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2022 (2) TMI 207 - AT - CustomsJurisdiction - notice not issued by competent person - scope of 'Proper Officer' - Valuation of imported goods - mis-declaration of value in the 11 Bills of Entry - rejection of declared value - demand of differential duty - Section 28(4) of Customs Act - Confiscation - penalties - HELD THAT - The constitutional validity of section 28(11) of the Act was challenged before the High Court of Delhi in the case of M/S MANGALI IMPEX LTD., M/S PACE INTERNATIONAL AND OTHERS VERSUS UNION OF INDIA AND OTHERS 2016 (5) TMI 225 - DELHI HIGH COURT . The High Court held that the section is constitutionally valid but set aside its retrospective application. Revenue appealed to the Supreme Court and the operation of this judgment and order of the Delhi High Court was stayed by the Supreme Court 2016 (8) TMI 1181 - SC ORDER - Sub-section (11) of section 28 of the Act has not been set aside by any High Court or Supreme Court and hence it continues to be in force till date. In fact, its constitutional validity has been examined and upheld by the High Court of Delhi in Mangali Impex. Thus, after the amendment, there are several proper officers‟ under section 17 with respect to the same type of goods imported through the same port/ airport/land customs station such as the assessing officer of the Appraising Group (appraiser or Assistant Commissioner or Deputy Commissioner) of the Custom House, the officers of the preventive Commissionerates who have jurisdiction over the area, the central excise officers who may have been notified as customs officers in the area, officers of Directorate of Revenue Intelligence who have jurisdiction over the area, etc. The decision of Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT is not only that officers of DRI were not proper officers under Section 2(34) of the Act, but the power of issuing a notice under Section 28 of the Act is conferred on the proper officer and not a proper officer or any proper officer. The proper officer for this purpose is held to be the officer of the appraising group who has assessed the Bill of Entry in the first place or his successor in office. This is because the notice under section 28 of the Act is a power of re-opening an assessment which is not inherent and is specially conferred on the assessing officer who alone can exercise it. As the SCN itself has been issued in this case by a person not competent to issue a demand under section 28 of the Act, the demand cannot be sustained. Neither can the proposals for confiscation and imposition of penalties which follow the confirmation of such demand - Demand do not sustain - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Validity of the Show Cause Notice (SCN) issued under Section 28(4) of the Customs Act, 1962. 2. Authority of the Commissioner of Customs (Preventive) to issue the SCN. 3. Impact of the Supreme Court judgment in Cannon India on the authority to issue SCNs. 4. Retrospective amendment of Section 28(11) of the Customs Act and its constitutional validity. 5. Consequences of an invalid SCN on the demand for differential duty, confiscation, and penalties. Detailed Analysis: 1. Validity of the Show Cause Notice (SCN) issued under Section 28(4) of the Customs Act, 1962: The SCN was issued by the Commissioner of Customs (Preventive) on the grounds of mis-declaration of the value in 11 Bills of Entry. The SCN proposed to reassess the value of the goods, recover differential duty, confiscate goods, and impose penalties. The Tribunal examined the sustainability of the SCN, considering the validity of the demand under Section 28(4) of the Act. 2. Authority of the Commissioner of Customs (Preventive) to issue the SCN: The Tribunal referred to the Supreme Court's decision in Commissioner vs. Sayed Ali, which held that only officers specifically assigned the functions of assessment under Section 17 by the Board or the Commissioner of Customs are considered "proper officers" to issue a notice under Section 28. The Commissioner of Customs (Preventive) was not assigned such functions, rendering the SCN issued by him unsustainable. 3. Impact of the Supreme Court judgment in Cannon India on the authority to issue SCNs: The Tribunal highlighted the Supreme Court's judgment in Cannon India, which emphasized that the power to issue a notice under Section 28 is conferred on "the proper officer" who initially assessed the Bill of Entry or his successor, not any other officer. This judgment clarified that the Additional Director General of DRI was not the proper officer to issue SCNs under Section 28(4), reinforcing that only the original assessing officer or his successor could reopen assessments. 4. Retrospective amendment of Section 28(11) of the Customs Act and its constitutional validity: Section 28(11) was inserted retrospectively to validate actions taken by officers who were not initially designated as proper officers. The constitutional validity of this amendment was upheld by the Delhi High Court in Mangali Impex, though its retrospective application was set aside. The Supreme Court stayed the operation of the Delhi High Court's judgment, and Section 28(11) remained in force. Despite this, Cannon India clarified that the proper officer for re-assessment must be the same as the one who performed the initial assessment. 5. Consequences of an invalid SCN on the demand for differential duty, confiscation, and penalties: The Tribunal concluded that since the SCN was issued by an officer not competent to do so, the demand for differential duty, confiscation, and penalties could not be sustained. The impugned order, which confirmed the demand based on the invalid SCN, was set aside. Consequently, the appeal was allowed, and the appellant was granted relief. Conclusion: The Tribunal's judgment emphasized the necessity for SCNs to be issued by the proper officer as defined under the Customs Act, aligning with the Supreme Court's interpretation in Cannon India. The retrospective amendment of Section 28(11) did not alter the requirement for the proper officer to be the one who initially assessed the goods. The invalid SCN led to the setting aside of the demand, confiscation, and penalties, providing relief to the appellant.
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