CESTAT: DRI Officials Have No Power Under Customs Act In Absence Of CG Notification

The Assessee had imported goods through three different ports in India, which were assessed and cleared for home consumption. Thereafter, on basis of some information, the Directorate of Revenue Intelligence (DRI) conducted search and investigation, concluding that the Assessee had undervalued his imported goods resulting in short levy of duty. The DRI issued a show cause notice on the Assessee under Section 28 of the Customs Act, 1962 proposing recovery of differential duty, interest, penalty and confiscation of impugned goods. The Commissioner of Customs confirmed the demand of differential duty and imposed a penalty of equal amount under the Act. The Assessee filed an appeal before the Tribunal against the impugned order.

The counsel for the Assessee submits that the impugned order should be set aside since the show cause notice issued under section 28 by the DRI suffers from lack of jurisdiction. The Assessee submitted that the Supreme Court in its 2021 judgment in Canon India versus Commissioner of Customs has held that officers of DRI are not 'proper officers' under Section 28 and that following the said judgment, various High Courts and benches of the Customs, Excise & Service Tax Appellate Tribunal (CE&STAT) have set aside the show cause notices issued by the DRI under Section 28 of the Act demanding Customs duty.

The Customs Department contented that in view of Section 28(11), any person appointed as Customs officer under Section 4(1) prior to 6th July 2011 is a proper officer for the purpose of assessment under section 17 as well as for issuing demands under section 28. The Department also submitted that Section 28(11) was not under consideration by the Supreme Court in Canon India. Given that the DRI officers were appointed as Customs officers under Section 4(1) vide a 2002 Notification, the Department submitted that the show cause notice issued by them in the present case was valid.

Section 28(1) provides that where any duty has not been levied or paid or short-levied or paid, the proper officer shall require the assessee to show cause why he should not pay the amount specified in the notice. Section 28(11) provides that persons appointed as Customs officers under section 4(1) before 6^th July, 2011 shall be deemed to have the power of assessment under section 17 and shall be deemed to have been the proper officers for the purposes of this section.

The Tribunal observed that though Section 28(11) of the Act is valid, under the Customs Act DRI and Customs Officers are treated as distinct and separate. As per Section 3, officers of DRI are not officers of Customs and they are appointed through a notification under Section 4. Similarly, the Tribunal observed that DRI officers were treated as separate and distinct from the Customs officers under the provisions of the Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985 and the Right to Information (RTI) Act, 2005.

The Tribunal noted that the Supreme Court in Canon India held that functions under the Customs Act can be entrusted to other officers, including the DRI, only by the Government under Section 6. Also, a show cause notice under Section 28 can be issued only by 'the proper officer' i.e., the officer by whom the assessment was done in the first place. Hence, the Tribunal observed that the court treated the DRI officers as distinct from Customs officers just like the legislature did in Customs Act, NDPS Act and RTI Act.

The Tribunal noted that the Finance Bill, 2022 has proposed retrospective amendments to the Customs Act, 1962. If enacted, DRI officers will be at par with Customs officers under the Customs Act by virtue of the substitution of section 3 and their various actions such as searches, seizures and arrests may not become void because of non-entrustment of those functions by the Government under Section 6. However, the Tribunal held that there was no proposal to amend Section 28 and hence the show cause notice under Section 28 can be issued only by the 'proper officer', i.e., the officer who has done the assessment in the first place even after the Bill becomes an Act.

Therefore, the Tribunal held that in the present case, despite the provisions of section 28(11), the show cause notice issued by the DRI under Section 28 is without authority since the Bills of Entry in the present case were not assessed by the DRI in the first place.

"Thus, even if there are more than one proper officer by virtue of section 28(11), the demand can be raised only by 'the proper officer' i.e., one who assessed the Bills of Entry in the first place or his successor in office and not by any other proper officer. In this case, since the Bills of Entry were not assessed by the officers of DRI, the SCN issued under Section 28 is without authority even if section 28(11) is considered. Thus section 28(11) does not carry the case of Revenue any further."

The Tribunal allowed the Assessee's appeal, setting aside the impugned order emanating from the show cause notice issued by the DRI.

CASE TITLE: M/S BERIWALA IMPEX PVT. LTD VERSUS COMMISSIONER OF CUSTOMS (PORT), KOLKATA

DATED: 23.02.2022

Counsels For The Appellant : Sourabh Bagaria & Indranil Banerjee,

Authorized Representative for the Respondent: M.P.Toppo,

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