Custom, Excise & Service Tax Tribunal
Sree Krishna Enterprises vs Commissioner Of Customs (Ii), Chennai on 27 January, 2022
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
Customs Appeal No.41803 of 2015
(Arising out of Order-in-Original No. 38827/2015 dated 29.5.2015 passed by the
Commissioner of Customs, Chennai - II)
M/s. Sree Krishna Enterprises Appellant
Plot No. 96, Seshachala Cooperative Society
1st Floor, East Maredpally, Secunderabad - 500 026.
Vs.
Commissioner of Customs Respondent
Chennai II Commissionerate
Custom House
60, Rajaji Salai
Chennai - 600 001.
Customs Appeal No.42416 of 2015
(Arising out of Order-in-Original No. 41404/2015 dated 31.8.2015 passed by the
Commissioner of Customs, Chennai - II)
Shri S. Raghavendra, Proprietor Appellant
of M/s. Sree Krishna Enterprises
Plot No. 96, Seshachala Cooperative Society
1st Floor, East Maredpally, Secunderabad - 500 026.
Vs.
Commissioner of Customs Respondent
Chennai II Commissionerate
Custom House
60, Rajaji Salai
Chennai - 600 001.
Customs Appeal No.42417 of 2015
(Arising out of Order-in-Original No. 41404/2015 dated 31.8.2015 passed by the
Commissioner of Customs, Chennai - II)
M/s. Mining & Machinery Services Appellant
216, C-Block, Karan Trade Centre
S.D.Road, Secunderabad - 500 003.
Vs.
Commissioner of Customs Respondent
Chennai II Commissionerate
Custom House
60, Rajaji Salai
Chennai - 600 001.
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APPEARANCE:
Shri B.V. Kumar, Advocate for the Appellant No. 1
Shri Y. Sreenivasa Reddy, Advocate for Appellants No. 2 & 3
Shri R. Rajaraman, AC (AR) for the Respondent
CORAM
Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial)
Hon'ble Shri P. Anjani Kumar, Member (Technical)
Final Order Nos. 40002-40004 / 2022
Date of Hearing : 24.1.2022
Date of Pronouncement: 27.1.2022
Per Ms. Sulekha Beevi C.S.
Brief facts are that M/s. Sree Krishna Enterprises is a proprietary
firm of which Shri S. Raghavendra is the Proprietor. They are importers
of Tungsten Carbide Tips and TC Rock Drill Bits from China. On specific
intelligence gathered by the Directorate of Revenue Intelligence (DRI),
Hyderabad Regional Unit that M/s. Sree Krishna Enterprises was
resorting to gross undervaluation of the goods and thereby evading
payment of appropriate duties of customs, simultaneous, searches
were conducted by the officers on 15.5.2013, at the office premises of
M/s. Sree Krishna Enterprises and Mining and Machinery Services
(appellant in C/42417/2015). Certain documents were recovered and
statements were recorded. After investigations, Show Cause Notice
dated 20.2.2014 was issued by the DRI. After due process of law, the
adjudicating authority passed an order rejecting the assessable value
and confirmed the demand of duty after reassessment. Besides this,
inter alia, there was order of confiscation of goods, imposition of
redemption fine as well as penalties. Aggrieved by such order, the
appellants are now before the Tribunal.
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2. On behalf of M/s. Sree Krishna Enterprises, learned counsel Shri
B.V. Kumar appeared and argued the matter. He submitted that the
Show Cause Notice having been issued by DRI, the order passed
cannot sustain in terms of the decision of the Hon'ble Supreme Court
in the case of Canon India Pvt. Ltd. Vs. Commissioner of Customs
reported in 2021 (376) ELT 3 (SC). In the said case, it was held by the
Hon'ble Supreme Court that the entire proceedings initiated by the
ADG, DRI by issuing Show Cause Notices are invalid and without any
authority of law. He submitted that Notification No. 44/2011-Cus (NT)
dated 6.7.2011 as amended by Notification No. 53/2012 (NT) dated
21.6.2012 and 43/2019-Cus (NT) dated 18.6.2019 was issued under
which the Addl. Directors General, Addl. Directors of Joint Directors,
Deputy Directors or Assistant Directors in the DRI were assigned the
function of the 'Proper Officer' under sec. 17, 28 and 28AAA and second
proviso of section 124 of the Customs Act, 1962. This notification was
issued by the CBEC under section 2(34) of the Customs Act, 1962 and
not by Central Government under sec. 6 ibid. Therefore, the Show
Cause Notice in the present case is ab initio void and any proceedings
emanating from such Show Cause Notice are also without authority of
law as held by the Hon'ble Supreme Court in the case of Canon India
Pvt. Ltd. (supra).
3. He argued that the above three Judges Bench judgment was
followed by the Hon'ble Supreme Court in the case of CC, Kandla Vs.
