Customs Commissioner's Order Set Aside Due to Lack of Jurisdiction

The Tribunal set aside the Commissioner of Customs' order as the show cause notice by the Additional Director General, DRI, lacked jurisdiction. Consequently, all related proceedings, including those for confiscation and penalty under section 124, were deemed invalid. The appeal was allowed on 09.11.2021.

---

---

Issues Involved:
1. Jurisdiction of the Additional Director General, DRI to issue the show cause notice under section 28 of the Customs Act.
2. Validity of proceedings under section 124 of the Customs Act for confiscation and penalty when the demand under section 28 fails.

Detailed Analysis:

1. Jurisdiction of the Additional Director General, DRI to issue the show cause notice under section 28 of the Customs Act:

The appellant contested that the Additional Director General, DRI lacked the jurisdiction to issue the show cause notice under section 28 of the Customs Act. The counsel for the appellant cited Supreme Court decisions in Canon India Pvt. Ltd. vs. Commissioner of Customs and Commissioner of Customs, Kandla vs. M/s. Agarwal Metals and Alloys, which established that the power to recover duty not paid or short paid after goods have been assessed and cleared for import is conferred specifically on "the proper officer." This proper officer must be the one who initially assessed and cleared the goods. The Supreme Court in Canon India observed that:

- The power under section 28 is akin to reviewing an earlier assessment decision and must be exercised by the same officer or their successor, not by another officer from a different department.
- The Additional Director General, DRI, was not the proper officer to issue the show cause notice as per section 28(4) and section 2(34) of the Customs Act.

This interpretation was reinforced by subsequent judgments, including the Bombay High Court in Kitchen Essentials & Ors. vs. The Union of India & Ors., the Madras High Court in Quantum Coal Energy (P) Ltd. vs. The Commissioner, Office of the Commissioner of Customs, and the Karnataka High Court in Shri Mohan C. Suvarna Director (Finance and Admin) M/s Givaudan India Pvt. Ltd. vs. The Principal Commissioner of Customs. Each of these cases invalidated proceedings initiated by the DRI on similar grounds.

Given these precedents, the Tribunal concluded that the show cause notice issued by the Additional Director General, DRI, was without jurisdiction and all subsequent proceedings based on this notice were invalid.

2. Validity of proceedings under section 124 of the Customs Act for confiscation and penalty when the demand under section 28 fails:

The Department argued that even if the notice under section 28 was invalid, the notice under section 124 for confiscation of goods and imposition of penalty should still stand. However, the appellant's counsel cited the Tribunal's decision in Bakeman’s Home Products Pvt. Ltd. vs. Collector of Cus., Bombay, which held that proposals for confiscation and penalty cannot be segregated from the duty demand. If the duty demand fails due to lack of jurisdiction, the proceedings for confiscation and penalty cannot survive.

The Tribunal accepted this argument, noting that the demand of duty and the actions for confiscation and penalty are interlinked and cannot be separated. Since the demand under section 28 was invalid, the related proceedings under section 124 also could not be sustained.

Conclusion:

The Tribunal set aside the order dated 31.05.2012 passed by the Commissioner of Customs (Adjudication) on the grounds that the show cause notice issued by the Additional Director General, DRI, was without jurisdiction. Consequently, all proceedings based on this notice, including those for confiscation and penalty, were invalid. The appeal was allowed, and the order was pronounced on 09.11.2021.

---