2016 (5) TMI 225 - HC - Customs

Proper officer - Juridiction to issue Show Cause Notice - Constitutional validity and effect of Section 28(11) of the Customs Act 1962 - inserted by the Customs (Amendment and Validation) Act 2011 ( Validation Act 2011 ) with effect from 16th September 2011 - In terms of Section 28(11) of the Act all persons appointed as Customs Officers under Section 4(1) of the Act prior to 6th July 2011 shall be deemed to have and always had the power of assessment under Section 17 and shall be deemed to have been and always had been the proper officers - Whether Section 28(11) cures the defects pointed out by the Supreme Court in the case of Commissioner of Customs v. Sayed Ali 2011 (2) TMI 5 - Supreme Court - Held that - the Department cannot seek to rely upon Section 28(11) of the Act as authorising the officers of the Customs DRI the DGCEI etc. to exercise powers in relation to non-levy short-levy or erroneous refund for a period prior to 8th April 2011 if in fact there was no proper assigning of the functions of reassessment or assessment in favour of such officers who issued such SCNs since they were not proper officers for the purposes of Section 2(34) of the Act and further because Explanation 2 to Section 28 as presently enacted makes it explicit that such non-levy short-levy or erroneous refund prior to 8th April 2011 would continue to be governed only by Section 28 as it stood prior to that date and not the newly re-cast Section 28 of the Act. Section 28(11) interpreted in the above terms would not suffer the vice of unconstitutionality. Else it would grant wide powers of assessment and enforcement to a wide range of officers not limited to customs officers without any limits as to territorial and subject matter jurisdiction and in such event the provision would be vulnerable to being declared unconstitutional. As regards the period subsequent to 8th April 2011 it is evident that if the administrative chaos as envisaged by the Supreme Court in Sayed Ali (supra) should not come about there cannot be any duplicating and/or overlapping of jurisdiction of the officers. It would have to be ensured through proper co-ordination and administrative instructions issued by the CBEC that once a SCN is issued specifying the adjudicating officer to whom it is answerable then that adjudication officer subject to such officer being a proper officer to whom the function of assessment has been assigned in terms of Section 2(34) of the Act will alone proceed to adjudicate the SCN to the exclusion of all other officers who may have the power in relation to that subject matter. Validity of SCN issued on 12th and 15th April 2013 by the Additional Director General DRI Bangalore - alleged non-levy short-levy or erroneous refund for period beginning with 1st April 2008 - Held that - insofar as any of the above SCNs relate to the period prior to 8th April 2011 they are clearly without jurisdiction since the ADG DRI could not have exercised such power for a period prior to 8th April 2011. Further in terms of Explanation 2 to Section 28 as has presently been enacted with effect from 8th April 2011 for the period prior to 8th April 2011 Section 28 of the Act as it stood prior to that date will apply and not the new Section 28 of the Act. That being the position the proceedings pursuant to the above SCNs issued by the ADG DRI regarding non-levy short-levy or erroneous refund prior to 8th April 2011 cannot be legally sustained and are hereby quashed. All proceedings consequent thereto are also hereby quashed. However insofar as the SCNs cover the period subsequent to 8th April 2011 the adjudication proceedings shall go on in accordance with law. Validity of SCN issued on 31st October 2003 under Section 28/124 of the Act by the Assistant Commissioner SIIB - not empowered or assigned the function of a proper officer under Section 2(34) of the Act at the time he issued the SCN Held that - the Department cannot seek to rely on Section 28(11) of the Act to validate the SCN issued by the Assistant Commissioner of Customs SIIB to the Petitioner on 31st October 2003. As has already been held by the Court Section 28(11) of the Act cannot validate SCNs or proceedings pursuant thereto in relation to non-levy short-levy or erroneous refund for a period prior to 8th April 2011 if such SCNs have been issued or proceedings conducted by officers of the Customs DRI or DGCEI or as in the present case by the SIIB who are not proper officers within the meaning of Section 2(34) of the Act. Therefore the SCN issued to the petitioner on 31st October 2003 and all proceedings pursuant thereto are hereby quashed. Validity of SCN dated 30th April 2010 issued by the ADG DRI Delhi - Search conducted at the residential premises of Petitioner No.4 - Challenge is on the ground that Respondent No. 3 was not authorised to issue such SCN as he was not a proper officer within the meaning of Section 2(34) of the Act. Counter affidavit filed where it is denied that at the time when the SCN was issued i.e. 30th April 2010 the ADG DRI was not assigned the function of assessment under Section 17 and reassessment under Section 28 of the Act and was therefore not a proper officer for the purposes of Section 2(34) of the Act - Held that - the recourse to Section 28(11) of the Act as introduced with effect from 8th July 2011 cannot be had to validate the impugned SCN particularly in view of Explanation 2 to Section 28 as it presently stands. Consequently the Court quashes the impugned SCN dated 18th April 2010 and SCN dated 12th February 2013 and all proceedings consequent thereto. Writ Petition (C) No. 1185/2013 and the pending application if any are disposed of. Validity of SCN dated 9th March 2011 issued by the Commissioner of Customs (Preventive) and Circular dated 29th September 2011 issued pursuant to the insertion of sub-section 11 to Section 28 - pursuant to the putting on hold various consignments of woollen carpets sought to be exported by the Petitioner - Held that - it is clear that in relation to the events that took place prior to 8th April 2011 no SCN could have been issued to the Petitioner by the Commissioner of Customs (Preventive) who admittedly is not a proper officer in terms of the Section 2(34) of the Act. Section 28(11) of the Act cannot be resorted to for validating the said SCN and proceedings pursuant thereto. Therefore the impugned SCN dated 9th March 2011 and the subsequent Circular dated 23rd September 2011 issued by the Department consequent upon the enactment of Section 28 (11) of the Act is quashed. Validity of SCN dated 3rd April 2013 issued by the DRI Delhi to BSNL as well as an order dated 23rd May 2013 passed by the Central Board of Excise and Customs (CBEC) under Section 4 of the Act - assigned several cases including the case on hand to the Commissioner of Customs (Import General) for the purposes of adjudication under Section 4 of the Act and consequent order dated 16th December 2013 passed by the Commissioner of Customs (Import General) - At the time when the SCN was issued to the Petitioner by the DRI there was no assignment of the functions of assessment or reassessment under the Act in favour of the DRI in so far as it pertains to events that occurred prior to 8th April 2011 - Held that - Section 28(11) of the Act cannot be relied upon to validate the SCN issued in relation to non-levy short-levy or erroneous refund for a period prior to 8th April 2011 by officers of the DRI even subsequent to the deeming fiction brought about by Section 28(11) of the Act. Therefore the impugned SCN dated 3rd April 2013 and all proceedings consequent thereto including the impugned orders dated 23rd May 2013 and 16th December 2013 are quashed. Validity of SCN dated 24th December 2011 issued by the ADG DRI - Short levy of customs duty for the period 28th January 2011 to 28th February 2013 - Held that - for the reasons already mentioned the said SCN and all the proceedings consequent thereto for the period from 28th January 2011 up to 8th April 2011 cannot be sustained in law and are hereby quashed. The adjudication proceedings as regards further period beyond 8th April 2011 will proceed in accordance with law. Validity of SCN dated 31st October 2008 issued by the ADG DRI Delhi and Circular No. 44/2011-Cus dated 23rd September 2011 issued consequent upon the insertion of Section 28(11) of the Act - Reassessment of imported goods during the period prior to 8th April 2011 - Admittedly the case pertains to a period prior to 8th April 2011. Further it is not in dispute that at the time when the SCN was issued the ADG DRI was not assigned the functions of reassessment under Section 28 of the Act and therefore was not a proper officer for the purposes of Section 2(34) of the Act - Held that - for the reasons already discussed the impugned SCN dated 31st October 2008 and the Circular dated 23rd September 2011 are hereby quashed. Validity of SCN dated 14th March 2011 issued by the ADG DRI - alleged imports made through the ICD Tughlakabad during the period prior thereto - Held that - in light of the above discussion with the ADG DRI not being the proper officer under Section 2(34) of the Act at the time when the SCN was issued Section 28(11) of the Act cannot be referred to for validating the acts and the SCN issued by the ADG DRI. Since it pertains to a period prior to 8th April 2011 it is governed entirely by Section 28 as it originally stood i.e. prior to 8th April 2011. Therefore the impugned SCN dated 14th March 2011 issued by the ADG DRI and all proceedings