By TIOL News Service

INDORE, JULY 06, 2018: THE  Delhi High Court in the case of  Mangali Impex Ltd - 2016-TIOL-877-HC-DEL-CUS, (judgment dated 03.05.2016) held that sub-section (11)of Section 28 of the Customs Act,1962 cannot validate SCNs or proceedings pursuant thereto in relation to non-levy, short levy or erroneous refund for the period prior to 8th April 2011, if such SCNs have been issued or proceedings conducted by officers of the Customs,DGDRI or DGCEI or by the SIIB, who are not 'proper officers' within the meaning of subsection(34) of Section 2 of the Act.

Pursuant thereto, the Board issued an Instruction in F.No..276/104/2016-CX.8A(Pt), Dated: June 29, 2016 clarifying -

2. In this regard it may be mentioned that the amendment in Section 28 (11) of the Customs Act, 1962 was brought out by the Government, after the decision of Supreme Court in Commissioner of Customs vs Sayed Ali  - 2011-TIOL-20-SC-CUS, wherein it was held that Customs Preventive Officers are not proper officers to issue Show Cause Notice u/s 28 of Customs Act, 1962. Vide Notification No.44/2011 dated 06.07.2011, Board assigned the functions of proper Officers to the officers of DGDRI, DGCEI and Preventive. Further, in the Statement of Facts and Reasons to the Customs (Amendment and Validation), Bill, 2011, while introducing sub-section 11 of Section 28 of the customs Act, 1962, the then FM had expressly mentioned that it has purposed to amend the Customs Act, 1962 retrospectively. Thus, the intention of Legislature was clearly spelt out. Therefore, the officers of DGDRI, DGCEI and Preventive  are Proper Officers even for the Show Cause Notices issued prior to issuance of Notification  dated 06.07.2011. Since the order dated 03.05.2016 of High Court of Delhi challenges the constitutional validity of sub-section (11) of Section 28 of the Customs Act, 1962, the Board has decided to file an SLP in the case before the Hon'ble Supreme Court.

3. The Board wants field formations to transfer all the SCNs issued by DRI, DGCEI, SIIB, Preventive prior to 06.07.2011 which are pending adjudication, to the Call Book till disposal of the matter in the Supreme Court.

In a further communication, F.No. 276/104/2016-CX.8A (Pt.) dated December 28, 2016, the Board clarified -

2. The Apex Court vide its  order dated 01.08.2016 in SLP (C) No. 20453/2016, filed by department in the case of M/s Mangali Impex Ltd., has stayed the operation of the Delhi High Court judgment dated 03.05.2016 =  2016-TIOL-877-HC-DEL-CUS.

3. The Board has received references from the field formations on the issues of (i) effect of stay granted by Supreme Court, on the Call Book cases and (ii) whether in view of the said judgment of Delhi High Court, all the show cause notices pending adjudication, where demand of duty is period  prior to 08.04.2011, should be kept in the Call Book, irrespective of the fact whether the SCN was issued prior to or post 06.07.2011 by DRI, DGCEI, SIIB, Preventive and other similarly placed officers.

4. These issues have been examined in the Board. As regards the effect of stay is concerned, it may be mentioned that the stay granted by the Apex Court on the operation of Delhi High Court judgment dated 03.05..2016, doesn't change the position. Hence, all the SCNs covered by the Delhi High Court Judgment dated 03.05.2016 should continue to be kept in the Call Book, till the Department's SLP is finally disposed by the Supreme Court. With regard to the second issue, it is clarified that all the Show Cause Notices issued by DRI, DGCEI, SIIB, Preventive and other similarly placed officers and pending adjudication,  where duty demand pertains to the period prior to 08.04.2011, should be transferred to the Call Book, irrespective of the fact whether the SCN is issued prior to or post 06.07.2011 by such officers, till the Department's SLP is finally disposed by the Supreme Court.

Within a few days, both these instructions dated 29.06.2016 &. 28.12.2016 (supra) were withdrawn based on the opinion of the Solicitor General.

