2016 (7) TMI 123 - HC - Customs

Proper officer - Validity of Show cause notice issued by the Additional Director General, Directorate of Revenue intelligence - Scope of Section 2(34) read with Section 17 and 28 of the Customs Act, 1962 - Amendment to Section 28, whether retrospective or prospective - Held that - The retrospective application of Section 28 (11) is limited in time with use of the words this section read with the Explanation 2, which necessarily means reference only to the now existing Section 28 which was inserted w.e.f. 8.4.2011 after substitution of the earlier provision. Thus, retrospective applicability is only since 8.4.2011, not prior thereto. In the instant case, the impugned show cause notice was issued much prior to 8.4.2011. Thus, the findings recorded on this jurisdictional issue by the Hon ble Supreme Court in Sayed Ali 2011 (2) TMI 5 - Supreme Court as also those recorded by the Hon ble Delhi High Court in the aforesaid judgment dated 3.5.2016 in M/s Pace International 2016 (5) TMI 225 - DELHI HIGH COURT are mutatis mutandis applicable to the case of the present petitioners. Therefore, the impugned show cause notice dated 13.3.2005, the adjudication order dated 25.6.2010 and consequential recovery proceedings, are rendered non est and void ab initio on the vice of jurisdiction and are as such quashed and set aside. - Decided in favor of the assessee.

Issues Involved:
1. Validity of the Show Cause Notice issued by the Additional Director General, Directorate of Revenue Intelligence (DRI).
2. Jurisdiction of the officer issuing the Show Cause Notice under the Customs Act, 1962.
3. Retrospective applicability of Section 28(11) of the Customs Act, 1962.
4. Legislative amendments and their impact on pending cases.

Detailed Analysis:

1. Validity of the Show Cause Notice:
The petitioners challenged the Show Cause Notice dated 13.3.2005 and the consequential Adjudication Order dated 25.6.2010, arguing that the Additional Director General, DRI, who issued the notice, was not a "proper officer" under Section 2(34) read with Sections 17 and 28 of the Customs Act, 1962. The petitioners relied on the Supreme Court judgment in "Commissioner of Customs v. Sayed Ali" and the Delhi High Court judgment in "M/s Pace International & another v. Union of India & others," which quashed similar notices issued prior to 8.4.2011.

2. Jurisdiction of the Officer:
The Supreme Court in "Sayed Ali" held that only a Customs Officer assigned specific functions of assessment and reassessment of duty by the Board or the Commissioner of Customs is competent to issue notices under Section 28. The Court stated, "It is only the officers of Customs, who are assigned the functions of assessment... working under the jurisdictional Collectorate... will have the jurisdiction to issue notice under Section 28 of the Act." This interpretation rendered the notice issued by the Additional Director General, DRI, invalid as he was not designated a "proper officer."

3. Retrospective Applicability of Section 28(11):
Section 28(11) was inserted to retrospectively validate actions taken by officers not designated as "proper officers" before 8.4.2011. However, the Court found that the retrospective application was limited to the period after 8.4.2011. The Delhi High Court in "M/s Pace International" concluded that Section 28(11) does not empower DRI officers to adjudicate or issue SCNs for the period prior to 8.4.2011. The Court emphasized, "The newly enacted Section 28 (11) would not empower the officers of the DRI and DGCEI to either proceed to adjudicate SCNs already issued by them for the period prior to 8th April 2011 or to issue SCNs for a period prior to 8th April 2011."

4. Legislative Amendments and Their Impact:
The Finance Act, 2011, and subsequent notifications aimed to address the jurisdictional issues raised in "Sayed Ali." However, the Court noted that these amendments did not retrospectively validate actions taken before 8.4.2011. The Court agreed with the Delhi High Court's findings that Section 28(11) and Explanation 2 to Section 28 could not be reconciled for actions prior to 8.4.2011. The Court stated, "The past actions of the officers of the DRI and DGCEI who are not designated as 'proper officer' in issuing SCNs for the period prior to 8th April 2011 have not been validated."

Conclusion:
The High Court quashed the Show Cause Notice dated 13.3.2005, the Adjudication Order dated 25.6.2010, and the consequential recovery proceedings, declaring them void ab initio due to lack of jurisdiction. The Court directed the respondents to refund ?60 lacs to the petitioners within two weeks, with interest. The Writ Petition was allowed without any cost.

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