2025 (8) TMI 819 - HC - Customs

DRI Officials Are Proper Officers Under Section 28 Customs Act; Pre-SCN Consultation Declined Validly, Appeal Allowed Under Section 129A

Tara International Versus Directorate Of Revenue Intelligence (Dri) Government Of India And Ors.

Tara International Versus Directorate Of Revenue Intelligence (Dri) Government Of India And Ors. - 2025:DHC:6683 - DB 1. ISSUES PRESENTED and CONSIDERED Whether the Directorate of Revenue Intelligence (DRI) officials qualify as 'proper officers' under Section 28 of the Customs Act, 1962 for issuance of show cause notices (SCNs). Whether the pre-show cause notice consultation process mandated under the Pre-Notice Consultation Regulations, 2018, and related Circulars/Notifications, is mandatory before issuance of the impugned SCN and whether failure to conduct such consultation renders the SCN liable to be quashed. Whether the impugned SCN issued under Section 28(4) of the Customs Act requires compliance with the pre-notice consultation process. Availability and scope of appellate remedies against the Order-in-Original denying exemption and imposing demand and penalty. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether DRI officials are 'proper officers' under Section 28 of the Customs Act, 1962 - Legal Framework and Precedents: Section 28 of the Customs Act, 1962 empowers 'proper officers' to issue show cause notices. The question of whether DRI officials qualify as 'proper officers' was initially addressed by the Supreme Court in Canon-I, which held that DRI officials are not 'proper officers' under Section 28. However, this decision was reviewed in Canon-II, where the Supreme Court reversed the earlier ruling and held that DRI officials are 'proper officers' competent to issue SCNs under Section 28. - Court's Interpretation and Reasoning: The Court relied on Canon-II, which clarified that officers of the DRI and similarly situated authorities are proper officers under Section 28. The judgment in Canon-II provided detailed guidance on the disposal of pending writ petitions and appeals challenging jurisdiction on this ground, including directions for restoration of SCNs and timelines for filing appeals before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). - Key Findings: The Court held that the issue regarding the jurisdiction of DRI officials as proper officers stands conclusively settled by the Supreme Court in Canon-II and does not require further adjudication. - Application of Law to Facts: Since the impugned SCN was issued by DRI officials, their status as proper officers is affirmed. Challenges to jurisdiction on this ground are not maintainable. - Treatment of Competing Arguments: The petitioner's contention based on the earlier Canon-I judgment was rejected in light of the subsequent authoritative ruling in Canon-II. - Conclusion: DRI officials are proper officers under Section 28 of the Customs Act, and the impugned SCN issued by them is valid on the jurisdictional front. Issue 2: Whether pre-show cause notice consultation under the Pre-Notice Consultation Regulations, 2018 is mandatory before issuance of the impugned SCN and consequences of non-compliance - Legal Framework and Precedents: The Pre-Notice Consultation Regulations, 2018, issued by the Central Board of Indirect Taxes and Customs (CBIC), prescribe a consultation process prior to issuance of show cause notices to promote transparency and reduce litigation. The petitioner relied on a decision of a coordinate Bench of the Delhi High Court in Amadeus India Pvt. Ltd., which set aside SCNs issued without pre-notice consultation, holding such issuance contrary to CBEC instructions. - Court's Interpretation and Reasoning: The Court examined the Order-in-Original passed by the Adjudicating Authority during pendency of the writ petition, which explicitly addressed the petitioner's contention regarding pre-notice consultation. The Adjudicating Authority held that the impugned SCN was issued under Section 28(4) of the Customs Act, which deals with extended period for issuance of SCNs, and that the pre-notice consultation process mandated under the Regulations does not apply to SCNs issued under Section 28(4). - Key Evidence and Findings: The Adjudicating Authority's reasoned order noted the petitioner's requests for pre-notice consultation and reliance on the Amadeus decision but concluded that no legal provision mandates such consultation before issuance of SCNs under Section 28(4). The Court found this reasoning cogent and binding on the petitioner. - Application of Law to Facts: Since the impugned SCN was issued under Section 28(4), the pre-notice consultation requirement does not apply. Therefore, the absence of such consultation does not vitiate the SCN. - Treatment of Competing Arguments: The petitioner's argument that the Regulations and Circulars require mandatory consultation before any SCN issuance was rejected on the ground that the statutory provision invoked (Section 28(4)) does not envisage such consultation. The Court distinguished the Amadeus decision on this basis. - Conclusion: The impugned SCN issued under Section 28(4) is not liable to be quashed for non-compliance with the pre-notice consultation process prescribed under the Regulations. Issue 3: Availability of appellate remedy against the Order-in-Original denying exemption and imposing demand and penalty - Legal Framework: Under Section 129A of the Customs Act, appeals lie before the CESTAT against Orders-in-Original passed under Section 28. The petitioner's remedy against the Order-in-Original denying exemption and imposing demand and penalty is to file an appeal before the CESTAT. - Court's Interpretation and Reasoning: The Court noted that the Order-in-Original dated 30th December 2020 is appealable before the CESTAT. The petitioner is free to challenge the Order on merits before the appellate forum. - Key Findings: The Court granted liberty to the petitioner to file the appeal on or before 30th September 2025, directing that the appeal shall not be dismissed on the ground of limitation and shall be adjudicated on merits. The period during which the writ petition remained pending shall be excluded for limitation purposes. - Application of Law to Facts: The petitioner's challenge to the Order-in-Original on the ground of non-compliance with pre-notice consultation or jurisdictional issues must be raised before the CESTAT in appeal. - Treatment of Competing Arguments: The petitioner's reliance on writ jurisdiction to quash the SCN and Order was declined, with the Court emphasizing the availability of efficacious alternative remedy before the CESTAT. - Conclusion: The petitioner shall pursue appellate remedy before the CESTAT against the Order-in-Original. The Court has provided an extended timeline and protection against dismissal on limitation grounds. Additional Observations and Directions The Court clarified that the pre-deposit before the CESTAT shall be as per Section 129E(i) of the Customs Act. All rights and contentions of the parties are left open for adjudication before the appellate forum. The writ petition is disposed of accordingly, with pending applications also disposed.