Commissioner of Customs v. M/s Canon India Pvt. Ltd.

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(2C) The provisions of sub-Section (2B) shall not apply to any case where the duty or the interest had become payable or ought to have been paid before the date on which the Finance Bill 2001 receives the assent of the President. (3) For the purposes of sub-section (1), the expression "relevant date" means,- (a) in a case where duty is not levied, or interest is not charged, the date on which the proper officer makes an order for the clearance of the goods; (b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest.”

134Copy pinpoint134. Thereafter, Section 28 was re-cast and a new scheme of the section was introduced vide the Finance Act, 2011 promulgated with effect from 08.04.2011. Section 28, as it stands after the amendment, is reproduced below: “28. Recovery of duties not levied or short-levied or erroneously refunded. (1) Where any duty has not been levied or has been short- levied or erroneously refunded, or any interest payable has not been paid, part-paid or erroneously refunded, for any reason other than the reasons of collusion or any wilful mis-statement or suppression of facts,- (a) the proper officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or which has been 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;

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(b) the person chargeable with the duty or interest, may pay before service of notice under clause (a) on the basis of,- (i) his own ascertainment of such duty; or (ii) the duty ascertained by the proper officer, the amount of duty along with the interest payable thereon under section 28AA or the amount of interest which has not been so paid or part-paid. (2) The person who has paid the duty along with interest or amount of interest under clause (b) of sub-section (1) shall inform the proper officer of such payment in writing, who, on receipt of such information shall not serve any notice under clause (a) of that sub-section in respect of the duty or interest so paid or any penalty leviable under the provisions of this Act or the rules made thereunder in respect of such duty or interest. (3) Where the proper officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall proceed to issue the notice as provided for in clause (a) of that sub-section in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of one year shall be computed from the date of receipt of information under sub-section (2). (4) Where any duty has not been levied or has been short- levied 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

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chargeable with duty or interest which has not been so levied 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. (5) 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 the employee of the importer or the exporter, to whom a notice has been served under sub- section (4) by the proper officer, such person may pay the duty in full or in part, as may be accepted by him, and the interest payable thereon under section 28AA and the penalty equal to twenty five per cent. of the duty specified in the notice or the duty so accepted by that person, within thirty days of the receipt of the notice and inform the proper officer of such payment in writing. (6) Where the importer or the exporter or the agent or the employee of the importer or the exporter, as the case may be, has paid duty with interest and penalty under sub-section (5), the proper officer shall determine the amount of duty or interest and on determination, if the proper officer is of the opinion- (i) that the duty with interest and penalty has been paid in full, then, the proceedings in respect of such person or other persons to whom the notice is served under sub-section (1) or sub- section (4), shall, without prejudice to the provisions of sections 135, 135A and 140 be deemed to be conclusive as to the matters stated therein; or (ii) that the duty with interest and penalty that has been paid falls short of the amount actually payable, then the proper officer shall proceed to issue the notice as provided for in clause (a) of sub-section (1) in respect of such amount which falls short of the amount

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actually payable in the manner specified under that sub-section and the period of one year shall be computed from the date of receipt of information under sub-section (5). (7) In computing the period of one year referred to in clause (a) of sub-section (1) or five years referred to in sub-section (4), the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded. (8) The proper officer shall, after allowing the concerned person an opportunity of being heard and after considering the representation, if any, made by such person, determine the amount of duty or interest due from such person not being in excess of the amount specified in the notice. (9) The proper officer shall determine the amount of duty or interest under sub-section (8),- (a) within six months from the date of notice in respect of cases falling under clause (a) of sub- section (1); (b) within one year from the date of notice in respect of cases falling under sub- section (4). (10) Where an order determining the duty is passed by the proper officer under this section, the person liable to pay the said duty shall pay the amount so determined along with the interest due on such amount whether or not the amount of interest is specified separately. Explanation 1 – For the purposes of this section, “relevant date” means,- (a) in a case where duty is not levied, or interest is not charged, the date on which the proper officer makes an order for the clearance of goods; (b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof; (c) in a case where duty or interest has been erroneously refunded, the date of refund;

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(d) in any other case, the date of payment of duty or interest. Explanation 2. - For the removal of doubts, it is hereby declared that any non-levy, short-levy or erroneous refund before the date on which the Finance Bill, 2011 receives the assent of the President, shall continue to be governed by the provisions of Section 28 as it stood immediately before the date on which such assent is received.”

