Supreme Court clarifies jurisdiction of DRI officers under Customs Act: Commissioner of Customs vs. M/s Suncity Strips and Tubes P Ltd (20 January 2022)

Date of the Judgment: 20 January 2022
Citation: Civil Appeal No of 2022 [Diary No 7082/2020]
Judges: Dr. Dhananjaya Y Chandrachud, J. and Bela M Trivedi, J.
Can an officer of the Directorate of Revenue Intelligence (DRI) initiate proceedings under the Customs Act, 1962, without specific authorization? The Supreme Court addressed this critical question in a recent judgment, clarifying the jurisdictional limits of DRI officers. This case revolves around a dispute concerning a show cause notice issued by the DRI, and the Court’s decision has significant implications for customs proceedings in India. The judgment was delivered by a two-judge bench comprising Dr. Dhananjaya Y Chandrachud, J. and Bela M Trivedi, J.

Case Background

The case involves an appeal by the Commissioner of Customs, Ahmedabad, against M/s Suncity Strips and Tubes P Ltd. The core issue arose from a show cause notice dated 30 October 2013, issued by the Additional Director General of the Directorate of Revenue Intelligence (DRI), Zonal Unit, Ahmedabad. This notice raised demands under the Customs Act, 1962. The appellant challenged the order of the Custom Excise Service Tax Appellate Tribunal dated 5 August 2019.

Timeline

Course of Proceedings

The Commissioner of Customs, Ahmedabad, filed an appeal against the order of the Custom Excise Service Tax Appellate Tribunal dated 5 August 2019. The Supreme Court, in its judgment, considered the legal position established in the case of Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699. The Court noted that the show cause notice in the present case was issued by the Additional Director General of the Directorate of Revenue Intelligence (DRI), Zonal Unit, Ahmedabad.

Legal Framework

The Supreme Court’s decision hinges on the interpretation of Section 6 of the Customs Act, 1962. This section deals with the entrustment of functions of customs officers to other officers. The Court referred to its previous ruling in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699, where it was held that:

“…in the absence of an entrustment under Section 6 of the Customs Act 1962, an officer of the Directorate of Revenue Intelligence will not have jurisdiction to exercise the functions entrusted to Customs Officers under the provisions of the Act.”

The Court emphasized that without a specific entrustment under Section 6 of the Customs Act, 1962, a DRI officer cannot exercise the powers of a Customs Officer.

Arguments

The primary argument revolved around the validity of the show cause notice issued by the Additional Director General of the DRI.

Appellant’s (Commissioner of Customs) Submission:

• The Commissioner of Customs likely argued that the DRI officer had the authority to issue the show cause notice and initiate proceedings under the Customs Act, 1962.
• They may have contended that the DRI, as an investigative agency, has the inherent power to act on customs violations.

Respondent’s (M/s Suncity Strips and Tubes P Ltd) Submission:

• M/s Suncity Strips and Tubes P Ltd likely argued that the show cause notice was invalid because the DRI officer lacked the necessary jurisdiction to issue it.
• They relied on the Supreme Court’s judgment in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699, which held that DRI officers need specific authorization under Section 6 of the Customs Act, 1962, to exercise the powers of a Customs Officer.

Innovativeness of the argument: The respondent’s argument was innovative in relying on the recent judgment in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699 to challenge the jurisdiction of the DRI officer, which was a significant departure from the previous understanding of the powers of DRI officers.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in the judgment. However, the core issue before the court was:

• Whether the show cause notice issued by the Additional Director General of the DRI was valid, given the lack of specific entrustment under Section 6 of the Customs Act, 1962.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authority:

Judgment

How each authority was viewed by the Court?

• Canon India Private Limited vs Commissioner of Customs [AIR 2021 SC 1699]*: The Supreme Court followed the ratio of this case, which held that DRI officers need specific authorization under Section 6 of the Customs Act, 1962 to exercise the functions of a Customs Officer.

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the legal principle established in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699. The Court emphasized the importance of adherence to statutory provisions, specifically Section 6 of the Customs Act, 1962, which mandates specific entrustment for DRI officers to exercise the powers of Customs Officers. The Court’s reasoning focused on maintaining the integrity of the statutory framework and ensuring that officers act within their defined jurisdictional limits.

The Supreme Court’s decision was primarily influenced by the legal principle established in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699 and the statutory requirement of Section 6 of the Customs Act, 1962.

The Court did not discuss any alternative interpretations or reasoning. The decision was solely based on the precedent set in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699 and the clear mandate of Section 6 of the Customs Act, 1962.

The Supreme Court dismissed the appeal filed by the Commissioner of Customs. The Court held that the show cause notice issued by the Additional Director General of the DRI was invalid because the officer lacked the necessary jurisdiction under the Customs Act, 1962.

The Court observed that,
“In the present case, the notice to show cause dated 30 October 2013 raising demands under the Customs Act 1962 was issued by the Additional Director General of the Directorate of Revenue Intelligence (Zonal Unit, Ahmedabad).”

The Court further stated that,
“In view of the decision of the three-Judge Bench in Canon India Private Limited (supra), the appeal which has been filed by the Commissioner of Customs in the present case will have to be and is accordingly dismissed.”

The Court also clarified that,
“Since the appeal has been dismissed on the above ground, it has not become necessary to express any opinion on the merits of the judgment of the Custom Excise Service Tax Appellate Tribunal dated 5 August 2019.”

There were no dissenting opinions in this case. The decision was unanimous.

The implications of this judgment are that DRI officers cannot act as Customs Officers unless they have been specifically authorized to do so under Section 6 of the Customs Act, 1962. This ensures that there is a clear demarcation of powers and prevents overreach by investigative agencies.

This decision reinforces the principle of statutory interpretation, emphasizing that powers must be explicitly conferred and cannot be assumed.

Key Takeaways

• ✓ DRI officers cannot exercise the powers of Customs Officers unless specifically authorized under Section 6 of the Customs Act, 1962.
• ✓ Show cause notices issued by DRI officers without proper authorization are invalid.
• ✓ This judgment reinforces the importance of statutory compliance and jurisdictional limits for investigative agencies.
• ✓ The decision has significant implications for customs proceedings initiated by DRI officers.

Directions

No specific directions were given by the Supreme Court in this judgment.

Development of Law

The ratio decidendi of this case is that a DRI officer cannot exercise the powers of a Customs Officer unless there is specific entrustment under Section 6 of the Customs Act, 1962. This judgment reinforces the position of law established in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699.

Conclusion

The Supreme Court dismissed the appeal, holding that the show cause notice issued by the Additional Director General of the DRI was invalid due to the lack of specific authorization under Section 6 of the Customs Act, 1962. This decision reinforces the principle that DRI officers cannot act as Customs Officers without explicit legal authorization, ensuring adherence to statutory provisions and jurisdictional limits.