2021 (3) TMI 384 - SC - Customs

Benefit of exemption - Import of Camera - Extended period of limitation - Jurisdiction of DRI to issue Show Cause Notice (SCN) - Proper Officer - Validity of proceeding initiated for Recovery of duty not paid - clearance of the cameras on the basis that they were exempted from levy of basic Customs duty under Notification No.15/2012 - Section 28(4) of the Customs Act, 1962 - whether the Directorate of Revenue Intelligence had authority in law to issue a show cause notice under Section 28(4) of the Act for recovery of duties allegedly not levied or paid when the goods have been cleared for import by a Deputy Commissioner of Customs who decided that the goods are exempted. HELD THAT - It is necessary that the answer must flow from the power conferred by the statute i.e. under Section 28(4) of the Act. This Section empowers the recovery of duty not paid, part paid or erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts and confers the power of recovery on the proper officer . The obvious intention is to confer the power to recover such duties not on any proper officer but only on the proper officer . There are only two articles a (or an) and the . A (or an) is known as the Indefinite Article because it does not specifically refer to a particular person or thing. On the other hand, the is called the Definite Article because it points out and refers to a particular person or thing. There is no doubt that, if Parliament intended that any proper officer could have exercised power under Section 28 (4), it could have used the word any - Parliament has employed the article the not accidently but with the intention to designate the proper officer who had assessed the goods at the time of clearance. It must be clarified that the proper officer need not be the very officer who cleared the goods but may be his successor in office or any other officer authorised to exercise the powers within the same office. In this case, anyone authorised from the Appraisal Group. If it was intended that officers of the Directorate of Revenue Intelligence who are officers of Central Government should be entrusted with functions of the Customs officers, it was imperative that the Central Government should have done so in exercise of its power under Section 6 of the Act. The reason why such a power is conferred on the Central Government is obvious and that is because the Central Government is the authority which appoints both the officers of the Directorate of Revenue Intelligence which is set up under the Notification dated 04.12.1957 issued by the Ministry of Finance and Customs officers who, till 11.5.2002, were appointed by the Central Government - The notification is obviously invalid having been issued by an authority which had no power to do so in purported exercise of powers under a section which does not confer any such power. 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 - Demands also set aside. Time Limitation - wilful mis-statement or suppression of facts or not - HELD THAT - The show cause notice was issued on 19.8.2014. Under Section 28(4), such a show cause notice must be issued within five years from the relevant date which means the date on which the goods were assessed and cleared, in case the duty was not paid or short paid or erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts - It is pertinent to note that the importer had asked for a first check and had shown the cameras and the cameras were offered on 20.3.2012 along with Bill of Entry and literature detailing specifications of models. The camera could have been operated to see the length of time of the single sequence and whether recording of the single sequence exhausts the total memory of the camera (including extended memory) and whether the cameras were eligible for exemption. It is difficult in such circumstances to infer that there was any wilful misstatement of facts. In these circumstances, it must, therefore, follow that the extended period of limitation of five years was not available to any authority to re-open under Section 28(4). Whether the cameras that were cleared on the basis that they were exempted from customs duty under Exemption Notification No.15/2012 were in fact eligible for the exemption or not? - HELD THAT - The goods must be taken to have been validly cleared by the Customs officer - cameras with similar specifications have been treated as exempted under the Explanatory Note to the Combined Nomenclature of the European communities. It is important to add that the same cameras have been considered to be eligible for exemption before 17.03.2012 and after 30.04.2015 under the exemption Notifications issued under the Customs Act read with Chapter 84 85 (First Schedule) of Customs Tariff Act, 1975. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Validity of recovery proceedings initiated by the Directorate of Revenue Intelligence (DRI) under Section 28(4) of the Customs Act, 1962.
2. Authority of the DRI to issue a show cause notice under Section 28(4).
3. Limitation period for issuing a show cause notice under Section 28(4).
4. Whether there was any wilful misstatement or suppression of facts by the importers.

Detailed Analysis:

1. Validity of Recovery Proceedings Initiated by DRI under Section 28(4):
The main issue in these appeals was whether the proceedings initiated by the Directorate of Revenue Intelligence (DRI) for recovery of duty not paid under Section 28(4) of the Customs Act, 1962, were valid in law. The Supreme Court held that the power to recover duties not paid or short-paid after the goods have been assessed and cleared for import is broadly a power to review the earlier decision of assessment. This power is not inherent in any authority but has been specifically conferred by Section 28 and other related provisions. The Court emphasized that the power to re-open assessment or recover duties which have escaped assessment must be exercised by the same officer who initially assessed and cleared the goods or his successor in office, and not by another officer of a different department, such as the DRI.

2. Authority of the DRI to Issue a Show Cause Notice under Section 28(4):
The Court examined whether the DRI had the authority to issue a show cause notice under Section 28(4) of the Customs Act. It was held that the Additional Director General of the DRI was not "the proper officer" to exercise the power under Section 28(4). The Court noted that the proper officer refers to the officer who, in the first instance, assessed and cleared the goods. The Court further observed that the notification purportedly issued by the Central Board of Excise and Customs (CBEC) to entrust the functions of a proper officer to DRI officers was invalid, as it was issued under a non-existent power under Section 2(34) of the Customs Act. Therefore, the initiation of recovery proceedings by the DRI was without jurisdiction and liable to be set aside.

3. Limitation Period for Issuing a Show Cause Notice under Section 28(4):
The show cause notice was issued on 19.08.2014, and under Section 28(4), it must be issued within five years from the relevant date, which is the date on which the goods were assessed and cleared. The Court examined whether there was any suppression of facts by the importers that would justify the extended period of limitation. It was found that the importers had submitted the Bill of Entry along with literature detailing the specifications of the cameras, and the Customs authorities had verified and cleared the goods based on these documents. The Court concluded that there was no wilful misstatement or suppression of facts by the importers, and therefore, the extended period of limitation was not applicable.

4. Whether There Was Any Wilful Misstatement or Suppression of Facts by the Importers:
The Court scrutinized the importers' actions and found that they had disclosed all relevant information to the Customs authorities, including the specifications of the cameras. The Customs authorities had the opportunity to verify the information and had cleared the goods based on their assessment. The Court held that there was no evidence of wilful misstatement or suppression of facts by the importers, and thus, the extended period of limitation for issuing a show cause notice under Section 28(4) was not available.

Conclusion:
The Supreme Court allowed the appeals, set aside the common order dated 19.12.2017 passed by the CESTAT, New Delhi, and quashed the impugned demand notices issued against the appellants. The Court held that the recovery proceedings initiated by the DRI were invalid and without jurisdiction. Consequently, the demands raised against the importers were also set aside. The parties were directed to bear their own costs.