M/S Canon India Private Limited versus Commissioner of Customs
Forum- Supreme Court of India
Date-9th March 2021
Case No.- Civil Appeal No. 1827 of 2018
In a landmark judgment delivered on 09.03.2021, the Hon’ble Supreme Court examined the finer aspects of the Customs Act, and held that where initial decision has been taken by a proper officer, then in view of the expression, “the proper officer” used in Section 28(4) of the Customs Act, any proper officer (especially officer of another Department) could not issue SCN under Section 28(4) of the Act.
Following is the analysis of the said judgment.
The Hon’ble Supreme Court was confronted with a situation where the Digital Still Image Video Cameras (“DSIC”) imported by Canon and Samsung were allowed to avail the benefit of exemption notification as directed by the Deputy Commissioner of Customs, also referred to as the proper officer. Later on, the Additional Director General DRI issued a show-cause notice under section 28(4) of the customs act, 1962, which alleged that the customs authorities had been induced to clear cameras by willful-misstatement and suppression of facts. Subsequently the exemption came to be denied and the consequential confiscation of goods, demand of interest and imposition of penalty as provided for under various sections of the Customs Act, was upheld by CESTAT.
The proceedings initiated under Section 28(4) of the Act were challenged before the Hon’ble Supreme Court vide Civil Appeal.
Taking of decision to clear the goods
As per the facts of the case, the consignment of cameras arrived at Delhi on 15.03.2012 and after due verification the Deputy Commissioner, Appraisal Group, Delhi Air Cargo took a decision to clear the goods on 24.03.2012, as being exempt from duty in terms of Notification No. 15/2012 dated 17.03.2012.
Issuance of SCN by DRI
SCN was issued under Section 28(4) of the Customs Act, albeit by the Additional Director General, Directorate of Revenue Intelligence (“DRI”) thereby initiating reassessment proceedings.
Question before the Hon’ble Court
Whether the DRI had authority in law to issue a SCN u/s 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.
Answer
The Hon’ble Court traced the answer to the above question to the power conferred by Statute, i.e. Section 28(4) of the Act. To quote:
Section 28 (4) Where any duty has not been [levied or not paid or has been shortlevied or short-paid] or erroneously refunded, or interest payable has not been paid, part paid or erroneously refunded, by reason of, –
(a) collusion; or
(b) any wilful mis-statement; or
(c) suppression of facts,
by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been [so levied or not paid] or which has been so short-levied or short-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.
In this regard, the Hon’ble Court, relying upon decisions in Consolidated Coffee and Shri Ishar Alloy Steels, observed that the expression used is “the proper officer” in contradistinction to the expression, “any proper officer”. To quote:
- 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.
Power to order re-assessment must be exercised by the same officer or his successor who exercised power of assessment, else there would be anarchical and unruly operation of the statute
The Hon’ble Court also held that 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. This would result into an anarchical and unruly operation of
a statute which is not contemplated by any canon of construction of statute.
Whether Additional Director General of DRI was even a proper officer?
The court commented on section 6 which provides for entrustment of functions of Customs officer on other officers of the Central or the State Government or local authority. It was observed by the Hon’ble court that if the intention was to entrust the officers of Directorate of Revenue intelligence with the functions of customs officers, the Central Government must have done so under the section 6 of the Act.
The Hon’ble Court observed by virtue of the Notification dated 02.05.2012 issued in exercise of power under Section 2(34) of the Customs Act, a Deputy Commissioner or Assistant Commissioner of Customs have been entrusted with the functions under Section 28 of the Act. The Court observed that the Notification dated 02.05.2012 was issued by the Central Board of Excise and Customs in exercise of non-existing power under Section 2 (34) of the Customs Act which is invalid as the authority has no power to do so under a section which does not confer any such power.
Ruling
Accordingly, the Hon’ble Court held that the entire proceeding in the present case initiated by Additional Director General of DRI by issuing SCN in present matters are invalid without any authority of law and liable to be set aside and the ensuing demands also set aside.
On Extended period of limitation
The Hon’ble Court examined the disclosure made by the Assessee in their bill of entry, which was examined by the proper officer at the time of clearance of goods and held that extended period of limitation was not available to any authority to re-open under Section 28(4).
Instructions issued by CBIC pursuant to judgment in Canon India
There has been recent instruction given by CBIC vide Instruction No. 04/2021-Customs dated 17.03.2021, after drawing attention to the judgement in the case of M/s Canon India Private Limited vs Commissioner of Customs. It was observed in the Instruction that the Hon’ble SC has held that DRI is not the proper officer to issue Show Cause Notice (SCN) under sub-section (4) of section 28 of the Customs Act, 1962 and the entire proceeding initiated by DRI for issuing SCN, was made invalid.
The CBIC gave specific reference to the SCN dated 19.03.2019 issued against Sh. Anil Aggarwal and 11 others, for which the Board’s directions were sought in view of the fact that the adjudication of the said SCN would get time barred on 18.03.2021 under sub-section (9) of section 28 of the Customs Act, 1962.
In this reference, the CBIC clarified that for the present and until further directions, the said SCN may be kept pending.
The board has also directed that all the fresh SCNs under section 28 of the Customs Act, 1962 in respect of the cases presently being investigated by DRI are required to be issued by jurisdictional Commissionerates from where imports have taken place.
Gaurav Gupta, Manager, ALA Legal, E-Mail: delhi@alalegal.in
Snigdha Shandilya, KIIT School of Law, Bhubaneswar, 5th year(2016-2021)
Gaurav is an advocate by profession and has done his B.Com(H) from Hansraj College and LL.B(H) from Faculty of Law, Banaras Hindu University. He has represented clients from Diverse sectors, providing services in Litigation involving Indirect Taxes, IBC, Commercial laws, Direct Taxes, RBI matters. He is active beforewrit Courts, Tribunals and Quasi-Judicial Authorities.