Declaration of Invalidity of Show Cause Notices Issued by Non-Proper Customs Officers under Section 28(11) of Customs Act, 1962

Declaration of Invalidity of Show Cause Notices Issued by Non-Proper Customs Officers under Section 28(11) of Customs Act, 1962

Introduction

The Delhi High Court delivered a landmark judgment on May 3, 2016, in the case of Mangali Impex Ltd. Petitioner v. Union Of India And Ors. S. This case primarily addressed the constitutional validity of Section 28(11) of the Customs Act, 1962, introduced by the Customs (Amendment and Validation) Act, 2011. The core issue revolved around whether Show Cause Notices (SCNs) issued prior to July 6, 2011, by officers not designated as "proper officers" under Section 2(34) could be validated under the new amendment. The petitioners contended that the amendment failed to rectify the fundamental defects identified by the Supreme Court in Commissioner of Customs v. Sayed Ali (2011) 3 SCC 537.

Summary of the Judgment

The High Court examined whether Section 28(11) effectively validated SCNs issued by officers not explicitly assigned as "proper officers" for assessments and reassessments. The court emphasized that Section 28(11) contains a non-obstante clause intending to override contrary judgments but does not negate other statutory provisions such as Explanation 2 to Section 28, which retains the original provisions for SCNs issued before April 8, 2011.

The court held that SCNs issued before July 6, 2011, by officers like those from the Directorate General of Revenue Intelligence (DRI) and Customs (Preventive) do not qualify as valid "proper officers" under Section 2(34) as they were not specifically assigned the functions of assessment or reassessment. Consequently, such SCNs are invalid, and all proceedings based on them are quashed. However, SCNs issued after April 8, 2011, by duly assigned "proper officers" remain valid and are enforceable.

Analysis

Precedents Cited

The judgment extensively cited several pivotal cases that laid the groundwork for understanding the role and designation of "proper officers" under the Customs Act. Notably:

  • Commissioner of Customs v. Sayed Ali (2011) 3 SCC 537: Established that only officers explicitly assigned assessment and reassessment functions are deemed "proper officers" authorized to issue SCNs.
  • Delhi Cloth & General Mills Co. Limited v. State of Rajasthan (1996) 2 SCC 449 and State of Haryana v. Karnal Co-op Farmers Society Limited (1993) 2 SCC 363: Reinforced the necessity of specific assignment of functions to avoid arbitrary powers.
  • Satyam Marketing Through: Its Proprietor v. Union Of India (W.P.(C) No. 4841/2015): Highlighted issues related to the designation of proper officers and the invalidity of SCNs issued by non-proper officers.

Legal Reasoning

The court delved into the statutory language of Section 28(11) and Explanation 2 to Section 28. It clarified that the non-obstante clause in Section 28(11) only overrides contrary judgments, decrees, or orders from courts but does not override existing statutory provisions. Explanation 2 explicitly states that SCNs related to non-levy, short-levy, or erroneous refunds before April 8, 2011, remain governed by the pre-amendment Section 28.

The court reasoned that the retrospective validation intended by Section 28(11) does not compensate for the lack of proper assignment of functions to officers, as required by Section 2(34). Therefore, any SCNs issued by officers not specifically assigned as "proper officers" remain invalid.

Additionally, the court emphasized the importance of avoiding administrative chaos by ensuring that only authorized officers possess the requisite powers. This prevents multiple officers from issuing conflicting SCNs, preserving the integrity of customs assessments.

Impact

This judgment has significant implications for the administration of customs laws in India:

  • Clarification of "Proper Officer" Designation: Reinforces the necessity for customs officers to be explicitly assigned assessment functions to issue valid SCNs.
  • Limit on Retrospective Validation: Limits the scope of Section 28(11) to only validate SCNs issued after April 8, 2011, ensuring that historical SCNs from non-authorized officers remain invalid.
  • Administrative Efficiency: Prevents arbitrary and overlapping authority among customs officers, thereby reducing potential harassment and ensuring orderly customs assessments.
  • Legal Precedence: Strengthens the adherence to Supreme Court rulings and statutory interpretation principles in lower courts.

Complex Concepts Simplified

Proper Officer

Under Section 2(34) of the Customs Act, 1962, a "proper officer" refers to a customs officer who has been specifically assigned by the Central Board of Excise and Customs (CBEC) or the Commissioner of Customs to perform assessment and reassessment functions. Only these designated officers have the authority to issue SCNs related to customs duty assessments.

