The Delhi High Court recently addressed the “flux” in the legal position regarding the powers of Directorate of Revenue Intelligence (DRI) officers to issue show-cause notices (SCNs) and recover duties under the Customs Act, 1962. This decision arose from a batch of petitions seeking to quash SCNs and pending adjudication proceedings under the Customs Act, 1962, the Finance Act, 1994, and the Central Goods and Services Tax, 2017.
Background of the Case
A division bench of Justices Yashwant Varma and Ravinder Dudeja was hearing these petitions, some of which involved cases dating back to 2006. One of the key issues raised by the Respondent-authorities was the delay in adjudication, which they attributed to the Supreme Court’s ruling in Commr. of Customs vs. Sayed Ali (2011). This judgment held that DRI officers lacked jurisdiction to issue SCNs or recover duties under the Customs Act.
Authorities’ Response to the Delay
In response to the Sayed Ali decision, the Central Board of Indirect Taxes and Customs issued instructions to keep matters initiated by DRI officers in abeyance, placing them in the ‘call book’. The Delhi High Court criticized the authorities for not reviewing the call book and questioned the delay in initiating proceedings.
The Court noted that even if the authorities were compelled to stay their actions due to the Sayed Ali judgment, there was no reason why they could not have transferred pending matters to Customs officers to continue the proceedings.
Legislative Interventions
The Court referred to the Amendment and Validation Act, 2011, which aimed to overcome the Sayed Ali decision and validate actions taken by DRI officers. Although the Delhi High Court had questioned the validity of this Act in Mangali Impex Ltd. vs. Union of India (2016), the Supreme Court stayed the judgment, and Parliament later introduced provisions in Section 28(11) of the Customs Act to allow respondents to complete pending proceedings.
Section 28(11) created a legal fiction, deeming all persons appointed as Customs officers before July 6, 2011, to have had the power of assessment, even if they were not specifically authorized under the previous law.
Continued Legal Uncertainty
Despite these legislative interventions, the authorities failed to continue the proceedings. In March 2021, the Supreme Court’s decision in Canon India (P) Ltd. vs. Commr. of Customs (2021) raised doubts about the authorization of DRI officers but did not strike down Section 28(11). Later, the Finance Act 2022 validated the initiation of proceedings that had been placed in the call book under Section 97.
Resolution of the Controversy
The issue was ultimately resolved in Commr. of Customs vs. Canon India (P) Ltd. (2024), where the Supreme Court ruled that DRI officers do have the power to issue SCNs and recover duties under the Customs Act, 1962. The Delhi High Court, in its judgment, noted that despite the legal flux, the authorities failed to act in line with legislative changes designed to empower them to pursue and conclude the adjudicatory process.
Court’s Decision
The High Court allowed the writ petitions, quashing the SCNs and pending proceedings due to the inordinate delay in adjudication.
Multiple-Choice Questions (MCQs):
1. What was the main issue addressed by the Delhi High Court regarding DRI officers?
A) Their jurisdiction to issue SCNs and recover duties
B) The validity of the Amendment and Validation Act, 2011
C) The delay in adjudication of cases
D) Whether the Supreme Court had jurisdiction over the matter
Answer: A) Their jurisdiction to issue SCNs and recover duties
2. What did the authorities cite as the reason for the delay in adjudication of cases?
A) Lack of jurisdiction
B) The Supreme Court’s decision in Sayed Ali (2011)
C) The legislative changes in Section 28(11)
D) Financial constraints
Answer: B) The Supreme Court’s decision in Sayed Ali (2011)
3. What legislative intervention was introduced to address the issue of DRI officers’ powers?
A) The Customs Act of 1962
B) The Finance Act, 2022
C) The Amendment and Validation Act, 2011
D) The Central Goods and Services Tax, 2017
Answer: C) The Amendment and Validation Act, 2011
4. What was the Supreme Court’s final decision regarding the powers of DRI officers in 2024?
A) DRI officers do not have the power to issue SCNs or recover duties
B) DRI officers have the power to issue SCNs and recover duties under the Customs Act
C) The decision was deferred
D) The decision was referred back to the Delhi High Court
Answer: B) DRI officers have the power to issue SCNs and recover duties under the Customs Act
5. What was the Delhi High Court’s conclusion regarding the delay in adjudication of cases?
A) The delay was justified due to legal uncertainty
B) The delay was caused by a lack of jurisdiction
C) The delay was due to the authorities’ failure to act in accordance with legislative changes
D) The delay was caused by financial issues
Answer: C) The delay was due to the authorities’ failure to act in accordance with legislative changes