2021 (10) TMI 1461 - HC - Customs

Competence of the Joint Director Directorate of Revenue Intelligence Bangalore to issue the SCN u/s 124 of the Customs Act 1962 - HELD THAT - The moot question whether the officer of the DRI namely the Joint Director who had triggered the subject Show Cause Notice had power competence need not detain the court even for a furlong the same being no longer res integra; the Apex Court in a very recent case ie. M/S CANON INDIA PVT. LTD Vs. COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT having discussed the same inter alia in the light of sections 2(34) 6 28 of the Act has observed that the Addl. Director General of the DRI who had issued the Show Cause Notice of the kind lacked competence. Conclusion - 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 are invalid without any authority of law and liable to be set-aside and the ensuing demands are also set-aside. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment was the competence of the Joint Director, Directorate of Revenue Intelligence (DRI), Bangalore, to issue the Show Cause Notice dated 10.11.2017 under section 124 of the Customs Act, 1962. The resolution of this issue was pivotal, as it determined the validity of subsequent actions, including the confiscation of currency and penalties imposed on the petitioner.

2. ISSUE-WISE DETAILED ANALYSIS

Competence of the Joint Director, DRI, to Issue Show Cause Notice

• Relevant Legal Framework and Precedents: The legal framework involved sections 2(34), 6, 28, and 124 of the Customs Act, 1962. The competence of the officer issuing the Show Cause Notice was scrutinized under these provisions. The judgment heavily relied on the precedent set by the Supreme Court in M/S Canon India Pvt. Ltd. Vs. Commissioner of Customs, where it was held that the Additional Director General of the DRI lacked the authority to issue such notices.
• Court's Interpretation and Reasoning: The Court noted that the Supreme Court's decision in Canon India was decisive in determining the incompetence of the officer who issued the Show Cause Notice. The Court emphasized that if the foundational action (i.e., the issuance of the Show Cause Notice) was incompetent, subsequent actions based on it could not stand.
• Key Evidence and Findings: The Court found that the facts of the petitioner's case closely mirrored those in the Canon India case, particularly regarding the authority of the DRI officer to issue the Show Cause Notice. The Show Cause Notice was the basis for the confiscation order and subsequent penalties, which were all challenged due to the initial incompetence.
• Application of Law to Facts: The Court applied the principle from Canon India that actions initiated by an incompetent authority are invalid. The Show Cause Notice issued by the Joint Director of DRI was deemed incompetent, rendering the subsequent confiscation and penalties void.
• Treatment of Competing Arguments: The respondents argued that procedural violations do not necessarily invalidate proceedings. However, the Court clarified that this principle applies only if the officer conducting the seizure and confiscation is statutorily empowered, which was not the case here.
• Conclusions: The Court concluded that the Show Cause Notice and all actions stemming from it were invalid due to the lack of competence of the issuing officer. This conclusion was consistent with the Supreme Court's ruling in Canon India and a similar decision by a Co-ordinate Bench in another case.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: The Court cited the Supreme Court's holding: "We, therefore, hold 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."
• Core Principles Established: The principle that actions initiated by an incompetent authority are void was reinforced. The Court highlighted the maxim "ex nihilo nihil fit," meaning "nothing could come out of nothing," to emphasize that proceedings based on an incompetent notice are null.
• Final Determinations on Each Issue: The Court issued a Writ of Certiorari quashing the Show Cause Notice and the impugned orders. The petitioner was granted relief consistent with the Supreme Court's decision in Canon India, ensuring equal treatment under Article 14 of the Constitution.

In conclusion, the judgment underscored the necessity of statutory competence in issuing Show Cause Notices under the Customs Act, affirming that any proceedings initiated by an unauthorized officer are invalid. This decision aligns with established Supreme Court precedents and principles of equality before the law.