135Copy pinpoint135. Parliament, therefore, made changes to the scheme of Section 28 and added the Explanation 2 which stated that any non-levy, short-levy or erroneous refund before the date of presidential assent to the Finance Bill, 2011 shall be governed by the provisions of Section 28 as it stood prior to the amendment.

136Copy pinpoint136. On 06.07.2011, Customs Notification No. 44/2011 was issued under Section 2(34), which designated inter alia DRI officers as proper officers for the purposes of Sections 17 and 28 of the Act, 1962 and empowered such officers to perform functions under Section 28 including the function of issuing show cause notices.

137Copy pinpoint137. Subsequently, on 16.09.2011, sub-section (11) of Section 28 came to be enacted vide the Validation Act. It provided that: “(11) Notwithstanding anything to the contrary contained in any judgment, decree or order of any court of law, tribunal or other authority, all persons appointed as officers of Customs under sub-section (1) of section 4 before the 6th day of July, 2011 shall be deemed to have and always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers for the purposes of this section.”

138Copy pinpoint138. As stated in the foregoing extract, sub-section (11) was introduced in the statute to remedy the defects highlighted by this Court in the case of Sayed Ali (supra) and the same retrospectively empowered all officers of customs appointed under Section 4(1) before 06.07.2011 to conduct assessments under Section 17 of the Act and to be proper officers for the purpose of Section 28.

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139Copy pinpoint139. The Statement of Objects and Reasons of the Validation Act explained that the introduction of Section 28(11) was necessary because the position of law on the functions of proper officers as interpreted by this Court in Sayed Ali (supra) and the consequent invalidation of show cause notices issued by the Commissionerates of Customs (Preventive), DRI and others, was not the legislative intent. Parliament clarified that show cause notices issued by officers of the Commissionerates of Customs (Preventive), DRI, Directorate General of Central Excise Intelligence (DGCEI) and Central Excise Commissionerates for demanding customs duty not levied or short levied or erroneously refunded under Section 28 in respect of goods imported are valid, irrespective of whether any specific assignment as proper officer was issued.

140Copy pinpoint140. The Validation Act was first challenged before the High Court of Bombay in the case of Sunil Gupta (supra) on the grounds that it is violative of Articles 14, 19 and 21 of the Constitution and that it fails to take note of Explanation 2 to Section 28. Relying on Sayed Ali (supra), the petitioners therein challenged the Validation Act on the ground that it is only the officers of customs who are assigned functions of assessment including the reassessment and they alone are competent to issue notice under Section 28.

x. Bombay High Court decision in Sunil Gupta (supra)

141Copy pinpoint141. Similar grounds were taken by the petitioners before the High Court of Delhi in the case of Mangali Impex (supra) wherein it was submitted that there was an apparent conflict between Explanation 2 and Section 28(11) which rendered the Validation Act inapplicable to show cause notices issued prior to 08.04.2011 i.e., the date on which the new Section 28 came into force. It was further submitted that Section 28(11), by conferring powers of the proper officer to multiple sets of customs officers without any territorial or pecuniary jurisdictional limit, would result in utter chaos and confusion as envisaged in Sayed Ali (supra) and therefore, does not cure the defects pointed out therein.

142Copy pinpoint142. The very same argument has been canvassed before us by the respondents herein. To comprehensively address the submissions

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made before us, we find it necessary to address the following three issues: (i) What is the scope of Explanation 2 to Section 28? (ii) Whether the field of operation of Section 28(11) and Explanation 2 overlaps? In other words, what is the scope of the non-obstante clause in sub-section (11)? (iii) Whether Section 28(11) cures the defect pointed out in Sayed Ali (supra)?