And consequently, the Show Cause Notices, which were kept in the Call Book in view of the above said Board Instructions were required to be taken out of the Call Book immediately and the adjudication of such Show Cause Notices were to be proceeded with in accordance with law.

The Board conveyed this in its instruction F.No.276/104/2016-CX.8A(Pt) dated January 3, 2017 which reads -

2. In this regard, I am directed to say that the Board  inter alia, had referred the issue of pending adjudications of cases covered by the above said Board Instruction to the Ld. Solicitor General of India. The Ld. Solicitor General has opined,  inter alia, that in view of the unconditional stay in force, granted by the Hon'ble Supreme Court the Department could continue with adjudication of the Show Cause Notices hitherto covered by the Mangali Impex judgment.

The petitioner has challenged this Instruction/Circular dated 03/01/2017 pursuant to the adjudicating authority in his case proceeding further to adjudicate the show cause notice issued by ADG, DRI proposing demand of duty from the petitioner.

It is submitted that even if a judgment (of Mangali Impex) is stayed, the stay shall operate qua the parties thereto, and not qua all others. Thus, irrespective of the stay, the judgment of Delhi High Court is still in force qua all others and thus the adjudication shall be kept in call book and the impugned Circular is thus liable to be set aside.

The High Court considered the submissions and observed –

+ It appears that merely since issue of competence of officers of Directorate of Revenue Intelligence is pending for final order before the Apex Court, to avoid adjudication, the petitioner has challenged the Circular dated 3/01/2017.

+ For every issue, some or the other case would be pending in High Court or the Hon'ble Supreme Court. The same cannot cause fetter in exercise of quasi judicial or judicial functions of the authorities or lower courts. If merely for this reason the adjudication is kept in call book, there would be grave injustice and the same would be not in public interest. The matters can be kept in call book, if there is specific direction for the same issued in that case by the Superior Courts.

+ It is not the case of the petitioner that the SLP in Mangali Impex Ltd. (supra) is already listed for final hearing and, therefore, the adjudicating authority shall await the decisions of the Hon'ble Supreme Court.

+ The Circular do not contain any infirmity. The Circular is binding upon the authorities and they cannot act to the contrary as held by the Apex Court in Catena of decisions including the decision of the Apex Court in the case of Paper Products Ltd. v. Commissioner of Central Excise reported in (1999) 7 SCC 84 - 2002-TIOL-84-SC-CX.

+ The claim of the petitioner that, therefore, several similar cases, wherein Show Cause Notices have been issued by the DRI Officers, have been placed in call book by various adjudicating authorities all over India is not supported by any favourable data.

+ Therefore, if adjudicating authority is proceeding for adjudication, we find no error in the same and thus on the contrary the adjudicating authority is bound to do the same in view of the said binding circular. Therefore, it is clear that so far as the department is concerned, whatever action it has to take, the same will have to be consistent with the Circular which is in force at the relevant point of time. The challenge of the circular, therefore, fails for lack of any merit.

+ The petitioner claims that the adjudicating proceedings are pending and final order is yet to be passed, we cannot presume merely on the basis of such unfounded apprehension that the adjudicating authority would not comply with the mandatory statutory requirement under Section 138B of the Customs Act, 1962, despite binding precedents in this regard…

+ The apprehension of the petitioner that the adjudicating authority would pass a final order without following the said mandatory, statutory and legal requirements and the petitioner would then be forced to hardship of payment of pre-deposit which is pre-requisite for availing appellate remedies, is also unfounded.

The Writ Petition was dismissed as being bereft of merits.

In passing:

Please also see –

+ Sunil Gupta vs. Union of India -  2014-TIOL-1949-HC-MUM-CUS

+ Vuppalamritha Magnetic Components Ltd. vs. DRI (Zonal Unit), Chennai -  2016-TIOL-2789-HC-AP-CUS

+ Supro Overseas Pvt. Ltd. 2017-TIOL-2619-CESTAT-MUM &

+ Arif Khichi 2018-TIOL-1057-HC-DEL-CUS.

(See 2018-TIOL-1264-HC-MP-CUS)