. Nandakumar, Nachiketa Joshi, Purvish Malkan made arguments for various parties.

The Respondents were represented by Advocate V. Lakshmikumaran, Senior Advocates Vikram Choudhary, . R.K. Sanghi.

The ASG argued that DRI officers can exercise the powers of Customs officers and since 1977 onwards, they have been part of the Ministry of Finance and the officers form a class of officers under the law. He argued that the judgment suffered from at least six apparent errors on record.

The Respondents argued that no case for review is made out and that a different view is not an "apparent error" which would warrant the exercise of review jurisdiction.

Following the ruling of the Supreme Court in Canon India, many High Courts and Tribunals in India had quashed proceedings undertaken by the officers of DRI 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 Canon India are pending in the Supreme Court.

In a connected matter, the Union of India had filed a Special Leave Petition before the Supreme Court against the order of 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 Supreme Court in Canon India held the proceedings initiated by the Additional Director General, Directorate of Revenue Intelligence as invalid under Section 28 of the Act.

In that case, the Attorney General had submitted 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 is not relevant, since the ADG has been authorized by the Central Board of Indirect Taxes and Customs (CBIT&C) under section 2 (34) of the Act itself. He had contended that under 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. Also, it was submitted that Section 28(11) was not under consideration in Canon India.

Case Details : COMMISSIONER OF CUSTOMS vs. M/S CANON INDIA PRIVATE LIMITED| R.P.(C) No. 000400 - / 2021

Citation : 2024 LiveLaw (SC) 867

Click Here To Read/Download Judgment