DRI Officers Confirmed as Proper Officers to Issue Show Cause Notices Under Validation Act Section

The HC upheld the SC's decision that DRI officers are "proper officers" authorized to issue show cause notices, affirming the Validation Act empowering them. The review petition filed by the revenue was allowed, overruling prior contrary views. Petitioners were granted eight weeks from the order's upload to file an appeal against the Order-in-Original dated 5 December 2023. If an appeal is filed within this period, the appellate authority must decide it on merits and law, disregarding limitation issues. The petition was disposed of accordingly.

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ISSUES:

Whether officers of the Directorate of Revenue Intelligence (DRI) qualify as "proper officers" under Section 28 of the Customs Act, 1962, empowered to issue show cause notices.Validity and jurisdictional competence of show cause notices issued by DRI officers under Section 28 of the Customs Act, 1962.Constitutionality and retrospective validation of show cause notices by Section 97 of the Finance Act, 2022.Procedural consequences and remedies available where show cause notices issued by DRI officers are challenged on grounds of jurisdictional defect.Scope of review of prior Supreme Court decision in Canon India Private Limited regarding jurisdiction of DRI officers and limitation issues.

RULINGS / HOLDINGS:

The Supreme Court held that DRI officers are "proper officers" for issuing show cause notices under Section 28 of the Customs Act, 1962, affirming that the previous decision in Canon India Private Limited was rendered without considering relevant notifications and circulars empowering DRI officers.The Court emphasized that the judgment in Canon India erred in concluding lack of jurisdiction of DRI officers by failing to consider the statutory scheme of Sections 2(34) and 5 and relevant circulars, and that reliance on Sayed Ali was misplaced.Section 97 of the Finance Act, 2022, which retrospectively validates all show cause notices issued under Section 28, is not unconstitutional, nor manifestly arbitrary, disproportionate or overbroad, thereby curing the jurisdictional defect pointed out in Canon India.The Court clarified that the review only pertained to jurisdictional issues and did not disturb prior findings on limitation periods in Canon India.The Court directed that where show cause notices issued by DRI officers are challenged on jurisdictional grounds, pending writ petitions and appeals must be disposed of in accordance with this ruling, restoring such notices for adjudication by the proper officer under Section 28.The petitioners were granted eight weeks to file appeals against orders challenged on jurisdictional grounds, with appellate authorities mandated to decide on merits without referring to limitation issues.

RATIONALE:

The Court applied statutory interpretation of the Customs Act, 1962, particularly Sections 2(34), 5, 6, 17, and 28, alongside Circular No. 4/99-Cus and Notification No. 44/2011, which empower DRI officers as proper officers.It reviewed and overruled prior precedent (Canon India) due to non-consideration of relevant administrative notifications and statutory amendments, marking a doctrinal correction on the jurisdictional status of DRI officers.The Court distinguished the earlier reliance on Sayed Ali by noting changes in statutory provisions post the Finance Act, 2011, and the differing scope of officers involved.The retrospective validation by Section 97 of the Finance Act, 2022 was upheld as constitutionally valid, addressing concerns of jurisdictional defects in show cause notices issued prior to the amendment.The Court rejected the application of harmonious construction between Section 28(11) and Explanation 2 to Section 28 as misconceived, emphasizing the administrative policy excluding jurisdiction of other officers once a show cause notice is issued by a particular proper officer.The ruling established procedural guidelines for disposal of pending challenges to show cause notices on jurisdictional grounds, ensuring appeals and writ petitions are resolved consistent with the clarified legal position.

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