2022 (1) TMI 524 - HC - Customs

Jurisdiction - power of DRI authorities to issue SCN - goods imported by the assessee should be rejected or not - show-cause notice proceedings have lingered on for unduly long time - Section 28 of the Customs Act, 1962 - HELD THAT - In the present case, the question of lack of jurisdiction of the DRI authorities issuing the impugned show-cause notice is squarely covered by the decision of the Supreme Court in the case of M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT . In the said case, this issue came up for consideration and was decided that the entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters before us are invalid without any authority of law and liable to be set-aside and the ensuing demands are also set- aside. The impugned show-cause notice is set aside with consequential effect. If the petitioner has given any guarantees on account of pendency of these proceedings, the same would stand discharged - petition allowed.

Summary

Issues Involved:
1. Jurisdiction of the Director of Revenue Intelligence (DRI) to issue the show-cause notice.
2. Delay in the disposal of the show-cause notice proceedings.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Director of Revenue Intelligence (DRI) to Issue the Show-Cause Notice:

The petitioner challenged the show-cause notice on the ground that the Director of Revenue Intelligence (DRI) did not have the jurisdiction to issue such a notice. The petitioner relied on the Supreme Court judgment in Canon India Private Limited vs. Commissioner of Customs (AIR 2021 SC 1699), which concluded that the DRI lacks the authority to issue show-cause notices under Section 28 of the Customs Act, 1962. The Supreme Court held that:

"An Additional Director General of the DRI, although appointed as an officer of Customs, was not entrusted with the functions under Section 28 as a proper officer under the Customs Act."

The notification relied upon by the respondents, Notification No. 40/2012 dated 2.5.2012, was deemed invalid as it was issued under Section 2(34) of the Customs Act, which merely defines a 'proper officer' and does not confer any powers to assign functions. The proper procedure for entrusting functions to DRI officers would have been under Section 6 of the Customs Act, which was not followed. Therefore, the Supreme Court in Canon India held that:

"The entire proceeding initiated by the Additional Director General of the DRI by issuing show-cause notices is invalid without any authority of law and liable to be set aside."

This judgment holds precedential value, and mere pendency of a review petition does not affect its applicability. Consequently, the Rajasthan High Court found that the show-cause notice issued by the DRI in the present case is invalid and must be set aside.

2. Delay in the Disposal of the Show-Cause Notice Proceedings:

The petitioner also contended that the prolonged delay in concluding the show-cause notice proceedings was opposed to the provisions of Section 28 of the Customs Act, 1962. The timeline of events shows significant delays:

- Show-cause notice issued on 18.12.2009.
- First personal hearing on 26.02.2013.
- Proceeding transferred to the Call Book on 26.08.2016.
- Recalled from the Call Book on 03.01.2017 with hearings on 28.02.2017 and 25.05.2017.
- Sent back to the Call Book on 13.12.2017 and reactivated on 08.11.2019.

The respondents argued that at the relevant time, Section 28(4) of the Customs Act did not provide a rigid period of limitation for the disposal of show-cause notice proceedings, stating only that they should be disposed of "as far as possible" within a specified time. Additionally, the petitioner had requested to keep the matter in the Call Book Register due to pending litigation (SLP filed by the department against the decision in M/s Mangli Impex Limited vs. Union of India).

However, given the conclusion on the jurisdiction issue, the court found it unnecessary to delve into the delay aspect.

Conclusion:

The petition was allowed, and the impugned show-cause notice was set aside with consequential effects. Any guarantees given by the petitioner on account of the pending proceedings were discharged, and any deposits made by the petitioner were deemed refundable.