The Delhi High Court has held that officers of Commissionerates of Customs (Preventive), Directorate General of Revenue Intelligence (‘DRI’), Directorate General of Central Excise Intelligence (DGCEI) and similarly placed officers, do not have jurisdiction to issue show cause notices under Section 28 of the Customs Act, 1962, in respect of imports made prior to 8-4-2011.
SCNs for import made prior to 8-4-2011
The Court in its judgment pronounced on 3rd May 2016 in a batch of writ petitions challenging jurisdiction of DRI/Preventive/SIIB officers, held that for imports made prior to 8th April, 2011, these officers were not proper officers. Show cause notices issued by these officers (either prior to or after 8th April, 2011) demanding duty for such imports were hence quashed by the Court, while it noted that Customs Section 28 (11) read with Explanation 2 to said Section, will apply only for the imports made on or after 8th April, 2011.
The High Court in this regard disagreed with the judgment of the Bombay High Court in the case of Sunil Gupta vs. Union of India [2015 (315) ELT 167] observing that “the decision of the Bombay High Court fails to address the essential problem in allowing Explanation 2 to Section 28 to remain in the statute book even while Section 28(11) was inserted”.
SCNs for imports made after 8-4-2011
The Court however upheld the validity of said sub-section (11) to Section 28 conferring jurisdiction on the above officers, in respect of imports made on or after 8th April, 2011. Central Board of Excise and Customs (CBEC) was directed to issue appropriate administrative instructions to avoid duplication/overlap of jurisdiction. The Court in this regard observed “It would have to be ensured through proper co-ordination and administrative instructions issued by the CBEC that once a SCN is issued specifying the adjudicating officer to whom it is answerable, then that adjudication officer, subject to such officer being a 'proper officer' to whom the function of assessment has been assigned in terms of Section 2(34) of the Act, will alone proceed to adjudicate the SCN to the exclusion of all other officers who may have the power in relation to that subject matter.”
Background
The Supreme Court of India in the case of Sayed Ali [(2011) 3 SCC 537] had held that only those officers who have been assigned the function of assessment/ re-assessment under Section 2(34) will be “the proper officer” for the purpose of issuance of SCNs under Section 28. It was held that otherwise there would be administrative chaos.
In April, 2011, new Section 28 was introduced with Explanation 2 stating that for any non-levy/ short-levy prior to April, 2011, the old Section 28 will apply. In September, 2011, sub-section 11 was inserted in Section 28, which deemed all officers appointed as customs officers under Section 4(1), Customs Act, as proper officers to issue show cause notices. The Customs understood this provision to be applicable retrospectively and cover all imports made even prior to 8th April, 2011.
The importers challenged Section 28(11) before the Delhi High Court, contending that in the light of Explanation 2, no show cause notices could have been issued by DRI/ Preventive/ SIIB officers for imports made prior to 8th April, 2011. It was also contended that even for the period post 8th April, 2011, the defect pointed out by the Supreme Court in the case of Sayed Ali was not cured by inserting sub-section 11 to Section 28 of the Customs Act, 1962.