DRI jurisdiction challenge under Section 28 becomes moot after parties appeal to CESTAT

The Delhi HC disposed of a writ petition challenging a DRI show cause notice dated 29th December 2020 regarding jurisdiction of DRI officials under Section 28 of the Customs Act, 1962. During pendency, an Order-in-Original dated 28th September 2022 was passed, which both parties subsequently appealed before CESTAT. Since both parties availed remedies before the appellate tribunal, the HC found no further orders necessary and disposed of the petition without adjudicating the jurisdictional issue.

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1. ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment is the jurisdiction of the Directorate of Revenue Intelligence (DRI) officials to issue show cause notices under Section 28 of the Customs Act, 1962. This issue arose from a batch of petitions challenging the authority of DRI officials, based on the Supreme Court's decision in Canon India Pvt. Ltd. v. Commissioner of Customs, which held that DRI officials were not 'proper officers' for the purpose of Section 28.

2. ISSUE-WISE DETAILED ANALYSIS

Jurisdiction of DRI Officials under Section 28:

Relevant Legal Framework and Precedents: The legal framework involves Section 28 of the Customs Act, 1962, which deals with the recovery of duties not levied or paid. The Supreme Court's decision in Canon India Pvt. Ltd. initially found that DRI officials were not 'proper officers' for issuing notices under this section. However, the review petition in Canon India (Canon-II) revisited this interpretation.

Court's Interpretation and Reasoning: The review judgment clarified that DRI officers were appointed as officers of customs through specific notifications and circulars, which were not considered in the original Canon India decision. The Court noted that these notifications and circulars empowered DRI officers to issue show cause notices under Section 28.

Key Evidence and Findings: The Court found that the notifications and circulars, which were overlooked in the original Canon India judgment, provided the legal basis for DRI officers' jurisdiction. The statutory scheme of Sections 2(34) and 5 of the Customs Act was also considered, indicating that DRI officers had the requisite authority.

Application of Law to Facts: The Court applied the clarified legal framework to the facts of the case, determining that the DRI officers were indeed 'proper officers' under Section 28 and had the jurisdiction to issue the contested show cause notices.

Treatment of Competing Arguments: The Court addressed the original arguments from Canon India, which questioned the jurisdiction of DRI officers. It concluded that the failure to consider relevant notifications and statutory provisions in the original decision led to an incorrect interpretation.

Conclusions: The Court concluded that DRI officers are proper officers under Section 28, and the show cause notices issued by them are valid. The decision in Canon India was reviewed and partially overturned regarding the jurisdiction of DRI officers.

3. SIGNIFICANT HOLDINGS

The Court held that DRI officers are proper officers for the purposes of Section 28 of the Customs Act, 1962. It emphasized that the statutory notifications and circulars empower DRI officers to issue show cause notices, thereby affirming their jurisdiction.

Core Principles Established: The judgment established that the jurisdiction of customs officers, including those from the DRI, is determined by statutory notifications and circulars, which must be considered in interpreting their authority under the Customs Act.

Final Determinations on Each Issue: The Court determined that the show cause notices issued by DRI officers are valid. It also provided guidance on how pending cases involving similar jurisdictional challenges should be handled, directing that such cases be disposed of in line with the clarified legal position.

The Court's decision effectively reinstates the authority of DRI officers to issue show cause notices under Section 28, subject to the statutory framework and notifications that define their roles as 'proper officers' within the customs administration.

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