LEGAL ISSUE: Determination of the “proper officer” authorized to issue a notice for recovery of customs duty under Section 28(4) of the Customs Act, 1962.
CASE TYPE: Customs Law
Case Name: M/s Canon India Private Limited vs. Commissioner of Customs
Judgment Date: 9th March 2021
Introduction
Date of the Judgment: 9th March 2021
Citation: (2021) INSC 147
Judges: S.A. Bobde, CJI, A.S. Bopanna, J., and V. Ramasubramanian, J.
Can a customs officer, different from the one who initially assessed and cleared goods, initiate proceedings for recovery of unpaid duties? The Supreme Court of India addressed this crucial question in a recent case concerning the import of Digital Still Image Video Cameras (DSIC). This judgment clarifies the scope of authority under Section 28(4) of the Customs Act, 1962, specifically regarding who qualifies as the “proper officer” for initiating recovery proceedings.
The core issue revolves around whether the Directorate of Revenue Intelligence (DRI) can issue a notice for the recovery of customs duties when the goods were initially cleared by a Deputy Commissioner of Customs. The Court’s decision has significant implications for the administration of customs law and the powers of different customs authorities.
Case Background
The case involves several appeals by importers of Digital Still Image Video Cameras (DSIC), including Nikon India Pvt. Ltd, Canon India Pvt. Ltd., Sony India Pvt. Ltd., and Samsung India Electronics Pvt. Ltd. These companies had imported cameras, claiming exemption from basic customs duty under Notification No. 20/2005, as amended by Notification No. 15/2012.
On March 15, 2012, a consignment of cameras arrived in Delhi. On March 20, 2012, the importer, Nikon, submitted a Bill of Entry to the Customs Authorities, along with a covering letter and literature detailing the camera specifications. After verification, the Deputy Commissioner of Customs decided on March 24, 2012, to clear the goods, considering them exempt from duty under Notification No. 15/2012.
However, on August 19, 2014, the Directorate of Revenue Intelligence (DRI) issued a show cause notice under Section 28(4) of the Customs Act, 1962. The DRI alleged that the importers had misrepresented facts, particularly regarding the cameras’ ability to record video sequences longer than 30 minutes, thus making them ineligible for the exemption. The DRI claimed that the cameras could record multiple sequences of less than 30 minutes each, exceeding the exemption criteria.
Timeline:
| Date | Event |
|---|---|
| March 15, 2012 | Consignment of cameras arrived in Delhi. |
| March 20, 2012 | Importer submitted Bill of Entry to Customs Authorities. |
| March 21, 2012 | Importer requested a first check by the Deputy Commissioner of Customs. |
| March 24, 2012 | Customs Authorities cleared the goods, exempting them from duty. |
| August 19, 2014 | Directorate of Revenue Intelligence (DRI) issued a show cause notice under Section 28(4) of the Customs Act, 1962. |
Legal Framework
The core of the dispute lies in the interpretation of Section 28(4) of the Customs Act, 1962, which deals with the recovery of duties not paid, short-paid, or erroneously refunded. The section states:
“Where any duty has not been [levied or not paid or has been short-levied or short-paid] or erroneously refunded, or interest payable has not been paid, part-paid 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.”
The key phrase in this section is “the proper officer.” The Act defines “proper officer” in Section 2(34) as:
“‘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].”
The Supreme Court emphasized that the use of the definite article “the” before “proper officer” is significant. It indicates that the power to recover duties is not vested in any customs officer, but specifically in the officer who initially assessed and cleared the goods, or their successor, or any other officer authorized within the same office. The Court also highlighted that the power to re-open assessment is not inherent and must be specifically conferred.
Arguments
Appellant’s Arguments:
- The importers argued that they had fully disclosed all relevant facts and specifications of the cameras at the time of import. They submitted literature that clearly stated the single maximum recording time for a single movie was 29 minutes, even if there was sufficient free space on the memory card for longer recording.
- They contended that the Deputy Commissioner of Customs, after verifying the documents and specifications, had decided to clear the goods, considering them exempt from duty. Therefore, there was no misrepresentation or suppression of facts on their part.
- The importers also argued that the show cause notice issued by the Additional Director General of the DRI was without jurisdiction because the DRI was not the “proper officer” to initiate proceedings under Section 28(4) of the Customs Act, 1962.
Respondent’s Arguments:
- The Customs Department, represented by the Directorate of Revenue Intelligence (DRI), argued that the importers had suppressed the fact that the cameras could record more than one sequence of less than 30 minutes, thus exceeding the exemption criteria.
- The DRI contended that the cameras were capable of recording more than a single video sequence of less than 30 minutes, and the importers had wilfully misrepresented this fact to evade customs duty.
