Beriwala Impex Pvt. Ltd. Vs Commr. of Customs (Port) (CESTAT Kolkata)
Facts- The appellant imported LDPE re-processed granules through Chennai and Kolkata ports and ICD Tughlakabad which were assessed by the proper officers and cleared for home consumption. DRI received information that the appellant had been resorting to undervaluation of the LDPE granules which resulted in short levy of duty and conducted searches, recorded statements and after completing investigation, came to the conclusion that the appellant had undervalued the imported goods. Additional Director General, DRI issued the SCN proposing recovery of differential duty under section 28 along with interest, confiscation of the impugned goods and imposition of penalties. Adjudicating upon the SCN, the learned Commissioner has, by the impugned order, confirmed a demand of differential duty of Rs. 96,42,062 and imposed a penalty of equal amount under section 112.
Conclusion- Held that when the legislature uses the definite article “the” it refers to a particular thing or particular person. This brings certitude as to who can issue a Show Cause Notice to demand duty or tax not levied short levied, not paid, short paid, etc. in all these three Acts viz., Customs Act, Central Excise Act, and the Finance Act, We also find legislature has also used definite article in subsequent enactments. In the Central Goods and Services Tax Act, 2017 (CGST Act) section 73 deals with demands other than cases of fraud, wilful misstatement or suppression of facts while section 74 deals with cases where these elements are present. In both sections, the notice can be issued by “the proper officer”. These provisions of CGST Act, 2017 are also made applicable to Inter-state Goods and Services Tax Act. Similar provisions are also there in the State Goods and Services Tax Acts of various states. Section 156 of the Income Tax Act, 1961 also gives the power of issuing notice of demand on the assessing officer. What is common in these provisions of various enactments is that the power to issue notice demanding tax or duty is always conferred on a particular officer which legislative intent is clarified by using definite article “the” instead of “a” or “any” or “any of the”. The proposed Section 110AA in the Finance Bill 2022 is also consistent with the legislature conferring the powers of raising a demand on only one officer.
Concluded that-
• DRI officers have not been entrusted the functions under the Customs Act by the Government under section 6 and hence cannot perform such functions.
• The SCN in this case was not issued by ‘the proper officer‘, i.e., the officer who had assessed the Bills of Entry in the first place.
FULL TEXT OF THE CESTAT KOLKATA ORDER
M/s. Beriwala Impex1 filed this appeal assailing Order-in-Original2 dated 14.7.2014 passed by the Commissioner of Customs, Kolkata (Port), whereby he adjudicated upon the Show Cause Notice3 dated 3.4.2012 issued by the Additional Director General, Directorate of Revenue Intelligence4, Chennai, to the appellant in respect of the goods imported by it through Kolkata port, Chennai port and Inland Container Depot (ICD), Tughlakabad, Delhi. The appellant was asked to submit its replies to the respective jurisdictional Commissioners. Since the same issues have to be decided with respect to three different customs locations, the Central Board of Excise and Customs5 issued order dated 20.12.2013 from file No. 437/94/2013-Cus IV appointing Commissioner of Customs, Seaport- Import, Kolkata as the common adjudicating authority in the case. Therefore, the learned Commissioner has decided the case with respect to all the imports made through the three ports.
2. The appellant imported LDPE re-processed granules through Chennai and Kolkata ports and ICD Tughlakabad which were assessed by the proper officers and cleared for home consumption. DRI received information that the appellant had been resorting to undervaluation of the LDPE granules which resulted in short levy of duty and conducted searches, recorded statements and after completing investigation, came to the conclusion that the appellant had undervalued the imported goods. Additional Director General6, DRI issued the SCN proposing recovery of differential duty under section 28 along with interest, confiscation of the impugned goods and imposition of penalties. Adjudicating upon the SCN, the learned Commissioner has, by the impugned order, confirmed a demand of differential duty of Rs. 96,42,062 and imposed a penalty of equal amount under section 112.
3. The impugned order was contested on several grounds in this appeal. A miscellaneous application was filed seeking permission to raise an additional ground that the SCN was issued without authority because DRI officers were not proper officers to issue a demand under section 28 in view of the judgment of Hon‘ble Supreme Court in the case Canon India7. The miscellaneous application was allowed.
