2022 (3) TMI 518 - HC - Customs

Seizure of goods - Gold and Silver were seized from the office and residential premises of the Petitioner - whether the respondents i.e. the Directorate of Revenue Intelligence (DRI), are not authorized for initiating proceeding against the Petitioner under the provisions of the Customs Act, 1962 - HELD THAT - Chapter XIII of the Customs Act deals with Searches, Seizure and Arrest . Chapter XIII starts from Section 100 and ends to Section 110A. The Sections referred under Chapter XIII prescribe the proper Officer to initiate steps or an Officer of the Customs empowered in this behalf by general and special order to take appropriate recourse under the provisions of Chapter XIII - After the proceeding under Chapter XIII is carried out, comes the question of Confiscation of improperly imported goods, etc. and which has been prescribed in Section 111 under Chapter XIV which deals with the Confiscation of goods and conveyances and imposition of penalties . Plain reading of the contents of the Notification dated 2.5.2012 makes it evident that the said Notification is only a Notification under Section 2(34) of the Customs Act. This would also make clear that the Respondents have not been able to produce any Notification issued by the Central Government published in the Official Gazette under Section 6 of the Customs Act empowering the DRI also to exercise the functions of the Board or any Officer of the Board or any Officer of the Customs under the Customs Act - infact in the instant case there is no Notification issued under Section 6 of the Customs Act entrusting the functions under the Customs Act also upon the Officers of the DRI. The Division Bench of the Bombay High Court also had an occasion of dealing with a similar issue in KITCHEN ESSENTIALS ORS. VERSUS THE UNION OF INDIA ORS. 2021 (10) TMI 1267 - BOMBAY HIGH COURT wherein the challenge was to the proceeding initiated by the DRI asking the Petitioners therein to provide the details of the imports made by them and other information. Coming to the facts of the present case, admittedly, the proceeding initiated against the Petitioner is by the DRI. From the documents enclosed also, there is no dispute to the fact that the proceeding is not by the Customs Department or the officials of the Customs Department. Merely because one of the Officers in the search and seizure proceeding belongs to the Customs Department does not mean that the proceeding has been drawn by the Customs Department. All the proceedings in the instant case have been from the office of the DRI. It was never the case of the Respondents that the proceeding not being from the Department of DRI or for that matter the proceedings being drawn by the Customs Department - the plea and the defence taken by learned Assistant Solicitor General or for that matter the Department of DRI are not sustainable nor do it have any substantial force. This Court is inclined to allow the present Writ Petition and to hold that the issuance of Notice dated 29.10.2021 (Annexure P-3) issued under Section 110(2) of the Customs Act, 1962 and the subsequent Notices/Summons issued to the Petitioner are all without any authority of law and are therefore not sustainable - the Writ Petition is allowed.

Summary

Issues Involved:
1. Legality of the seizure proceeding initiated by the Directorate of Revenue Intelligence (DRI).
2. Authority of the DRI under the Customs Act, 1962 to conduct search and seizure operations.
3. Validity of the summons issued to the Petitioner by the DRI.

Issue-wise Detailed Analysis:

1. Legality of the seizure proceeding initiated by the Directorate of Revenue Intelligence (DRI):

The Petitioner challenged the seizure of gold and silver from his premises by the DRI, arguing that the DRI was not authorized to initiate proceedings under the Customs Act, 1962. The Petitioner relied on the Supreme Court judgment in Cannon India Pvt. Ltd. Vs. Commissioner of Customs [AIR 2021 SC 1699], which emphasized that only officers of the Customs Department or those specifically notified by the Central Government could initiate such proceedings.

2. Authority of the DRI under the Customs Act, 1962 to conduct search and seizure operations:

The Petitioner contended that the DRI lacked the authority to conduct search and seizure operations under the Customs Act because they were not designated as "proper officers" under Section 2(34) of the Act. The Petitioner further argued that there was no notification under Section 6 of the Customs Act entrusting the DRI with the functions of the Customs officers. The Respondents, however, relied on a Notification dated 2.5.2012, which they claimed designated the DRI as "proper officers."

Upon examining the provisions of the Customs Act, particularly Sections 2(34) and 6, the Court noted that Section 6 allows the Central Government to entrust functions to officers of the Central or State Government via a notification in the Official Gazette. The Court found that the Notification dated 2.5.2012, relied upon by the Respondents, was issued under Section 2(34) and not Section 6, thereby lacking the necessary legal basis to empower the DRI.

The Court referred to the Supreme Court's judgment in Cannon India Pvt. Ltd., which clarified that the Notification under Section 2(34) did not confer the necessary authority on the DRI. The Court also cited similar judgments from the Bombay High Court and the Delhi High Court, reiterating that the DRI could not act as "proper officers" without a valid notification under Section 6.

3. Validity of the summons issued to the Petitioner by the DRI:

The Petitioner sought to quash the summons issued by the DRI, which insisted on his presence for further investigation. Given the Court's findings on the DRI's lack of authority, it concluded that the summons were also without legal basis. The Court held that the entire proceeding initiated by the DRI, including the seizure and the subsequent summons, was invalid and without authority of law.

Conclusion:

The Court allowed the Writ Petition, quashing the seizure proceedings, the Panchnama, and the summons issued by the DRI. It held that the actions taken by the DRI were not sustainable in law due to the absence of proper authorization under the Customs Act, 1962. The Court emphasized the need for adherence to legal provisions and authoritative judicial precedents, thereby setting aside the DRI's actions with all consequential effects.