M/s Canon India Private Limited vs Commissioner of Customs

Customs Act, 1962: s.28(4) – Power to review – The nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import, is broadly a power to review the earlier decision of assessment – Such a power is not inherent in any authority – The power has been so conferred specifically on “the proper officer” which must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods – It is completely impermissible to allow an officer, who has not passed the original order of assessment, to re-open the assessment on the grounds that the duty was not paid/not levied, by the original officer who had decided to clear the goods and who was competent and authorised to make the assessment – The nature of the power conferred by s.28(4) to recover duties which have escaped assessment is in the nature of an administrative review of an act – The section must, therefore, be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment – In other words, an officer who did the assessment, could only undertake re-assessment – It is, therefore, clear that the Additional Director General of DRI was not “the” proper officer to exercise the power under s.28(4) and the initiation of the recovery proceedings in this case is without any jurisdiction and liable to be set aside – Tax/Taxation.

Customs Act, 1962: s.6 – Import of cameras – Deputy Commissioner of Customs checked the goods and took a decision to clear the goods as being exempt from duty – Show cause notice issued under s.28(4) by Additional Director General, Directorate of Revenue Intelligence alleging that the Customs Authorities had been induced to clear the cameras by wilful mis-statement and suppression of facts about the cameras – Whether the Additional Director General of the DRI was even a proper officer – Held: The Additional Director General can be considered to be a proper officer only if it is shown that he was a Customs officer under the Customs Act – It is obvious that the re-assessment and recovery of duties i.e. contemplated by s.28(4) is by the same authority and not by any superior authority such as Appellate or Revisional Authority – It is, therefore, clear that the Additional Director General of DRI was not “the” proper officer to exercise the power under s.28(4) – 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 s.6 of the Act – 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 are invalid without any authority of law and liable to be set-aside and the ensuing demands are also setaside. Customs Act, 1962: s.28(4) – Limitation – Suppression of facts – Invocation of extended period of limitation – Held: On facts, importer had asked for a first check and had shown the cameras along with Bill of Entry and literature detailing specifications of models – The custom authorities could have operated the cameras to see the length of time of the single sequence and whether recording of the single sequence exhausted the total memory of the camera (including extended memory) and whether the cameras were eligible for exemption – In such circumstances, it cannot be said that there was any wilful mis-statement of facts – It must, therefore, follow that the extended period of limitation of five years was not available to any authority to re-open under s.28(4). Interpretation of statutes: It is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone – Customs Act, 1962 – s.28(4).

Interpretation of statutes: Use of article ‘the’ in a provision – Interpretation of the provision.

Allowing the appeals, the Court

HELD: 1.1 Section 28(4) of the Customs Act empowers the recovery of duty not paid, part paid or erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts and confers the power of recovery on “the proper officer”. The obvious intention is to confer the power to recover such duties not on any proper officer but only on “the proper officer”. [Para 9][786-B-C]

Consolidated Coffee Ltd. and Another v. Coffee Board, Bangalore (1980) 3 SCC 358 : [1980] 3 SCR 625; Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd. (2001) 3 SCC 609 : [2001] 2 SCR 36 – relied on.

1.2 There are only two articles ‘a (or an)’ and ‘the’. `A (or an)’ is known as the Indefinite Article because it does not specifically refer to a particular person or thing. On the other hand, ‘the’ is called the Definite Article because it points out and refers to a particular person or thing. There is no doubt that, if Parliament intended that any proper officer could have exercised power under Section 28 (4), it could have used the word ‘any’. [Para 10][786-F-G]

1.3 Parliament has employed the article “the” not accidentally but with the intention to designate the proper officer who had assessed the goods at the time of clearance. It must be clarified that the proper officer need not be the very officer who cleared the goods but may be his successor in office or any other officer authorised to exercise the powers within the same office. In this case, anyone authorised from the Appraisal Group. Assessment is a term which includes determination of the dutiability of any goods and the amount of duty payable with reference to, inter alia, exemption or concession of customs duty vide Section 2 (2) (c) of the Customs Act, 1962. [Para 11] [786-G-H; 787-A-B]

1.4 The nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import, is broadly a power to review the earlier decision of assessment. Such a power is not inherent in any authority. Indeed, it has been conferred by Section 28 and other related provisions. The power has been so conferred specifically on “the proper officer” which must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods i.e. the Deputy Commissioner Appraisal Group. Indeed, this must be so because no fiscal statute has been shown to us where the power to reopen assessment or recover duties which have escaped assessment has been conferred on an officer other than the officer of the rank of the officer who initially took the decision to assess the goods. [Para 12][787-B-D]

1.5 Where the statute confers the same power to perform an act on different officers, as in this case, the two officers, especially when they belong to different departments, cannot exercise their powers in the same case. Where one officer has exercised his powers of assessment, the power to order reassessment must also be exercised by the same officer or his successor and not by another officer of another department though he is designated to be an officer of the same rank. This would result into an anarchical and unruly operation of a statute which is not contemplated by any canon of construction of statute. [Para 13][787-E-F]