Agarwal Metals and Alloys reported in 2021 (376) ELT 7 (SC). The
Hon'ble jurisdictional High Court has followed the same in Quantum
Coal Energy P. Ltd. Vs. CC, Tuticorin reported in 2021 (377) ELT 488
(Mad.). The Hon'ble High Court of Delhi in a writ petition filed by Rani
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Enterprises Vs. Principal Commissioner of Customs, Patparganj in W.P.
(C) No. 11721/2021 decided on 12.10.2021 observed that the decision
of the Hon'ble Supreme Court has to be followed. He prayed that the
appeal may be allowed. No arguments on merits were advanced by
the counsel for the appellant.
4. The learned counsel Shri Y. Sreenivasa Reddy appeared in the
appeals filed by Shri S. Raghavendra as well as M/s. Mining Machinery
Service. Separate Show Cause Notice dated 30.7.2014 was issued to
M/s. Mining Machinery Service consequent to the very same
investigations carried out. Searches were carried out in the office
premises of M/s. Mining Machinery Service as well as the residential
premises of late T.V. Srinivasan, Proprietor of M/s. Mining Machinery
Service. He submitted that the proprietor is no more and therefore the
appeal filed by him stands abated in terms of Rule 22 of CESTAT
(Procedure) Rules, 1982. He adopted the arguments advanced by
learned counsel Shri B.V. Kumar in respect of the issue with regard to
application of the judgment of the Hon'ble Supreme Court in Canon
India Pvt. Ltd. (supra). He argued that the Show Cause Notice issued
by the DRI is not sustainable and therefore the impugned orders are
to be set aside on this sole ground itself. No arguments were advanced
on merits of the case.
5. Heard both sides.
6. The main argument advanced by the learned counsels is that the
Show Cause Notice having been issued by DRI is not sustainable in law
in terms of the decision of the Hon'ble Supreme Court in the case of
Canon India Pvt. Ltd. (supra). The Hon'ble Supreme Court in the said
case held as under:-
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"21. If it was intended that officers of the Directorate of Revenue
Intelligence who are officers of Central Government should be
entrusted with functions of the Customs officers, it was imperative
that the Central Government should have done so in exercise of its
power under Section 6 of the Act. The reason why such a power is
conferred on the Central Government is obvious and that is because
the Central Government is the authority which appoints both the
officers of the Directorate of Revenue Intelligence which is set up
under the Notification dated 4-12-1957 issued by the Ministry of
Finance and Customs officers who, till 11-5-2002, were appointed by
the Central Government. The notification which purports to entrust
functions as proper officer under the Customs Act has been issued
by the Central Board of Excise and Customs in exercise of non-
existing power under Section 2(34) of the Customs Act. The
notification is obviously invalid having been issued by an authority
which had no power to do so in purported exercise of powers under
a section which does not confer any such power.
22. In the above context, it would be useful to refer to the decision
of this Court in the case of Commissioner of Customs v. Sayed Ali
and Another [(2011) 3 SCC 537 = 2011 (265) E.L.T. 17 (S.C.)]
wherein the proper officer in respect of the jurisdictional area was
considered. The consideration made is as hereunder :-
"16. It was submitted that in the instant case, the import manifest
and the bill of entry were filed before the Additional Collector of
Customs (Imports), Mumbai; the bill of entry was duly assessed, and
the benefit of the exemption was extended, subject to execution of a
bond by the importer which was duly executed undertaking the
obligation of export. The Learned Counsel argued that the function
of the preventive staff is confined to goods which are not manifested
as in respect of manifested goods, where the bills of entry are to be
filed, the entire function of assessment, clearance, etc. is carried out
by the appraising officers functioning under the Commissioner of
Customs (Imports).
17. Before adverting to the rival submissions, it would be expedient
to survey the relevant provisions of the Act. Section 28 of the Act,
which is relevant for our purpose, provides for issue of notice for
payment of duty that has not been paid, or has been short-levied or
erroneously refunded, and provides that :
"28. Notice for payment of duties, interest, etc. - (1) When any duty
has not been levied or has been short-levied or erroneously
refunded, or when any interest payable has not been paid, part paid
or erroneously refunded, the proper officer may, -
(a) in the case of any import made by any individual for his
personal use or by Government or by any educational, research or
charitable institution or hospital, within one year;
(b) in any other case, within six months,
from the relevant date, serve notice on the person chargeable with
the duty or interest which has not been levied or charged or which
has been so short-levied or part paid or to whom the refund has
erroneously been made, requiring him to show cause why he should
not pay the amount specified in the notice :
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Provided that where any duty has not been levied or has been short-
levied or the interest has not been charged or has been part paid or
the duty or interest has been erroneously refunded by reason of
collusion or any wilful misstatement or suppression of facts by the
importer or the exporter or the agent or employee of the importer or
exporter, the provisions of this sub-section shall have effect as if for
the words 'one year' and 'six months', the words 'five years' were
substituted."
