Case Law Details

Case Name : Modern Insecticides Limited Vs Commissioner of Customs (CESTAT Chandigarh)
Appeal Number : Customs Appeal No. 61392 of 2019 [DB]
Date of Judgement/Order : 05/10/2021
Related Assessment Year :

Modern Insecticides Limited Vs Commissioner of Customs (CESTAT Chandigarh)

Although Review Petition filed by the Revenue has been pending before the Hon’ble Apex Court in the above said case but there after in the case of Commissioner of Customs Kandla vs. M/s. Agarwal Metals & Alloys (supra) again the Hon’ble Apex Court has follow up the decision of Canon India Pvt. Ltd. (supra) and hold that the Additional Director General (ADG), DRI is not a proper Officer within the meaning of Section 28 (4) read with Section 2 (34) of Customs Act, 1962. Further, the said decision has been followed by the Hon’ble Madras High Court in the case of Quantum Coal Energy Pvt. Ltd. (supra) and the jurisdictional Hon’ble High Court of Punjab & Haryana in the case of Steelman Industries vs. Union of India & Ors. (supra).

In view of the above, following the above said decisions, we hold that Additional Director General, DRI, Ludhiana is not a proper Officer to issue Show Cause Notice under Section 28 (4) read with Section 2 (34) of Customs Act, 1962. Therefore, the impugned proceedings are set aside.

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

This appeal filed by the appellant is against the order passed by Commissioner, Customs, Ludhiana wherein Show Cause Notice has been issued by Additional Director General, DRI, Ludhiana.

2. The learned Counsel for the appellant submits that in this matter Show Cause Notice has been issued by Additional Director General (DRI), Ludhiana who is not a proper Officer to issue Show Cause Notice under Section 28 (4) read with Section 2 (34) of Customs Act, 1962. Therefore, impugned order is to be set aside. In support of his contention, he relied on the decisions as follows:-

1. Canon India P. Ltd. vs. Commissioner of Customs reported in 2021 – TIOL – 123 – SC – CUS – LB.

2. Commissioner of Customs Kandla vs. M/s. Agarwal Metals & Alloys reported in 2021 – TIOL – 233 – SC – CUS – LB.

3. Quantum Coal Energy Pvt. Ltd. vs. Commissioner, Office of the Commissioner of Customs reported in 2021 – TIOL – 711 – HC – MAD – CUS.

4. Steelman Industries vs. Union of India & Ors CWP No.11287 of 2015 decided on 04.08.2021.

5. Godrej Boyee Manufacturing Co. Ltd. vs. Union of India CWP No.19871 of 2020, Order dated 19.04.2021.

3. On the other hand, learned Authorised Representative for the Department submitted that the respondents have filed a Review Petition before the Hon’ble Apex Court in the case of Canon India P. Ltd. (supra). Therefore, matter be kept pending. He further submitted that documents were sought from the Department to argue the matter on merits. Therefore, matter be adjourned.

4. Heard the parties and considered the submissions.

5. We find that the appellant primarily had challenged the jurisdiction of Additional Director General, DRI, Ludhiana have no power to issue Show Cause Notice. Therefore, issue before us to decide as under:-

“Whether Additional Director General, DRI, Ludhiana is having jurisdiction to issue Show Cause Notice under Section 28 (4) read with Section 2 (34) of Customs Act, 1962 or not.”

6. The said issue has been dealt by the Hon’ble Apex Court in the case of Canon India P. Ltd. (supra) wherein the Hon’ble Apex Court held as under:-

18. The next step is to see whether an Additional Director General of the DRI who has been appointed as an officer of Customs, under the notification dated 7-3-2002, has been entrusted with the functions under Section 28 as a proper officer under the Customs Act. In support of the contention that he has been so entrusted with the functions of a proper officer under Section 28 of the Customs Act, Shri Sanjay Jain, Learned Additional Solicitor General relied on a Notification No. 40/2012, dated 2-5-2012 issued by the Central Board of Excise and Customs. The notification confers various functions referred to in Column (3) of the notification under the Customs Act on officers referred to in Column (2). The relevant part of the notification reads as follows :-

“[To be published in the Gazette of India, Extraordinary, Part I,
Section 3, Sub-section (i)]

Government of India

Ministry of Finance

(Department of Revenue)

Notification No. 40/2012-Customs (N.T.)

New Delhi, dated the 2nd May, 2012

S.O. (E). – In exercise of the powers conferred by sub-section (34) of section 2 of the Customs Act, 1962 (52 of 1962), the Central Board of Excise and Customs, hereby assigns the officers and above the rank of officers mentioned in Column (2) of the Table below, the functions as the proper officers in relation to the various sections of the Customs Act, 1962, given in the corresponding entry in Column (3) of the said Table :-

Sl.
No.
Designation of the officers Functions under Section of the        Customs Act, 1962
(1) (2) (3)
1. Commissioner of Customs (i) Section 33
2. Additional Commissioner or Joint Commissioner of Customs (i)               

(ii)              

Sub-section of section and

Section 149

(5)

46;

3. Deputy Commissioner or  Assistant Commissioner of  Customs and      Central Excise (i)  

(ii)              

(iii)             

(iv)             

(v)              

(vi)             

