Validity of Show Cause Notices Issued by DRI-Supreme Court Stays Delhi High Court Order
IT is the practice for DRI and DGCEI to book cases left right and centre, prepare bulky Show Cause Notices running into hundreds of pages and then make the Jurisdictional Customs or Central Excise officers to adjudicate them. It is an unwritten rule in the field that a Show Cause Notice issued by DRI/DGCEI has to be invariably confirmed.
However, all this changed five years ago when the Supreme Court in the case of Sayed Ali - held,
"it is only the officers of customs, who are assigned the functions of assessment, which of course, would include re-assessment, working under the jurisdictional Collectorate within whose jurisdiction the bills of entry or baggage declarations had been filed and the consignments had been cleared for home consumption, will have the jurisdiction to issue notice under Section 28 of the Act".
Lo and behold! All the Show Cause Notices issued by DRI, suddenly became illegal.
Government does not tolerate such decisions of the Supreme Court and so it got Parliament to retrospectively confer the power on DRI to issue Show Cause Notices. The Parliament amended Section 28 of the Customs Act by inserting a new clause 11 with effect from 16.09.2011, which reads as:
"(11) Notwithstanding anything to the contrary contained in any judgement, decree or order of any court of law, tribunal or other authority, all persons appointed as officers of Customs under sub-section (1) of section 4 before the sixth day of 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 for the purposes of this section."
Covering this event in 27.09.2011 , I wrote, "No one should ever dream of challenging this in the High Courts or Supreme Court, for retrospective amendment of law to undo Court Orders, has judicial approval in India."
I was proved wrong. 20 petitioners challenged this and got relief from the Delhi High Court on 3 rd May 2016, where the Show Cause Notices issued by DRI were quashed.
The High Court observed in ;
1. 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.
2. Section 28(11) confers validity only on 'the proper officer'.
3. If jurisdiction is exercised by one officer of the Customs or of the DRI or DGCEI, it should impliedly oust the jurisdiction of other officers over the same subject matter. The doctrine of comity of jurisdiction requires that for the proper administration of justice there should not be an overlapping of the exercise of powers and functions.
4. The Department cannot seek to rely upon Section 28(11) of the Act as authorising the officers of the Customs, DRI, the DGCEI etc. to exercise powers in relation to non-levy, short-levy or erroneous refund for a period prior to 8th April 2011 if, in fact, there was no proper assigning of the functions of reassessment or assessment in favour of such officers who issued such SCNs since they were not 'proper officers' for the purposes of Section 2(34) of the Act
5. As regards the period subsequent to 8th April 2011, it is evident that if the administrative chaos as envisaged by the Supreme Court in Sayed Ali should not come about, there cannot be any duplicating and/or overlapping of jurisdiction of the officers. It would have to be ensured through proper coordination and administrative instructions issued by the CBEC that once a SCN is issued specifying the adjudicating officer to whom it is answerable, then that adjudication officer, subject to such officer being a 'proper officer' to whom the function of assessment has been assigned in terms of Section 2 (34) of the Act, will alone proceed to adjudicate the SCN to the exclusion of all other officers who may have the power in relation to that subject matter.
In 04 05 2016, I wrote;
This is not positively the end of litigation in this matter. The Government is sure to take the matter to the Supreme Court and/or try another hand at retrospective litigation. Undoing a Supreme Court order requires deft drafting skills, which bureaucrats are not fortunately endowed with.
As expected, the Department took the matter in SLP to the Supreme Court. In one of the SLPs, the Supreme Court on 7.10.2016, stayed the Delhi High Court Order. The Supreme Court ordered,
Delay condoned.
Leave granted.
There shall be a stay of operation of the impugned judgment and order passed by the High Court of Delhi.