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2016 (7) TMI 123 - PUNJAB & HARYANA HIGH COURT

2016 (7) TMI 123 - PUNJAB & HARYANA HIGH COURT - 2016 (339) E.L.T. 370 (P & H) - Proper officer - Validity of Show cause notice issued by the Additional Director General, Directorate of Revenue intelligence - Scope of Section 2(34) read with Section 17 and 28 of the Customs Act, 1962 - Amendment to Section 28, whether retrospective or prospective - Held that:- The retrospective application of Section 28 (11) is limited in time with use of the words “this section” read with the Explanation 2, whi .....

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urt in the aforesaid judgment dated 3.5.2016 in M/s Pace International [2016 (5) TMI 225 - DELHI HIGH COURT] are mutatis mutandis applicable to the case of the present petitioners. Therefore, the impugned show cause notice dated 13.3.2005, the adjudication order dated 25.6.2010 and consequential recovery proceedings, are rendered non est and void ab initio on the vice of jurisdiction and are as such quashed and set aside. - Decided in favor of the assessee. - CWP No. 12678 of 2016 - Dated:- 30-6 .....

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.No. 856(20)LDH/2004/380 dated 13.3.2005 and the consequential proceedings including the Adjudication Order dated 25.6.2010. This challenge is centered on the premises that the said Notice is issued by Respondent No. 2 Additional Director General, Directorate of Revenue intelligence, Ludhiana, who is not a 'proper officer' in terms of Section 2(34) read with Section 17 and 28 of the Customs Act, 1962. They rely on judgment of the Hon'ble Supreme Court in Commissioner of Customs v. Sa .....

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posit. On behalf of the petitioners it was submitted that they would withdraw the appeal, and the writ petition can be finally disposed of. Since the issue raised is of jurisdiction to issue the notice itself, as per the settled law, the alternative remedy is not a bar and thus we are inclined to exercise the writ jurisdiction. 4. That while interpreting the scope and ambit of Section 28 of Customs Act, 1962 (as it existed prior to its substitution on 8.4.2011), the Hon'ble Supreme Court in .....

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Customs, in terms of Section 2 (34) of the Act is competent to issue notice under Section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2 (34) of the Act otiose inasmuch as the test contemplated under Section 2 (34) of the Act is that of specific conferment of such functions. 21. Moreover, if the Revenue's contention that once territorial jurisdiction is conferred, the Collector of Customs (Preventive) becomes a 'proper officer' in terms of Se .....

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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. ..........We are convinced that Notification Nos. 250-Cus and 251-Cus. Both dated 27th August 1983, issued by the central government in exercise of the powers conferred by sub-section (1) of the Section 4 of the Act, appointing Collector of Customs (Preventive), etc. to be the Collector of Customs for Bombay, Thane an .....

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to appoint officers of Customs and confer on them the powers and duties to be exercised/discharged by them, but for the purpose of Section 28 of the Act, an officer of Customs has to be designated as 'proper officer' by assigning the function of levy and collection of duty, by the Board or the Commissioner of Customs. The argument of the Revenue was rejected accordingly. 6. Thereafter, on 8.4.2011, the Finance Act, 2011 received the assent of the President and was notified in the Offici .....

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h assent is received. 7. Since a specific order or notification issued by the Board assigning the functions to the specific officers of the Customs to enable him to act as 'proper officer' for various purposes under the Act is required, instructions were issued on 15.4.2011 by the CBEC to all officers of the Customs (Preventive) and DRI, inter alia, as under : 2. In view of Hon'ble Supreme Court order, while other alternative measures are being considered to address the matter, it ha .....

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the earlier show cause notices and in the light of the Hon'ble Supreme Court judgment in the matter. 3. As for the cases which would be hit by limitation if notices are issued afresh now, necessary legal options are being explored. 4. Difficulty faced, if any, may be brought to the notice of the Board. 8. On 6.7.2011, Notification No. 44 of 2011-Customs was issued by the Central Board of Excise and Customs which thereby assigned the functions of the proper officer inter alia to the Addition .....

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ub-section 11 after sub-section 10 of the said new Section 28 of the Act. The Statement of Objects and Reasons (SOR) referred to the judgment of the Hon'ble Supreme Court of India in Sayed Ali (supra) and the said notification dated 6th July, 2011 specifically declaring certain officers as proper officers for the purposes of Sections 17 and 28. It was sought to clarify that Show Cause Notices issued inter alia by Directorate General of Revenue Intelligence (DRI), for demanding customs duty n .....

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inserted after sub-section (10) in this new Section 28 of the Act and the same reads as under : (11) Notwithstanding anything to the contrary contained in any judgment, 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 6th 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 .....

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d Reasons also makes it clear that the purpose was to amend the Act retrospectively and to validate anything done or any action taken under the said Act at all material times irrespective of issuance of any specific assignment on 6.7.2011. However, the retrospective application of Section 28 (11) is limited in time with use of the words this section read with the Explanation 2, which necessarily means reference only to the now existing Section 28 which was inserted w.e.f. 8.4.2011 after substitu .....

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rt while setting aside the show cause notices issued prior to 8.4.2011 arrived at, inter alia, the following conclusions:- 47. ....................In other words, the newly enacted Section 28 (11) would not empower the officers of the DRI and DGCEI to either proceed to adjudicate SCNs already issued by them for the period prior to 8th April 2011 or to issue SCNs for a period prior to 8th April 2011. 62. There is merit in the contention that Section 28 (11) is overbroad in as much as it confers j .....

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uires clarification that a reference can be made to the SOR as an external aid of construction. However, there cannot be a presumption of validity by reference to such SOR. (See Gujarat University, Ahmedabad v. Krishna Rangnath Mudholkar AIR 1963 SC 703 para 20). 66. 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 off .....

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ers validity only on 'the proper officer'. As explained in Consolidated Coffee Ltd. v. Coffee Board (supra), the use of article 'the' as opposed to 'an' or 'any' is indeed significant. Only officers who have been assigned the functions of the 'proper officer' for the purposes of Section 17, i.e., assessment of the bills of entry can be considered as the proper officer for the purposes of Section 28(11) of the Act. As further explained in Shri Ishar Alloys .....

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functions. The decision of the Punjab and Haryana High Court in Kenapo Textiles Pvt. Ltd. v. State of Haryana (supra) and the decision of the Supreme Court in India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd. (supra) are relevant in this context. Conclusion on the effect and validity of Section 28 (11). 70.1 The net result of the above discussion is that the Department cannot seek to rely upon Section 28(11) of the Act as authorising the officers of the Customs, DRI, the D .....

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h April 2011 would continue to be governed only by Section 28 as it stood prior to that date and not the newly re-cast Section 28 of the Act. 70.2 Section 28(11) interpreted in the above terms would not suffer the vice of unconstitutionality. Else, it would grant wide powers of assessment and enforcement to a wide range of officers, not limited to customs officers, without any limits as to territorial and subject matter jurisdiction and in such event the provision would be vulnerable to being de .....

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