M/S Canon India Private Limited vs Commissioner Of Customs

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1827 OF 2018

M/S CANON INDIA PRIVATE LIMITED …. APPELLANT(S) VERSUS COMMISSIONER OF CUSTOMS …. RESPONDENT(S)

WITH CIVIL APPEAL NO. 1875 OF 2018 WITH CIVIL APPEAL NO.1832 OF 2018 WITH CIVIL APPEAL NO.3213 OF 2018

J U D G M E N T

S.A. BOBDE, CJI.

1. This batch of statutory appeals (being Civil Appeal

Nos. 1827/2018, 1875/2018, 1832/2018 and 3213/2018)

under Section 130E of the Customs Act, 1962 arises from a

common final order of the Central Excise and Service Tax

Appellate Tribunal (‘CESTAT’) dated 19th December 2017

(‘impugned order’).

Signature Not Verified Digitally signed by

2. Vide the impugned order an exemption of basic Sanjay Kumar Date: 2021.03.09 16:50:07 IST

customs duty accorded to the Digital Still Image Video Reason:

1

Cameras (‘DSIC’) imported by the Nikon India Pvt. Ltd,

Canon India Pvt. Ltd., Sony India Pvt. Ltd. and Samsung

India Electronics Pvt. Ltd (hereinafter referred to as

‘appellants’ or ‘importers’), in terms of exemption

Notification No. 20/2005 dated 01.03.2005 (as amended by

Notification No. 15/2012 dated 17.03.2012) came to be

denied and the consequential confiscation of goods,

demand of interest and imposition of penalty as provided

for under various sections of the Customs Act, 1962, was

upheld by the CESTAT.

3. Since the appeals involve common questions, these

are being decided together and for sake of convenience we

shall be referring to the events which took place in the case

of Nikon.

4. The main issue is whether after clearance of the

cameras on the basis that they were exempted from levy of

basic Customs duty under Notification No.15/2012, the

proceedings initiated by the Directorate of Revenue

Intelligence for recovery of duty not paid under Section

28(4) of the Customs Act, 1962 are valid in law.

2 Exemption Notification

5. Exemption to Digital Still Image Video Cameras was

issued on 1.3.2005 vide Notification No.25/2005 (and

amended vide Notification No.15/2012 on 17.3.2012).

Arrival and decision to clear the goods on payment

of nil duty

6. The consignment of cameras arrived at Delhi on

15.3.2012. The importer submitted a Bill of Entry to the

Customs Authorities on 20.3.2012. Along with the Bill of

Entry, the importer submitted a covering letter and

literature containing specifications of the cameras. After

verification of the Bill of Entry by the Inspector and the

Superintendent, the importer requested the Deputy

Commissioner of Customs for a first check on 21.3.2012.

The Customs Authorities checked the goods on 24.3.2012.

They compared the goods with the description given in the

literature and took a decision to clear the goods on

24.3.2012, as being exempt from duty in terms of the

Notification No.15/2012 which was issued on 17.3.2012.

3 Recovery of Duties

7. On 19.8.2014, a show cause notice was

issued under Section 28 (4) of the Customs Act, 1962 1

alleging that the Customs Authorities had been induced to

clear the cameras by wilful mis-statement and suppression

of facts about the cameras. In particular; that the cameras

were capable of recording more than a single video

sequence of less than 30 minutes. In other words, after

one sequence of less than 30 minutes was recorded, the

camera had sufficient memory (extendable) to record more

such sequences.

8. It is significant to note that while the decision to clear

the goods for import because they were exempted from

customs duties under Notification No.15/2012, was taken

by Deputy Commissioner, Appraisal Group, Delhi Air Cargo,

1 Section 28 (4) Where any duty has not been [levied or not paid or has been short- levied or short-paid] or erroneously refunded, or interest payable has not been paid, part- paid or erroneously refunded, by reason of, -

(a) collusion; or

(b) any wilful mis-statement; or

(c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been [so levied or not paid] or which has been so short-levied or short-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.

4 the show cause notice was issued by the Additional Director

General, Directorate of Revenue Intelligence.

9. The question that arises is whether the Directorate of

Revenue Intelligence had authority in law to issue a show

cause notice under Section 28(4) of the Act for recovery of

duties allegedly not levied or paid when the goods have

been cleared for import by a Deputy Commissioner of

Customs who decided that the goods are exempted. It is

necessary that the answer must flow from the power

conferred by the statute i.e. under Section 28(4) of the Act.

This Section 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”. This

Court in Consolidated Coffee Ltd. and Another vs.

Coffee Board, Bangalore2 has held:-

“14. ...Secondly, and more importantly, the user of the definite article ‘the’ before the word ‘agreement’ is, in our view, very significant. Parliament has not said ‘an agreement’ or ‘any

2 (1980) 3 SCC 358

5 agreement’ for or in relation to such export and in the context the expression ‘the agreement’ would refer to that agreement which is implicit in the sale occasioning the export.”

In Shri Ishar Alloy Steels Ltd. vs. Jayaswals

Neco Ltd.3 has held:-

“9. ...’The’ is the word used before nouns, with a specifying or particularising effect as opposed to the indefinite or generalizing force of ‘a’ or ‘an’. It determines what particular thing is meant; that is, what particular thing we are to assume to be meant. ‘The’ is always mentioned to denote a particular thing or a person.”

10. 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’.