4. Learned counsel for the appellant submitted that the impugned order needs to be set aside because it was passed in pursuance of SCN issued by the DRI demanding duty under section 28 and officers of DRI are not ‘proper officers‘ to issue an SCN under that section as held by a three member bench of Hon‘ble Supreme Court in the case of Canon India. He submits that this judgment was followed subsequently by Hon‘ble Supreme Court, various High Courts and also various benches of this Tribunal and wherever the SCN demanding duty under section 28 was issued by DRI, all such orders were set aside on the ground of lack of jurisdiction. He prays that a similar decision may be taken and the impugned order may be set aside and their appeal may be allowed.
5. Learned Departmental Representative, on the other hand, submits that the judgment of Hon‘ble Supreme Court in Canon India was that DRI officers were not proper officers as per section 2(34) of the Customs Act. However, there is another section-Section 28(11) according to which all Customs officers are proper officers for the purpose of assessment under section 17. Thus, there are two sections under which a Customs officer will be a proper officer- Section 2(34) and section 28(11)- which read as follows:
Section 2 Definitions:
(34) “proper officer”, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Principal Commissioner of Customs or Commissioner of Customs;
Section 28 Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.
(1)…. (10)
(11) Notwithstanding anything to the contrary contained in any judgement, decree or order of any court of law, tribunal or other authority, all persons appointed as officers of Customs under sub-section (1) of section 4 before the 6th day of 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 for the purposes of this section.
6. He submits that while as per Section 2(34), an officer has to be notified to be a proper officer, section 28(11), itself defines that all persons appointed as officers of Customs under sub-section (1) of Section 4 before 6th July 2011, as proper officers and are deemed to have always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers under section 28. Thus, no notification is required in respect of the officers covered under section 28(11). Officers of DRI were appointed as Customs officers under sub-section (1) of Section 4 by Notification No.17/2002 – Customs (NT) dated 7.3.2002 as has been noted in Canon India. The relevant extract of the judgment is as follows:
16. At this stage, we must also examine whether the Additional Director General of the DRI who issued the recovery notice under Section 28(4) was even a proper officer. The Additional Director General can be considered to be a proper officer only if it is shown that he was a Customs officer under the Customs Act. In addition, that he was entrusted with the functions of the proper officer under Section 6 of the Customs Act. The Additional Director General of the DRI can be considered to be a Customs officer only if he is shown to have been appointed as Customs officer under the Customs Act.
17. Shri Sanjay Jain, learned Additional Solicitor General, relied on a Notification No.17/2002 – Customs (NT) dated 7.3.2002 to show all Additional Directors General of the DRI have been appointed as Commissioners of Customs. At the relevant time, the Central Government was the appropriate authority to issue such a notification. This notification shows that all Additional Directors General, mentioned in Column (2), are appointed as Commissioners of Customs.
(emphasis supplied)
7. Learned Departmental Representative submits that it is undisputed that DRI officers were appointed as Customs officers under section 4(1) prior to 6th July 2011. After the notification dated 7.3.2002 appointing DRI officers as Customs officers, another Notification No.40/2012-Customs (N.T.) New Delhi, dated the 2nd May, 2012 was issued by the Central Board of Excise and Customs under section 2(34), assigning various functions including functions under section 28 to officers of and above certain ranks. This notification has been struck down in Canon India as having been issued without authority.
8. He submits that from the judgment of Hon‘ble Supreme Court in Canon India, it does not appear that section 28(11) was either under consideration or has been struck down by Hon‘ble Supreme Court. Nor has this section been struck down by any High Court till date. Explaining the background to insertion of section 28(11) and its legislative intent, he submits that Hon‘ble Supreme Court had, in Commissioner vs. Sayed Ali8, held that officers of Customs (Preventive) were not proper officers to issue SCN under section 28. Thereafter, Parliament amended section 28 retrospectively inserting section 28(11) as above. The Statement of objects and reasons presented by the Hon‘ble Finance Minister while introducing the bill clarifies the legislative intent of section 28(11). It reads as follows:
STATEMENT OF OBJECTS AND REASONS
The Customs Act, 1962 consolidates and amends the law relating to customs. Clause (34) of section 2 of the said Act defines the expression ―proper officer” in relation to the functions under the said Act to mean the officer of customs who is assigned those functions by the Central Board of Excise and Customs or the Commissioner of Customs. Recently, a question has arisen as to whether the Commissioner of Customs (Preventive) is competent to exercise and discharge the powers of a proper officer for issue of a notice for the demand of duty. The Hon‟ble Supreme Court of India in Commissioner of Customs versus Sayed Ali and Anr. (Civil Appeal Nos. 4294-4295 of 2002) held that only a customs officer who has been specifically assigned the duties of assessment and reassessment in the jurisdiction area is competent to issue a notice for the demand of duty as a proper officer. As such the Commissioner of Customs (Preventive) who has not been assigned the function of a ―proper officer” for the purposes of assessment or re-assessment of duty and issue of show cause Notice to demand Customs duty under Section 17 read with Section 28 of the Act in respect of goods entered for home consumption is not competent to function as a proper officer which has not been the legislative intent.