1.6 It is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone. As in this case, when the statute directs that “the proper officer” can determine duty not levied/not paid, it does not mean any proper officer but that proper officer alone. It is completely impermissible to allow an officer, who has not passed the original order of assessment, to re-open the assessment on the grounds that the duty was not paid/not levied, by the original officer who had decided to clear the goods and who was competent and authorised to make the assessment. The nature of the power conferred by Section 28 (4) to recover duties which have escaped assessment is in the nature of an administrative review of an act. The section must therefore be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment. In other words, an officer who did the assessment, could only undertake re-assessment [which is involved in Section 28 (4)]. [Para 14][788-A-C]

1.7 It is obvious that the re-assessment and recovery of duties i.e. contemplated by Section 28(4) is by the same authority and not by any superior authority such as Appellate or Revisional Authority. It is, therefore, clear that the Additional Director General of DRI was not “the” proper officer to exercise the power under Section 28(4) and the initiation of the recovery proceedings in the present case is without any jurisdiction and liable to be set aside. [Para 15][788-D-E]

2. Whether the Additional Director General of the DRI who issued the recovery notice under Section 28(4) was even a proper officer?

2.1 The Additional Director General can be considered to be a proper officer only if it is shown that he was a Customs officer under the Customs Act. In addition, that he was entrusted with the functions of the proper officer under Section 6 of the Customs Act. The Additional Director General of the DRI can be considered to be a Customs officer only if he is shown to have been appointed as Customs officer under the Customs Act. [Para 16][788-F]

2.2 A Deputy Commissioner or Assistant Commissioner of Customs has been entrusted with the functions under Section 28, vide Sl. No.3 above. By reason of the fact that the functions are assigned to officers referred to in Column (3) and those officers above the rank of officers mentioned in Column (2), the Commissioner of Customs would be included as an officer entitled to perform the function under Section 28 of the Act conferred on a Deputy Commissioner or Assistant Commissioner but the notification appears to be ill-founded. The notification is purported to have been issued in exercise of powers under sub-Section

(34) of Section 2 of the Customs Act. This section does not confer any powers on any authority to entrust any functions to officers. The sub-Section is part of the definitions clause of the Act, it merely defines a proper officer. Section 6 is the only Section which provides for entrustment of functions of Customs officer on other officers of the Central or the State Government or local authority. [Paras 19, 20][790-A-C, E]

2.3 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 04.12.1957 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. [Para 21][790-G-H; 791-A-B]

Commissioner of Customs v. Sayed Ali and Another (2011) 3 SCC 537 : [2011] 2 SCR 1045 – relied on.

2.4 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 are invalid without any authority of law and liable to be set-aside and the ensuing demands are also setaside. [Para 23][793-E]

3.1 The show cause notice was issued on 19.8.2014. Under Section 28(4), such a show cause notice must be issued within five years from the relevant date which means the date on which the goods were assessed and cleared, in case the duty was not paid or short paid or erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts. It is, therefore, necessary to examine whether there is suppression of facts. [Para 24][793-F-G]

3.2 The case was presented for scrutiny of the Customs officers on 20.3.2012 along with the Bill of Entry and literature consisting of specifications of the cameras. The Bill of Entry made a statement that these are Digital Still Image Video Camera packed for retail sale (COOLPIX S4300, S2600 etc.). This was supported by literature which clearly stated that “… the single maximum recording time for a single movie is 29 minutes, even when there is sufficient free space on the memory card for longer recording”. This meant that even if the camera could record more than 29 minutes when it had sufficient free space (which depends on the capacity of the card providing extended memory) the maximum time for which it could record a single sequence was

29 minutes. [Paras 25, 26][793-H; 794-A-B]

3.3 In other words, the camera could record more than one single sequence but not 30 minutes and more in a single sequence. It is obvious that the Deputy Commissioner took the view that the camera complied with the requirement of exemption i.e. it could only record up to less than 30 minutes in a single sequence. At this juncture, it is not relevant to see whether the Deputy Commissioner was right or not in taking this decision to clear the goods as exempted goods. What is important is to see whether the importers made any wilful mis-statement or suppression of facts and induced the delivery of goods. [Para 27][794-C-D]

3.4 The importer had asked for a first check and had shown the cameras and the cameras were offered on 20.3.2012 along with Bill of Entry and literature detailing specifications of models. The camera could have been operated to see the length of time of the single sequence and whether recording of the single sequence exhausts the total memory of the camera (including extended memory) and whether the cameras were eligible for exemption. It is difficult in such circumstances to infer that there was any wilful mis-statement of facts. In these circumstances, it must, therefore, follow that the extended period of limitation of five years was not available to any authority to re-open under Section 28(4). [Para 28][794-E-F]