Commr. Of Customs vs Sayed Ali & Anr

COMMISSIONER OF CUSTOMS -- APPELLANT

VERSUS

SAYED ALI & ANR. -- RESPONDENTS

WITH

[CIVIL APPEAL NOS.4603-4604 of 2005]

J U D G M E N T

D.K. JAIN, J.:

1. Challenge in these civil appeals, filed under Section 130E of the Customs

Act, 1962 (for short "the Act"), is to the orders dated 1st October, 2001

and 4th January, 2005 passed by the Customs, Excise & Gold (Control)

Appellate Tribunal (for short "the CEGAT") and the Customs, Excise &

Service Tax Appellate Tribunal (for short "the CESTAT") respectively.

In the first set of appeals (Nos. 4294-4295 of 2002), the CEGAT has held

that the Commissioner of Customs (Preventive), Mumbai, not being a

"proper officer" as defined in Section 2(34) of the Act, did not have

jurisdiction to issue show cause notice in terms of Section 28 of the Act.

1 However, in the second set of appeals (Nos. 4603-4604 of 2005), the

CESTAT has, to the contrary, held that the Commissioner of Customs

(Preventive), Mumbai had jurisdiction to issue notice under Section 28 of

the Act.

2. Since the question of law arising in all the appeals is similar, these are

being disposed of by this common judgment. However, to appreciate the

controversy, facts in C.A. Nos. 4294-4295 of 2002 are adverted to. These

are:

Respondent No. 1 is a partner in respondent No. 2 firm viz. M/s.

Handloom Carpet, which is engaged in the business of carpet

manufacture/export. Respondent No. 2 was charged with misusing the

Export Pass Book scheme by selling goods cleared duty free in the open

market or selling the pass book on premium in violation of the ITC

restriction imposed on such sale. Investigations in the matter were conducted

by the Marine and Preventive Wing of the Customs. On 28th August, 1991,

the Assistant Collector of Customs (Preventive), Mumbai, issued to the

respondents a show cause notice, alleging violation of the provisions of

Section 111(d) of the Act. On 3rd February, 1993, the same officer

adjudicated upon the said show cause notice, confirming the demands raised

in the show cause notice.

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3. Being aggrieved, the respondents preferred an appeal before the Collector

of Customs (Appeals), who vide order dated 14th December, 1993,

allowed the appeal holding that since the matter involved demand of duty

beyond a period of six months, the show cause notice was required to be

issued by the Collector, and not by the Assistant Collector. Nevertheless,

the Collector (Appeals) granted liberty to the department to re-adjudicate

the case by issuing a proper show cause notice.

4. Accordingly, the Collector of Customs (Preventive) issued show cause

notice dated 16th April, 1994 asking the respondents to show cause as to

why the goods under seizure valued at `1,04,118.52/- should not be

confiscated, and customs duty amounting to `5,07,274/- be not levied in

terms of Section 28(1) of the Act, by invoking the extended period of

limitation. Penalties under Sections 112(a) and (b)(i) and (ii) of the Act

were also proposed.

5. In reply to the show cause notice, the jurisdiction of the Collector of

Customs (Preventive) was questioned on the ground that the jurisdiction

of a Commissioner by virtue of Notification No. 251/83 being more

specific and limited in nature, the said notification will prevail over

Notification No.250/83. Vide order dated 19th August, 1996, the

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Collector of Customs (Preventive) rejected the objections regarding his

jurisdiction, holding thus:

"It is not disputed by the parties that by virtue of notification

No. 250/83 the commissioner of customs (preventive) Mumbai

is appointed as Commissioner of Customs in the areas

comprising Districts of Mumbai, Thane and Kolaba and a

concurrent jurisdiction is thus vested in respect of Mumbai port

also. What is being contended is that the jurisdiction of

commissioner of customs, Mumbai under Notification No.

