By TIOL News Service

NEW DELHI, MAY 04, 2016: THE Trigger: Following is the extract from DDT 1647 dated 08.07.2011 while reporting the Notification 44/2011-Cus (NT) dated July 6, 2011.

Board Empowers DRI, DGCEI to Issue SCNs

IT   is the practice for DRI and DGCEI to book cases left right and centre, prepare bulky Show Cause Notices running into hundreds of pages and then make the Jurisdictional Customs or Central Excise officers to adjudicate them. It is an unwritten rule in the field that a Show Cause Notice issued by DRI/DGCEI has to be invariably confirmed.

However, all this changed recently. The Supreme Court in the case of Sayed Ali - 2011-TIOL-20-SC-CUS held,

"… it is only the officers of customs, who are assigned the functions of assessment, which of course, would include re-assessment, working under the jurisdictional Collectorate within whose jurisdiction the bills of entry or baggage declarations had been filed and the consignments had been cleared for home consumption, will have the jurisdiction to issue notice under Section 28 of the Act".

Lo and behold! All the Show Cause Notices issued by DRI, suddenly became illegal. A panicked Board, in Instruction dated 15.04.2011 told the field, "while other alternative measures are being considered to address the matter, it has been decided by the Board that henceforth all Show Cause Notices under Section 28 of the Customs Act, 1962 in respect of cases investigated DRI/Customs Preventive formations are required to be issued by jurisdictional Commissioners from where imports have taken place. Board also desires the field formations to examine the pending show cause notices and wherever the cases are not hit by limitation, show cause notices may be got issued afresh by jurisdictional Commissionerates in supersession of the earlier show cause notices and in the light of the Hon'ble Supreme Court judgement in the matter".

Now, the Board has come up with a notification assigning the functions of 'proper officer' for the purposes of Section 17 (Assessment) and Section 28 (Recovery of duties) of the Customs Act, on the following officers.

1. Additional Director Generals, Additional Directors or Joint Directors, Deputy Directors or Assistant Directors in the Directorate General of Revenue Intelligence.

2. Commissioners of Customs (Preventive), Additional Commissioners or Joint Commissioners of Customs (Preventive), Deputy Commissioners or Assistant Commissioners of Customs (Preventive).

3. Additional Director Generals, Additional Directors or Joint Directors, Deputy Directors or Assistant Directors in the Directorate General of Central Excise Intelligence.

4. Commissioners of Central Excise, Additional Commissioners or Joint Commissioners of Central Excise, Deputy Commissioners or Assistant Commissioners of Central Excise.

Please also see DDT 1597 - 28.04.2011

You can be sure this will be one of the retrospective amendments in the next budget.

Incidentally, the Central Government did not wait for the next Union Budget.

We covered this happening that was informed by the Board in Circular 44/2011-Cus dated 23.09.2011, in DDT 1701 as below -

Parliament retrospectively amends Section 28 of Customs Act - Life induced into dead SCNs

PURSUANT to the judgement of the Supreme Court dated 18.02.2011, in the Sayed Ali case - 2011-TIOL-20-SC-CUS, Board had issued an Instruction F.No.437/143/2009-Cus.IV(pt) dated 15.04.2011 directing the field formations to examine pending Show Cause Notices and wherever these are not hit by time limitation to get these issued afresh by the jurisdictional Commissionerates.

Further, as a prospective remedial measure, in terms of Section 2(34) of the Customs Act, 1962, the Board issued Notification No.44/2011-Customs (N.T.), dated 06.07.2011. By virtue of this Notification, officers of Directorate General of Revenue Intelligence (DRI), Commissionerates of Customs (Preventive), Directorate General of Central Excise Intelligence (DGCEI) and Central Excise Commissionerates were assigned the functions of the 'proper officer' for the purposes of Sections 17 and 28 of the said Act.

To address the issue of validity of Show Cause Notices issued prior to 06.07.2011, which was likely to be adversely impacted by the said judgment of the Hon'ble Supreme Court, a suitable legislative change was proposed. In this regard, the President has given assent to the Customs (Amendment and Validation) Bill, 2011 on 16.09.2011 and the corresponding Act has been published in the Gazette of India dated 20.09.2011 as Act No.14 of 2011. Thus, the amendment to Section 28 has come into force w.e.f. 16.09.2011. The said Act amends Section 28 of the Customs Act, 1962 by inserting clause (11), which reads as follows:

"(11) Notwithstanding anything to the contrary contained in any judgement, decree or order of any court of law, tribunal or other authority, all persons appointed as officers of Customs under sub-section (1) of section 4 before the sixth day of July, 2011 shall be deemed to have and always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers for the purposes of this section."

