Landmark Judgement by The Hon. SC of
India, Now DRI cannot Issue SCN
· The
“Proper Officer” is the Appraising Officer only
· This
is a Major Development in Favour of Industry &
Trade
IN THE
SUPREME COURT OF INDIA
CIVIL
APPELLATE JURISDICTION
CIVIL
APPEAL NO.1827 OF 2018
M/s Canon India Private Limited …. Appellant(s)
Versus
Commissioner OF Customs …. Respondent(s)
With Civil
Appeal No. 1875 of 2018
With Civil
Appeal No.1832 of 2018
With Civil
Appeal No.3213 of 2018
J U D G M E
N T
S.A. BOBDE, CJI.
1. This batch of statutory appeals (being Civil Appeal Nos.
1827/2018, 1875/2018, 1832/2018 and 3213/2018) under Section 130E of the
Customs Act, 1962 arises from a common final order of the Central Excise and
Service Tax Appellate Tribunal (‘CESTAT’) dated 19th December 2017 (‘impugned
order’).
2. Vide the impugned order an exemption
of basic customs duty accorded to the Digital Still Image Video Cameras
(‘DSIC’) imported by the Nikon India Pvt. Ltd, Canon India Pvt. Ltd., Sony
India Pvt. Ltd. and Samsung India Electronics Pvt. Ltd (hereinafter referred to
as ‘appellants’ or ‘importers’), in terms of exemption Notification No. 20/2005
dated 01.03.2005 (as amended by Notification No. 15/2012 dated 17.03.2012) came
to be denied and the consequential confiscation of goods, demand of interest
and imposition of penalty as provided for under various sections of the Customs
Act, 1962, was upheld by the CESTAT.
3. Since the appeals involve common questions, these are
being decided together and for sake of convenience we
shall be referring to the events which took place in the case of Nikon.
4. The main issue is whether after clearance of the cameras
on the basis that they were exempted from levy of basic Customs duty under Notification
No.15/2012, the proceedings initiated by the Directorate of Revenue
Intelligence for recovery of duty not paid under Section 28(4) of the Customs
Act, 1962 are valid in law.
Exemption Notification
5. Exemption to Digital Still Image Video Cameras was issued
on 1.3.2005 vide Notification No.25/2005 (and amended vide Notification
No.15/2012 on 17.3.2012).
Arrival and decision to clear the goods on payment of nil duty
6. The consignment of cameras arrived at Delhi on 15.3.2012.
The importer submitted a Bill of Entry to the Customs Authorities on 20.3.2012.
Along with the Bill of Entry, the importer submitted a covering letter and
literature containing specifications of the cameras. After verification of the
Bill of Entry by the Inspector and the Superintendent, the importer requested
the Deputy Commissioner of Customs for a first check on 21.3.2012. The Customs
Authorities checked the goods on 24.3.2012. They compared the goods with the
description given in the literature and took a decision to clear the goods on
24.3.2012, as being exempt from duty in terms of the Notification No.15/2012 which was issued on 17.3.2012.
Recovery of Duties
7. On 19.8.2014, a show cause notice was
issued under Section 28 (4) of the Customs Act, 19621
alleging that the Customs Authorities had been induced to clear the cameras by wilful mis-statement and
suppression of facts about the cameras. In particular; that the cameras were
capable of recording more than a single video sequence of less than 30 minutes.
In other words, after one sequence of less than 30 minutes was
recorded, the camera had sufficient memory (extendable) to record more
such sequences.
1Section 28 (4) Where any duty has not
been [levied or not paid or has been shortlevied or
short-paid] or erroneously refunded, or interest payable has not been paid, partpaid 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.
8. It is significant to note that while the decision to
clear the goods for import because they were exempted from customs duties under
Notification No.15/2012, was taken by Deputy Commissioner, Appraisal Group,
Delhi Air Cargo, the show cause notice was issued by
the Additional Director General, Directorate of Revenue Intelligence.
