2025 (6) TMI 103 - HC - Customs

Seeking for quashing of Summons issued by the Respondent No. 2 (DRI) under Section 108 of the Customs Act 1962 - proper officer forthe purpose of issuance of SCN - DRI are proper officers or not - HELD THAT - DRI Officers were the Proper Officers for the purpose of Section 28 Customs Act 1962 and were competent to issue the Show Cause Notices thereunder. Therefore the present Petitions are hereby disposed of with the directions that the Notices are restored for the purpose of adjudication by the Proper Officers under Section 28 Customs Act 1962. Further the Orders passed by the Adjudicatory Authority under Section 28 Customs Act 1962 may be challenged by way of Appeal before the Customs Excise and Services Tax Appellate Tribunal (for short CESTAT ) which are under challenge before this Court on the ground of maintainability due to lack of jurisdiction of Proper Officer to issue Show Cause Notices. Eight weeks time is granted to the Petitioners to prefer their appropriate Appeal before the CESTAT. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

- Whether the Directorate of Revenue Intelligence (DRI) officers qualify as "proper officers" under the Customs Act, 1962, specifically for issuing show cause notices under Section 28 of the Act.

- Whether the summons issued by the DRI under Section 108 of the Customs Act, 1962, and the arrest made under Section 104, were valid in light of the question of conferment of "proper officer" status.

- The impact of the Apex Court's judgment in the case of Commissioner of Customs vs. M/s Canon India Pvt. Ltd. (referred to as Canon India), which held that DRI officers were not "proper officers" for initiating proceedings under Section 104 of the Customs Act, 1962.

- The effect of the Finance Act, 2022 (Section 97) which retrospectively validated show cause notices issued under Section 28 of the Customs Act, 1962, and whether this retrospective validation cured the defect pointed out in the Canon India judgment.

- The procedural directions for disposal of writ petitions and appeals challenging the maintainability of show cause notices and adjudication orders issued by DRI officers on the ground of lack of jurisdiction due to non-"proper officer" status.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether DRI officers are "proper officers" under the Customs Act, 1962 for issuing show cause notices under Section 28

Relevant legal framework and precedents: Section 28 of the Customs Act, 1962 empowers "proper officers" to issue show cause notices for adjudication of customs-related matters. The Apex Court in the Canon India judgment had held that DRI officers were not "proper officers" under the Act and therefore lacked jurisdiction to initiate proceedings under Section 104 and issue summons or arrest.

Court's interpretation and reasoning: The present Court considered the subsequent Review Petition judgment of the Apex Court dated 07.11.2024, which revisited the Canon India decision. The Apex Court upheld the constitutional validity of Section 97 of the Finance Act, 2022, which retrospectively validated all show cause notices issued under Section 28. It further clarified that officers of the DRI and other similar agencies are "proper officers" for purposes of Section 28 and competent to issue show cause notices.

Key evidence and findings: The Court relied heavily on the authoritative pronouncement in the Review Petition judgment, which explicitly overruled the earlier position in Canon India regarding jurisdictional competence of DRI officers.

Application of law to facts: Since the summons and show cause notices impugned in the present petitions were issued by DRI officers, the Court held that these officers were validly empowered as "proper officers" under Section 28. Therefore, the summons and related proceedings were not without jurisdiction.

Treatment of competing arguments: The petitioners' reliance on the Canon India judgment to challenge the jurisdiction of DRI officers was addressed by the Court in light of the Review Petition's overruling and retrospective validation. The Court did not find merit in the challenge based on lack of jurisdiction.

Conclusions: DRI officers are "proper officers" under Section 28 of the Customs Act, 1962, and competent to issue show cause notices. The summons issued under Section 108 and arrest under Section 104 by DRI officers are valid.