Accordingly, as per the amended Section 28 of the Customs Act, 1962 Show Cause Notices issued prior to 06.07.2011 by officers of Customs, which would include officers of Commissionerates of Customs (Preventive), Directorate General of Revenue Intelligence (DRI), Directorate General of Central Excise Intelligence and similarly placed officers stand validated since these officers are retrospectively recognized as 'proper officers' for the purpose of Sections 17 and 28 of the said Act.

In this regard it may also be noted that in terms of Notification No.44/2011-Customs (N.T.), dated 06.07.2011 the officers of DRI and DGCEI are 'proper officers' for the purposes of Section 28. However, Board directs that these officers shall not exercise authority in terms of clause (8) of Section 28 of the said Act. In other words, there shall be no change in the present practice and officers of DRI and DGCEI shall NOT adjudicate the Show Cause Notices issued under Section 28 of the Act.

Since the matter pertaining to validity of Show Cause Notice stands settled in terms of Notification No.44/2011-Customs (N.T.), dated 06.07.2011 and amended Section 28 of the Customs Act, 1962, the Instruction F.No.437/143/2009-Cus.IV(pt) dated 15.04.2011 is no longer necessary. Hence, the said Instruction dated 15.04.2011 stands withdrawn with immediate effect.

Board wants pending Show Cause Notices and cases before adjudicating authorities and before appellate and judicial authorities to be dealt with on the basis of the latest legal position.

No one should ever dream of challenging this in the High Courts or Supreme Court, for retrospective amendment of law to undo Court Orders, has judicial approval in India.

Please also see TIOL-DDT 1597 28.04.2011, TIOL-DDT 1647 08.07.2011 and TIOL-DDT 1657 22.07.2011 for more on this.

Interestingly, 20 petitioners, which included Bharat Sanchar Nigam Limited realized their dreams in the Delhi High Court yesterday.

All the petitioners had challenged the constitutional validity of Section 28 (11) of the Customs Act, 1962 which was inserted by the Customs (Amendment and Validation) Act, 2011 ('Validation Act, 2011') with effect from 16th September 2011.

In terms of Section 28 (11) of the Act, all persons appointed as Customs Officers under Section 4 (1) of the Act prior to 6th July 2011 "shall be deemed to have and always had the power of assessment under Section 17 and shall be deemed to have been and always had been the proper officers..."

Section 28(11) of the Act also states that the provision would take effect "notwithstanding anything to the contrary contained in any judgment, decree or order of any court of law, tribunal or other authority."

The principal submission on behalf of the Petitioners is that although the insertion of Section 28 (11) is by the Validation Act, 2011 which was meant to cure the defects pointed out in Section 28 of the Act by the Supreme Court in Commissioner of Customs v. Sayed Ali - 2011-TIOL-20-SC-CUS, in fact, it does not do so. The further submission is that for the period prior to 6th July 2011 the decision of the Supreme Court in Sayed Ali (supra) would still apply and even in terms of Section 28 (11) of the Act the offices of the Commissionerates of Customs (Preventive), DRI, DGCEI would not have jurisdiction to continue proceedings in relation to the SCNs already issued or issue fresh SCNs for the period prior to 6th July 2011.

In an expansive order running into 150 paragraphs, the Delhi High Court, yesterday, held in favour of the petitioners, well almost.

This is what the High Court observed -

++ A perusal of Explanation 2 to Section 28 of the Act reveals that it opens with the words 'For removal of doubts'. This Explanation is supposed to be a clarification by the legislature itself. It is categorically stated that any non-levy, short-levy or erroneous refund prior to the date on which the Finance Bill, 2011 receives the assent of the President, shall continue to be governed by the provisions of Section 28 as it stood immediately before the date on which such assent is received. Explanation 2 remains in the statute even after the insertion of Section 28 (11) of the Act which seeks to deal with the very same period, i.e., the period prior to the date on which the Finance Act, 2011 receives the assent of the President i.e., 8th April 2011. Although what is intended to be done by the legislature, as is evident from the Statement of Objects & Reasons (SOR) appended to the Validation Act, 2011, is to validate the notices issued prior to 8th April 2011, the opening words of sub-section (11) of Section 28 is a non- obstante clause only in a limited sphere. It makes sub-section (11) apply notwithstanding anything contained in any "judgment, decree or order of the Court". It does not make it apply notwithstanding anything contained elsewhere in the same statute or in any other law for the time being in force.

++ Section 28 (11) of the Act opens with a non-obstante clause which overrides 'anything to the contrary contained in any judgment, decree or order of any court' but does not override any other provisions of the Act or any other Act for the time being in force. In other words Section 28 (11) neither explicitly or implicitly seeks to overcome the legal position brought about by Explanation 2 which states that non-levy, short-levy or erroneous refunded prior to 8th April 2011 will continue to be governed by the un-amended Section 28 of the Act as it stood prior to 8th April 2011, notwithstanding enactment of Section 28 (11) of the Act. Considering that Explanation 2 opens the words 'For the removal of doubts' the Court cannot presume a legislative intent to the contrary.

