Steelman Industries Vs Union of India (Punjab and Haryana High Court)
Conclusion: In present facts of the case the Hon’ble High Court relied on the Judgment of M/s Canon India and have observed that Joint/Additional Director (in short “DRI”) is not the ‘proper officer’ to issue show cause notice under Section 28(4) of Customs Act, 1962.
Facts: An application was filed by the applicant/petitioner to dispose of the present writ petition in light of the judgment dated 09.03.2021 passed by the Supreme Court in ‘Civil Appeal No.1827 of 2018’ titled ‘M/s Canon India Pvt. Ltd. Vs. Commissioner of Customs, cited at ‘2021 (376) ELT 3 (SC)’, wherein it was held that the Joint/Additional Director (in short “DRI”) is not the “proper officer” to issue show cause notice under Section 28(4) of Customs Act, 1962 and that in the present case also the show cause notice culminating into the order-in-original dated 15.05.2015 has been issued by the Joint Director, DRI.
The Petitioner submitted that as per Rule 16 of the Customs and Central Excise Duties and Service Tax Drawback Rules 1995, only the ‘proper officer’ of the custom department can raise the demand. The Show Cause Notice could be issued by proper officer and respondent is not a proper officer. There is no notification by which the Joint Director-DRI has been notified as proper officer. The Hon’ble Supreme Court in case of Commissioner of Customs Versus Sayad Ali, 2011 (265) ELT 17 (SC) has clearly held that proper officer means an officer who has been specifically entrusted functions either by Board or by Commissioner of Customs. It has further been stated that as per settled law, once the show cause notice has been issued by an incompetent authority, then the entire proceeding subsequent to the same, is also illegal in law. Reliance for the same has been placed upon the judgment of the Supreme Court in M/s Canon India Pvt. Ltd. (supra), wherein it was held that:
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.”
Further reliance has also been placed upon the judgment of the Division Bench of Karnataka High Court in Writ Petition No.10773 of 2018 dated 14.07.2021 titled ‘Shri Mohan C. Suvarna Vs. Principal Commissioner of Customs’ to contend that once the show cause notice was bad in law then even the order passed in pursuance of the same was required to be set aside.
On the basis of the above submissions, the Hon’ble High Court allowed the writ petition and set aside the entire proceedings from the issuance of the Show Cause Notice dated 29.11.2012 to the passing of the order dated 15.05.2015.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
This is an application filed by the applicant/petitioner to dispose of the present writ petition in light of the judgment dated 09.03.2021 passed by the Supreme Court in ‘Civil Appeal No.1827 of 2018’ titled ‘M/s Canon India Pvt. Ltd. Vs. Commissioner of Customs, cited at ‘2021 (376) ELT 3 (SC)’. It has further been prayed that the present petition, which was adjourned sine die to await the crystallization of the issue of law arising in the present case, by the Supreme Court of India, may kindly be fixed for hearing.
It has been stated in the application that the Supreme Court of India in M/s Canon India Pvt. Ltd. (supra) has held that the Joint/Additional Director (in short “DRI”) is not the “proper officer” to issue show cause notice under Section 28(4) of Customs Act, 1962 and that in the present case also the show cause notice culminating into the order-in-original dated 15.05.2015 has been issued by the Joint Director, DRI.
In view of the averments made in the application, and also with the consent of Learned Counsel for both the parties, the main petition is taken up on board for hearing today itself.
CWP-11287-2015
That the challenge in the present writ petition is to the order-in-original dated 15.05.2015 (P-10), which was passed in pursuance of the show cause notice dated 29.11.2012 (Annexure P-1) issued by the Joint Director, DRI, Ludhiana Regional Unit. Several issues have been raised in the present writ petition including the issue that the Joint Director, DRI is not the ‘proper officer’ and has no jurisdiction to issue the said show cause notice. It has specifically been stated that as per Rule 16 of the Customs and Central Excise Duties and Service Tax Drawback Rules 1995, only the ‘proper officer’ of the custom department can raise the demand. The relevant portion of para 17.C and 17.D of the writ petition, where the said issues have been raised are reproduced hereinbelow: –
“C. That as per Rule 16 Customs and Central Excise Duties and Service Tax Drawback Rules 1995, the claimant shall on demand by a proper officer of Customs repay the amount erroneously or in excess paid to him. Rule 16 is reproduced as under: –
Rule 16. Repayment of erroneous or excess payment of drawback and interest.– Where an amount of drawback and interest, if any, has been erroneously or the amount so paid is in excess of what the claimant is entitled to, the claimant shall, on demand by a proper officer of Customs repay the amount so paid erroneously or in excess, as the case may be, and where the claimant fails to repay the amount it shall be recovered in the manner laid down in sub-section (1) of Section 142 of the Customs Act, 1962 (52 of 1962).
