2021 (3) TMI 384 - SC - Customs

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 ... Proper officer - power of reassessment/recovery under Section 28(4) - entrustment of functions under Section 6 - limitation and extended period for collusion, wilful mis-statement or suppression of factsProper officer - power of reassessment/recovery under Section 28(4) - entrustment of functions under Section 6 - Validity of show cause notices issued by the Additional Director General, DRI under Section 28(4) after clearance by the Deputy Commissioner (Appraisal) - whether the DRI officer was the 'proper officer' authorised to initiate recovery proceedings. - HELD THAT: - Section 28(4) empowers 'the proper officer' to issue notice for recovery where duty has not been levied or has been short levied by reason of collusion or wilful mis statement or suppression of facts. The use of the definite article 'the' indicates that the power to re open assessment and recover duty is to be exercised by the officer who assessed and cleared the goods (or his successor or an officer specifically assigned that function). An officer of another department, even of equivalent rank, cannot exercise that power in the same case. Entrustment of functions to officers who are not customs officers must be made by the Central Government under Section 6; the Board's notification purporting to assign functions under Section 2(34) is invalid as Section 2(34) is a definition and does not confer power to entrust functions. Consequently, an Additional Director General of DRI who is not shown to have been validly entrusted with the functions of a 'proper officer' under Section 6 cannot issue a notice under Section 28(4). Applying these principles, the Court held that the Additional Director General, DRI, was not the 'proper officer' to reopen the assessments in these matters and that the proceedings initiated by him were without jurisdiction. [Paras 15, 21, 23]Proceedings and show cause notices issued by the Additional Director General, DRI under Section 28(4) were without jurisdiction and are set aside.Limitation and extended period for collusion, wilful mis-statement or suppression of facts - power of reassessment/recovery under Section 28(4) - Whether the extended five year limitation under Section 28(4) could be invoked given the facts disclosed to the assessing officer at the time of clearance - specifically, whether there was wilful mis statement or suppression of facts by the importer. - HELD THAT: - Section 28(4) permits issuance of notice within five years where duty was not levied by reason of collusion or wilful mis statement or suppression of facts. The consignments were manifested and presented with the bill of entry and literature disclosing model specifications and stating that the single maximum recording time for a single movie is 29 minutes. The importer requested first check, the goods were physically examined, and the Deputy Commissioner cleared the goods on the basis of the materials before him. Given that the specifications were available and the cameras could have been operated at the time, there was no basis to infer a wilful mis statement or suppression that would sustain invocation of the extended limitation period. In these circumstances the extended five year period under Section 28(4) was not available to reopen the assessment, and it was unnecessary to decide the substantive question whether the goods in fact met the exemption criteria. [Paras 24, 28, 29]No wilful mis statement or suppression of facts was shown; the extended five year limitation under Section 28(4) did not apply and the goods are to be treated as validly cleared.Final Conclusion: The CESTAT order is set aside; the recovery proceedings and demands initiated by the Additional Director General, DRI under Section 28(4) are invalid for lack of jurisdiction and, on the facts, the extended limitation was not attracted - the goods are treated as validly cleared and the impugned demands are quashed. 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.