2025 (6) TMI 103 - HC - Customs

DRI Officers Validated Retroactively: Finance Act 2022 Confirms Customs Act Powers and Jurisdictional Authority

Krishan Kumar Bansal (In Custody) (Through His Brother Dinesh Bansal), Sandeep Sharma, Manoj Kumar Partner Of M/s S.M. International, Inderpal Singh Versus Union Of India, Additional Director General Directorate Of Revenue Intelligence, Deputy Director Directorate Of Revenue Intelligence, Senior Intelligence Officer Directorate Of Revenue Intelligence.

DRI officers were confirmed as 'proper officers' under the Customs Act, 1962, with authority to issue show cause notices. The SC upheld the retrospective ... Seeking for quashing of Summons issued by the Respondent No. 2 (DRI) under Section 108 of the Customs Act, 1962 - proper officer forthe purpose of issuance of SCN - DRI are proper officers or not - HELD THAT:- DRI Officers were the “Proper Officers” for the purpose of Section 28 Customs Act, 1962 and were competent to issue the Show Cause Notices thereunder. Therefore, the present Petitions are hereby disposed of with the directions that the Notices are restored for the purpose of adjudication by the Proper Officers under Section 28 Customs Act, 1962. Further, the Orders passed by the Adjudicatory Authority under Section 28 Customs Act, 1962, may be challenged by way of Appeal before the Customs Excise and Services Tax Appellate Tribunal (for short “CESTAT”), which are under challenge before this Court on the ground of maintainability due to lack of jurisdiction of Proper Officer to issue Show Cause Notices. Eight weeks time is granted to the Petitioners, to prefer their appropriate Appeal before the CESTAT. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether officers of the Directorate of Revenue Intelligence (DRI) and similarly situated officers are 'proper officers' competent to issue show cause notices under Section 28 of the Customs Act, 1962. 2. Whether retrospective validation by legislation (Section 97 of the Finance Act, 2022) cures any defect previously identified in judicial pronouncements that held such notices invalid for want of issuance by a 'proper officer', and whether that validation is constitutionally objectionable on the grounds considered. 3. The appropriate remedies and procedure where show cause notices or adjudication orders have been held or challenged on the ground that they were not issued by a 'proper officer'-specifically, whether such notices/orders should be restored for adjudication and/or appellate relief afforded, and the suitable time-limits for pursuing such appeals. ISSUE-WISE DETAILED ANALYSIS Issue 1: Competence of DRI and similarly situated officers to issue show cause notices under Section 28 Customs Act, 1962 Legal framework: Section 28 of the Customs Act, 1962 governs issuance of show cause notices by a 'proper officer' and provides the statutory basis for adjudication of alleged contraventions. The competence of an officer to initiate proceedings under Section 28 depends on whether that officer qualifies as a 'proper officer' under the statute and allied rules. Precedent treatment: The Court considered the conclusions reached in an earlier apex decision which had been the subject of review. That earlier decision had held that certain officers lacked the status of 'proper officer' and therefore notices/initiations were infirm. The subsequent review judgment of the Apex Court altered that position. Interpretation and reasoning: Having examined the later, reviewed conclusion of the Apex Court, the Court accepted the review conclusion that officers of the Directorate of Revenue Intelligence, Commissionerate of Customs (Preventive), Directorate General of Central Excise Intelligence and Commissionerates of Central Excise and other similarly situated officers are to be treated as 'proper officers' for purposes of Section 28. On that basis, notices issued by those officers fall within the statutory competence conferred by Section 28 and are not invalid for want of jurisdiction. Ratio vs. Obiter: The finding that the named classes of officers are proper officers is treated as ratio of the higher court's review and is followed. The present Court's acceptance of that conclusion and its application to restore notices is a binding application of that ratio. Conclusions: DRI officers and similarly situated officers are proper officers to issue show cause notices under Section 28 Customs Act, 1962, and notices issued by them are competent for adjudication (see cross-reference to Issue 2 concerning validation). Issue 2: Effect of retrospective validation (Section 97, Finance Act, 2022) on prior defects and its constitutional validity Legal framework: Parliament enacted Section 97 of the Finance Act, 2022, which, inter alia, retrospectively