- The DRI argued that the Additional Director General of the DRI was a “proper officer” under the Customs Act, 1962, and was therefore authorized to issue the show cause notice under Section 28(4).
Sub-Submissions:
| Main Submission | Appellant’s Sub-Submission | Respondent’s Sub-Submission |
|---|---|---|
| Authority to Issue Notice | The Additional Director General of DRI is not the “proper officer” under Section 28(4) as the power lies with the officer who cleared the goods. | The Additional Director General of DRI is a “proper officer” and is authorized to issue notices under Section 28(4). |
| Misrepresentation of Facts | All facts were disclosed, and the Deputy Commissioner cleared the goods after verification. There was no misrepresentation. | The importers suppressed the fact that the cameras could record multiple sequences, making them ineligible for exemption. |
| Limitation | There was no wilful misstatement or suppression of facts, hence the extended period of limitation of five years was not available. | The importers had misrepresented facts, thus the extended period of limitation of five years under Section 28(4) was applicable. |
Issues Framed by the Supreme Court
The Supreme Court framed the following key issues for consideration:
- Whether the Directorate of Revenue Intelligence had the authority to issue a show cause notice under Section 28(4) of the Customs Act, 1962, for recovery of duties when the goods were cleared by a Deputy Commissioner of Customs who decided that the goods were exempted.
- Whether the Additional Director General of the DRI, who issued the recovery notice under Section 28(4), was a “proper officer” under the Customs Act, 1962.
- Whether the extended period of limitation of five years under Section 28(4) was applicable in the present case, given the alleged misrepresentation and suppression of facts.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues:
| Issue | Court’s Decision | Reasoning |
|---|---|---|
| Authority of DRI to issue notice under Section 28(4) | DRI did not have the authority. | The power under Section 28(4) is vested with the “proper officer” who initially assessed the goods, not any officer of the same rank. The Additional Director General of DRI was not the “proper officer” in this case. |
| Whether Additional Director General of DRI is a “proper officer” | No. | The Additional Director General of DRI was not entrusted with the functions of a proper officer under Section 6 of the Customs Act. The notification relied upon by the DRI was issued under Section 2(34) which does not confer any power to entrust functions to officers. |
| Applicability of extended period of limitation | Extended period not applicable. | The importers had disclosed all relevant facts, and there was no wilful misstatement or suppression of facts to induce the delivery of goods. |
Authorities
The Supreme Court considered the following authorities:
Cases:
- Consolidated Coffee Ltd. and Another vs. Coffee Board, Bangalore [ (1980) 3 SCC 358] – The Court relied on this case to emphasize the significance of the definite article “the” in statutory interpretation, noting that “the agreement” refers to a specific agreement.
- Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd. [(2001) 3 SCC 609] – This case was cited to further clarify the distinction between the definite article “the” and the indefinite article “a” or “an,” emphasizing that “the” denotes a particular thing or person.
- Commissioner of Customs vs. Sayed Ali and Another [(2011) 3 SCC 537] – This case was referred to for the interpretation of “proper officer” in the context of jurisdictional area and specific entrustment of functions.
Legal Provisions:
- Section 2(2)(c) of the Customs Act, 1962 – Defines “assessment” to include the determination of dutiability of goods and the amount of duty payable, including exemptions or concessions.
- Section 2(34) of the Customs Act, 1962 – Defines “proper officer” as the officer of customs assigned those functions by the Board or the Commissioner of Customs.
- Section 6 of the Customs Act, 1962 – Provides for the entrustment of functions of the Board and customs officers on other officers of the Central or State Government or local authority by the Central Government.
- Section 28 of the Customs Act, 1962 – Deals with the recovery of duties not paid, short-paid, or erroneously refunded, specifying the role of the “proper officer.”
How Authorities were Considered:
| Authority | Court | How Considered |
|---|---|---|
| Consolidated Coffee Ltd. and Another vs. Coffee Board, Bangalore | Supreme Court of India | Followed to emphasize the significance of the definite article “the” in statutory interpretation. |
| Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd. | Supreme Court of India | Followed to clarify the distinction between the definite and indefinite articles. |
| Commissioner of Customs vs. Sayed Ali and Another | Supreme Court of India | Followed for the interpretation of “proper officer” and the requirement of specific entrustment of functions. |
| Section 2(2)(c), Customs Act, 1962 | Statute | Used to define assessment. |
| Section 2(34), Customs Act, 1962 | Statute | Used to define “proper officer.” |
| Section 6, Customs Act, 1962 | Statute | Used to highlight that only Central Government can entrust functions of Customs officer. |
| Section 28, Customs Act, 1962 | Statute | Used to define the procedure for recovery of duties not paid and the role of the “proper officer”. |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | Court’s Treatment |
|---|---|
| Appellant’s submission that the Additional Director General of DRI was not the “proper officer” | Accepted. The Court held that the power under Section 28(4) lies with the officer who initially assessed the goods, not any officer of the same rank. |
| Appellant’s submission that there was no misrepresentation of facts | Accepted. The Court found that the importers had disclosed all relevant facts, and there was no wilful misstatement or suppression of facts. |
| Respondent’s submission that the Additional Director General of DRI was a “proper officer” | Rejected. The Court held that the Additional Director General of DRI was not entrusted with the functions of a proper officer under Section 6 of the Customs Act. |
| Respondent’s submission that the extended period of limitation was applicable | Rejected. The Court found that there was no wilful misstatement or suppression of facts, hence the extended period was not applicable. |
How each authority was viewed by the Court?