2. In view of the above the Show Cause Notices issued over the time by the Customs officers such as those of the Commissionerates of Customs (Preventive), Directorate General of Revenue Intelligence and others, who were not specifically assigned the functions of assessment and reassessment of customs duty may be construed as invalid. The result would be huge loss of revenue to the exchequer and disruption in the revenue already mobilized in cases already adjudicated. However, having regard to the urgency of the matter, the Government issued notification on 6th July, 2011 specifically declaring certain officers as proper officers for the aforesaid purposes.
3. In the circumstances, it has become necessary to clarify the true legislative intent that Show Cause Notices issued by Customs officers, i.e., officers of the Commissionerates of Customs (Preventive), Directorate General of Revenue Intelligence (DRI), Directorate General of Central Excise Intelligence (DGCEI) and Central Excise Commissionerates for demanding customs duty not levied or short levied or erroneously refunded in respect of goods imported are valid, irrespective of the fact that any specific assignment as proper officer was issued or not. It is, therefore, purposed to amend the Customs Act, 1962 retrospectively and to validate anything done or any action taken under the said Act in pursuance of the provisions of the said Act at all material times irrespective of issuance of any specific assignment on 6th July, 2011.
4. The Bill seeks to achieve the above objects.
9. He submits that the constitutional validity of section 28(11) was challenged before the Hon‘ble High Court of Delhi in the case of Mangáli Impex9. The High Court held that the section is constitutionally valid but set aside its retrospective application. On an appeal by revenue, Hon‘ble Supreme Court stayed10 the operation of this judgment and order of Hon‘ble Delhi High Court. The validity of Section 28(11) was also upheld by the Hon‘ble High Court of Bombay in the case of Sunil Gupta Vs. Union of India11. Thus, section 28(11) is operative in its full force, according to which, any person appointed as Customs officer under section 4(1) prior to 6th July 2011 is a proper officer both under section 17 and also under section 28. Any notification under section 2(34) in respect of such officers assigning functions under section 17 or section 28 is redundant because the section itself designates them as proper officers.
10. He, therefore, submits that DRI officers, being proper officers both under section 17 and under section 28, the SCN issued in this case is valid and cannot be struck down.
11. We have considered the submissions made and case laws relied upon by both sides. Learned counsel for the appellant was correct in his assertion that DRI officers were held to be NOT proper officers under in Canon India and hence the order issued in pursuance of an SCN issued by DRI demanding duty was set aside. The ratio of Canon India was followed in the following cases and the orders confirming demands in pursuance of SCN issued by DRI were set aside.
Supreme Court
1. Commissioner of Customs vs Agarwal Metals and Alloys12
Madras High Court- Madurai bench
2. Quantum Coal Energy Pvt. Ltd vs Commissioner of Customs13
Karnataka High Court
3. Givaudan India Pvt. Ltd. vs Commissioner of Customs14
Punjab and Haryana High Court
4. Godrej & Boyce Manufacturing Co. Ltd. vs UOI15
Tribunal
5. Principal Commissioner, Customs, ACC Import vs Dish TV India Limited, Rajeev Dalmia and Virender Kumar Tagra16
6. Evershine Customs (C&F) Pvt. Ltd vs Commissioner of Customs17
12. Learned Departmental Representative is correct in his submission that Section 28(11) itself defines all persons appointed as Customs officers under section 4(1) prior to 6th July 2011 as proper officers both for assessment under section 17 and for issuing demands under section 28 and Section 28(11) was not under consideration in Canon India. He is also correct in his submission that since officers of DRI were appointed as Customs officers under section 4(1) prior to 6th July 2011, as noted in Canon India, they are covered by section 28(11). He is also correct in his submission that the constitutional validity of section 28(11) was upheld except to the extent of its retrospective application by Hon‘ble High Court of Delhi in Mangali Impex and its validity was fully upheld by Hon‘ble High Court of Bombay in Sunil Gupta. The judgment of Hon‘ble High Court of Delhi setting aside the retrospective application of section 28(11) in Mangali Impex was stayed by the Hon‘ble Supreme Court. There does not appear to be any judgment of Hon‘ble Supreme Court or any High Court whereby Section 28(11) was held to be invalid. Thus, section 28(11) is on the statute book and is valid. The case laws cited by both sides are binding on us and we proceed to examine and decide this case accordingly. We proceed to discuss this issue in depth and examining all dimensions of the issue.