143Copy pinpoint143. Explanation 2 was introduced as a part of the new Section 28 enacted by the Finance Act, 2011 with effect from 08.04.2011. Explanation 2 to Section 28 reads as follows: “Explanation 2. - For the removal of doubts, it is hereby declared that any non-levy, short-levy or erroneous refund before the date on which the Finance Bill, 2011 receives the assent of the President, shall continue to be governed by the provisions of section 28 as it stood immediately before the date on which such assent is received.”

144Copy pinpoint144. It was vehemently argued on behalf of the respondents that reading Section 28(11) with Explanation 2 narrows down the period for the purposes of retrospective validation of the show cause notices issued and limits the application of sub-section (11) to the period from 08.04.2011 (enactment of new Section 28) to 16.09.2011 (enactment of the Validation Act). This challenge is based on the reasoning that the non-obstante clause contained in Section 28(11) is limited to “…judgment, decree or order of any court of law, tribunal or other authority…” and does not oust the application of other provisions of the Act including Explanation 2. It was argued that the phrase “…this section…” in sub-section (11) when read harmoniously with Explanation 2 refers to the new Section 28 only and will not be applicable to the old provision as it stood prior to 08.04.2011.

145Copy pinpoint145. The determination of the soundness of the aforesaid argument necessitates a comparison of Section 28, prior to the amendment and subsequent to the amendment.

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Provisions of old Corresponding Comparison and Section 28 provisions of new Remarks [running in continuation from Section 28 sub-sections (1) to (3)]

28. Notice for payment of 28. Recovery of duties duties, interest, etc. not levied or short-levied or erroneously refunded. (1) When any duty has not (1) Where any duty has not The legislature vide been levied or has been short- been levied or has been the amendment, levied or erroneously refunded, short-levied or erroneously has removed the or when any interest payable refunded, or any interest distinction between has not been paid, part paid payable has not been paid, the purposes for or erroneously refunded, the part-paid or erroneously which the imports proper officer may, refunded, for any reason are to be used. Sub- other than the reasons of section (1)(b) of the (a) in the case of any import collusion or any wilful mis- old Section 28 is made by any individual for his statement or suppression analogous to the personal use or by government of facts, sub-section (1)(a) of or by any educational, research the new Section 28. or charitable institution or (a) the proper officer shall, The only change hospital, within one year; within one year from the that has been relevant date, serve notice (b) in any other case, within made herein is the on the person chargeable six months, from the relevant period of limitation with the duty or interest date, serve notice on the for service of show which has not been so person chargeable with the cause notice which levied or which has been duty or interest which has has been increased short-levied or short-paid not been levied or charged or from six months to or to whom the refund has which has been short-levied or one year. erroneously been made, part paid or to whom the refund requiring him to show has erroneously been made, cause why he should not requiring him to show cause pay the amount specified why he should not pay the in the notice; amount specified in the notice: Provided that where any duty (4) Where any duty has In respect of the has been levied or has been not been levied or has provision relating short- levied or the interest been short- to issuance of show has not been charged or has levied or erroneously cause notice for non- been part paid or the duty or r e f u n d e d , o r i n t e r e s t levy, short-levy, not- interest has been erroneously payable has not been paid, paid, part-paid and refunded by reason of collusion part-paid or erroneously erroneous refund or any wilful mis-statement or refunded, by reason of,- of duty by reasons suppression of facts by the of collusion, wilful importer or the exporter or (a) collusion; or mis-statement or the agent or employee of the (b) any wilful mis-statement; suppression of importer or exporter, the or facts, no change

