DRI cannot issue show cause notices under Section 28(4) when goods cleared by Deputy Commissioner

The SC held that the Directorate of Revenue Intelligence (DRI) lacked authority to issue show cause notices under Section 28(4) of the Customs Act, 1962 for recovery of duties when goods were already cleared by a Deputy Commissioner of Customs. The Court emphasized that Section 28(4) empowers only "the proper officer" (not "any proper officer") who assessed the goods at clearance, distinguishing between definite and indefinite articles in statutory interpretation. The DRI's notification purporting to grant such powers was invalid as it was issued without statutory authority under Section 6. Additionally, the extended limitation period of five years was unavailable as there was no wilful mis-statement or suppression of facts by the importer who had transparently declared camera specifications during first check. The cameras were validly cleared under Exemption Notification No.15/2012. The entire DRI proceeding was set aside as invalid, and demands were quashed. Appeal allowed in favor of appellant.

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Issues Involved:
1. Validity of recovery proceedings initiated by the Directorate of Revenue Intelligence (DRI) under Section 28(4) of the Customs Act, 1962.
2. Authority of the DRI to issue a show cause notice under Section 28(4).
3. Limitation period for issuing a show cause notice under Section 28(4).
4. Whether there was any wilful misstatement or suppression of facts by the importers.

Detailed Analysis:

1. Validity of Recovery Proceedings Initiated by DRI under Section 28(4):
The main issue in these appeals was whether the proceedings initiated by the Directorate of Revenue Intelligence (DRI) for recovery of duty not paid under Section 28(4) of the Customs Act, 1962, were valid in law. The Supreme Court held that the power to recover duties 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. This power is not inherent in any authority but has been specifically conferred by Section 28 and other related provisions. The Court emphasized that the power to re-open assessment or recover duties which have escaped assessment must be exercised by the same officer who initially assessed and cleared the goods or his successor in office, and not by another officer of a different department, such as the DRI.

2. Authority of the DRI to Issue a Show Cause Notice under Section 28(4):
The Court examined whether the DRI had the authority to issue a show cause notice under Section 28(4) of the Customs Act. It was held that the Additional Director General of the DRI was not "the proper officer" to exercise the power under Section 28(4). The Court noted that the proper officer refers to the officer who, in the first instance, assessed and cleared the goods. The Court further observed that the notification purportedly issued by the Central Board of Excise and Customs (CBEC) to entrust the functions of a proper officer to DRI officers was invalid, as it was issued under a non-existent power under Section 2(34) of the Customs Act. Therefore, the initiation of recovery proceedings by the DRI was without jurisdiction and liable to be set aside.

3. Limitation Period for Issuing a Show Cause Notice under Section 28(4):
The show cause notice was issued on 19.08.2014, and under Section 28(4), it must be issued within five years from the relevant date, which is the date on which the goods were assessed and cleared. The Court examined whether there was any suppression of facts by the importers that would justify the extended period of limitation. It was found that the importers had submitted the Bill of Entry along with literature detailing the specifications of the cameras, and the Customs authorities had verified and cleared the goods based on these documents. The Court concluded that there was no wilful misstatement or suppression of facts by the importers, and therefore, the extended period of limitation was not applicable.

4. Whether There Was Any Wilful Misstatement or Suppression of Facts by the Importers:
The Court scrutinized the importers' actions and found that they had disclosed all relevant information to the Customs authorities, including the specifications of the cameras. The Customs authorities had the opportunity to verify the information and had cleared the goods based on their assessment. The Court held that there was no evidence of wilful misstatement or suppression of facts by the importers, and thus, the extended period of limitation for issuing a show cause notice under Section 28(4) was not available.

Conclusion:
The Supreme Court allowed the appeals, set aside the common order dated 19.12.2017 passed by the CESTAT, New Delhi, and quashed the impugned demand notices issued against the appellants. The Court held that the recovery proceedings initiated by the DRI were invalid and without jurisdiction. Consequently, the demands raised against the importers were also set aside. The parties were directed to bear their own costs.

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