++ It requires to be noticed that the SOR appended to the Validation Act, 2011 makes no reference to Explanation 2 to Section 28 at all. It is not for the Court to undertake a task that the legislature itself did not undertake, viz., rewrite Section 28 (11) to make it override Explanation 2 to Section 28 of the Act. The words 'this section' appearing in Section 28 (11) can only mean Section 28 as newly enacted. However, it does not in any manner affect Explanation 2 to Section 28 of the Act as far as the period prior to 8th April 2011 is concerned. In other words, the newly enacted Section 28(11) would not empower the officers of the DRI and DGCEI to either proceed to adjudicate SCNs already issued by them for the period prior to 8th April 2011 or to issue SCNs for a period prior to 8th April 2011.

++ The decision of the Bombay High Court [in Sunil Gupta - 2014-TIOL-1949-HC-MUM-CUS] fails to address the essential problem in allowing Explanation 2 to Section 28 to remain in the statute book even while Section 28(11) was inserted.

Constitutional Validity

++ There is merit in the contention that Section 28(11) is overbroad in as much as it confers jurisdiction on a plurality of officers on the same subject matter which would result in chaos, harassment, contrary and conflicting decisions. Such untrammelled power would indeed be arbitrary and violative of Article 14 of the Constitution.

++ The statute has to be read for what it actually states. It is only where there is some ambiguity which requires clarification that a reference can be made to the SOR as an external aid of construction. However, there cannot be a presumption of validity by reference to such SOR.

++ Section 28 (11) interpreted in the above terms would not suffer the vice of unconstitutionality. Else, it would grant wide powers of assessment and enforcement to a wide range of officers, not limited to customs officers, without any limits as to territorial and subject matter jurisdiction and in such event the provision would be vulnerable to being declared unconstitutional.

Conclusion:

(i) Section 28(11) states that all persons appointed as Customs Officers prior to 6th July 2011 will be deemed to always have had the power of assessment under Section 17 and shall be deemed to always have been 'proper officers'. Further, this is notwithstanding anything to the contrary in any judgment, decree or order of any Court of law. While the said provision is intended to overcome the defect pointed out in the decision of the Supreme Court in the Sayed Ali case, Section 28(11) of the Act does not state that it would operate notwithstanding anything contained either in the Act or any other Act for the time being in force. In other words, the legislature has not made it explicit that Section 28(11) would prevail notwithstanding anything contained in Explanation 2 to Section 28 of the Act.

(ii) On the contrary, Explanation 2 which, as it presently stands, appears after Section 28(11) of the Act as already stood enacted with effect from 8th April 2011 opens with the words 'for the removal of doubts'. It is made clear that non-levy, short-levy or erroneous refund prior to 8th April 2011 would be governed by Section 28 "as it stood immediately before the date on which such assent is received".

(iii) Section 28(11), as it presently stands, was not in the statute book prior to 8th April 2011. Therefore, no reference can be made to Section 28(11) of the Act for determining not only the procedure but the very basis on which a non-levy, short-levy or erroneous refund occurring prior to 8th April 2011 should be dealt with.

(iv) Prior to 8th April 2011 and even subsequent thereto, only a 'proper officer' who has been 'assigned' specific functions by the CBEC or the Commissioner as amended by Section 2(34) of the Act could undertake the task of non-levy, short-levy or erroneous refund. Therefore, for any non-levy, short-levy or erroneous refund prior to 8th April 2011, an officer of the Customs who has not been specifically assigned such function in terms of the Act cannot exercise such power.

(v) Section 28(11) therefore, does not validate the show cause notices issued by the DRI, DGCEI Officers who are not 'proper officers' for the purposes of Section 2(34) of the Act if it amounted to undertaking any assessment or re-assessment of a non-levy, short-levy or erroneous refund prior to 8th April 2011.

(vi) It is only for a period between 8th April 2011 and 6th July 2011 that such deemed 'proper officer' can be said to have been given retrospective power to deal with non-levy, short-levy or erroneous refund for any period subsequent to 8th April 2011, i.e., the date on which Section 28(11) read with Explanation 2 could be said to have come into force.

The parting shot: SCNs relating to the period prior to 8th April 2011 issued by Customs, DRI or DGCEI or SIIB, who are not 'proper officers' within the meaning of Section 2 (34) of the Act were quashed. The Circular dated 23rd September 2011 is also quashed. However, insofar as the SCNs covering the period subsequent to 8th April 2011, the adjudication proceedings were to go on in accordance with law.

The petitions were disposed of.

(See 2016-TIOL-877-HC-DEL-CUS)