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provisions of this sub-section (c) suppression of facts, has been made shall have effect as if for the by the importer or the and the time period words “one year” and “six exporter or the agent or of five years for months”, the words “five years” employee of the importer service of notice were substituted. or exporter, the proper has been retained. officer shall, within five The legislature has years from the relevant further clarified the date, serve notice on the procedure following person chargeable with the service of notice. duty or interest which has not been so levied or which Sub-section (5) of has been so short-levied the new Section or short-paid or to whom 28 provides for the the refund has erroneously levy of interest on been made, requiring him the amount due to show cause why he and permits part- should not pay the amount payment of the specified in the notice. amount mentioned in the notice to (5) Where any duty has not the extent that the been levied or has been short-fall in duty has short- levied or the interest been accepted by has not been charged or the notice. has been part- paid or the duty or interest has been Sub-section (6) of erroneously refunded by the new Section reason of collusion or 28 lays down the any wilful mis-statement manner in which or suppression of facts the proceedings by the importer or the following the exporter or the agent or the service of the show employee of the importer cause notice will or the exporter, to whom be either closed on a notice has been served payment of the full under sub- section (4) by amount mentioned the proper officer, such The legislature person may pay the duty has removed in full or in part, as may be the pecuniary accepted by him, and the distinction and interest payable thereon the consequent under section 28AA and approvals from the penalty equal to different authorities twenty- five per cent of the for issuance of show duty specified in the notice cause notices. or the duty so accepted by that person, within thirty

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days of the receipt of the notice and inform the proper officer of such payment in writing. (6) Where the importer or the exporter or the agent or the employee of the importer or the exporter, as the case may be, has paid duty with interest and penalty under sub-section (5), the proper officer shall determine the amount of duty or interest and on determination, if the proper officer is of the opinion- (i) that the duty with interest and penalty has been paid in full, then, the proceedings in respect of such person or other persons to whom the notice is served under sub-section (1) or sub- section (4), shall, without prejudice to the provisions of sections 135, 135A and 140 be deemed to be conclusive as to the matters stated therein; or (ii) that the duty with interest and penalty that has been paid falls short of the amount actually payable, then the proper o ff i c e r s h a l l p r o c e e d to issue the notice as provided for in clause (a) of sub-section (1) in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the

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period of one year shall be computed from the date of receipt of information under sub-section (5).

Provided further that where The legislature the amount of duty which has has removed not been levied or has been the pecuniary short-levied or erroneously distinction and refunded or the interest the consequent payable has not been paid, approvals from part paid or erroneously different authorities refunded is one crore rupees for issuance of show or less, a notice under this cause notices. sub-section shall be served by the Commissioner of Customs or with his prior approval by any officer sub-ordinate to him: Provided also that where the amount of duty has not been levied or has been short-levied or erroneously refunded or the interest payable thereon has not been paid, part paid or erroneously refunded is more than one crore rupees, no notice under this sub- section shall be served except with the prior approval of the Chief Commissioner of Customs. Explanation : Where the (7) In computing the period This is an analogous service of the notice is stayed of one year referred to in provision. by an order of a court, the clause period of such stay shall be (a) of sub-section (1) excluded in computing the or five years referred to aforesaid period of one year in sub-section (4), the or six months or five years, period during which there as the case may be. was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded.

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(2) The proper officer, after (8) The proper officer This is an analogous considering the representation, shall, after allowing the provision and if any, made by the person on concerned person an pertains to the whom notice is served under opportunity of being heard adjudication / sub-section (1), shall determine and after considering the determination of the the amount of duty or interestrepresentation, if any, amount specified due from such person (not made by such person, in the show-cause being in excess of the amount determine the amount of notice when issued specified in the notice) and duty or interest due from under sub-section thereupon such person shall such person not being (1) of the new pay the amount so determined. in excess of the amount Section 28. specified in the notice. (2A) Where any notice has (9) The proper officer shall This is an analogous been served on a person under determine the amount provision. sub- section (1), the proper of duty or interest under Sub-section (9)(a) officer - sub-section (8),- of the new Section (i) in case any duty has not (a) within six months 28 is analogous to been levied or has been from the date of notice sub-section (2A)(ii) short-levied, or the interest in respect of cases falling of the old provision has not been paid or has under clause (a) of sub- and provides for been part paid or the section (1); a time period of duty or interest has been six months for erroneously refunded by (b) within one year from the adjudication of reason of collusion or any date of notice in respect of notices issued wilful mis-statement or cases falling under sub- under new Section suppression of facts, where section (4). 28(1)(a). it is possible to do so, shall determine the amount of Sub-section (9)(b) such duty or the interest, of the new Section within a period of one year: 28 is analogous to and sub-section (2A)(i) of the old provision (ii) in any other case, where it and provides for a is possible to do so, shall time period of one determine the amount of year for adjudication duty which has not been of notices issued in levied or has been short- cases of collusion, levied or erroneously wilful mis-statement refunded or the interest and suppression of payable which has not facts. been paid, part paid or erroneously refunded, within a period of six months, from the date of service of the notice on the person under sub- section (1).