Show Cause Notice (SCN)

An SCN is an official notice issued by customs authorities requiring the importer or exporter to explain or justify why certain customs duties, interest, or penalties should not be levied. It is a critical step in customs enforcement, allowing authorities to recover unpaid or erroneously refunded duties.

Section 28(11) and Explanation 2

Section 28(11) was introduced to retrospectively validate SCNs issued before July 6, 2011, by treating all customs officers appointed before this date as "proper officers." However, the accompanying Explanation 2 to Section 28 maintains that SCNs for non-levy, short-levy, or erroneous refunds issued before April 8, 2011, remain governed by the original provisions of Section 28, thereby not being affected by the new sub-section.

Conclusion

The Delhi High Court's judgment in Mangali Impex Ltd. v. Union Of India And Ors. S serves as a crucial validation of the necessity for clear statutory authorizations within customs law. By invalidating SCNs issued by non-proper officers prior to April 8, 2011, the court upheld constitutional principles and reinforced the importance of precise legislative amendments. This decision ensures that customs assessments are conducted by appropriately designated officers, thereby maintaining the fairness and integrity of the customs regulatory framework.

Moving forward, customs authorities must ensure strict adherence to the designation of "proper officers" as per statutory mandates. This will not only prevent legal challenges but also promote a more organized and transparent customs administration system.

Case Details

Year: 2016
Court: Delhi High Court

Judge(s)

