Legal principle

A show cause notice for recovery of duty under Section 28 of the Customs Act can be issued only by the 'proper officer', and notices issued by the DRI are without authority and liable to be quashed per M/s Canon India, without prejudice to fresh proceedings by the competent authority.

Court decision

The High Court allowed all the petitions and quashed the show cause notices issued by the DRI in each case on the ratio laid down in M/s Canon India, without entering into the merits of individual cases. The quashing was made subject to the outcome of the review pending before the Supreme Court in Commissioner of Customs v. M/s Canon India Pvt. Ltd. (Review Petition (C) No. 400/2021), and it does not preclude the Revenue from initiating action on merit, if permissible under law, by the proper authority. The decision was in favour of the petitioners.

Facts

M/s Aztec Fluids & Machinery Pvt Ltd, a Gujarat company, imported Continuous Inkjet Printers, Laser Marking Machines and their parts/accessories from China during 2014-2021, declaring them under tariff headings 84433250/40, 84433290, 84439951/59 and 84718000, with duties finally assessed and fully paid. Around February 2020, DRI's Chennai Zonal Unit initiated investigation on the belief that the goods were classifiable under CTH 84433910, 84433990 and 84439960 carrying higher duty, alleging misclassification to avail lower duty or exemption; during investigation the petitioner deposited Rs. 50 lakhs in two TR-6 challans. The Additional Director General, DRI, Chennai issued a show cause notice dated 24.02.2021 invoking Section 28(4) of the Customs Act, proposing reassessment of imports, recovery of differential duty, interest, penalty and confiscation across several customs stations. A group of identically-situated petitions was disposed of by a common Gujarat High Court judgment.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 2(34), Customs Act, 1962 — Definitions
• Section 6, Customs Act, 1962 — Entrustment of functions of Board and customs officers on certain other officers
• Section 4, Customs Act, 1962 — Appointment of officers of customs
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 5, Customs Act, 1962 — Powers of officers of customs
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc
• Section 111, Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 110(2), Customs Act, 1962 — Seizure of goods, documents and things
• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 24(4), Customs Act, 1962 — Power to make rules for denaturing or mutilation of goods