pursuant thereto are quashed. Validity of SCN dated 29th May 2014 - alleged short levy during the period 27th May 2009 to July 2013 - Held that - as far as the period involved covers the period 27th May 2009 to 8th April 2011 it cannot be sustained in law since during the said period the ADG DRI had no power of assessment or reassessment. To that extent the impugned SCN and all proceedings pursuant thereto for the period prior to 8th April 2011 are hereby quashed. However for the period subsequent to 8th April 2011 the proceedings may go on in accordance with law. Validity of SCN dated 2nd April 2009 issued by the DRI and for declaring Section 28(11) of the Act to be constitutionally invalid - Held that - it is not in dispute that at the time the SCN was issued the DG DRI or any other officer of the DRI was not specifically assigned the task of reassessment and therefore was not a proper officer under Section 2(24) of the Act. Accordingly the impugned SCN and all proceedings consequent thereto are hereby quashed. Validity of SCN dated 2nd December 2013 issued by the ADG DRI - in relation to 190 bills of entry for the period prior to 8th April 2011 - Held that - the ADG DRI who issued the SCN was admittedly not a proper officer for the purposes of Section 2(34) of the Act. Therefore the impugned SCN dated 2nd December 2013 and all proceedings consequent thereto to the extent they pertain to the period prior to 8th April 2011 are hereby quashed. The proceedings for the subsequent period may go on in accordance with law. Validity of SCN dated 2nd December 2013 issued by the ADG DRI - Held that - the impugned SCN are hereby quashed to the extent they pertain to the period prior to 8th April 2011. The proceedings for the subsequent period may go on in accordance with law. Validity of SCN dated 12th March 2014 issued by the ADG DRI - imports made for the period 24th June 2009 to 8th April 2011 - 8 bills of entry pertain to ICD Tughlakabad 6 pertain to Mumbai Port and 2 pertain to ICD Mulund in Bombay - held that - for the reasons already explained the said SCN is unsustainable in law and the said SCN and all proceedings pursuant thereto are hereby quashed. Validity of SCN dated 7th November 2013 issued by the ADG DRI - Imports of Narrow Woven Fabrics from China during the period 8th November 2008 to 30th November 2010 i.e. a period prior to 8th April 2011 - Held that - for the reasons already discussed the said SCN dated 7th November 2013 and all proceedings consequent thereto are hereby quashed. Validity of SCN dated 9th June 2014 issued by the ADG DRI - Invokation of Section 124 of the Act and Section 28 read with Section 9A of the Customs Tariff Act 1975 - Imports of Color Picture Tubes made through the ICD Tughlakabad as well as ICD Dadri for the period May 2009 to January 2011 - Held that - for the reasons already mentioned the said impugned SCN and all proceedings pursuant thereto are unsustainable in law and are hereby quashed. Validity of SCN dated 10th September 2004 issued by the ADG DRI - alleged mis-declaration of value of export of Alloy Steel Forgings (Machined) from ICD Tughlakabad and CFS Patparganj - availing higher DEPB credit for the period prior to 8th April 2011 - Held that - for the reasons already mentioned the impugned SCN and all proceedings consequent thereto stand hereby quashed. Validity of SCN dated 20th November 2014 issued by the ADG DRI - Section 124 of the Customs Act read with Section 9A of the Customs Tariff Act 1975 - Import of Color Picture Tubes in the year 2010 - Held that - for the reasons already mentioned the impugned SCN and all proceedings consequent thereto are unsustainable in law and hereby set aside. Validity of SCN dated 23rd September 2014 issued by the ADG DRI - Color Picture Tubes imported from January 2009 to February 2011 - Held that - for the reasons already mentioned the impugned SCN and all proceedings consequent thereto are unsustainable in law and hereby set aside. Validity of SCN issued on 17th December 2007 by the DRI to be adjudicated by the Commissioner of Customs - Searches were conducted in the residential premises of the Petitioner - allegedly mis-declaring and undervaluing the import in connivance with the various Registrars of Newspapers in India - Demand of duty - appeal filed before the CESTAT against the said order is still pending and the CESTAT has required the Petitioner to deposit the 10% duty amount as a pre-deposit - Held that - the SCN was issued by the ADG DRI who at the time of issuance of the said SCN had not been assigned functions by the CBEC of assessment or reassessment and therefore is not a proper officer under Section 2(34) of the Act. The impugned SCN and all proceedings consequent thereto are hereby stand quashed. - Petitions disposed of

