CANON INDIA CASE UPDATE SERIES PART I: HISTORY

CANON INDIA CASE UPDATE SERIES PART I: HISTORY

UPDATE ON WHETHER DIRECTORATE OF REVENUE INTELLINGENCE IS A PROPER OFFICER U/S 28(4) OF CUSTOMS ACT,1962

The interpretation of Legislature, Act, Rules and Regulation have been subject to complexities and part of litigation in history of Indian judicial system. Indirect tax laws are also no longer exception to same. In this update we shall discuss whether after clearance of the cameras on the basis that they were exempted from levy of Basic Customs Duty under Notification No.15/2012, the proceedings initiated by the Directorate of Revenue Intelligence for recovery of duty short paid under Section 28(4) of the Customs Act, 1962 is valid in law.

In the case of M/S CANON INDIA PRIVATE LIMITED in civil appeal in supreme court, digital cameras were imported by petitioner which were cleared without payment of duty on the basis of exemption under notification no. 15/2012 dt. 17-3-2012. Specific digital cameras were exempted vide entry no. 377 of the notification followed by conditions prescribed in the serial number 55 of the same.

The exemption was granted by custom authorities after due checking. Subsequently, SCN was issued under Section 28(4) ibid of the Act alleging that the Customs Authorities had been induced to clear the cameras by willful mis-statement and suppression of facts about the cameras.

Section 28(4) of the Customs Act allows PROPER OFFICER to issue SCN within 5 years from the relevant date in case wherein the duty has not been paid or short paid/levied due to collusion, willful misstatement or suppression of facts. The obvious intention is to confer the power to recover such duties not on ‘any proper officer’ but only on ‘the proper officer’.

The show cause notice was issued by the Additional Director General, Directorate of Revenue Intelligence. Issue arose whether the above-mentioned person fall within the ambit of proper officer to issue show cause notice u/s 28(4).

There are only two articles, ‘a or an’ and ‘the’. `A or an’ is known as the Indefinite Article because it does not specifically refer to a particular person or thing. On the other hand, ‘the’ is called the Definite Article because it points out and refers to a particular person or thing. There is no doubt that, if Parliament intended that any proper officer could have exercised power under Section 28 (4), it could have used the word any. Moreover, the initiation of proceedings under section 28(4) can be done only by the officer who has done the assessment earlier i.e. granted the exemption of duty. Indeed, this must be so because no fiscal statute has been shown to us where the power to re-open assessment or recover duties which have escaped assessment has been conferred on an officer other than the officer of the rank who initially took the decision to assess the goods.

The very purpose of the section 28(4)ibid is to recover the duty which has escaped assessment. 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. In other words, an officer who did the assessment, could only undertake re-assessment. Thus, additional director who did not cleared the goods by giving exemption were not the correct authority to do re-assessment. The Additional Director General can be considered to be a proper officer under the said section only if it is shown that he was mentioned in notification no. 40/2021 dt. 2-5-2012 empowering the officers eligible under section 28(4)ibid. The notification only empowers deputy commissioner or assistant commissioner as the proper officer for initiating proceedings under above referred section 28(4).

Section 2(34) defines proper officer, 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.

It can be concluded that DRI is not the proper officer under section 28(4) of Customs Act read with definition of proper officer as envisaged in section2(34), therefore, the proceedings initiated by DRI were dropped. Now the question arises whether the same analogy can be applied to other statues also? We shall discuss the impact of this decision vis a vis other Statues in our next update.

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CANON INDIA CASE UPDATE SERIES PART I: HISTORY

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