2022 (3) TMI 334 - AT - Customs

Jurisdiction - power of Additional Director General, DRI to issue SCN - Confiscation of goods - rejection of declared value - HELD THAT - This precise issue was examined by the Supreme Court in Canon India 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. In view of the aforesaid and respectfully following the decisions of the Apex Court, the Hon ble High Courts and the Coordinate Benches of the Tribunal, it is held that the show cause notices issued by the Additional Director General, DRI, are without jurisdiction and therefore all proceedings undertaken by the Department on the basis of or pursuant to the said show cause notices, including the impugned orders dated 31.01.2018, 16.07.2019 and 16.04.2019 respectively are without jurisdiction. Thus, 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. The Punjab and Haryana High Court in M/S STEELMAN INDUSTRIES VERSUS UNION OF INDIA AND OTHERS, 2021 (8) TMI 1236 - PUNJAB AND HARYANA HIGH COURT , in view of the decision of the Supreme Court in Canon India, allowed the Writ Petition and set aside the entire proceedings arising from the show cause notice, as the Additional Director General, DRI was not the proper officer. Therefore the proper officer to whom the power is conferred under Section 28 of the Act and other related provisions would necessarily mean the proper officer who in the first instance assessed and cleared the goods, i.e., Appraising Officer in the Customs port or Air Cargo Complex. Therefore the Additional Director General of DRI cannot be the proper officer in the facts and circumstances of each of the instant cases where assessments were undisputedly done originally by the respective assessing officers of the Kolkata Customs. The said impugned orders passed by the Commissioner of Customs (Port), Kolkata and the Commissioner of Customs (Airport Administration), Kolkata respectively therefore cannot be sustained and are set aside - appeal allowed.

Summary

Issues Involved:
1. Jurisdiction of the Additional Director General, DRI to issue show cause notices.
2. Validity of the proceedings initiated by the DRI.
3. Impact of the Supreme Court's decisions in Canon India and Agarwal Metals and Alloys on the current case.
4. Validity of Section 28(11) of the Customs Act.
5. Whether penalties and confiscation can be segregated from the duty demand.

Detailed Analysis:

1. Jurisdiction of the Additional Director General, DRI to Issue Show Cause Notices:
The primary issue in the appeals was whether the Additional Director General, DRI had the jurisdiction to issue the show cause notices. The Supreme Court in Canon India observed that the power to recover duty not paid or short paid after the goods have been assessed and cleared for import is a power conferred to review the earlier decision for assessment. This power must necessarily be exercised by the proper officer who initially assessed and cleared the goods. Therefore, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notices.

2. Validity of the Proceedings Initiated by the DRI:
The Supreme Court's decision in Canon India was followed, which held that the proceedings initiated by the Additional Director General, DRI by issuing show cause notices were without any authority of law and thus liable to be set aside. This was reaffirmed in Agarwal Metals and Alloys, where the Supreme Court dismissed the appeals on the same grounds.

3. Impact of the Supreme Court's Decisions in Canon India and Agarwal Metals and Alloys:
Several High Courts and Tribunal Benches have followed the Supreme Court's decisions in Canon India and Agarwal Metals and Alloys, setting aside proceedings where show cause notices were issued by the DRI. The Tribunal in the current case also followed these decisions, concluding that the Additional Director General, DRI was not the proper officer to issue the show cause notices, and thus the entire proceedings were invalid.

4. Validity of Section 28(11) of the Customs Act:
The Department contended that Section 28(11) of the Customs Act, inserted with retrospective effect, provided that all persons appointed as officers of Customs before July 6, 2011, shall be deemed to have always had the power of assessment. However, the Tribunal noted that even if Section 28(11) is considered valid, the proper officer for issuing a show cause notice under Section 28 must be the officer who initially assessed the goods or his successor. Since the original assessments were done by jurisdictional Customs officers and not by DRI officers, the show cause notices issued by DRI were invalid.

5. Whether Penalties and Confiscation Can Be Segregated from the Duty Demand:
The Tribunal held that the proposals for confiscation of goods and imposition of penalties cannot be segregated from the duty demand. If the duty demand fails due to the show cause notice being issued by an unauthorized officer, the proceedings for confiscation and penalties cannot survive. This was supported by precedents such as Bakeman’s Home Products and Arun Kumar Agarwal and M/s Venus Industries.

Conclusion:
The Tribunal concluded that the show cause notices issued by the Additional Director General, DRI were without jurisdiction. Consequently, all proceedings undertaken based on these notices, including the impugned orders, were set aside. The appeals were allowed with consequential relief to the appellants.