….. ….. ….. ….. ….. Section 28;

….. ”

19.It appears that a Deputy Commissioner or Assistant Commissioner of Customs has been entrusted with the functions under Section 28, vide Sl. No. 3 above. By reason of the fact that the functions are assigned to officers referred to in Column (3) and those officers above the rank of officers mentioned in Column (2), the Commissioner of Customs would be included as an officer entitled to perform the function under Section 28 of the Act conferred on a Deputy Commissioner or Assistant Commissioner but the notification appears to be ill-founded. The notification is purported to have been issued in exercise of powers under sub-section (34) of Section 2 of the Customs Act. This section does not confer any powers on any authority to entrust any functions to officers. The sub-Section is part of the definitions clause of the Act, it merely defines a proper officer, it reads as follows :-

“2. Definitions. – In this Act, unless the context otherwise requires, –

(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.”

20.Section 6 is the only Section which provides for entrustment of functions of Customs officer on other officers of the Central or the State Government or local authority, it reads as follows :-

“6. Entrustment of functions of Board and customs officers on certain other officers.

The Central Government may, by notification in the Official Gazette, entrust either conditionally or unconditionally to any officer of the Central or the State Government or a local authority any functions of the Board or any officer of customs under this Act.”

21. 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 4-12-1957 issued by the Ministry of Finance and Customs officers who, till 11-5-2002, were appointed by the Central Government. The notification which purports to entrust functions as proper officer under the Customs Act has been issued by the Central Board of Excise and Customs in exercise of non-existing power under Section 2(34) of the Customs Act. 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.

22. In the above context, it would be useful to refer to the decision of this Court in the case of Commissioner of Customs v. Sayed Ali and Another [(2011) 3 SCC 537 = 2011 (265) E.L.T. 17 (S.C.)] wherein the proper officer in respect of the jurisdictional area was considered. The consideration made is as hereunder :-

“16. It was submitted that in the instant case, the import manifest and the bill of entry were filed before the Additional Collector of Customs (Imports), Mumbai; the bill of entry was duly assessed, and the benefit of the exemption was extended, subject to execution of a bond by the importer which was duly executed undertaking the obligation of export. The Learned Counsel argued that the function of the preventive staff is confined to goods which are not manifested as in respect of manifested goods, where the bills of entry are to be filed, the entire function of assessment, clearance, etc. is carried out by the appraising officers functioning under the Commissioner of Customs (Imports).

Before adverting to the rival submissions, 17. it would be expedient to survey the relevant provisions of the Act. Section 28 of the Act, which is relevant for our purpose, provides for issue of notice for payment of duty that has not been paid, or has been short-levied or erroneously refunded, and provides that :

“28. Notice for payment of duties, interest, etc. – (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, –

(a) in the case of any import made by any individual for his personal use or by Governmentor by any educational, research or charitable institution or hospital, within one year;

(b) in any other case, within six months,

from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :

Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words one year‟ and six months‟, the words five years‟ were substituted.”

18. It is plain from the provision that the proper officer‟ being subjectively satisfied on the basis of the material that may be with him that customs duty has not been levied or short levied or erroneously refunded on an import made by any individual for his personal use or by the Government or by any educational, research or charitable institution or hospital, within one year and in all other cases within six months from the relevant date, may cause service of notice on the person chargeable, requiring him to show cause why he should not pay the amount specified in the notice. It is evident that the notice under the said provision has to be issued by the proper officer‟.

19. Section 2(34) of the Act defines a proper officer‟, thus :

2. Definitions.

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 Commissioner of Customs;‟

It is clear from a mere look at the provision that only such officers of customs who have been assigned specific functions would beproper officers‟ in terms of Section 2(34) the Act. Specific entrustment of function by either the Board or the Commissioner of Customs is therefore, the governing test to determine whether an officer of customs‟ is the proper officer‟.

20. From a conjoint reading of Sections 2(34) and 28 of the Act, it is manifest that only such a Customs Officer who has been assigned the specific functions of assessment and reassessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose inasmuch as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions.”

23. We, therefore, hold that 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 before us are invalid without any authority of law and liable to be set aside and the ensuing demands are also set aside.”

7. Although Review Petition filed by the Revenue has been pending before the Hon’ble Apex Court in the above said case but there after in the case of Commissioner of Customs Kandla vs. M/s. Agarwal Metals & Alloys (supra) again the Hon’ble Apex Court has follow up the decision of Canon India Pvt. Ltd. (supra) and hold that the Additional Director General, DRI is not a proper Officer within the meaning of Section 28 (4) read with Section 2 (34) of Customs Act, 1962. Further, the said decision has been followed by the Hon’ble Madras High Court in the case of Quantum Coal Energy Pvt. Ltd. (supra) and the jurisdictional Hon’ble High Court of Punjab & Haryana in the case of Steelman Industries vs. Union of India & Ors. (supra).

8. In view of the above, following the above said decisions, we hold that Additional Director General, DRI, Ludhiana is not a proper Officer to issue Show Cause Notice under Section 28 (4) read with Section 2 (34) of Customs Act, 1962. Therefore, the impugned proceedings are set aside.

9. In the result, the appeal is allowed with consequential relief, if any.

[Operative part of the order pronounced in the open Court]

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