11. Parliament has employed the article “the” not

accidently but with the intention to designate the proper

officer who had assessed the goods at the time of

3 (2001) 3 SCC 609

6 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 4.

12. 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

4 Section 2. Definitions – In this Act, unless the context otherwise requires, -

… (2) “assessment” means determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the Customs Tariff Act) or under any other law for the time being in force, with reference to –

(a) …

(b) …

(c) exemption or concession of duty, tax, cess or any other sum, consequent upon any notification issued therefor under this Act or under the Customs Tariff Act or under any other law for the time being in force;

7 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 re-open 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.

13. 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 re-assessment 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. In our view,

this would result into an anarchical and unruly operation of

a statute which is not contemplated by any canon of

construction of statute.

14. It is well known that when a statute directs that the

things be done in a certain way, it must be done in that

8 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. We find it 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)].

15. 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

9 Appellate or Revisional Authority. It is, therefore, clear to us

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.

16. At this stage, we must also examine whether the

Additional Director General of the DRI who issued the

recovery notice under Section 28(4) was even a proper

officer. 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.

17. Shri Sanjay Jain, learned Additional Solicitor General,

relied on a Notification No.17/2002 - Customs (NT) dated

7.3.2002 to show all Additional Directors General of the DRI

have been appointed as Commissioners of Customs. At the

10 relevant time, the Central Government was the appropriate

authority to issue such a notification. This notification

shows that all Additional Directors General, mentioned in

Column (2), are appointed as Commissioners of Customs.

18. The next step is to see whether an Additional Director

General of the DRI who has been appointed as an officer of

Customs, under the notification dated 7.3.2002, has been

entrusted with the functions under Section 28 as a proper

officer under the Customs Act. In support of the contention

that he has been so entrusted with the functions of a

proper officer under Section 28 of the Customs Act, Shri

Sanjay Jain, learned Additional Solicitor General relied on a

Notification No.40/2012 dated 2.5.2012 issued by the

Central Board of Excise and Customs. The notification

confers various functions referred to in Column (3) of the

notification under the Customs Act on officers referred to in

Column (2). The relevant part of the notification reads as

follows:-

“[To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii)] Government of India Ministry of Finance (Department of Revenue)

11 Notification No.40/2012-Customs (N.T.) New Delhi, dated the 2nd May, 2012

S.O. (E). – In exercise of the powers conferred by sub-section (34) of section 2 of the Customs Act, 1962 (52 of 1962), the Central Board of Excise and Customs, hereby assigns the officers and above the rank of officers mentioned in Column (2) of the Table below, the functions as the proper officers in relation to the various sections of the Customs Act, 1962, given in the corresponding entry in Column (3) of the said Table: -

Sl. Designation of Functions No. the officers under Section of the Customs Act, 1962 (1) (2) (3) 1. Commissioner of (i) Section 33 Customs 2. Additional (i) Sub-section (5) Commissioner or of section 46; Joint Commissioner and of Customs (ii) Section 149 3. Deputy (i) ….. Commissioner or (ii) ….. Assistant (iii) ….. Commissioner of (iv) ….. Customs and (v) ….. Central Excise (vi) Section 28; ………

19. It appears that 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

12 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, it reads as follows:-

“2. Definitions – In this Act, unless the context otherwise requires, -

… (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 [Principal Commissioner of Customs or Commissioner of Customs]. “

20. 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, it reads as follows:-

“6. Entrustment of functions of Board and customs officers on certain other officers – The Central Government may, by notification in the Official Gazette, entrust either conditionally or unconditionally to any officer of the Central or the State Government or a local authority any

13 functions of the Board or any officer of customs under this Act.”

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

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.

14 22. In the above context, it would be useful to refer to

the decision of this Court in the case of Commissioner of

Customs vs. Sayed Ali and Another5 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 5 (2011) 3 SCC 537

15 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:

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.”

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:

16 ‘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 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 undersection 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.

17 Limitation

24. It is strictly not necessary to decide the question on

limitation but we intend to do so since parties have

elaborately relied on disclosures made before the Customs

officer on that issue. 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 for us to examine whether there is suppression

of facts.

25. 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.

26. 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

18 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.

27. 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.

28. It is pertinent to note that 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

19 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).

29. In this view of the matter, we consider it unnecessary

to answer the issue whether the cameras that were cleared

on the basis that they were exempted from customs duty

under Exemption Notification No.15/2012 were in fact

eligible for the exemption or not. The goods must be taken

to have been validly cleared by the Customs officer.

30. We might note that cameras with similar

specifications have been treated as exempted under the

Explanatory Note to the Combined Nomenclature of the

European communities. It is important to add that the

20 same cameras have been considered to be eligible for

exemption before 17.03.2012 and after 30.04.2015 under

the exemption Notifications issued under the Customs Act

read with Chapter 84 & 85 (First Schedule) of Customs Tariff

Act, 1975.

31. In the result, these appeals are allowed. The

common order dated 19.12.2017 passed by the CESTAT,

New Delhi in Customs Appeal Nos. 50098, 50099, 50100

and 50280/2017 is set aside. Consequently, the impugned

demand notices issued against all the three appellants

herein are also set aside.

32. Parties to bear their own costs.

..…………....................CJI.

[S. A. BOBDE]

…..…………....................J. [A. S. BOPANNA]

..…..………......................J. [V. RAMASUBRAMANIAN]

MARCH 9, 2021 NEW DELHI 21