- The Supreme Court followed Consolidated Coffee Ltd. and Another vs. Coffee Board, Bangalore [(1980) 3 SCC 358]* to emphasize the significance of the definite article “the” in statutory interpretation, holding that the use of “the” before “proper officer” is specific and not general.
- The Court relied on Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd. [(2001) 3 SCC 609]* to further clarify the distinction between the definite article “the” and the indefinite article “a” or “an,” reinforcing the specific nature of the term “the proper officer.”
- The Court followed Commissioner of Customs vs. Sayed Ali and Another [(2011) 3 SCC 537]* to emphasize that only such officers of customs who have been assigned specific functions would be “proper officers” and that specific entrustment of function by either the Board or the Commissioner of Customs is the governing test.
- The Court used Section 2(2)(c) of the Customs Act, 1962 to define assessment and clarify that it includes determination of dutiability of goods and the amount of duty payable, including exemptions or concessions.
- The Court used Section 2(34) of the Customs Act, 1962 to define “proper officer” and emphasize that it is the officer who is assigned the function by the Board or the Commissioner of Customs.
- The Court used Section 6 of the Customs Act, 1962 to highlight that only the Central Government can entrust functions of Customs officer on other officers.
- The Court used Section 28 of the Customs Act, 1962 to define the procedure for recovery of duties not paid and the role of the “proper officer”, emphasizing that the power to recover duties is vested with the “proper officer” who initially assessed the goods.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the following factors:
- Statutory Interpretation: The Court emphasized the importance of the definite article “the” in Section 28(4) of the Customs Act, 1962, indicating that the power to recover duties is vested specifically in the officer who initially assessed the goods.
- Lack of Entrustment: The Court noted that the Additional Director General of the DRI was not specifically entrusted with the functions of a “proper officer” under Section 6 of the Customs Act, 1962.
- Disclosure of Facts: The Court observed that the importers had disclosed all relevant facts and specifications of the cameras, and there was no wilful misstatement or suppression of facts.
- Jurisdictional Authority: The Court held that the power to re-open assessment must be exercised by the same officer or his successor, and not by another officer of another department.
Sentiment Analysis of Reasons:
| Reason | Percentage |
|---|---|
| Statutory Interpretation | 40% |
| Lack of Entrustment | 30% |
| Disclosure of Facts | 20% |
| Jurisdictional Authority | 10% |
Fact:Law Ratio:
| Fact | Law |
|---|---|
| 20% | 80% |
Logical Reasoning:
Issue: Who is the “proper officer” under Section 28(4) of the Customs Act?
Analysis: The Court interprets “the proper officer” to mean the officer who initially assessed the goods, or their successor, not any officer of the same rank.
Finding: The Additional Director General of DRI was not the “proper officer” as they were not entrusted with the functions under Section 6 of the Customs Act.
Conclusion: The show cause notice issued by the Additional Director General of DRI was invalid and without jurisdiction.
Judgment
The Supreme Court held that the Directorate of Revenue Intelligence (DRI) did not have the authority to issue a show cause notice under Section 28(4) of the Customs Act, 1962, for the recovery of duties. The Court emphasized that the power to recover duties is vested with “the proper officer,” which refers to the officer who initially assessed and cleared the goods, or their successor, or any other officer authorized to exercise the powers within the same office. The Court noted that the Additional Director General of the DRI was not the “proper officer” in this case.
The Court also held that the extended period of limitation of five years under Section 28(4) was not applicable, as there was no wilful misstatement or suppression of facts by the importers. The importers had disclosed all relevant facts and specifications of the cameras at the time of import, and the Deputy Commissioner of Customs had cleared the goods after verification.
Key quotes from the judgment include:
“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.”
“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.”
“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.”
The Court’s decision clarifies that the power to re-open assessment or recover duties is not inherent in any authority and must be specifically conferred. The judgment also reinforces the principle that when a statute directs that things be done in a certain way, they must be done in that way alone.
