Dated 7th April, 2021

 
The taxability dispute on ocean freight has been finally decided by the Gujarat High Court, which held that taxing ocean freight is ultra vires and leads to double-taxation

Supreme Court holds issuance of SCN by DRI Officers under Customs is invalid

Summary

Recently, Hon’ble Apex Court observed [1]that only the officer who has assessed the goods at the time of clearance or his successor or any other officer authorized to exercise power within the same office, the Appraisal Group can re-assess the goods. The intention to authorize “The Proper Officer” to recover duties under Section 28(4) of the Customs Act, 1962 to issue SCN, is to confer the power to recover such duties not on any proper officer but on the officer with the same designation that assessed the goods at the time of clearance. In the said backdrop, the Hon’ble Supreme Court held that the Directorate of Revenue Intelligence (DRI) is not empowered to issue SCN to recover duties when the officer of concerned Appraising Group allowed exemption from duties of customs at the time of clearance.

Brief Facts of the Case

  • The Appellant had imported Digital Still Image Video Cameras by availing exemption from basic customs duty and accordingly filed bill of entry along with the necessary documents
  • The Appellant had filed request before the Deputy Commissioner of Customs, Delhi Air Cargo for the "First Check". Based on the said request he checked the goods and cleared them as exempt
  • Subsequently, a SCN was issued by Additional Director General, DRI(ADG, DRI) under Section 28(4) of the Customs Act, 1962 alleging that the goods imported are not eligible for exemption and there is wilful misstatement and suppression of facts by the appellant in relation to technical specification of the product
  • Further an order was issued alleging that the customs officer had been induced to clear the imported goods by wilful misstatement leading to confiscation of goods, demand of interest and imposition of penalty
  • CESTAT, Delhi vide order dated 19.12.2017 upheld the above order and the Appellant appealed to the Supreme Court against the CESTAT order

Issue before Supreme Court

Whether the proceedings initiated by the ADG, DRI for recovery of duty under section 28(4) of the Customs Act, 1962 after the first assessment and clearance of goods by a customs officer of concerned Appraisal Group are valid in law

Supreme Court Ruling

  • Section 28 of the Customs Act, 1962 authorizes “the proper officer” to issue an SCN for recovery of duty where any duty has not been levied or not paid or has been shortly levied or short-paid
  • The intention behind the term “the proper officer”, used in section 28(4) of the Customs Act, is to grant the power to recover duties not on “any proper officer” but only on “the proper officer”, who had assessed the goods at the time of clearance.
  • The power assigned to the proper officer under section 28(4) of the Customs Act should be construed to have been conferred only on the same officer who assessed the imported goods or his successor or any other officer assigned to the function of assessment
  • Where the law confers the same power to perform an act to different officers, officers belonging to the different department cannot exercise their powers in the same matter
  • It was concluded that officers ofDRI was not “the proper officer” to exercise the power under section 28(4)
  • The SC observed that ADG, DRI can be considered to be a proper officer only if he was entrusted with the functions of the proper officer under section 6 of the Customs Act
  • It was also provided by the Apex Court that ADG, DRI has been appointed as Commissioner of Customs under section 4(1) of the Customs Act vide Notification No. 17/2002 dated 07.03.2002
  • Notification No. 40/2012 dated 02.05.2012 which extends the functions of the proper officer under section 28 of the Customs Act to DRI Officers has been issued under Section 2(34) of the Customs Act. The said section is part of the definition clause of the customs Act and it is only section 6 which provides for entrustment of functions of the customs officer on the other officer
  • The power to issue notification under section 6 is granted to Central Government but the notification was issued by CBIC[4]

BTA Comment

CBIC may issue a circular or internal instruction to keep the SCN issued by DRI under abeyance till any amendment is done in the Customs Act, 1962. However, filing the writ at this point of time can accrue the benefits in favor of the notice, and BT Associates will assist and guide you in reaping the benefit.

Discussion with BTA

For the detailed analysis of how can this judgment accrue benefits in favour of business, please contact BTA at thakkar@btassociate.com

[1] M/s CANON INDIA PRIVATE LIMITED VS COMMISSIONER OF CUSTOMS [CIVIL APPEAL NO. 1827 OF 2018]

[2] Notification No. 25/2005 dated 01.03.2005 amended by Notification No. 15/2012 dated 17.03.2012

[3] 2018(362) E.L.T 637 (Tri-Del)

[4] Commissioner of Customs Vs Sayed Ali [(2011) 3 SCC 537]

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Twenty years of experience in tax practice. Specialist in structuring & planning and tax optimization under indirect tax. Lead eastern India indirect tax practice of Ernst & Young in past.