251/83 is more specific and limited. In this regard it is relevant

to refer to the definition of smuggling under the provisions of

customs Act, 1962. Under the Act Smuggling is defined as any

act or omission which renders the goods to confiscation under

the provisions of the Act. In this case M/s handloom carpet

manufacturer (sic) are charged with trafficking of the goods

imported and cleared only free in violation of the provisions of

notification No. 117/88 dated 30-3-1988 and fabrication of

documents to show receipt and consumption of the same in

their factory. The goods imported and cleared duty free were

thus rendered liable for confiscation under the provisions of the

customs Act, 1962 and the customs (preventive)

Commisionerate created for the purpose of prevention of

smuggling and detention of cases of smuggling including

commercial frauds is thus (sic) competent to investigate and

adjudicate the case."

The Collector confirmed the demand of duty of ` 5,07,274/-under Section

28(1) of the Act. He also ordered confiscation of two consignments of dyes

sulphur blue and sulphur blue green valued at ` 1,34,118.52/-, and imposed a

redemption fine of ` 1,50,000/-.

6. Aggrieved, the respondents preferred appeals before the CEGAT. As

afore-mentioned, accepting the preliminary objection of the respondents

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regarding jurisdiction of the Collector (Preventive), the CEGAT has, vide

the impugned order, allowed the appeals, observing that:

"it is very clear that the Commissioner of Customs (Preventive)

does not have jurisdiction to issue the impugned show cause

notice and in view thereof he could not have the jurisdiction to

adjudicate the matter when imports have taken place at Bombay

Customs House."

7. At the sake of repetition, it may be noted that although the facts obtaining

in C.A. Nos. 4603-4604 of 2005 were similar to those in C.A. Nos. 4294-

4295 of 2002, but, in the former case, following the decision of its larger

bench in Konia Trading Co. Vs. Commissioner of Customs, Jaipur1, the

CESTAT while upholding the issue of show cause notice by the

Collector of Customs (Preventive) under Section 28 of the Act, set aside

the order of adjudication passed by the said officer with a direction that

the issues be determined afresh by the jurisdictional Collector of Customs

who had earlier assessed the bill of entry in question at Bombay Port.

8. Hence, the present cross appeals by the revenue and the importers. At the

very outset, we may clarify that these appeals are confined only to the

question of validity of the demands raised by virtue of re-assessment

orders passed by the Collector of Customs (Preventive) Mumbai,

pursuant to the issue of show cause notices under Section 28 of the Act.

1 2004 (170) E.L.T. 51 (Tri.-LB)

5

For the sake of convenience, hereinafter, both the CESTAT and CEGAT

are referred to as "the Tribunal".

9. Mr. Harish Chander, learned senior counsel appearing on behalf of the

Revenue in one set of appeals, contended that once the Commissioner

(Preventive) had been appointed as Collector of Customs (Preventive),

Bombay by virtue of the Notification Nos. 250/83 and 251/83, issued by

the Central Government under Section 4 of the Act, the former became

"proper officer" in terms of Section 2(34) of the Act, and was competent

to issue notice under Section 28 of the Act as the goods were cleared for

home consumption in Bombay. In support of the proposition that an

officer of Customs who has been assigned certain functions, which are to

be performed under the Act is a "proper officer" and such assignment can

be done by the Board or the Commissioner of Customs, reliance was

placed on the decision of this court in Union of India & Ors. Vs. Ram

Narain Bishwanath & Ors.2 as also on a larger bench decision of the

Tribunal in Konia Trading Co. (supra) and another decision of the

Tribunal in Manohar Bros. (Capacitors) Vs. Collector of Customs-II,

2 (1998) 9 SCC 285

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Bombay3, the latter having attained finality on the dismissal of revenue's

appeal by this Court (See : Collector Vs. Manohar Bros. (Capacitors)4).

