In a significant case of cannon India, the Supreme Court ruled that the officers of the Directorate of Revenue Intelligence ( DRI ) have the power to exercise powers under the Customs Act, 1962 to issue show-cause notices and recover duties.
It was held that DRI officers are “proper officers” to issue show cause notices under Section 28 of the Customs Act, 1962.
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The petition seeking review of Canon India are allowed for the following reasons. Circular No.4/99 dated 15.02.1999 issued by the Central Board of Excise and Customs which empowered officers of DRI to issue show-cause notices under S.28 of the Act as well as Notification no.44/2011 dated 06.07.2011 which assigned the functions of “proper officers” for the purposes of Sections 17 and 28 to the officers of the DRI were not brought to the notice of this Court during the proceedings in Canon India.
In other words, the judgment in Canon India was rendered without looking into the circular and notification, therefore seriously affecting the correctness of the same. The decision in Canon India failed to look into the statutory scheme.
The Commissioner of Customs was represented by Additional Solicitor General ( ASG ) N Venkataraman. Senior advocates Arshad Hidayatullah, Arvind Datar, S. Nandakumar, Nachiketa Joshi, Purvish Malkan made arguments for various parties. The Respondents were represented by Advocate V. Lakshmikumaran, Senior Advocates Vikram Choudhary, . R.K. Sanghi.
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The ASG argued that DRI officers can exercise the powers of Customs officers and since 1977 onwards, they have been part of the Ministry of Finance and the officers form a class of officers under the law. He argued that the judgment suffered from at least six apparent errors on record.
It was viewed by the court that subject to the observations made in the judgment, the officers of the Directorate of Revenue Intelligence, Commissionates of Customs-Preventive, Directorate General of Central Excise Intelligence, and Commissionates of Central Excise and other similarly situated officers are “proper officers” for the purposes of Section 28 of the Customs Act and are competent to issue show-cause notices.
A three judge bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra allowed the review petition filed by the Customs Department against the 2021 Supreme Court Judgment in Canon India Private Ltd. versus Commissioner of Customs, which had held that officers of the Directorate of Revenue Intelligence do not have powers under the Customs Act ,1962.
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In Canon India Private Ltd. vs. Commissioner of Customs,(2022) set a significant precedent on the powers and jurisdiction of authorities under customs law in India. The case involved Canon India Private Limited importing digital cameras. The customs authorities questioned the classification of these cameras, arguing that they were being misclassified to pay lower duties.
The Directorate of Revenue Intelligence ( DRI ), an agency responsible for anti-smuggling operations, issued a show cause notice to Canon India, challenging the duty exemption the company claimed under the customs notifications. The critical question was whether the DRI had the jurisdiction to issue a show cause notice under Section 28 of the Customs Act, 1962. Section 28 empowers customs officers to demand duty not levied or short-levied, but the question was whether the DRI, not being a proper officer under the Act, could exercise this power.
The Supreme Court held that only a “proper officer” under Section 28 can issue show cause notices related to duty demands. It ruled that the DRI officers were not “proper officers” for reassessment of duties because this designation is specific to the officers who initially assess the import duties. Therefore, the DRI could not issue the show cause notice in this case.
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The judgment restricted the DRI’s powers in customs matters, affecting its role in reassessing duty payments and initiating demands. It led to numerous reassessment cases being questioned, as many show cause notices issued by the DRI were no longer considered valid without proper officer designation.
The ruling created a need for clarity on the roles and powers of customs authorities, prompting legislative and procedural changes to resolve these jurisdictional issues.
Post this judgment, the government made amendments to the Customs Act to explicitly define and authorize officers for issuing notices and reassessing duties. The decision also set a precedent for limiting authorities’ powers and upholding procedural compliance within administrative frameworks.
The Canon India case marked a pivotal moment in customs law by clarifying jurisdictional limits, which has had a lasting impact on regulatory practices and the customs framework in India.
Following the ruling of the Supreme Court in Canon India, many High Courts and Tribunals in India had quashed proceedings undertaken by the officers of DRI as invalid on the basis of show cause notices issued under Section 28 of the Act.
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