9. The question that arises is whether the Directorate of
Revenue Intelligence had authority in law to issue a show cause notice under
Section 28(4) of 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. It is
necessary that the answer must flow from the power conferred by the statute
i.e. under Section 28(4) of the Act. This Section empowers the recovery of duty
not paid, part paid or erroneously refunded by reason
of collusion or any wilful mis-statement
or suppression of facts and confers the power of recovery on “the proper
officer”. The obvious intention is to confer the power to recover such duties
not on any proper officer but only on “the proper officer”. This Court in Consolidated
Coffee Ltd. and Another vs. Coffee Board, Bangalore2 has held:-
2(1980) 3 SCC 358
“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.3 has held:-
3(2001) 3 SCC 609
“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 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, 19624.
4Section 2. Definitions – In this Act,
unless the context otherwise requires, -
…
(2) “assessment” means determination
of the dutiability of any goods and the amount of
duty, tax, cess or any other sum so payable, if any,
under this Act or under the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred
to as the Customs Tariff Act) or under any other law for the time being in
force, with reference to –
(a) …
(b) …
(c) exemption or concession of duty,
tax, cess or any other sum, consequent upon any
notification issued therefor under this Act or under the Customs Tariff Act or
under any other law for the time being in force;
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, in the first instance, assessed and cleared the
goods i.e. the Deputy Commissioner Appraisal Group. Indeed, this must be so
because no fiscal statute has been shown to us where the power to re-open
assessment or recover duties which have escaped assessment
has been conferred on an officer other than the officer of the rank of the
officer who initially took the decision to assess the goods.
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)].
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.
17. Shri Sanjay Jain, learned Additional Solicitor General,
relied on a Notification No.17/2002- Customs (NT) dated 7.3.2002 to show all Additional
Directors General of the DRI have been appointed as
Commissioners of Customs. At the relevant time, the Central Government was the
appropriate authority to issue such a notification. This notification shows
that all Additional Directors General, mentioned in Column (2), are appointed as Commissioners of Customs.
18. The next step is to see whether an Additional Director
General of the DRI who has been appointed as an
officer of Customs, under the notification dated 7.3.2002, has been entrusted
with the functions under Section 28 as a proper officer under the Customs Act.
In support of the contention that he has been so entrusted with the functions
of a proper officer under Section 28 of the Customs Act, Shri Sanjay Jain, learned Additional Solicitor General relied on a
Notification No.40/2012 dated 2.5.2012 issued by the Central Board of Excise
and Customs. The notification confers various functions referred to in Column
(3) of the notification under the Customs Act on officers referred to in Column
(2). The relevant part of the notification reads as follows:-
“[To
be published in the Gazette of India,
Extraordinary,
Part II, Section 3, Sub-section (ii)]
Government
of India
Ministry
of Finance
(Department
of Revenue)
Notification
No.40/2012-Customs (N.T.)
New
Delhi, dated the 2nd May, 2012
S.O. (E). – In
exercise of the powers conferred by sub-section (34) of section 2 of the
Customs Act, 1962 (52 of 1962), the Central Board of Excise and Customs, hereby
assigns the officers and above the rank of officers mentioned in Column (2) of
the Table below, the functions as the proper officers in relation to the
various sections of the Customs Act, 1962, given in the corresponding entry in
Column (3) of the said Table: -
|
Sl.No. |
Designation of the officers |
Functions under Section of the
Customs Act, 1962 |
|
(1) |
(2) |
(3) |
|
1. |
Commissioner of Customs |
(i)
Section 33 |
|
2. |
Additional Commissioner or Joint
Commissioner of Customs |
(i)
Sub-section (5) of section 46; and (ii) Section 149 |
|
3. |
Deputy Commissioner or Assistant
Commissioner of Customs and Central Excise |
(i) ….. (ii) ….. (iii) ….. (iv) ….. (v) ….. (vi) Section 28; |
19. It appears that a Deputy Commissioner or Assistant
Commissioner of Customs has been entrusted with the
functions under Section 28, vide Sl. No.3 above. By reason of
the fact that the functions are assigned to officers referred to in Column (3)
and those officers above the rank of officers mentioned in Column (2), the
Commissioner of Customs would be included as an officer entitled to perform the
function under Section 28 of the Act conferred on a Deputy Commissioner or
Assistant Commissioner but the notification appears to be ill-founded.
