2021 (11) TMI 368 - AT - Customs

Jurisdiction - power of Additional Director General, DRI to issue SCN - section 28 of the Customs Act - HELD THAT - The Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT observed that the nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import is a power that has been conferred to review the earlier decision for assessment. This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice. It would thus be seen that the Supreme Court in Canon India held that the entire proceedings initiated by the Additional Director General, DRI by issuance of a show cause notice was without any authority of law and was, therefore, liable to be set aside - In BAKEMAN S HOME PRODUCTS PVT. LTD. VERSUS COLLECTOR OF CUS., BOMBAY 1997 (6) TMI 178 - CEGAT, NEW DELHI , the Tribunal held that the proposal for confiscation and penalty cannot be segregated from duty demand and, therefore, the proceedings for confiscation and imposition of penalty cannot be sustained. The order passed by the Commissioner of Customs (Adjudication) cannot be sustained and is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Jurisdiction of the Additional Director General, Directorate of Revenue Intelligence (DRI) to issue the show cause notice under section 28 of the Customs Act.
2. Validity of proceedings initiated under section 124 of the Customs Act for confiscation and imposition of penalty when the show cause notice under section 28 is held invalid.

Detailed Analysis:

1. Jurisdiction of the Additional Director General, DRI:

The primary issue was whether the Additional Director General, DRI had the jurisdiction to issue the show cause notice under section 28 of the Customs Act. The appellant contended that the Additional Director General, DRI was not the "proper officer" as required by section 28, citing the Supreme Court decisions in Canon India Pvt. Ltd. vs. Commissioner of Customs and Commissioner of Customs, Kandla vs. M/s. Agarwal Metals and Alloys. The Supreme Court in Canon India clarified that the power to recover duty not paid or short paid after goods have been assessed and cleared for import is conferred on the proper officer who initially assessed and cleared the goods. The Court emphasized that this power could not be exercised by another officer from a different department, even if of the same rank, as it would lead to an "anarchical and unruly operation of a statute." The decision explicitly stated that the Additional Director General, DRI was not the proper officer to issue the show cause notice under section 28(4). This was reinforced by the Supreme Court in Agarwal Metals and Alloys, which dismissed appeals where show cause notices were issued by the Additional Director General, DRI.

2. Validity of Proceedings under Section 124 of the Customs Act:

The Department argued that even if the notice under section 28 was invalid, the notice under section 124 for confiscation and penalty should still be valid. However, the appellant relied on the Tribunal's decision in Bakeman’s Home Products Pvt. Ltd. vs. Collector of Customs, Bombay, which held that proposals for confiscation and penalty cannot be segregated from the duty demand. If the duty demand fails due to the lack of jurisdiction of the officer issuing the notice, the proceedings for confiscation and penalty based on the same notice cannot survive. This principle was consistently upheld by various High Courts and Tribunal Benches, which set aside proceedings where show cause notices were issued by the DRI officers not considered proper officers under the Customs Act.

Conclusion:

In light of the Supreme Court's decisions in Canon India and Agarwal Metals and Alloys, and supporting judgments from various High Courts and Tribunal Benches, the show cause notice dated 30.01.2009 issued by the Additional Director General, DRI was deemed without jurisdiction. Consequently, all proceedings based on this notice, including the order dated 31.05.2012 passed by the Commissioner of Customs (Adjudication), were set aside. The appeal was allowed, and the submission to defer the hearing until the review petition in Canon India was decided was rejected, following the Karnataka High Court's approach in Mohan C. Suvarna.

Order:

The order dated 31.05.2012 passed by the Commissioner of Customs (Adjudication) is set aside, and the appeal is allowed. The proceedings initiated by the Additional Director General, DRI are declared invalid and without jurisdiction.