2022 (2) TMI 968 - HC - Customs

Court sets aside show cause notices, grants refund, and denies jurisdiction of DRI officers.

The Court allowed the writ petitions, setting aside the show cause notices and subsequent demands confirmed by the original orders. It held that DRI ... Maintainability of petition - availability of remedy of appeal or not - Validity of SCN - right to cross-examination not granted - violation of principles of natural justice - Jurisdiction - Proper officer to issue SCN - DRI are “proper officers” to initiate proceedings by way of issuance of show cause notice, raising demand/confiscation under Section 28 and 124 of the Act of 1962 and the subsequent proceedings thereto, or not - HELD THAT:- It has been held in WHIRLPOOL CORPORATION VERSUS REGISTRAR OF TRADE MARKS, MUMBAI & ORS. [1998 (10) TMI 510 - SUPREME COURT] that entertaining writ petition under Article 226 of the Constitution of India is a self imposed restriction if the petitioner is aggrieved and is not having efficacious and effective remedy, the same can be invoked but in the circumstance, when there is violation of fundamental rights or the action of the respondent is without jurisdiction and there is violation of principles of natural justice, the writ courts/constitutional courts have a bounden duty to entertain the writ petition. In the case in hand, it is an admitted fact that a show cause notice was issued, order in original was passed, appeal was preferred but the issue whether DRI Officers are proper officers under the Act of 1962 and have power to issue a show cause notice was not analyzed and ignored though the said controversy was no more res integra. The petitioner has also raised the said issue before the learned Adjudicating Authority and placed reliance on the judgment of Canon India [2021 (3) TMI 384 - SUPREME COURT], COMMISSIONER OF CUSTOMS VERSUS SAYED ALI [2011 (2) TMI 5 - SUPREME COURT] & M/S MANGALI IMPEX LTD., M/S PACE INTERNATIONAL AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2016 (5) TMI 225 - DELHI HIGH COURT]. It is also to be taken note of that the judgment of Cannon India Private Ltd was pronounced on 09.03.2021 and the OIO was passed on 15.03.2021 but the same was ignored - In the compelling circumstances, when the entire proceedings were initiated by way of show cause notice which was issued by DRI Officers who lacked jurisdiction to issue show cause notices as held by Apex Court, it is deemed appropriate to entertain the present writ petition overruling the argument on alternative remedy as raised by respondent counsel. The entire proceedings initiated by officers of DRI in as much as by issuance of show cause notice under Section 28/124 of the Customs Act lacks jurisdiction and are without any authority of law because the present show cause notice is not issued by custom officer but by DRI officer who has not been assigned specific function/power under Section 6 to issue show cause notice U/S 28 of the Act of 1962. DRI officer is not Competent Authority to issue show cause notice and adjudicate the same as “proper officer”. The Act, the notification relied upon do not define and bring the DRI officers within four corners of “proper officers” having functions and powers to act under Section 28 of the Act of 1962 - Thus there is a lack of jurisdiction. It is also noteworthy to mention that learned counsel for the respondent has raised further argument that the present show cause notice in the connected matters is issued U/S 124 of the Customs Act qua the confiscation of the goods and therefore the judgment of Canon India is not applicable - the said contention of the respondent is also not tenable as it is held that DRI Officers lacks jurisdiction qua the functions to be executed under the Act of 1962, the proceedings under Section 124 is also illegal, void ab initio and nullity. The proceedings issued by show cause notice and subsequent demands confirmed by OIO are set aside, as prayed in the writ petitions - petition allowed. Issues Involved:1. Jurisdiction of DRI officers to issue show cause notices under Sections 28 and 124 of the Customs Act, 1962.2. Maintainability of writ petitions in the presence of alternative remedies.3. Violation of principles of natural justice in adjudication without considering Supreme Court judgments.Detailed Analysis:1. Jurisdiction of DRI Officers:The primary contention raised by the petitioners was that, as per the Supreme Court judgment in M/s Canon India Private Ltd. Vs. Commissioner of Customs (AIR 2021 SC 1699), officers of the Directorate of Revenue Intelligence (DRI) are not 'proper officers' to initiate proceedings under Sections 28 and 124 of the Customs Act, 1962. The petitioners argued that the show cause notices issued by DRI officers were ultra vires and without jurisdiction. The Court agreed with this contention, noting that the entire proceedings initiated by DRI officers lacked jurisdiction and were invalid. The Court referenced Sections 2(34) and 6 of the Customs Act, which define 'proper officer' and the functions of customs officers, respectively. The Court concluded that DRI officers, not being specifically assigned these functions, could not issue show cause notices under Section 28 or 124 of the Customs Act.2. Maintainability of Writ Petitions:The respondents argued that the writ petitions were not maintainable due to the availability of alternative remedies, as the petitioners had already filed appeals against the original orders. The Court, however, cited the Supreme Court's decision in Whirlpool Corporation v. Registrar of Trade Marks Mumbai (1998) 8 SCC 1, which allows the High Court to entertain writ petitions despite the availability of alternative remedies in cases where there is a violation of fundamental rights, lack of jurisdiction, or violation of principles of natural justice. The Court found that the case fell within these exceptions, particularly due to the lack of jurisdiction of the DRI officers and the violation of principles of natural justice.3. Violation of Principles of Natural Justice:The petitioners contended that the adjudication of the show cause notices was done in violation of principles of natural justice, as they were not granted the right to cross-examination and the judgments of the Supreme Court in Commissioner of Customs Vs. Sayed Ali (2011) 3 SCC 537 and Canon India Private Ltd. were not considered. The Court noted that the adjudicating authority ignored these Supreme Court judgments, which was a violation of Article 141 of the Constitution of India. The Court emphasized that the principles of natural justice were not followed, making the proceedings and subsequent demands void ab initio.Conclusion:The Court allowed the writ petitions, setting aside the show cause notices and subsequent demands confirmed by the original orders. It held that DRI officers lacked jurisdiction to issue the show cause notices and that the proceedings were without any authority of law. The Court also granted consequential relief by way of refund or release of seized goods, if any. No order as to costs was made, and all pending applications were disposed of.