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2016 Supreme(Del) 1882
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR & VIBHU BAKHRU, JJ.
MANGALI IMPEX LTD – Petitioner
Versus
UNION OF INDIA AND ORS – Respondents
W.P. (C) 441, 1185, 8196, 7383/2013 & CM 2240, 15847, 17295/2013 & W.P. (C) 211, 225, 863, 3803, 5262, 5877/2014 & CM 389, 416, 1731, 7658, 14409/2014 & W.P. (C) 4162, 4841, 5191, 9379, 11041, 11285, 11806, 11853, 11854/2015 & CM 8739, 9414, 9416, 10559, 21818, 28502, 31354, 31504, 31506/2015 & W.P. (C) 563/2016 & CM 2353/2016
Decided On : 03-05-2016
Mr. Naveen Malhotra, Advocate.
Mr. S.K. Dubey, Advocate for DRI.
Mr. Satish Kumar, Senior Standing Counsel for R3 and R4.
Mr. Rahul Kaushik, Senior Standing Counsel with Mr. Bhavishya Sharma, Advocate for Customs.
Section 28 (11) of the Customs Act, 1962 (Act) does not cure the defects pointed out in Sayed Ali (2011) 3 SCC 537 and cannot validate SCNs or proceedings pursuant thereto in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 if such SCNs have been issued or proceedings conducted by officers of the Customs, DRI or DGCEI or as in the present case by the SIIB, who are not 'proper officers' within the meaning of Section 2 (34) of the Act.
Headnote:
Whether Section 28 (11) of the Customs Act, 1962 (Act) cures the defects pointed out in Sayed Ali (2011) 3 SCC 537, in fact, does it overcome the legal position brought about by Explanation 2 to Section 28 of the Act as far as the period prior to 8th April 2011 is concerned.
Fact of the Case:
The challenge in this batch of matters pertains to the constitutional validity of Section 28 (11) of the Customs Act, 1962 (Act) 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.....” However, this amendment adversely impacts the Petitioners herein in that it seeks to validate the show-cause notices (SCNs) issued prior to 6th July 2011 by not only officers of the Customs but also officers of the Commissionerates of Customs (Preventive), Directorate General of Revenue Intelligence (DRI), Directorate General of Central Excise Intelligence and similar placed officers.
Finding of the Court:
The Court held that Section 28 (11) of the Act does not cure the defects pointed out in Sayed Ali (supra). The Court further held that Section 28 (11) of the Act cannot validate SCNs or proceedings pursuant thereto in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 if such SCNs have been issued or proceedings conducted by officers of the Customs, DRI or DGCEI or as in the present case by the SIIB, who are not 'proper officers' within the meaning of Section 2 (34) of the Act.
Issues: 1. Whether Section 28 (11) of the Customs Act, 1962 (Act) cures the defects pointed out in Sayed Ali (2011) 3 SCC 537? 2. Whether Section 28 (11) of the Act overcomes the legal position brought about by Explanation 2 to Section 28 of the Act as far as the period prior to 8th April 2011 is concerned?
Ratio Decidendi: 1. The Court held that Section 28 (11) of the Act does not cure the defects pointed out in Sayed Ali (supra). The Court reasoned that Explanation 2 to Section 28 of the Act, which opens with the words “for removal of doubts”, makes it 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”. The Court further reasoned that Section 28 (11) of the Act, 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. 2. The Court held that Section 28 (11) of the Act cannot validate SCNs or proceedings pursuant thereto in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 if such SCNs have been issued or proceedings conducted by officers of the Customs, DRI or DGCEI or as in the present case by the SIIB, who are not 'proper officers' within the meaning of Section 2 (34) of the Act. The Court reasoned that the mere fact that Section 28 (11) has been given retrospective effect does not solve the essential problem pointed out by the Supreme Court in the Sayed Ali case, which is the absence of the assigning of functions to proper officers under Section 2 (34) of the Act.
Final Decision: The Court quashed the impugned SCNs and all proceedings consequent thereto in all the writ petitions.
S. MURALIDHAR, J.
Introduction
1. The common question in this batch of matters pertains to the constitutional validity of Section 28 (11) of the Customs Act, 1962 (Act) 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.....”
2. Section 28(11) of the Act 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.” However, this amendment adversely impacts the Petitioners herein in that it seeks to validate the show-cause notices (SCNs) issued prior to 6th July 2011 by not only officers of the Customs but also officers of the Commissionerates of Customs (Preventive), Directorate General of Revenue Intelligence (DRI), Directorate General of Central Excise Intelligence and similar placed officers.
3. The subsidiary issue that arises is the possibility that on the strength of Section 28 (11) of the Act, SCNs will now be issued by any of the above officers for the purpose of “opening of assessment” prior to 6th July 2011.
4. 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) 3 SCC 537, 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.
5. This is then the conspectus of the main issue in these batch of petitions.
Relevant provisions of the Act
6. In order to appreciate the above central issue that arises, it is necessary to first examine the background of the provisions of the Act. Under the Act as it stood prior to the Validation Act 2011, the relevant provisions read as follows.
7. Under Section 2 (34) of the Act, the proper officer is defined as under:
“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 Commissioner of Customs.”
8. Section 4 of the Act talks of appointment of officers of customs. It states that the Central Board of Excise and Customs “may appoint such persons as it thinks fit to be officers of customs”. The concept of proper officer becomes relevant for the purpose of assessment of duty under Section 17, provisional assessment of duty under Section 18, the exercise of the power to issue SCN under Section 28 where there has been non-levy, short-levy or erroneous refund of customs duty or where any interest payable has not been paid or part-paid or erroneously refunded. It is only a proper officer who can exercise jurisdiction under the above provisions and certain other provisions which explicitly state that the powers therein are to be exercised only by a proper officer.
9. In order to determine which of the officers of the customs are proper officers one has to necessarily examine, in terms of Section 2 (34) of the Act, whether such proper officer has been assigned those functions by the CBEC or the Commissioner of Customs. Section 28 of the Act as it stood prior to the recasting of the entire Section 28 by th
