Summary
Allowing the Customs Department's review of Canon India (2021) on the question of jurisdiction, the Supreme Court held that DRI officers are officers of customs appointed under Section 4 who, once assigned proper-officer functions (as by Notification 44/2011), may issue show cause notices under Section 28 of the Customs Act, 1962; no Section 6 entrustment is needed and Section 28 is not tied to the officer who assessed under Section 17. It upheld Section 28(11), set aside the Delhi High Court's Mangali Impex ruling, and upheld Section 97 of the Finance Act, 2022, leaving Canon India's limitation findings undisturbed.
Issues
- Whether Canon India suffered from an error apparent on the face of the record warranting review.
- Whether DRI officers are proper officers competent to issue show cause notices under Section 28, and whether entrustment by the Central Government under Section 6 was required.
- Whether the power under Section 28 can be exercised only by the proper officer who assessed or could assess the goods under Section 17, and what 'the proper officer' in Section 28 means.
- Whether proceedings under Section 28 are an administrative review or quasi-judicial in nature.
- Whether Section 28(11), inserted by the Customs (Amendment and Validation) Act, 2011, is valid and extends to the period before 08.04.2011 despite Explanation 2 to Section 28.
- Whether Section 97 of the Finance Act, 2022, retrospectively validating actions under the Customs Act, is unconstitutional.
Provisions considered
- Order XLVII Rule 1, Code of Civil Procedure, 1908 (with Order XLVII, Supreme Court Rules, 2013 and Article 137 of the Constitution)Review lies for error apparent on the face of the record; a judgment rendered without attention to a material statutory provision is per incuriam and amenable to review. Canon India overlooked Sections 3, 4 and 5, the amended Section 17 and the relevant circular and notification, warranting review. (¶¶ 57, 58, 59, 60, 62, 63, 64, 65, 67, 130)
- Section 2(34) read with Sections 3, 4 and 5, Customs Act, 1962A proper officer is an officer of customs assigned the relevant function by the Board or the Commissioner. DRI officers were appointed officers of customs by notifications under Section 4(1) (Notification 19/90, superseded by 17/2002), so they can be assigned proper-officer functions, which they exercise under Section 5. (¶¶ 102, 103, 109, 112, 113, 115, 124, 128, 168)
- Section 6, Customs Act, 1962Section 6 lets the Central Government entrust customs functions to officers of other departments of the Central or State Government or local authorities; it does not apply to DRI officers, who are already officers of customs. Canon India's reliance on Section 6 was a glaring misapplication of the law. (¶¶ 117, 119, 120, 121, 122, 125, 129, 130)
- Section 17 (as amended by the Finance Act, 2011 w.e.f. 08.04.2011), Customs Act, 1962Since 08.04.2011 the importer self-assesses and the proper officer only verifies and re-assesses if needed; Canon India applied the pre-amendment Section 17 to a 2012 bill of entry and overlooked this change. (¶¶ 83, 84, 85, 88, 89, 90, 91, 94)
- Section 28, Customs Act, 1962Section 28 is a distinct, subsequent quasi-judicial proceeding for recovering duty not levied, short-levied or erroneously refunded, not a re-assessment or administrative review. 'The proper officer' means the officer assigned the Section 28 function, not the officer who assessed under Section 17. (¶¶ 96, 97, 99, 101, 102, 103, 104)
- Section 28(11) and Explanation 2 to Section 28, Customs Act, 1962Explanation 2 preserves the old Section 28 (chiefly its limitation periods) for pre-08.04.2011 non-levy, while Section 28(11) deals only with the competence of officers; the two operate in distinct fields, so Section 28(11) applies to the old Section 28 too and is not confined to 08.04.2011 to 16.09.2011. (¶¶ 137, 138, 139, 143, 146, 147, 148, 149, 155)
- Section 110AA (inserted by the Finance Act, 2022), Customs Act, 1962Treated as a prospective change in procedure, not an admission that the earlier practice of DRI issuing show cause notices was unlawful; legality is judged by the law in force when the action was taken. (¶¶ 98, 165)
- Section 97, Finance Act, 2022The validating provision cures any defect, does not impermissibly overrule a judicial finding of fact, and is not manifestly arbitrary or discriminatory; Section 97(iii) operates only to further validation under clause (i), and the criteria in Section 5(4) are discretionary. (¶¶ 158, 159, 160, 162, 163, 164, 165, 166, 167)
Held
- When a court decides a case without regard to a relevant statutory provision, the judgment is per incuriam and open to review. Canon India was rendered without considering Sections 3, 4 and 5, the amendment to Section 17, Circular 4/99-Cus dated 15.02.1999 and Notification 44/2011 assigning proper-officer functions under Sections 17 and 28 to DRI officers, so review was warranted. (¶¶ 67, 91, 130, 168)
- DRI officers are officers of customs appointed under Section 4; an officer of customs becomes 'the proper officer' for a function when that function is assigned to him, which DRI officers exercise under Section 5. Entrustment under Section 6 is meant for officers of other departments and was unnecessary; Canon India's contrary finding was an error apparent. (¶¶ 106, 115, 125, 127, 128, 129, 130)
- Nothing in the Act links Sections 17 and 28 so as to make the power of assessment a precondition for issuing a show cause notice under Section 28. The observations in Sayed Ali on such linkage are obiter, did not lay down correct law, and could not govern the period after Section 17 was amended in 2011. (¶¶ 81, 82, 83, 97, 99)
- The definite article in 'the proper officer' in Section 28 refers to the officer assigned the Section 28 function by the competent authority, not to the officer who assessed the goods under Section 17; the proper officer is identified with reference to the function. (¶¶ 101, 102, 103, 105)
- Proceedings under Section 28, involving a show cause notice and adjudication, are quasi-judicial and distinct from assessment or re-assessment under Section 17; Canon India erred in describing them as an administrative review and in treating Section 28(4) as re-assessment. (¶¶ 93, 96, 97, 163)
- Section 28(11) is constitutionally valid, cures the defect identified in Sayed Ali, and applies to show cause notices under the old Section 28 as well; possible misuse is no ground to invalidate a law, and the Department's practice that once one proper officer issues a notice the others' jurisdiction is excluded is an adequate safeguard against multiple proceedings. (¶¶ 148, 151, 152, 153, 154, 155)
- The Bombay High Court's view in Sunil Gupta is correct; the Delhi High Court in Mangali Impex erred in confining Section 28(11) by harmonising it with Explanation 2 and in holding it overbroad, and that decision was set aside. (¶¶ 150, 156, 168)
- Section 97 of the Finance Act, 2022 is constitutionally valid: there was no subsisting defect after the review, a validating law may cure jurisdictional defects retrospectively, a prospective change through Section 110AA creates no unreasonable classification, and the criteria in Section 5(4) are discretionary. (¶¶ 160, 163, 164, 165, 166, 167)
- The review was confined to jurisdiction; Canon India's findings that the show cause notices there were beyond limitation were not reviewed and remain undisturbed. (¶¶ 168, 169)
Result
Review Petitions 400 to 403 of 2021 allowed on the jurisdiction issue only, Canon India's limitation findings left intact; Mangali Impex set aside and Sunil Gupta approved; Section 28(11) and Section 97 of the Finance Act, 2022 upheld; DRI, Customs (Preventive), DGCEI and Central Excise officers held proper officers for Section 28; pending matters to be disposed of accordingly, with notices restored for adjudication or eight weeks allowed to appeal to CESTAT as directed; connected matters to be listed before the appropriate Bench.