DRI officers are “proper officers” and are competent to issue show cause notice u/s 28 the Customs Act, 1962 for custom duty recovery – Supreme Court
In a recent judgment, Hon’ble Supreme Court has held that officers of Directorate of Revenue Intelligence, Commissionerates of Customs (Preventive), Directorate General of Central Excise Intelligence and Commissionerates of Central Excise are “proper officers” and are competent to issue show cause notice u/s 28 the Customs Act, 1962 for custom duty recovery.
ABCAUS Case Law Citation:
4312 (2024) (11) abcaus.in SC
In the instant case, a Review Petition was filed by the Customs Department seeking review of its earlier judgment.
The Central Board of Excise and Customs (the Board vide Notification No. 44/2011-Cus-NT dated 06.07.2011 provided that the Commissioners of Customs (Preventive), Directorate of Revenue Intelligence (“DRI”), Directorate General of Anti Evasion (“DGAE”) and Officers of Central Excise shall be the “proper officers” within the meaning of Section 2(34) of the Customs Act, 1962 (the Act).
In a batch of appeals, the Hon’ble Supreme Court dealt with the question as to whether the officers of DRI would be “proper officers” under Section 2(34) for the purposes of Sections 17 and 28 of the Act respectively; and second, whether such officers are empowered to issue show cause notices demanding customs duty under section 28 of the Act.
The Hon’ble Supreme Court in 2021 held that only such officers who are vested with the power of assessment under Section 17 can be empowered to issue show cause notices under Section 28 or else this would result in a state of chaos and confusion. It also held that unless it is shown that the officers of DRI are at the first instance, customs officers under the Act and are entrusted with the functions of a proper officer under Section 6 of the Act, they would not be competent to issue show-cause notices. It was held that, since no entrustment was made under Section 6 of the Act, the officers of DRI who were not otherwise officers of customs, could not have been assigned as the “proper officers”.
The Custom Department preferred a Review Petition against the said judgement stating that the said judgement required review as there were errors apparent on the face of the record.
The Hon’ble Supreme Court disposed off the Review Petition holding that its previous judgment was rendered without looking into the circular and the notification empowering the officers of DRI to issue show cause notices, thereby seriously affecting the correctness of the same. It was also observed that the judgment failed to consider the statutory scheme of Sections 2(34) and 5 of the Act. As a result, the decision erroneously recorded the finding that since DRI officers were not entrusted with the functions of a proper officer for the purposes of Section 28 in accordance with Section 6, they did not possess the jurisdiction to issue show cause notices for the recovery of duty under Section 28 of the Act.
The Hon’ble Supreme Court further held that Section 97 of the Finance Act, 2022 which, inter-alia, retrospectively validated all show cause notices issued under Section 28 of the Act, cannot be said to be unconstitutional.
The Hon’ble Supreme Court held that the officers of Directorate of Revenue Intelligence, Commissionerates of Customs (Preventive), Directorate General of Central Excise Intelligence and Commissionerates of Central Excise and other similarly situated officers are proper officers for the purposes of Section 28 and are competent to issue show cause notice thereunder.
The Hon’ble Supreme Court further laid down the manner to deal with any further challenge made to the maintainability of such show cause notices issued by this particular class of officers, on the ground of want of jurisdiction for not being the proper officer, which remain pending before various forums.
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