14. The Directorate of Revenue Intelligence was created by a notification by the Government of India dated 4 December 1957. Later, Customs Act, 1962 was enacted replacing its predecessor Customs laws such as Sea Customs Act, 1878. Section 3 of the Customs Act, 1962 defines various classes of officers of Customs which does NOT include DRI officers till date. Section 4 states that the Board may appoint such persons as it thinks fit to be officers of customs. Officers of DRI are not officers of Customs as per Section 3 itself but they were appointed through a notification under section 4. The Customs Act also does not mention DRI or Revenue Intelligence anywhere nor does it confer any powers on such officers. Thus, officers of DRI and Customs officers were treated as distinct and separate by the legislature under the Customs Act.
15. A perusal of some other enactments also shows that DRI and Customs officers were treated as separate by legislature. As per the Narcotic Drugs and Psychotropic Substances Act, 198518 the government can empower officers of various departments to conduct search, seizures and make arrests. It clearly mentions Customs officers and officers of Revenue Intelligence separately. Section 42 of this Act reads as follows:
42. Power of entry, search, seizure and arrest without warrant or authorisation.—(l) Any such officer (being an officer superior in rank to a peon, sepoy or constable) of the departments of central excise, narcotics, customs, revenue intelligence or any other department of the Central Government including para-military forces or armed forces as is empowered in this behalf by general or special order by the Central Government, …….. may between sunrise and sunset:
(a) enter into and search any such building, conveyance or place;
(b) in case of resistance, break open any door and remove any obstacle to such entry;
(c) seize such drug or substance and all materials used in the manufacture thereof and any other article and any animal or conveyance which he has reason to believe to be liable to confiscation under this Act and any document or other article which he has reason to believe may furnish evidence of the commission of any offence punishable under this Act or furnish evidence of holding any illegally acquired property which is liable for seizure or freezing or forfeiture under Chapter VA of this Act; and
(d) detain and search, and, if he thinks proper, arrest any person whom he has reason to believe to have committed any offence punishable under this Act… ”
16. If officers of Revenue Intelligence were also Customs officers, there would have been no need to mention them separately in section 42 of the NDPS Act.
17. The Right to Information Act, 2005 provided an exemption to certain organisations. Section 24 and Second Schedule of this Act read as follows:
24. (1) Nothing contained in this Act shall apply to the intelligence and security organisations specified in the Second Schedule, being organisations established by the Central Government or any information furnished by such organisations to that Government:
……………
THE SECOND SCHEDULE (See section 24)
Intelligence and security organisation established by the Central Government
1. Intelligence Bureau.
2. Research and Analysis Wing of the Cabinet Secretariat.
3. Directorate of Revenue Intelligence.
4. Central Economic Intelligence Bureau.
5. Directorate of Enforcement.
6. Narcotics Control Bureau.
7. Aviation Research Centre.
8. Special Frontier Force.
9. Border Security Force.
10. Central Reserve Police Force.
11. Indo-Tibetan Border Police.
12. Central Industrial Security Force.
13. National Security Guards.
14. Assam Rifles.
15. Special Service Bureau
16. Special Branch (CID), Andaman and Nicobar.
17. The Crime Branch-C.I.D.-CB, Dadra and Nagar Haveli.
18. Special Branch, Lakshadweep Police.
18. It is evident from the RTI Act that DRI was treated by the legislature as an intelligence and security organisation created by the Government and hence was granted immunity under section 24. Such immunity was not given to the Customs officers. Like Customs Act and NDPS Act, RTI Act also treats officers of DRI as separate and distinct from the Customs officers. The nature of DRI also becomes clearer from its functions which, according to the website of DRI are as follows19:
