Relief to Microsoft: Delhi HC Restores Customs Appeals after SC Ruling on DRI’s Jurisdiction to Issue Notice u/s 28 of Customs Act [Read Order]

In a recent decision, the Delhi High Court revived the Customs Department's appeals before the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ), granting relief to Microsoft Licensing GP by directing the tribunal to reconsider the cases in light of the Supreme Court’s ruling upholding the authority of the Directorate of Revenue Intelligence ( DRI ) under the Customs Act, 1962.

The assessee, Microsoft Licensing GP, was involved in importing software kits into India. Later, DRI officials issued Show Cause Notices to various Original Equipment Manufacturers (OEMs), including the assessee. These notices were adjudicated, and Orders-in-Original were passed in 2015. Aggrieved by these orders, the Customs Department filed appeals before CESTAT.

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However, CESTAT set aside the department's appeals, citing the Delhi High Court's decision in Mangli Impex Limited vs. Union of India (2016), which held that DRI officers were not "proper officers" under the Customs Act, 1962, to issue such notices. The matters were remanded for jurisdictional review.

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The Customs Department then filed separate appeals against the remand orders in cases involving WIPRO Ltd. and HCL Infosystems Ltd. (other OEMs), and the High Court reinstated the department's appeals before CESTAT. The tribunal was instructed to make a decision on the merits, including the jurisdictional aspect, without reference to the Mangli Impex ruling.

Despite the order, the Customs Department did nothing to reinstate the Microsoft appeals. Microsoft, dissatisfied with this lack of action, filed the current appeals in an attempt to have the Customs Department's appeals reinstated before CESTAT.

The counsel for the assessee stated that the appellant was forced to file these appeals because the Customs Department failed to reinstate their own appeals before CESTAT. It was also pointed out in a previous order by the same High Court in a similar case involving Microsoft Corporation Pvt. Ltd., the department stated that it would take steps to restore all related appeals.

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Meanwhile, the revenue counsel stated that the Supreme Court's decision in Commissioner of Customs v. Canon India Private Limited (2021) (Canon II) resolved the issue of DRI officials' jurisdiction. The revenue claimed that this Supreme Court decision overturned the basis on which CESTAT had initially dismissed the appeals.

Counsel Nisha Bagchi, Pooja Sharma, and Tarun Kumar Sobti appeared for the petitioner, while the respondent was represented by Gibran Naushad, Harsh Singhal, and Suraj Shekhar Singh.

The division bench, which was made up of Justices Prathiba M. Singh and Rajneesh Kumar Gupta, observed that the legal issue regarding DRI officials' ability to issue show cause notices under the Customs Act of 1962 was settled by the Canon II ruling.

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In light of the Supreme Court’s decision, the Delhi High Court directed that the Customs department's appeals be restored before the CESTAT for a revised decision based on their merits.

To Read the full text of the Order CLICK HERE

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