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(2B) Where any duty has not (1) … In both the old and been levied, or has been short- (a) … new Section 28, the levied or erroneously refunded, law has provided an or any interest payable has (b) the person chargeable opportunity to the not been paid, part paid or with the duty or interest, person chargeable erroneously refunded, the may pay before service of with duty or interest person, chargeable with the notice under clause (a) on to make payment duty or the interest, may pay the basis of,- before the show the amount of duty or interest (i) his own ascertainment cause notice is before service of notice on of such duty; or issued to him and him under sub-section (1) inform the proper (ii) the duty ascertained in respect of the duty or the officer of such by the proper officer, the interest, as the case may be, payment in writing. amount of duty along and inform the proper officer of with the interest payable The legislature, in such payment in writing, who, thereon under section the new Section on receipt of such information, 28AA or the amount of 28(1)(b) has shall not serve any notice under interest which has not clarified the basis sub-section (1) in respect of been so paid or part-paid. for ascertainment of the duty or the interest so paid: (2) The person who has amount to be paid paid the duty along with prior to issuance of interest or amount of show cause notice. interest under clause (b) of sub-section (1) shall inform the proper officer of such payment in writing, who, on receipt of such information shall not serve any notice under clause (a) of that sub-section in respect of the duty or interest so paid or any penalty leviable under the provisions of this Act or the rules made thereunder in respect of such duty or interest. Provided that the proper officer (3) Where the proper These provisions may determine the amount officer is of the opinion are analogous. of short-payment of duty or that the amount paid under interest, if any, which in his clause (b) of sub-section opinion has not been paid by (1) falls short of the amount such person and, then, the actually payable, then, he proper officer shall proceed shall proceed to issue the to recover such amount in the notice as provided for in

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manner specified in this clause (a) of that sub- section, and the period of section in respect of such “one year” or “six months” amount which falls short as the case may be, referred of the amount actually to in sub-section (1) shall be payable in the manner counted from the date of receipt specified under that sub- of such information of payment. section and the period of one year shall be computed from the date of receipt of information under sub-section (2). Explanation 2. For the removal ( 1 0 ) W h e r e a n o r d e r This provision is of doubts, it is hereby declared determining the duty is for the recovery of that the interest under Section passed by the proper interest. 28AB shall be payable on the officer under this section, amount paid by the person the person liable to pay under this sub-section and the said duty shall pay also on the amount of short- the amount so determined payment of duty, if any, as may along with the interest due be determined by the proper on such amount whether or officer, but for this sub-section. not the amount of interest is specified separately. (2C) The provisions of sub- Section (2B) shall not apply to any case where the duty or the interest had become payable or ought to have been paid before the date on which the Finance Bill 2001 receives the assent of the President. (3) For the purposes of sub- Explanation 1 - For the This provision is section (1), the expression purposes of this section, identical to the old “relevant date” means,- “relevant date” means,- provision. (a) in a case where duty is (a) in a case where duty not levied, or interest is not is not levied, or interest is charged, the date on which the not charged, the date on proper officer makes an order which the proper officer for the clearance of the goods; makes an order for the clearance of goods; (b) in a case where duty (b) in a case where duty is provisionally assessed is provisionally assessed under section 18, the date of under section 18, the adjustment of duty after the date of adjustment of duty final assessment thereof; after the final assessment thereof;

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(c) in a case where duty or (c) in a case where duty interest has been erroneously o r i n t e r e s t h a s b e e n refunded, the date of refund; erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest.” (d) in any other case, the date of payment of duty or interest. Explanation 2. - For the The Explanation 2 removal of doubts, it is was added to the hereby declared that any new Section 28 non-levy, short-levy or to demarcate the erroneous refund before date from which the the date on which the said section shall F i n a n c e B i l l , 2 0 11 become applicable receives the assent of the and any recoveries President, shall continue of duty prior to to be governed by the such date would provisions of Section 28 be governed by the as it stood immediately old Section 28. before the date on which such assent is received.”