The notification is purported to have been issued in
exercise of powers under sub-Section (34) of Section 2 of the Customs Act. This
section does not confer any powers on any authority to entrust any functions to
officers. The sub-Section is part of the definitions clause of the Act, it
merely defines a proper officer, it reads as follows:-
“2. Definitions – In this Act,
unless the context otherwise requires,-
…
(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]. “
20. Section 6 is the only Section which provides for
entrustment of functions of Customs officer on other officers of the Central or
the State Government or local authority, it reads as follows:-
“6. Entrustment of functions of
Board and customs officers on certain other officers–
The Central Government may, by
notification in the Official Gazette, entrust either conditionally or
unconditionally to any officer of the Central or the State Government or a
local authority any functions of the Board or any officer of customs under this
Act.”
21. If it was intended that officers
of the Directorate of Revenue Intelligence who are officers of Central
Government should be entrusted with functions of the Customs officers, it was
imperative that the Central Government should have done so in exercise of its
power under Section 6 of the Act. The reason why such a power
is conferred on the Central Government is obvious and that is because the
Central Government is the authority which appoints both the officers of the
Directorate of Revenue Intelligence which is set up under the Notification
dated 04.12.1957 issued by the Ministry of Finance and Customs officers who,
till 11.5.2002, were appointed by the Central Government. The notification which purports to entrust functions as proper officer
under the Customs Act has been issued by the Central Board of Excise and
Customs in exercise of non-existing power under Section 2 (34) of the Customs
Act. The notification is obviously invalid having been issued by an authority which had no power to do so in purported exercise
of powers under a section which does not confer any such power.
22. In the above context, it would be useful to refer to the
decision of this Court in the case of Commissioner of Customs vs. Sayed
Ali and Another5 wherein the proper officer in respect of the
jurisdictional area was considered. The consideration
made is as hereunder:-
5(2011) 3 SCC 537
“16. It was submitted that in the instant case,
the import manifest and the bill of entry were filed before the Additional
Collector of Customs (Imports), Mumbai; the bill of entry was duly assessed,
and the benefit of the exemption was extended, subject to execution of a bond
by the importer which was duly executed undertaking the obligation of export.
The learned counsel argued that the function of the preventive staff is
confined to goods which are not manifested as in
respect of manifested goods, where the bills of entry are to be filed, the entire
function of assessment, clearance, etc. is carried out by the appraising
officers functioning under the Commissioner of Customs (Imports).
17. Before adverting to the rival submissions, it would
be expedient to survey the relevant provisions of the Act. Section 28 of the
Act, which is relevant for our purpose, provides for issue of notice for
payment of duty that has not been paid, or has been
short-levied or erroneously refunded, and provides that:
“28. Notice for payment of duties, interest,
etc. – (1) When any duty has not been levied or has been short-levied or
erroneously refunded, or when any interest payable has not been paid, part paid
or erroneously refunded, the proper officer may,-
(a) in the case of any import
made by any individual for his personal use or by Government or by any
educational, research or charitable institution or hospital, within one year;
(b) in any other case,
within six months,
from the relevant
date, serve notice on the person chargeable with the duty or interest which has
not been levied or charged or which has been so shortlevied
or part 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:
Provided that
where any duty has not been levied or has been short-levied or the interest has
not been charged or has been part paid or the duty or interest has been
erroneously refunded by reason of collusion or any wilful
mis-statement or suppression of facts by the importer
or the exporter or the agent or employee of the importer or exporter, the
provisions of this sub-section shall have effect as if for the words ‘one year’
and ‘six months’, the words ‘five years’ were substituted.”