10. Per contra, Mr. Joseph Vellapally, learned senior counsel appearing on

behalf of the respondents in C.A. Nos. 4294-4295 of 2002, contended

that the statutory powers conferred under Section 28 of the Act must be

exercised by an officer of Customs, who has been assigned those

functions either by the Central Board of Excise and Customs or by the

jurisdictional Commissioner of Customs (Imports). As the Commissioner

(Preventive) has not been appointed as a "proper officer" for the purposes

of assessment or re-assessment, nor assigned any functions under Section

28 of the Act or under any other Section related to assessment of goods

entered for home consumption, he was not competent to issue notice

under Section 28 of the Act, argued the learned counsel. It was also urged

that mere appointment of a person as an officer of Customs with

territorial jurisdiction over the Mumbai port under Section 4 of the Act,

does not ipso facto confer authority on him to exercise the statutory

powers entrusted to proper officers, as under the Act, while all proper

officers must be `officers of Customs', all `officers of Customs' are not

"proper officers". In support of the proposition, learned counsel heavily

3 1998 (98) E.L.T. 821 (Tri)

4 2004 (166) E.L.T. A152 (S.C.)

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relied on a decision of the Karnataka High Court in Devilog Systems

India Vs. Collector of Customs, Bangalore5 and orders of the Tribunal in

Orient Arts & Crafts Vs. Commissioner of Customs (Prev.), Mumbai6

and Informatika Software (P) Ltd. & Anr. Vs. Commissioner of

Customs (P), Calcutta7. Learned counsel submitted that the use of the

expression "proper officer" in contradistinction to "officer of customs" in

certain Sections in the Act makes it clear that the two expressions cannot

be used interchangeably. Learned counsel contended that if the

Revenue's contention that all "officers of customs" are "proper officers"

is accepted, it would render Section 2(34) otiose, and would amount to

re-writing the Act, leading to administrative anarchy. In support, reliance

was placed on the decision of this Court in The Commissioner, Sales

Tax, U.P. Vs. M/s. Suraj Prasad Gouri Shankar8.

11. Explaining the procedure for clearance of imported goods for home

consumption, learned counsel submitted that the Act clearly delineates

the functions to be performed by the Commissioner of Customs (Imports)

and the Commissioner (Preventive). According to the learned counsel

under Section 30 of the Act, the owner of a vessel, on arrival or prior to

5 1995 (76) E.L.T. 520 (Kar.)

6 2003 (155) E.L.T .168 (Tri-Mum)

7 1997 (73) ECR 348 (Tri.-Kolkata)

8 (1974) 3 SCC 230

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arrival, is required to file an Import General Manifest ("IGM") with the

proper officer i.e. the Commissioner of Customs (Imports), the

Rummaging and Intelligence Wing of the Preventive Division checks the

conveyance to ensure that all goods in the vessel are mentioned in the

IGM; then, in terms of Section 31 of the Act, an order allowing "entry

inwards" is granted by the proper officer, i.e. Commissioner of Customs

(Imports); the goods are unloaded under the supervision of the Preventive

Officer in terms of Section 34; and then, the importer files a bill of entry,

which is assessed by the "proper officer" i.e. Commissioner (Imports)

who, on payment of all duties by the importer, issues an order allowing

clearance of goods for home consumption under Section 47 of the Act. It

was thus, asserted that once goods are manifested, the jurisdiction to pass

any order of assessment or re-assessment vests in the Collector of

Customs (Imports) and not in the Collector of Customs (Preventive). To

bring home the point, reference was made to a decision of the Calcutta

High Court in Sharad Himatlal Daftary Vs. Collector of Customs9. 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

9 1988 (36) E.L.T. 468 (Cal.)

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which was duly executed, undertaking the obligation of export. 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).

12.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

mis-statement 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.

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 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".

13. 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;

1

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) of 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".

14.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 re-assessment 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 in as much as the test contemplated under Section

2(34) of the Act is that of specific conferment of such functions.