Issue 2: Validity and effect of retrospective validation under Section 97 of the Finance Act, 2022

Relevant legal framework and precedents: Section 97 of the Finance Act, 2022 retrospectively validates all show cause notices issued under Section 28 of the Customs Act, 1962. The Apex Court in the Review Petition judgment upheld the constitutionality of this provision.

Court's interpretation and reasoning: The Court noted that the retrospective validation cannot be declared unconstitutional as it cures the defect of jurisdiction pointed out in the Canon India judgment. The Court emphasized that the validation is not manifestly arbitrary, disproportionate, or overbroad.

Key evidence and findings: The Court relied on the Apex Court's express observations that Section 97 cures the jurisdictional defect and validates the show cause notices issued by DRI officers.

Application of law to facts: The retrospective validation applies directly to the notices issued to the petitioners, thereby legitimizing the proceedings initiated by DRI officers.

Treatment of competing arguments: The petitioners' challenge to the notices on grounds of jurisdictional defect was negated by the retrospective validation upheld by the Apex Court.

Conclusions: Section 97 of the Finance Act, 2022 validly and retrospectively cures the jurisdictional defect in show cause notices issued by DRI officers under Section 28 of the Customs Act.

Issue 3: Procedural directions for disposal of writ petitions and appeals challenging jurisdiction of DRI officers

Relevant legal framework and precedents: The Apex Court's Review Petition judgment provided detailed procedural guidance for pending writ petitions and appeals challenging the maintainability of show cause notices and adjudication orders on the ground of lack of jurisdiction of the "proper officer."

Court's interpretation and reasoning: The Court applied the procedural directions from the Apex Court judgment, which include:

• High Courts disposing of writ petitions challenging show cause notices by restoring the notices for adjudication by proper officers.
• Pending appeals before the Apex Court to be disposed of in accordance with the Review Petition judgment and restoration of show cause notices for adjudication.
• Granting eight weeks' time to assessees to prefer appeals before the Customs Excise and Service Tax Appellate Tribunal (CESTAT) against orders passed by adjudicating authorities under Section 28.

Key evidence and findings: The Court noted that the present writ petitions were filed challenging summons and notices on jurisdictional grounds, which are now addressed by the Apex Court's directions.

Application of law to facts: The Court disposed of the writ petitions with directions to restore the show cause notices for adjudication and granted eight weeks to the petitioners to prefer appeals before CESTAT against any adjudication orders.

Treatment of competing arguments: The Court acknowledged the petitioners' submissions for disposal in light of the Apex Court's final order and did not entertain further jurisdictional challenges.

Conclusions: The writ petitions challenging the jurisdiction of DRI officers are disposed of with directions to restore notices for adjudication, and petitioners are granted time to appeal before CESTAT.

3. SIGNIFICANT HOLDINGS

The Court's crucial legal reasoning includes the following verbatim excerpts from the Apex Court's Review Petition judgment:

"Section 97 of the Finance Act, 2022 which, inter-alia, retrospectively validated all show cause notices issued under Section 28 of the Act, 1962 cannot be said to be unconstitutional. It cannot be said that Section 97 fails to cure the defect pointed out in Canon India (supra) nor is it manifestly arbitrary, disproportionate and overbroad, for the reasons recorded in the foregoing parts of this judgment."

"Subject to the observations made in this judgment, the officers of Directorate of Revenue Intelligence, Commissionerate of Customs (Preventive), Directorate General of Central Excise Intelligence and Commissionerate of Central Excise and other similarly situated officers are proper officers for the purposes of Section 28 and are competent to issue show cause notice thereunder."

"Where the show cause notices issued under Section 28 of the Act, 1962 have been challenged before the High Courts directly by way of a writ petition, the respective High Court shall dispose of such writ petitions in accordance with the observations made in this judgment and restore such notices for adjudication by the proper officer under Section 28."

Core principles established:

• DRI officers are "proper officers" under Section 28 of the Customs Act, 1962, competent to issue show cause notices.
• Retrospective validation by Section 97 of the Finance Act, 2022