Supreme Court Dismisses Customs Appeal: DRI Officer’s Jurisdiction Challenged (20 January 2022)

Introduction

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 a customs demand raised by a Directorate of Revenue Intelligence (DRI) officer be considered valid if that officer was not specifically authorized to do so? The Supreme Court of India addressed this critical question in a recent case, focusing on the jurisdictional limits of DRI officers under the Customs Act, 1962. The court examined whether the lack of specific authorization for a DRI officer to act as a Customs Officer invalidates the proceedings initiated by them.

The Supreme Court bench, comprising Justices Dr. Dhananjaya Y Chandrachud and Bela M Trivedi, delivered the judgment, dismissing the appeal filed by the Commissioner of Customs. The core issue revolved around the authority of DRI officers to issue show cause notices and raise demands under the Customs Act, 1962, without explicit authorization.

Case Background

The case originated 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 against M/s Suncity Strips and Tubes P Ltd. The Commissioner of Customs, Ahmedabad, subsequently filed an appeal against the order of the Custom Excise Service Tax Appellate Tribunal dated 5 August 2019.

The central question was whether the DRI officer had the legal authority to issue the show cause notice and raise the demand. This issue was brought before the Supreme Court after the Customs Excise Service Tax Appellate Tribunal ruled against the Commissioner of Customs.

Timeline

Course of Proceedings

The case reached the Supreme Court after the Customs Excise Service Tax Appellate Tribunal ruled against the Commissioner of Customs. The Commissioner of Customs then appealed to the Supreme Court, challenging the Tribunal’s decision.

Legal Framework

The Supreme Court’s decision hinged on the interpretation of Section 6 of the Customs Act, 1962, which deals with the entrustment of functions of customs officers to other officers. The court referred to its previous judgment in Canon India Private Limited vs Commissioner of Customs AIR 2021 SC 1699, which clarified that a DRI officer must be specifically entrusted with the powers of a Customs Officer to exercise jurisdiction under the Customs Act, 1962.

The relevant portion of the Customs Act, 1962, as interpreted by the Supreme Court, emphasizes that without a specific entrustment under Section 6 of the Customs Act, 1962, a DRI officer cannot exercise the functions of a Customs Officer.

Arguments

The primary argument in this case revolved around the jurisdiction of the Additional Director General of the Directorate of Revenue Intelligence (DRI) to issue a show cause notice under the Customs Act, 1962.

• Appellant’s Argument (Commissioner of Customs, Ahmedabad):
  • The Commissioner of Customs argued that the Additional Director General of DRI had the authority to issue the show cause notice and raise demands under the Customs Act, 1962.
  • They contended that the DRI officers are generally empowered to act on behalf of the Customs Department.
• Respondent’s Argument (M/s Suncity Strips and Tubes P Ltd):
  • The respondent argued that the Additional Director General of DRI lacked the necessary jurisdiction to issue the show cause notice because there was no specific entrustment of power under Section 6 of the Customs Act, 1962.
  • They relied on the Supreme Court’s judgment in Canon India Private Limited vs Commissioner of Customs, which held that DRI officers must be specifically entrusted with the functions of a Customs Officer to exercise jurisdiction under the Customs Act, 1962.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the Additional Director General of the Directorate of Revenue Intelligence (DRI) had the jurisdiction to issue a show cause notice and raise demands under the Customs Act, 1962, in the absence 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:

The Court also considered Section 6 of the Customs Act, 1962.

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 this judgment, reiterating that a DRI officer must be specifically entrusted with the powers of a Customs Officer to exercise jurisdiction under the Customs Act, 1962.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of jurisdictional competence, emphasizing that an officer can only exercise powers specifically granted to them by law. The absence of specific entrustment under Section 6 of the Customs Act, 1962, for the DRI officer to act as a Customs Officer was the key factor.

The Court’s reasoning was based on the interpretation of Section 6 of the Customs Act, 1962, and the precedent set by the Canon India Private Limited case. The Court emphasized that the law requires specific entrustment for a DRI officer to exercise the powers of a Customs Officer.

The Court did not consider any alternative interpretations, as the legal position was clear based on the precedent and the statutory provision.

The Supreme Court dismissed the appeal, holding that the show cause notice issued by the Additional Director General of DRI was invalid due to lack of jurisdiction. The court stated:

“In Canon India Private Limited vs Commissioner of Customs, a three-Judge Bench of this Court has 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.”

“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).”

“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 bench comprised Justices Dr. Dhananjaya Y Chandrachud and Bela M Trivedi, and the judgment was unanimous.

The decision reinforces the importance of strict adherence to statutory procedures and jurisdictional limits. It also highlights the need for specific authorization for officers to exercise powers under the Customs Act, 1962. This ruling could lead to a review of procedures followed by the DRI and other similar agencies.

Key Takeaways

• DRI officers must be specifically authorized under Section 6 of the Customs Act, 1962, to exercise the functions of a Customs Officer.
• Show cause notices issued by DRI officers without such specific authorization are invalid.
• The Supreme Court’s judgment in Canon India Private Limited vs Commissioner of Customs is a binding precedent on this issue.
• This decision emphasizes the importance of jurisdictional competence and adherence to statutory procedures.

Directions

The Supreme Court did not provide any specific directions in this case, as the appeal was dismissed based on the lack of jurisdiction of the DRI officer.

Development of Law

The ratio decidendi of this case is that a Directorate of Revenue Intelligence (DRI) officer cannot exercise the powers of a Customs Officer under the Customs Act, 1962, without specific entrustment under Section 6 of the Customs Act, 1962. This decision reinforces the principle established in Canon India Private Limited vs Commissioner of Customs, thereby solidifying the legal position on the jurisdictional limits of DRI officers. There is no change in the previous position of law, but the court has reiterated the importance of specific entrustment.

Conclusion

The Supreme Court dismissed the appeal filed by the Commissioner of Customs, Ahmedabad, affirming that a DRI officer cannot exercise the powers of a Customs Officer without specific authorization under Section 6 of the Customs Act, 1962. This judgment reinforces the need for strict compliance with statutory procedures and jurisdictional limits. The decision is a significant reminder that officers must have explicit legal authority to carry out their functions.