TaxTMI 
TaxTMI 
TaxTMI 
The Supreme Court’s Review Petition judgment in the Canon India matter has stirred much debate within legal and trade communities. This pivotal decision touches on intricate legal concepts, but let’s simplify and break it down in a way that everyone can grasp. There are three components that the judgment dealt with.,
The Three Important Components of the Review Judgment are:
- Addressing the Error in the Earlier Supreme Court Rulings (Sayed Ali and Canon India)
- Revenue’s Appeal Against the Delhi High Court’s Decision in Mangali Impex [UNION OF INDIA VERSUS MANGALI IMPEX LIMITED - 2016 (9) TMI 1622 - SC ORDER]
- Assessing the Constitutional Validity of Section 97 of the Finance Act, 2022, which introduced Section 110AA to the Customs Act, 1962
For the purpose of this article, we’ll focus on the first component: whether the Supreme Court’s earlier judgments in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS - 2021 (3) TMI 384 - SUPREME COURT and COMMISSIONER OF CUSTOMS VERSUS SAYED ALI - 2011 (2) TMI 5 - SUPREME COURT suffered from “errors apparent on the record.” and how the Review Bench addressed them and the implications going forward
Setting the Scene: The Canon and Sayed Ali Judgments Explained
Let’s use an analogy to understand what was at stake. Imagine that in your city, only traffic police officers are authorized to issue traffic violation tickets. Suddenly, health inspectors start issuing traffic tickets too. You’d probably question whether the health inspectors have the authority to do so, right?
In Canon India and Sayed Ali, the Supreme Court faced a similar issue concerning customs officers. Specifically, the question was whether officers from the Directorate of Revenue Intelligence (DRI), who are technically customs officers but not traditionally tasked with assessments, had the legal authority to issue show-cause notices and demand duties.
Canon India Judgment: The Supreme Court ruled that DRI officers could not issue such notices unless they were specifically authorized under Section 6 of the Customs Act. The Court argued that only the officer who performed the original assessment could reassess or recover duties, much like saying only a traffic police officer can issue and reissue traffic tickets.
Sayed Ali Judgment: In this case, the Court had earlier ruled that only officers assigned the role of “assessment” under Section 17 of the Customs Act could reassess and collect duties. The Court emphasized that these powers couldn’t be exercised by just any officer, such as Preventive officers of Customs.
Why the Review?
The Revenue Department (Customs) argued that these judgments contained apparent errors that needed correction. They filed a Review Petition seeking approval from the Review Bench that DRI officers were always authorised to act as “proper officers” for assessment and therefore the Supreme Court in Sayed Ali and Canon did not appreciate the scheme of authorisation of the officers of customs as ‘Proper officers’.
What Does “Error Apparent on Record” Mean?
In simple terms, an “error apparent on record” is like an apparent mistake in a document—something that doesn’t require in-depth analysis to spot. It could be a decision arrived at without noticing a provision of law or settled legal ratios.
The Supreme Court in the Canon case relied heavily on the argument that DRI officers needed special authorization under Section 6. The Review Bench, however, pointed out that DRI officers are already customs officers therefore a notification under Section 6 was not required, It was also held that the previous rulings misunderstood the law on assessment, especially the changes made to the law in this regard in April 2011.
Simplifying the Review Judgment
The Review Bench made several key points:
Assessment vs. Reassessment: The earlier Canon judgment had argued that the officer who did the original assessment should be the one to conduct any reassessment. The Review Bench disagreed, noting that after the 2011 amendment to Section 17 when the importer was required to “self-assess” to be verified by customs officers, there was no ‘assessment’ by a Proper Officer. Thus, any officer, including a DRI officer, could do only reassessment.
Example: Imagine you self-assess your taxes, and then a tax officer checks your assessment and finds errors. According to the Review Bench, there was no assessment by the verifying officer but only a re-assessment. While Sayed Ali was in respect of a Preventive Officer and before the amendments to Section 17, the Canon decision did not notice the amendments in the scheme of assessment under Section 17. The DRI officers having been duly recognised as proper officers under Section 28, they could issue a Notice under Section 28.
The Role of Section 6: The Supreme Court in the Canon matter had held that DRI officers needed authorization under Section 6. The Review Bench clarified that this was not the case, as DRI officers are always officers of customs. Therefore, the needed Notification under Section 3 was there and therefore the DRI officers always had the authority to issue Notices under Section 28
Interpreting “Proper Officer”: The phrase “proper officer” has been a bone of contention. In the Canon and Sayed Ali judgments, the Supreme Court said it referred only to those specifically tasked with assessment. The Review Bench argued that this interpretation was too narrow and overlooked how the Customs Act works in practice.
Conflicting Interpretations and Legislative Amendments
The Review Judgment also delved into the link between Sections 17 and Section 28. According to the Review Bench, post-2011 amendments, there was only “self-assessment,” but the customs officer still had the authority to check and reassess if needed. This interpretation seemingly contradicts the earlier rulings, which emphasized that only the original assessing officer could reassess.
Legal Citation Example: The Review Bench criticised the Canon ruling for not noticing the amended version of Section 17. As there was no assessment post-April 2011, the reliance placed on the Proper officer ‘assessing’ the bill of entry was in the opinion of the Review Bench erroneous.
Judicial Overreach or Necessary Correction?
Critics argue that the Review Bench has essentially re-adjudicated the case, which a Review Petition is not supposed to do, placing their interpretation of the terms assessment pre and post-April 2011. A Review Petition could correct obvious errors, not re-interpret laws. The decision to rule against the Revenue in the original cases was seen as a major setback for tax enforcement, and some feel that the Review Bench’s decision appears to be more of an effort to rectify this than correcting any error apparent on the record.
Implications for Trade and Customs
This decision has significant implications for importers and customs enforcement. If DRI officers are now affirmed as “proper officers”. While this decision has practically revived all the Notices issued by DRI officers before 30 March 2022, it also raises questions about the consistency of judicial decisions.
Final Thoughts: Was the Review Justified?
Was the Supreme Court’s intervention a justified correction of an “error,” or did it amount to judicial overreach? While the Review Bench claims it was merely setting the record straight, many feel it has, in effect, judged the decisions of two prior Supreme Court benches.
The debate continues, but one thing is clear: the Supreme Court’s Review Judgment has added a new layer of complexity to customs law and the interpretation of officers' powers especially the interpretation of the term ‘assessment’ under Section 17. It’s a fascinating case study for legal professionals and anyone involved in trade compliance.
What are your thoughts on this? Do you agree with the Review Bench’s interpretation, or do you think the original rulings should have stood? Share your feedback to [email protected]
