Union Budget 2022: Supreme Court’s Order Reversed on Power of DRI to issue SCN under Customs Act

The Budget 2022 has marked the end of the controversy on the power of the DRI to issue Show Cause Notices (SCN) under Customs Act.

Clause (34) of section 2 contains definition of “proper officer”. This section is being modified to specifically state that assignment of functions to an officer of Customs by the Board or the Principal Commissioner of Customs or the Commissioner of Customs shall be done under the newly inserted sub-sections (1A) and (IB) of Section 5 in the Customs Act, 1962

As per the Finance Bill, 2022 Section 3 is being amended to specifically include the officers of DRI. Audit and Preventive formation in the class of Officers. This amendment has been made to remove any ambiguity as regards the class of officers of Customs.

Sub-Section (1A) and 1(B) to Section 5: Sub-section (IA) and (IB) have been inserted in section 5 of the Act to explicitly provide power of assignment of function to officers of customs by the Board or as the case may be by the Principal Commissioner of Customs or Commissioner of Customs. This amendment has been necessitated to correct the infirmity observed by the Courts in recent judgments that the Act require explicit provision conferring powers for assignment of function to officers of Customs as “proper officers” for the purposes of the Act, besides the definition clause (34) in section 2 of the Customs Act

The Supreme Court in the case M/S Canon India Private Limited v. Commissioner of Customs [Civil Appeal No. 1827 of 2018 dated March 09, 2021] held that the Additional Director General (“ADG”) of DRI is not the proper officer to issue Show Cause Notice (“SCN”) which has so been issued in the current matter under Section 28(4) read with Section 2(34) of the Customs Act, 1962.

“Changes in Customs Act restoring powers of DRI officers to issue SCNs, reversing the adverse impact of Canon judgement by Supreme Court. Have to read the details. We have to be on the qui vive to see how courts view such amendments giving retrospective effect,” experts says.