The Supreme Court has allowed the customs department review petition and pointed out errors in Cannon India Judgement.
The bench of Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra observed that DRI officers are “proper officers” to issue show cause notices under Section 28 of the Customs Act, 1962.
Table of Contents
Know Top 5 Errors In Canon India Judgement
1. Decision in Canon India failed to consider the Statutory Scheme
The decision in Canon India failed to consider the statutory scheme of Sections 2(34) and 5 of the Act, 1962 respectively. As a result, the decision erroneously recorded the finding that since DRI officers were not entrusted with the functions of a proper officer for the purposes of Section 28 in accordance with Section 6, they did not possess the jurisdiction to issue show cause notices for the recovery of duty under Section 28 of the Customs Act, 1962.
2. Reliance placed on the decision in case of Commissioner of Customs v. Sayed Ali and Another
A two-Judge Bench of the Supreme Court in the case of Commissioner of Customs v. Sayed Ali and Another has held that the Commissioner of Customs (Preventive) is not a “proper officer” as defined in Section 2(34) of the Customs Act, 1962 and therefore did not have the jurisdiction to issue a show cause notice in terms of Section 28 of the Act, 1962. The Court observed that while all proper officers must be “officers of customs”, all “officers of customs” are not proper officers.
It also held that only those officers of customs who were assigned the functions of assessment, which would include re-assessment, working under the jurisdictional collectorate within whose jurisdiction the bills of entry or baggage declarations had been filed and consignments had been cleared for home consumption, would have the jurisdiction to issue show cause notice under Section 28 or else it would lead to a situation of utter chaos and confusion, in as much as all officers of customs in a particular area, be it under the Collectorate of Customs (Imports) or the Preventive Collectorate, would fall under the definition of “proper officers”.
The Apex court while reviewing its judgement held that the reliance placed in Canon India on the decision in Sayed Ali is misplaced for two reasons.
First, Sayed Ali dealt with the case of officers of customs (Preventive), who, on the date of the decision in Sayed Ali were not empowered to issue show cause notices under Section 28 of the Customs Act, 1962 unlike the officers of DRI.
Secondly, the decision in Sayed Ali took into consideration Section 17 of the Act, 1962 as it stood prior to its amendment by the Finance Act, 2011. However, the assessment orders, in respect of which the show cause notices under challenge in Canon India were issued, were passed under Section 17 of the Act, 1962 as amended by the Finance Act, 2011.
DRI officers came to be appointed as customs officers
DRI officers came to be appointed as the officers of customs vide
Notification No. 19/90-Cus (N.T.) dated 26.04.1990 issued by the Department of Revenue, Ministry of Finance, Government of India. This notification later came to be superseded by Notification No. 17/2002 dated 07.03.2002 issued by the Department of Revenue, Ministry of Finance, Government of India, to account for administrative changes.
Circular No. 4/99-Cus dated 15.02.1999
Circular No. 4/99-Cus dated 15.02.1999 issued by the Central Board of Excise & Customs, New Delhi which empowered the officers of DRI to issue show cause notices under Section 28 of the Act, 1962 as well as Notification No. 44/2011 dated 06.07.2011 which assigned the functions of the proper officer for the purposes of Sections 17 and 28 of the Act, 1962 respectively to the officers of DRI were not brought to the notice of this Court during the proceedings in Canon India (supra). In other words, the judgment in Canon India (supra) was rendered without looking into the circular and the notification referred to above thereby seriously affecting the correctness of the same.
Retrospective Applicability of Section 97 of the Finance Act, 2022
Section 97 of the Finance Act, 2022 which, inter-alia, retrospectively validated all show cause notices issued under Section 28 of the Act, 1962 cannot be said to be unconstitutional. It cannot be said that Section 97 fails to cure the defect pointed out in Canon India nor is it manifestly arbitrary, disproportionate and overbroad, for the reasons recorded in the foregoing parts of this judgement.
The Apex Court clarified that the findings in respect of the vires of the Finance Act, 2022 is confined only to the questions raised in the petition seeking review of the judgment in Canon India. The challenge to the Finance Act, 2022 on grounds other than those dealt with herein, if any, are kept open.
Case Details
Case Title: Commissioner Of Customs Vs. M/S Canon India Private Limited
Case No.: R.P.(C) No. 000400/2021