18. It is plain from the provision that the 'proper officer' being
subjectively satisfied on the basis of the material that may be with
him that customs duty has not been levied or short levied or
erroneously refunded on an import made by any individual for his
personal use or by the Government or by any educational, research
or charitable institution or hospital, within one year and in all other
cases within six months from the relevant date, may cause service of
notice on the person chargeable, requiring him to show cause why
he should not pay the amount specified in the notice. It is evident that
the notice under the said provision has to be issued by the 'proper
officer'.
19. Section 2(34) of the Act defines a 'proper officer', thus :
'2. Definitions. -
......................
(34) '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 Commissioner of Customs;' It is clear from a mere look at the provision that only such officers of customs who have been assigned specific functions would be 'proper officers' in terms of Section 2(34) the Act. Specific entrustment of function by either the Board or the Commissioner of Customs is therefore, the governing test to determine whether an 'officer of customs' is the 'proper officer'.
20. From a conjoint reading of Sections 2(34) and 28 of the Act, it is manifest that only such a Customs Officer who has been assigned the specific functions of assessment and reassessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose inasmuch as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions."
23. We, therefore, hold that the entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters before us are invalid without any authority of law and liable to be set aside and the ensuing demands are also set aside."
7. The learned counsel has placed the decision of the Hon'ble High Court of Delhi in the case of Rani Enterprises reported in 2021 TIOL 2257. The Hon'ble High Court while granting interim relief has observed as under:-
7"8. It is rather unfortunate that despite a clear enunciation and pronouncement of the law on the aspect of 'Proper Officer' under section 110 of the Customs Act, 1962, the concerned officials of the Respondents are repeatedly seizing goods without having the authority and jurisdiction to do so. Perhaps, the judgment in Canon India (supra) has not been either read by the concerned officials or has not been understood in the correct perspective. As a result, this Court is flooded with litigation on the same issue and we cannot help but observe that it is the action of the Respondents in not applying the binding dicta of the Hon'ble Supreme Court, which is breeding unnecessary litigation.
9. We, therefore, direct the Registry of this court to send a copy of the judgment dated 9.3.2021 passed by the Hon'ble Supreme Court in Canon India (supra) to the Respondents herein, through electronic mode, so that corrective measures and steps are taken, in accordance with the judgment and citizens are not put to mental and financial harassment by filing petitions before this Court.
10. We also direct Respondent No. 1 herein / Principal Commissioner of customs, ICD, Patparganj, to circular a copy of the aforesaid judgment, to all the concerned officials in the department for information and compliance, as there can hardly be a doubt that the judgments of the Courts are binding not only on the private parties but also on the Government officials dealing with matters in their official capacity.
11. We also expect from Respondents No. 1 and 2 that they will convene a meeting with the concerned officers in order to sensitize them with regard to implementation of the observations and directions of the Hon'ble Supreme Court in Canon India (supra), in letter and spirit as also in general on the implementation of judgments of the courts and their binding effects."
8. The Hon'ble jurisdictional High Court in the case of Quantum Coal Energy P. Ltd. (supra) has applied the decision of the Hon'ble Supreme Court to hold that the Show Cause Notice issued by DRI is invalid and the proceedings initiated cannot sustain. The Tribunal in the case of Nitin Jatania vs. Commissioner of Customs (Adjudication), Mumbai reported in 2022-TIOL-61-CESTAT-MUM had occasion to analyse the very same issue as to whether DRI has jurisdiction to issue Show Cause Notice. Applying the decision of the Hon'ble Supreme Court in Canon India Pvt. Ltd. (supra), the Tribunal held that the Show Cause Notice issued by DRI is invalid. In the recent decision of Arun Kumar Agarwal 8 Vs. Principal Commissioner of Customs (Import), New Delhi reported in 2022-TIOL-65-CESTAT-DEL similar view was taken.
9. With regard to the appeal filed by M/s. Mining Machinery Service, the learned counsel for the appellant has submitted that the proprietor of the firm is no more and produced the death certificate dated 17 th July 2020. Therefore, the appeal filed stands abated in terms of Rule 22 of the CESTAT (Procedure) Rules, 1982.
10. Be that as it may, following the above decisions discussed above, we hold that the Show Cause Notice having been issued by DRI are ab initio void. The impugned orders cannot sustain and requires to be set aside.
11. In the result, the impugned orders are set aside. The appeals are allowed with consequential relief, if any.
(Pronounced in open court on 27.1.2022) (SULEKHA BEEVI C.S.) Member (Judicial) (P. ANJANI KUMAR) Member (Technical) Rex