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 reassessment 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
undersection 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.”
23. We, therefore, hold that the entire proceeding in the
present case initiated by the Additional Director General of the DRI by issuing
show cause notices in all the matters before us are invalid without any
authority of law and liable to be set-aside and the ensuing demands are also setaside.
Limitation
24. It is strictly not necessary to decide the question on
limitation but we intend to do so since parties have elaborately relied on
disclosures made before the Customs officer on that issue. The show cause
notice was issued on 19.8.2014. Under Section 28(4),
such a show cause notice must be issued within five years from the relevant date which means the date on which the goods were assessed
and cleared, in case the duty was not paid or short paid or erroneously
refunded by reason of collusion or any willful mis-statement
or suppression of facts. It is, therefore, necessary for us to examine whether
there is suppression of facts.
25. The case was presented for
scrutiny of the Customs officers on 20.3.2012 along with the Bill of Entry and
literature consisting of specifications of the cameras.
26. The Bill of Entry made a statement that these are Digital
Still Image Video Camera packed for retail sale (COOLPIX S4300, S2600 etc.).
This was supported by literature which clearly stated
that “… the single maximum recording time for a single movie is 29 minutes,
even when there is sufficient free space on the memory card for longer
recording”. This meant that even if the camera could record more than 29
minutes when it had sufficient free space (which depends on the capacity of the
card providing extended memory) the maximum time for which it could record a
single sequence was 29 minutes.
27. In other words, the camera could record more than one
single sequence but not 30 minutes and more in a single sequence. It is obvious
that the Deputy Commissioner took the view that the camera complied with the
requirement of exemption i.e. it could only record up to less than 30 minutes
in a single sequence. At this juncture, it is not
relevant to see whether the Deputy Commissioner was right or not in taking this
decision to clear the goods as exempted goods. What is important is to see
whether the importers made any wilful mis-statement or suppression of facts and induced the
delivery of goods.
28. It is pertinent to note that the importer had asked for a
first check and had shown the cameras and the cameras were
offered on 20.3.2012 along with Bill of Entry and literature detailing
specifications of models. The camera could have been operated
to see the length of time of the single sequence and whether recording of the
single sequence exhausts the total memory of the camera (including extended
memory) and whether the cameras were eligible for exemption. It is difficult in
such circumstances to infer that there was any wilful
misstatement of facts. In these circumstances, it must,
therefore, follow that the extended period of limitation of five years
was not available to any authority to re-open under Section 28(4).
29. In this view of the matter, we consider it unnecessary to
answer the issue whether the cameras that were cleared on the basis that they
were exempted from customs duty under Exemption Notification No.15/2012 were in
fact eligible for the exemption or not. The goods must be
taken to have been validly cleared by the Customs officer.
30. We might note that cameras with similar specifications have been treated as exempted under the Explanatory Note to
the Combined Nomenclature of the European communities. It is important to add
that the same cameras have been considered to be eligible
for exemption before 17.03.2012 and after 30.04.2015 under the exemption
Notifications issued under the Customs Act read with Chapter 84 & 85 (First
Schedule) of Customs Tariff Act, 1975.
31. In the result, these appeals are
allowed. The common order dated 19.12.2017 passed by the CESTAT, New Delhi in Customs Appeal Nos. 50098, 50099, 50100
and 50280/2017 is set aside. Consequently, the impugned demand notices issued
against all the three appellants herein are also set aside.
32. Parties to bear their own costs.
..…………....................CJI.
[S. A. BOBDE]
…..…………....................J.
[A. S. BOPANNA]
..…..………......................J.
[V. RAMASUBRAMANIAN]
MARCH
9, 2021
NEW
DELHI