S. Muralidhar Vibhu Bakhru, JJ.

Advocates

Mr. Naveen Malhotra, Advocate.Mr. S.K Dubey, Advocate for DRI. Mr. Satish Kumar, Senior Standing Counsel for R3 and R4.Mr. Rahul Kaushik, Senior Standing Counsel with Mr. Bhavishya Sharma, Advocate for Customs.Mr. V. Lakshmi Kumaran, Advocate with Mr. Abhinav Jagnathan, Advocate.Mr. Sanjev Kumar Dubey, Advocate with Mr. Rajmangal Kumar, Mr. Udit Malik, Advocate and Mr. Aman Singh Paras, Advocate for DRI.Mr. Satish Kumar, Senior Standing Counsel for R3.Mr. Naveen Malhotra, Advocate.Mr. Akshay Makjhija, CGSC with Mr. Vikas Bhadauria, Advocate for UOI.Mr. S.K Dubey, Advocate with Mr. Udit Malik, and Mr. Rajmangal Kumar, Advocate for DRI. Ms. Sonia Sharma, Senior Standing Counsel with Mr. C.P Pandey, Advocate for R3.Mr. V. Lakshmi Kumaran and Mr. Abhinav Jaganathan, Advocates.Mr. Akshay Makhija, CGSC and Mr. Vikas Bhadauria, Advocate for UOI.Mr. Sanjev Kumar Dubey, Advocate with Mr. Rajmangal Kumar, Mr. Udit Malik, Advocate and Mr. Aman Singh Paras, Advocate for DRI.Mr. C. Hari Shankar, Senior Advocate with Mr. S. Sunil and Mr. P.K Singh, Advocates.Mr. Ripu Daman Bhardwaj, CGSC with Mr. T.P Singh, Advocate for R1.Mr. S.K Dubey, Advocate with Mr. Udit Malik and Mr. Rajmangal Kumar, Advocate for DRI.Mr. Sanjeev Kumar Dubey, Advocate with Mr. Rajmangal Kumar, Mr. Udit Malik and Mr. Aman Singh Paras, Advocate for DRI.Mr. Rajesh Mahana, Advocate.Mr. Akshay Makhija, CGSC and Mr. Vikas Bhadauria, Advocate for UOI.Mr. Satish Aggarwala, Advocate with Mr. Vineet Sharma, Advocate for DRI.Mr. V. Lakshmi Kumaran and Mr. Abhinav Jaganathan, Advocates.Mr. Akshay Makhija, CGSC with Mr. Vikas Bhadauria, Advocate for UOI.Mr. Sanjev Kumar Dubey, Advocate with Mr. Rajmangal Kumar, Mr. Udit Malik, Advocate and Mr. Aman Singh Paras, Advocate for DRI.Mr. Satish Kumar, Senior Standing Counsel forMr. Arshad Hidyatullah, Senior Advocate with Mr. Rupesh Kumar, Mr. Pravesh Bhauguna, Mr. Jitin Singhal and Mr. Pratik Raoka, AdvocatesMr. Ajitesh Kumar, Advocate for Mr. Gaurav Sarin, Advocate for R1. Mr. Satish Aggarwala, Advocate with Mr. Vineet Sharma, Advocate for DRI.Mr. Naveen Malhotra, Advocate.Mr. Satish Aggarwala, Advocate with Mr. Vineet Sharma, Advocate for DRI.Mr. Sanjeev Kumar Dubey, Advocate with Mr. Rajmangal Kumar, Mr. Udit Malik and Mr. Aman Singh Paras, Advocate for DRI.Mr. Umesh Sharma, Senior CGSC with Mr. Akshat Kumar, CGSC.Mr. Kamal Nijhawan, Senior Standing Counsel for R-2.Mr. Naveen Malhotra, Advocate.Mr. Ripu Daman Bhardwaj, CGSC with Mr. T.P Singh, Advocate for R1.Mr. Kamal Nijhawan, Senior Standing Counsel for R2.Mr. Sanjeev Kumar Dubey, Advocate for DRI.Mr. Naveen Malhotra, Advocate.Mr. S.K Dubey, Mr. Udit Malik and Mr. Rajmangal Kumar, Advocates for DRI.Mr. Satish Aggarwala, Advocate with Mr. Vineet Sharma, Advocate for DRI.Mr. Kamal Nijhawan, Senior Standing Counsel for R2.Mr. Riput Daman Bhardwaj, CGSC with Mr. T.P Singh, Advocate for R1.Mr. Naveen Malhotra, Advocate.Mr. Ajay Digpaul, CGSC for R1.Mr. S.K Dubey, Advocate witgh Mr. Udit Malik and Mr. Rajmangal Kumar, Advocates for DRI.Mr. Satish Aggarwala, Advocate with Mr. Vineet Sharma, Advocate for DRI.Mr. Kamal Nijhawan, Senior Standing Counsel for R-2.Mr. Raghvendra Singh and Mr. Rahul Chaudhary, Advocates.Mr. Akshay Chandra & Mr. Raktim Gogoi, Advocates.Mr. S.K Dubey, Advocate with Mr. Rajmangal Kumar and Mr. Udit Malik, Advocates.Mr. Satish Kumar, Senior Standing Counsel for R2 and R4.Mr. Akshay Chandra & Mr. Raktim Gogoi, Advocates.Mr. Arun Bhardwaj, CGSC/UOI.Mr. Rahul Kaushik, Senior Standing Counsel CBEC with Mr. Bhavishya Sharma, Advocate for Customs.Mr. R.K Sanghi and Mr. satyendra Kumar and Mr. Palash, Advocates.Mr. S.K Dubey, Advocate with Mr. Rajmangal Kumar and Mr. Udit Malik, Advocate for DRI.Mr. Amit Mahajan, CGSC for UOI.Mr. Prosenjit Mandal and Mr. Umang Srivastav, Advocates.Mr. S.K Dubey, Advocate withMr. Rajmangal Kumar and Mr. Udit Malik, Advocate.Mr. Vivek Goyal, CGSC with Mr. Prabhakar Srivastav, Advocate for UOI/R1.Mr. Akshay Makhija, CGSC for UOI.Mr. Satish Kumar, Senior Standing Counsel for R3.Mr. Pawan Shree Agarwal, Advocate with Mr. Ayush Sharma, Advocate.Mr. S.K Dubey, Advocate with Mr. Rajmangal Kumar and Mr. Udit Malik, Advocate.Ms. Suparna Srivastava, Senior Standing counsel for UOI with Mr. Manu Dev Sharma, Advocate.Mr. Satish Aggarwala, Advocate for DRI.Mr. Satish Kumar, Senior Standing Counsel for R3.Mr. Piyush Kumar and Ms. Reena Rawat, Advocates.Mr. S.K Dubey, Advocate with Mr. Rajmangal Kumar and Mr. Udit Malik, Advocate.Mr. Kamal Nijhawan, Advocate with Mr. Sumit Gaur, Advocate for R3.Mr. Satish Aggarwala, Advocate for DRI.Mr. Anurag Ahluwalia, CGSC with Mr. Prashant Ghai, Advocate for UOI.Mr. Prem Ranjan Kumar, Advocate.Mr. S.K Dubey, Advocate with Mr. Rajmangal Kumar and Mr. Udit Malik, Advocate for DRI.Mr. Satish Kumar, Senior Standing Counsel for R3.Mr. Rupender Sinhman, Advocate with Ms. Rubal Maini, Advocate.Mr. S.K Dubey, Advocate with Mr. Rajmangal Kumar and Mr. Udit Malik, Advocate for DRI.Ms. Sonia Sharma, Senior Standing Counsel with Mr. C.P Pandey, Advocate for R3.Mr. Satish Aggarwala, Advocate for DRI.

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