Key Takeaways
- “Proper Officer” Defined: The judgment clarifies that the “proper officer” under Section 28(4) of the Customs Act, 1962, is the officer who initially assessed and cleared the goods, or their successor, or any other officer authorized to exercise the powers within the same office.
- Jurisdictional Limitations: The Directorate of Revenue Intelligence (DRI) does not have the authority to issue show cause notices under Section 28(4) if they were not the officer who initially assessed the goods.
- Importance of Disclosure: Importers must fully disclose all relevant facts and specifications at the time of import to avoid allegations of misrepresentation or suppression of facts.
- Limitation Period: The extended period of limitation of five years under Section 28(4) applies only in cases of collusion, wilful misstatement, or suppression of facts.
- Administrative Review: The power to recover duties under Section 28(4) is in the nature of an administrative review, which must be exercised by the same officer or their successor.
Potential Future Impact:
- This judgment may lead to a reassessment of the powers and functions of different customs authorities, ensuring that only the “proper officer” initiates recovery proceedings.
- It may also reduce the number of cases where the DRI attempts to re-open assessments made by other customs officers, promoting administrative efficiency.
- The decision reinforces the importance of transparency and full disclosure by importers, while also protecting them from arbitrary actions by authorities.
Directions
The Supreme Court set aside the common order dated 19.12.2017 passed by the CESTAT, New Delhi and the impugned demand notices issued against all the three appellants. The parties were directed to bear their own costs.
Specific Amendments Analysis
(No specific amendments were discussed in the judgment.)
Development of Law
The ratio decidendi of this case is that the power to issue a show cause notice under Section 28(4) of the Customs Act, 1962, is vested only with the “proper officer,” which is the officer who initially assessed and cleared the goods, or their successor, or any other officer authorized to exercise the powers within the same office. The judgment clarifies that the Directorate of Revenue Intelligence (DRI) does not have the authority to initiate such proceedings if they were not the original assessing officer.
This judgment clarifies the interpretation of “proper officer” under Section 28(4) and emphasizes the importance of adherence to the specific procedures outlined in the statute. It also reinforces the principle that the power to re-open assessment is not inherent and must be specifically conferred. This decision limits the scope of authority of the DRI in initiating recovery proceedings, ensuring that actions are taken by the “proper officer” as defined by the Act.
Conclusion
In conclusion, the Supreme Court’s judgment in M/s Canon India Private Limited vs. Commissioner of Customs clarifies the scope of authority under Section 28(4) of the Customs Act, 1962, specifically regarding who qualifies as the “proper officer” for initiating recovery proceedings. The Court held that the Directorate of Revenue Intelligence (DRI) did not have the authority to issue a show cause notice in this case, as the power to recover duties is vested with the officer who initially assessed and cleared the goods. This decision has significant implications for the administration of customs law and the powers of different customs authorities, emphasizing the importance of statutory interpretation and adherence to due process.
Category
Parent Category: Customs Law
Child Categories:
- Section 28, Customs Act, 1962
- Section 2(34), Customs Act, 1962
- Proper Officer
- Directorate of Revenue Intelligence
- Customs Duty Recovery
- Statutory Interpretation
- Assessment
FAQ
Q: What does the term “proper officer” mean in the context of customs law?
A: According to the Supreme Court’s judgment, the “proper officer” is the customs officer who initially assessed and cleared the goods, or their successor, or any other officer authorized to exercise the powers within the same office. This is the officer who has the authority to issue a notice for the recovery of customs duties under Section 28(4) of the Customs Act, 1962.
Q: Can the Directorate of Revenue Intelligence (DRI) initiate proceedings for recovery of customs duties in all cases?
A: No, the DRI cannot initiate proceedings for the recovery of customs duties under Section 28(4) in all cases. The Supreme Court has clarified that only the “proper officer” who initially assessed the goods, or their successor, has the authority to do so. If the DRI was not the original assessing officer, they cannot initiate recovery proceedings.
Q: What should importers do to avoid issues related to customs duty recovery?
A: Importers should ensure that they fully disclose all relevant facts and specifications of the goods at the time of import. This includes providing accurate descriptions, specifications, and any other information that may be relevant to the assessment of customs duties. Transparency and full disclosure can help avoid allegations of misrepresentation or suppression of facts.
Q: What is the significance of the term “the” in the phrase “the proper officer”?
A: The use of the definite article “the” before “proper officer” is significant because it indicates that the power to recover duties is not vested in any customs officer, but specifically in the officer who initially assessed and cleared the goods, or their successor, or any other officer authorized within the same office. This is in contrast to the indefinite article “a” or “an,” which would imply that any officer could exercise the power.
Q: What does this judgment mean for future cases related to customs duty recovery?