validated show cause notices issued under Section 28. Questions arose whether such retrospective validation can cure jurisdictional defects and whether the provision is constitutionally impermissible as arbitrary, disproportionate, or overbroad. Precedent treatment: The Apex Court in its review considered the constitutional challenge to the Finance Act provision in the limited context of curing the defect previously identified, and confined its findings to questions raised in the review petition (keeping open other possible challenges). Interpretation and reasoning: The Apex Court held that Section 97, insofar as it retrospectively validates show cause notices under Section 28, does not suffer constitutional infirmity on the grounds considered in the review. The review judgment clarified that the validation provision cures the particular defect earlier identified (relating to want of status of proper officer) and that such validation is not manifestly arbitrary, disproportionate, or overbroad for the reasons recorded in the review. The Court applied that conclusion and observed that the validation, together with the review finding on proper officer status, means that notices previously challenged on that ground should be restored for adjudication. Ratio vs. Obiter: The conclusion that Section 97 validly and retrospectively validates show cause notices for the limited questions raised is treated as ratio insofar as it decides the specific point of curing the defect pointed out earlier; broader constitutional questions were expressly left open by the Apex Court and thus are obiter or not decided here. Conclusions: Retrospective validation by Section 97 cures the specific defect related to issuance by non-'proper officers' as considered in the review; the provision is not held unconstitutional on those grounds. Challenges to the Finance Act on other grounds remain open for adjudication elsewhere. Issue 3: Remedy and procedural consequences where notices/orders were challenged for lack of jurisdiction of the issuing officer Legal framework: Where adjudicatory orders or show cause notices have been impugned before High Courts on maintainability grounds (lack of jurisdiction), procedural remedies include restoration of notices for adjudication by a proper officer under Section 28 and appellate recourse to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). Precedent treatment: The review judgment of the Apex Court prescribed specific modalities for disposal of pending matters affected by the earlier holding: writ petitions directly before High Courts, pending appeals in the Apex Court, and matters where orders-in-original were challenged before High Courts. Interpretation and reasoning: Applying that framework, the Court directed that notices challenged in writ petitions be restored for adjudication by the proper officer under Section 28. Where adjudicatory orders are under challenge before High Courts on the ground of maintainability due to lack of jurisdiction, the Court followed the Apex Court's direction to grant eight weeks to the assessee to prefer an appropriate appeal before CESTAT. The Court thus gave effect to the appellate/curative scheme prescribed by the higher court, balancing the need to vindicate statutory adjudication with protection of litigants' appellate rights. Ratio vs. Obiter: The directive to restore notices and to grant a specific eight-week period for filing appeals to CESTAT follows the binding procedural guidance from the Apex Court's review and is applied herein as ratio. Any observations beyond those procedural directions are not necessary to the decision and hence obiter. Conclusions: Affected show cause notices are to be restored for adjudication by proper officers under Section 28. Orders passed by adjudicating authorities that are under challenge on the ground of lack of jurisdiction may be appealed to CESTAT; eight weeks' time is permitted to prefer such appeals in conformity with the Apex Court's guidance. Cross-references and Implementation 1. The conclusions on Issues 1-3 are interdependent: the acceptance that DRI and similarly situated officers are proper officers (Issue 1) and the validation effected by Section 97 (Issue 2) together justify the restoration and adjudication directions (Issue 3). 2. The Court confined its application to the aspects decided by the Apex Court's review; challenges to the Finance Act or related issues that were expressly left open by the Apex Court are not decided and remain available for adjudication in appropriate proceedings. 3. The restoration for adjudication and the grant of eight weeks to prefer appeals are remedial measures mandated to give effect to the review judgment and to preserve appellate rights before CESTAT as directed by the Apex Court.