Summary

Issues Involved:
1. Constitutional validity of Section 28(11) of the Customs Act, 1962.
2. Impact of Section 28(11) on show-cause notices (SCNs) issued before 6th July 2011.
3. Jurisdiction of officers from DRI, DGCEI, and Customs (Preventive) to issue SCNs prior to 6th July 2011.
4. Scope and interpretation of Section 2(34) defining "proper officer."
5. Harmonization of Section 28(11) with Explanation 2 of Section 28.
6. Validity of SCNs issued by officers not designated as "proper officers."

Detailed Analysis:

1. Constitutional Validity of Section 28(11):
Section 28(11) was inserted by the Customs (Amendment and Validation) Act, 2011 to retrospectively validate the powers of officers appointed under Section 4(1) of the Act before 6th July 2011. It states that these officers "shall be deemed to have and always had the power of assessment under Section 17 and shall be deemed to have been and always had been the proper officers." The provision was challenged on the grounds that it conferred arbitrary and unguided powers to multiple customs officers without any territorial or pecuniary jurisdictional limits, leading to potential chaos and confusion.

2. Impact of Section 28(11) on SCNs Issued Before 6th July 2011:
The court analyzed whether Section 28(11) effectively cured the defects pointed out by the Supreme Court in Commissioner of Customs v. Sayed Ali (2011) 3 SCC 537, which held that only officers specifically assigned the functions of assessment and reassessment by the CBEC or the Commissioner of Customs could issue SCNs under Section 28. The court concluded that Section 28(11) did not explicitly override Explanation 2 to Section 28, which states that any non-levy, short-levy, or erroneous refund before 8th April 2011 would continue to be governed by the provisions of Section 28 as it stood immediately before that date.

3. Jurisdiction of Officers from DRI, DGCEI, and Customs (Preventive):
The court held that officers from DRI, DGCEI, and Customs (Preventive) who issued SCNs before 6th July 2011 were not "proper officers" as defined under Section 2(34) of the Act, unless they were specifically assigned the functions of assessment or reassessment by the CBEC or the Commissioner of Customs. Consequently, SCNs issued by these officers for the period prior to 8th April 2011 were deemed to be without jurisdiction and invalid.

4. Scope and Interpretation of Section 2(34):
Section 2(34) defines "proper officer" as an officer of customs who is assigned specific functions by the CBEC or the Commissioner of Customs. The court emphasized the necessity of specific assignment of functions to an officer to qualify as a "proper officer" for the purposes of issuing SCNs under Section 28. The court rejected the argument that a general appointment under Sections 4 and 5 of the Act sufficed for an officer to be deemed a "proper officer."

5. Harmonization of Section 28(11) with Explanation 2 of Section 28:
The court found it challenging to harmonize Section 28(11) with Explanation 2 of Section 28, as the latter explicitly states that non-levy, short-levy, or erroneous refund prior to 8th April 2011 would be governed by the unamended Section 28. The court concluded that Section 28(11) did not provide retrospective validation for SCNs issued before 8th April 2011 by officers not designated as "proper officers."

6. Validity of SCNs Issued by Officers Not Designated as "Proper Officers":
The court quashed several SCNs issued by officers from DRI, DGCEI, and Customs (Preventive) for periods prior to 8th April 2011, as these officers were not "proper officers" under Section 2(34) at the time of issuing the SCNs. The court held that Section 28(11) could not retrospectively validate these SCNs, and the proceedings pursuant to such SCNs were also quashed.

Conclusion:
The court concluded that Section 28(11) did not cure the defects identified in the Sayed Ali case and could not retrospectively validate SCNs issued by officers not designated as "proper officers" for periods prior to 8th April 2011. Consequently, several SCNs and proceedings initiated by officers from DRI, DGCEI, and Customs (Preventive) were quashed. The court emphasized the necessity of specific assignment of functions to an officer to qualify as a "proper officer" for the purposes of issuing SCNs under Section 28.