In a recent ruling, the Delhi High Court examined the authority of Directorate of Revenue Intelligence ( DRI ) officers to issue Show Cause Notices ( SCNs ) under the Customs Act, 1962, considering it prolonged legal uncertainty surrounding their jurisdiction.
A group of writ petitions was filed challenging the validity of Show Cause Notices (SCNs) and prolonged adjudication delays under the Customs Act, 1962, issued by Directorate of Revenue Intelligence (DRI) officers.
The issue arose from the Supreme Court judgment in Sayed Ali (2011) which held that only “proper officers” explicitly assigned functions under Section 2(34) of the Customs Act could issue SCNs.
SCNs issued by DRI officers who were not explicitly designated as proper officers were challenged as invalid. For this, the Parliament enacted the Amendment and Validation Act, 2011, introducing Section 28(11) in the Customs Act. This amendment retrospectively validated actions taken by Customs officers including DRI officers before July 6, 2011.
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The petitioners’ counsel argued that SCNs issued by DRI officers are invalid as they are not proper officers under Section 2(34) of the Customs Act as held in Sayed Ali and Canon India (2021), and called out the Adjudication delays.
The bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that in the Sayed Ali case, the Supreme Court ruled that only officers explicitly designated as “proper officers” could issue show-cause notices (SCNs) under the Customs Act where the doubt on the authority of DRI officers.
The court examined Section 28(11) retrospectively empowered all Customs officers appointed before July 6, 2011, to act as “proper officers.” But in Mangali Impex (2016) the Delhi High Court questioned the validity of Section 28(11), arguing that it created overlapping jurisdictions among officers, violating Article 14 of the Constitution. The Supreme Court stayed this judgment.
The court further observed the Parliament intervened again through the Finance Act, 2022, introducing Section 97 to retrospectively validate actions and SCNs issued under the Customs Act, irrespective of judgments or orders by courts. Despite these legislative efforts, many cases initiated as far back as 2006 remained unresolved which led to delays in adjudication.
The court observed that the respondents failed to act on pending cases despite having legislative backing to proceed. The court criticized the authorities for failing to reassign cases to Customs officers and for their inability to act despite clear legislative directives to proceed with adjudication.
In its analysis, the court referenced the Canon India (2024) (Canon II) judgment, where the Supreme Court upheld the authority of DRI officers to issue SCNs but explained that inordinate delays violated principles of natural justice.
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In light of the above observation, the court quashed the SCNs and pending adjudication proceedings due to inordinate delays and a lack of steps by the authorities. So, now it’s clear that DRI has the power to issue a Show Cause Notice under the Customs Act and it is also important to note that inordinate delays in adjudicating the matter will not be tolerated under the law.
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