Issue
Whether the Directorate of Revenue Intelligence(DRI) had authority in law to issue a show cause notice under Section 28(4) of the Customs Act,1962( the Act) for recovery of duties allegedly not levied or paid when the goods have been cleared for import by a Deputy Commissioner of Customs who decided that the goods are exempted.
Decided
9th March,2021
Provision Under Reference
Section 2 (34) ‘proper officer’, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the [Principal Commissioner of Customs or Commissioner of Customs].
Section 28 (4) Where any duty has not been [levied or not paid or has been short- levied or short-paid] or erroneously refunded, or interest payable has not been paid, part- paid or erroneously refunded, by reason of, –
(a) collusion; or
(b) any wilful mis-statement; or
(c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been [so levied or not paid] or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.
Analysis of “the”
The Constitutional bench of Supreme Court observed that
9………….This Court in Consolidated Coffee Ltd. and Another vs. Coffee Board, Bangalore (1980 AIR 1468) has held:-
“14. …Secondly, and more importantly, the user of the definite article ‘the’ before the word ‘agreement’ is, in our view, very significant.
Parliament has not said ‘an agreement’ or ‘any agreement’ for or in relation to such export and in the context the expression ‘the agreement’ would refer to that agreement which is implicit in the sale occasioning the export.”
In Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd.in(Appeal (crl.) 219 of 2001) has held:-
“9. …’The’ is the word used before nouns, with a specifying or particularising effect as opposed to the indefinite or generalizing force of ‘a’ or ‘an’. It determines what particular thing is meant; that is, what particular thing we are to assume to be meant. ‘The’ is always mentioned to denote a particular thing or a person.”
10. There are only two articles ‘a (or an)’ and ‘the’. `A (or an)’ is known as the Indefinite Article because it does not specifically refer to a particular person or thing. On the other hand, ‘the’ is called the Definite Article because it points out and refers to a particular person or thing. There is no doubt that, if Parliament intended that any proper officer could have exercised power under Section 28 (4), it could have used the word ‘any’.
11. Parliament has employed the article “the” not accidently but with the intention to designate the proper officer who had assessed the goods at the time of 3 (2001) 3 SCC 609 clearance. It must be clarified that the proper officer need not be the very officer who cleared the goods but may be his successor in office or any other officer authorised to exercise the powers within the same office. In this case, anyone authorised from the Appraisal Group. Assessment is a term which includes determination of the dutiability of any goods and the amount of duty payable with reference to, inter alia, exemption or concession of customs duty vide Section 2 (2) (c) of the Customs Act, 1962 .
Assessment
12. The nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import, is broadly a power to review the earlier decision of assessment. Such a power is not inherent in any authority. Indeed, it has been conferred by Section 28 and other related provisions. The power has been so conferred specifically on “the proper officer” which must necessarily mean the proper officer who, unless the context otherwise requires, ..
Exercise of Power by a Specific Officer
13. Where the statute confers the same power to perform an act on different officers, as in this case, the two officers, especially when they belong to different departments, cannot exercise their powers in the same case. Where one officer has exercised his powers of assessment, the power to order re-assessment must also be exercised by the same officer or his successor and not by another officer of another department though he is designated to be an officer of the same rank. In our view, this would result into an anarchical and unruly operation of a statute which is not contemplated by any canon of construction of statute.
14. It is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone. As in this case, when the statute directs that “the proper officer” can determine duty not levied/not paid, it does not mean any proper officer but that proper officer alone. We find it completely impermissible to allow an officer, who has not passed the original order of assessment, to re-open the assessment on the grounds that the duty was not paid/not levied, by the original officer who had decided to clear the goods and who was competent and authorised to make the assessment. The nature of the power conferred by Section 28 (4) to recover duties which have escaped assessment is in the nature of an administrative review of an act. The section must therefore be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment. In other words, an officer who did the assessment, could only undertake re-assessment [which is involved in Section 28 (4)].
Additional Director General of DRI is not a Proper Officer
15. It is obvious that the re-assessment and recovery of duties i.e. contemplated by Section 28(4) is by the same authority and not by any superior authority such as Appellate or Revisional Authority. It is, therefore, clear to us that the Additional Director General of DRI was not “the” proper officer to exercise the power under Section 28(4) and the initiation of the recovery proceedings in the present case is without any jurisdiction and liable to be set aside.
16. At this stage, we must also examine whether the Additional Director General of the DRI who issued the recovery notice under Section 28(4) was even a proper officer. The Additional Director General can be considered to be a proper officer only if it is shown that he was a Customs officer under the Customs Act. In addition, that he was entrusted with the functions of the proper officer under Section 6 of the Customs Act. The Additional Director General of the DRI can be considered to be a Customs officer only if he is shown to have been appointed as Customs officer under the Customs Act.
Ratio – DRI is not Proper Officer Under Section 28(4)
18. It is plain from the provision that the ‘proper officer’ being subjectively satisfied on the basis of the material that may be with him that customs duty has not been levied or short levied or erroneously refunded on an import made by any individual for his personal use or by the Government or by any educational, research or charitable institution or hospital, within one year and in all other cases within six months from the relevant date, may cause service of notice on the person chargeable, requiring him to show cause why he should not pay the amount specified in the notice. It is evident that the notice under the said provision has to be issued by the ‘proper officer’.
19. Section 2(34) of the Act defines a ‘proper officer’, thus:
‘2. Definitions.-
(34) ‘proper officer’, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Commissioner of Customs;’ It is clear from a mere look at the provision that only such officers of customs who have been assigned specific functions would be ‘proper officers’ in terms of Section 2(34) the Act. Specific entrustment of function by either the Board or the Commissioner of Customs is therefore, the governing test to determine whether an ‘officer of customs’ is the ‘proper officer’.
20. From a conjoint reading of Sections 2(34) and 28 of the Act, it is manifest that only such a Customs Officer who has been assigned the specific functions of assessment and re- assessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose inasmuch as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions.”
The entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices are invalid and without any authority of law and liable to be set-aside and the ensuing demands are also set- aside.
AMLEGALS Remarks
It will be interesting to see as to how the Government will come up with such an order of the Supreme Court. However, going by the past track record of tackling such an issue, an issuance of a notification with retrospective effect cannot be ruled out to validate the issuance of the show cause notices by DRI wherein duty has been demanded under Section 28(4) of the Customs Act,1962.
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