In the above stated Rule, it has been provided that proper officer may raise demand and claimant shall be liable to pay. No period for issuing the show cause notice and recovery has been prescribed. Under Section 28 of the Customs Act, a maximum period of 5 years has been prescribed for recovery of duty not levied or short levied or erroneously refunded.”
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“D. That Show Cause Notice in question was issued by Joint Director, Directorate of Revenue Intelligence, Ludhiana. As per Rule 16 of the Drawback Rules, demand can be raised by a proper officer of Customs. Proper officer of Customs has been defined under Section 2(34) of the Customs Act. Section (34) of the Act is reproduced as under:-
SECTION 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 Commissioner of Customs.
The Show Cause Notice could be issued by proper officer and respondent is not a proper officer. There is no notification by which the Joint Director-DRI has been notified as proper officer. The Hon’ble Supreme Court in case of Commissioner of Customs Versus Sayad Ali, 2011 (265) ELT 17 (SC) has clearly held that proper officer means an officer who has been specifically entrusted functions either by Board or by Commissioner of Customs. In the absence of specific entrustment, the officer or Customs had no power to issue Show Cause Notice. In the present case, there is demand of drawback and it had been raised under Rule 16 of the Drawback Rules. In the absence of any notification, notifying the Joint Director-DRI as proper officer, the Joint Director-DRI had no authority to issue Show Cause Notice. Therefore, the Joint Director-DRI had issued Show Cause Notice in question beyond his jurisdiction.”
It has further been stated that as per settled law, once the show cause notice has been issued by an incompetent authority, then the entire proceeding subsequent to the same, is also illegal in law. Reliance for the same has been placed upon the judgment of the Supreme Court in M/s Canon India Pvt. Ltd. (supra). The relevant portion of the judgment is reproduced herein below: –
“1. This batch of statutory appeals (being Civil Appeal Nos.1827/2018, 1875/2018, 1832/2018 and 3213/2018) under Section 130E of the Customs Act, 1962 arises from a common final order of the Central Excise and Service Tax Appellate (‘CESTAT’) dated 19th December 2017 (‘impugned order’).”
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9. The question that arises is 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. 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”.
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11. 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’. 11. 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. Assessment is a term which includes determination of the dutiability of any goods and the amount of duty payable with reference to, inter alia, exemption or concession of customs duty vide Section 2 (2) (c) of the Customs Act, 1962.
12. The nature of the power to recover the duty, 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. Such a power is not inherent in any authority. Indeed, it has been conferred by Section 28 and other related provisions. The power has been so conferred specifically on “the proper officer” which must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods i.e. the Deputy Commissioner Appraisal Group. Indeed, this must be so because no fiscal statute has been shown to us where the power to re-open assessment or recover duties which have escaped assessment has been conferred on an officer other than the officer of the rank of the officer who initially took the decision to assess the goods.
13. Where the statute confers the same power to perform an act on different officers, as in this case, the two officers, especially when they belong to different departments, cannot exercise their powers in the same case. Where one officer has exercised his powers of assessment, the power to order re-assessment must also be exercised by the same officer or his successor and not by another officer of another department though he is designated to be an officer of the same rank. In our view, this would result into an anarchical and unruly operation of a statute which is not contemplated by any canon of construction of statute.
14. It is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone. As in this case, when the statute directs that “the proper officer” can determine duty not levied/not paid, it does not mean any proper officer but that proper officer alone. We find it completely impermissible to allow an officer, who has not passed the original order of assessment, to re-open the assessment on the grounds that the duty was not paid/not levied, by the original officer who had decided to clear the goods and who was competent and authorised to make the assessment. The nature of the power conferred by Section 28 (4) to recover duties which have escaped assessment is in the nature of an administrative review of an act. The section must therefore be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment. In other words, an officer who did the assessment, could only undertake re-assessment [which is involved in Section 28 (4)].
15. It is obvious that the re-assessment and recovery of duties i.e. contemplated by Section 28(4) is by the same authority and not by any superior authority such as 9 Appellate or Revisional Authority. It is, therefore, clear to us that the Additional Director General of DRI was not “the” proper officer to exercise the power under Section 28(4) and the initiation of the recovery proceedings in the present case is without any jurisdiction and liable to be set aside.
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.
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 II, Section 3, Sub-section (ii)]
Government of India
Ministry of Finance
(Department of Revenue)
Notification No.40/2012-Customs (N.T.) New Delhi, dated the 2 nd 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: –
