2021 (12) TMI 488 - AT - Customs

Jurisdiction - Power of Additional Director General, DRI to issue SCN - sections 28 of the Customs Act 1962 - HELD THAT - This precise issue was examined by the Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT . The 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. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Jurisdiction of the Additional Director General, DRI to issue show cause notice under section 28 of the Customs Act.
2. Validity of proceedings initiated based on show cause notice issued by the Additional Director General, DRI.
3. Impact of Supreme Court judgments in Canon India and Agarwal Metals and Alloys on similar cases.
4. Decision to defer appeal hearing based on pending review petition.
5. Consistency in setting aside orders where show cause notices were issued by officers not designated as proper officers.

Issue 1: Jurisdiction of the Additional Director General, DRI to issue show cause notice under section 28 of the Customs Act:
The appeal challenged an order dismissing the appellant's appeal while partially allowing the department's appeal. The key contention was whether the Additional Director General, DRI had the jurisdiction to issue the show cause notice. The Supreme Court rulings in Canon India and Agarwal Metals and Alloys were cited to support the argument that the Additional Director General, DRI did not have the authority to issue such notices under section 28 of the Customs Act. The Supreme Court emphasized that the power to recover unpaid duties post-assessment is vested in the proper officer who initially assessed and cleared the goods, not in officers from different departments. The Court held that the Additional Director General, DRI was not the proper officer to exercise the power under section 28(4) of the Act, rendering the recovery proceedings initiated without jurisdiction and invalid.

Issue 2: Validity of proceedings initiated based on show cause notice issued by the Additional Director General, DRI:
The judgments in Canon India and subsequent cases highlighted that show cause notices issued by the Additional Director General, DRI were invalid as he did not qualify as a proper officer under the Customs Act. The Bombay High Court, Madras High Court, Karnataka High Court, and Punjab and Haryana High Court, among others, set aside proceedings where such notices were issued. The Tribunal also annulled orders based on show cause notices from officers not designated as proper officers. Consequently, the show cause notice dated 29.03.2018 by the Additional Director General, DRI lacked jurisdiction, rendering all ensuing proceedings by the Department without authority. As a result, the order dated 03.12.2020 by the Commissioner of Customs (Appeals) was deemed unsustainable.

Issue 3: Impact of Supreme Court judgments in Canon India and Agarwal Metals and Alloys on similar cases:
The decisions in Canon India and Agarwal Metals and Alloys, along with subsequent High Court judgments, established a precedent that show cause notices issued by officers like the Additional Director General, DRI were invalid due to lack of proper officer designation. These rulings were consistently applied to set aside proceedings and orders based on such notices, emphasizing the requirement for adherence to statutory procedures and the designation of the proper officer under the Customs Act.

Issue 4: Decision to defer appeal hearing based on pending review petition:
The Department sought to defer the appeal hearing pending a review petition filed in Canon India. However, the Karnataka High Court rejected this plea, emphasizing the necessity to adhere to the Supreme Court's ruling on the issue of jurisdiction concerning the proper officer. The court's decision reflected the importance of upholding legal principles and statutory provisions despite pending review petitions.

Issue 5: Consistency in setting aside orders where show cause notices were issued by officers not designated as proper officers:
Various judicial forums consistently set aside orders and proceedings where show cause notices were issued by officers like the Additional Director General, DRI, who did not qualify as proper officers under the Customs Act. The decisions underscored the significance of procedural compliance and the authority of the proper officer in initiating recovery proceedings post-assessment. The uniformity in setting aside such orders reinforced the legal principle that only designated proper officers can exercise specific powers under the Customs Act, ensuring procedural fairness and adherence to statutory provisions.

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