Moreover, if the Revenue's contention that once territorial jurisdiction is

conferred, the Collector of Customs (Preventive) becomes a "proper

officer" in terms of Section 28 of the Act is accepted, it would lead to a

situation of utter chaos and confusion, in as much as all officers of

customs, in a particular area be it under the Collectorate of Customs

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(Imports) or the Preventive Collectorate, would be "proper officers". In

our view therefore, it is only the officers of customs, who are assigned

the functions of assessment, which of course, would include re-

assessment, working under the jurisdictional Collectorate within whose

jurisdiction the bills of entry or baggage declarations had been filed and

the consignments had been cleared for home consumption, will have the

jurisdiction to issue notice under Section 28 of the Act.

15. In this behalf, our attention was also invited by Mr. Joseph Vellapally to

standing order No. 35/89 dated 12th July, 1989, issued by a Collector of

Customs, holding dual charges of Collector of Customs, Calcutta and

Collector of Customs (Preventive) as also to certain notifications issued

by the Board under Section 2 (34) of the Act clearly defining the

functions of the Customs House and the Preventive Collectorate.

16. In the present cases, the import manifest and the bill of entry having been

filed before the Collectorate of Customs (Imports) Mumbai, the same

having been assessed and clearance for home consumption having been

allowed by the proper officer on importers executing bond, undertaking

the obligation of export, in our opinion, the Collector of Customs

(Preventive), not being a "proper officer" within the meaning of Section

2(34) of the Act, was not competent to issue show cause notice for re-

1 assessment under Section 28 of the Act. Nothing has been brought on

record to show that the Collector of Customs (Preventive), who had

issued the show cause notices was assigned the functions under Section

28 of the Act as "proper officer" either by the Board or the

Collector/Commissioner of Customs. We are convinced that

Notifications No. 250-Cus and 251-Cus., both dated 27th August, 1983,

issued by the Central Government in exercise of the powers conferred by

sub-section (1) of the Section 4 of the Act, appointing Collector of

Customs (Preventive) etc. to be the Collector of Customs for Bombay,

Thane and Kolaba Districts in the State of Maharashtra did not ipso facto

confer jurisdiction on him to exercise power entrusted to the "proper

officers" for the purpose of Section 28 of the Act. In that view of the

matter, we do not find any substance in the contention of Mr. V. Shekhar,

learned Senior Counsel, appearing for the revenue in the second set of

appeals, that the source of power to act as a "proper officer" is Sections 4

and 5 of the Act and not sub-section 34 of Section 2 of the Act. The said

sections merely authorize the Board to appoint officers of Customs and

confer on them the powers and duties to be exercised/discharged by

them, but for the purpose of Section 28 of the Act, an officer of customs

has to be designated as "proper officer" by assigning the function of levy

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and collection of duty, by the Board or the Commissioner of Customs.

The argument is rejected accordingly. Similarly, revenue's reliance on

the decision of this court in Ram Narain Bishwanath & Ors. (supra) is

clearly misplaced. In that case the issue for determination was that when

goods imported and cleared at Paradip Port (Orissa State) were seized by

the Customs authorities in West Bengal on the allegation that these had

been imported on the strength of fictitious licences, whether the customs

authorities at Paradip or West Bengal will have the jurisdiction to initiate

adjudication proceedings. By a short order it was held that it was for the

customs authorities at Paradip to initiate proceedings against the

importer. Apart from the fact that none of the statutory provisions were

considered in that case, the issue arising for consideration in the present

appeals was not the subject matter therein. Thus, the said decision is of

no avail to the revenue.

17.For the aforegoing reasons, we do not find any merit in the stand of the

revenue. Resultantly, C.A. Nos. 4294-4295 of 2002, being devoid of any

merit, are dismissed, while C.A. Nos. 4603-4604 of 2005 are allowed.

Before parting with the cases, we once again clarify that this judgment

shall not preclude the revenue from initiating any proceedings against the

1

importers for recovery of duty and other charges payable in respect of the

subject goods, if permissible under the Act.

18.However, in the facts and circumstances of these cases, there shall be no

order as to costs.

...........................................

(D.K. JAIN, J.)

............................................

(H.L. DATTU, J.)

NEW DELHI;

FEBRUARY 18, 2011.

RS

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