146Copy pinpoint146. What is discernible from the aforesaid modifications made by the Parliament is as under: (a) Distinction in the time-period: In sub-section (1) of new Section 28, the difference in the purpose of the duty has been removed and for all cases of short-levy, non-levy, part-payment, non-payment and erroneous refund except for cases falling under new Section 28(4), the period of one year has been provided for the service of the show cause notice, which under the old provision was six months. (b) Additional provision in respect of short-levy, non-levy, part-payment, non-payment and erroneous refund by reasons of collusion, willful misstatement and suppression of facts: An additional provision has been inserted by way of Section 28(5) stipulating that, to the extent the amount mentioned in the show cause notice has been accepted by the person chargeable with payment of such duty, the payment of a part of such amount is allowed. (c) Self-ascertainment of recovery amount before the issuance of a show cause notice: Parliament introduced the mechanism

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of self-ascertainment of the recovery amount by the person chargeable with the payment of duty and payment of such amounts before the service of a show cause notice, subject to final adjudication or determination by the proper officer. (d) Insertion of Explanation 2: For the removal of doubts regarding the applicable provision for recoveries of duty arising before and after the enactment of new Section 28, Parliament added Explanation 2 to clarify that recoveries arising prior to 08.04.2011 shall be governed by old Section 28 of the Act.

147Copy pinpoint147. Having analysed the aforesaid modifications made by Parliament to old Section 28, we can say with certainty that none of the changes made by the amendments to Section 28 has any impact on the competence of the proper officer for the purposes of fulfilment of functions under Section 28. In our considered view, the only major change that warrants the clarification provided under Explanation 2 is the distinction with respect to the limitation period for the issuance of show cause notices.

148Copy pinpoint148. Therefore, the application of sub-section (11), which pertains only to the empowerment of proper officers to issue show cause notices under Section 28, cannot be said to be limited only to new Section 28 but also to the provision as it stood prior to 08.04.2011. The legislative intent is that sub-section (11) was meant to apply to Section 28 without any restriction as to time. This is apparent from the Statement of Objects and Reasons of the Validation Act. Therefore, the contention of the respondent that the phrase “…this section…” in sub-section (11) means only new Section 28, which was also accepted by the High Court of Delhi in Mangali Impex (supra), is erroneous.

149Copy pinpoint149. Since, there is no overlap in the field of operation of Section 28(11) and Explanation 2, the interpretation of the non-obstante clause in Section 28(11) and the consequent harmonious construction of the two provisions in Mangali Impex (supra) is otiose.

150Copy pinpoint150. Thus, we are in complete agreement with the view taken by the High Court of Bombay in the case of Sunil Gupta (supra) with respect to the first two questions raised by us in this case. The relevant portion of that judgment is reproduced below: “25. As a result of the above discussion and finding that Explanation 2 has not been dealing with the case, which

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was specifically dealt with by sub- section (11) of section 28 of the Act, that we are of the opinion that the challenge in the writ petition is without any merit. The Explanation removes the doubts and states that even those cases which are governed by section 28 and whether initiated prior to the Finance Bill 2011 receiving the assent of the President shall continue to be governed by section 28, as it stood immediately before the date on which such assent is received. The reference to the Finance Bill therein denotes the Bill by the section itself was substituted by Act 8 of 2011 with effect from April 8, 2011. Prior to this Bill by which the section was substituted receiving the assent of the President of India, some cases were initiated and section 28 was resorted to by the authorities. Explanation 2 clarifies that they will proceed in terms of the unamended provision. The position dealt with by insertion of section 28 (11) is distinct and that is about competence of the officer. The officers namely those from the Directorate of Revenue Intelligence having been entrusted and assigned the functions as noted above, they are deemed to have been possessing the authority, whether in terms of section 28 unamended or amended and substituted as above. In these circumstances, for these additional reasons as well, the challenge to this sub-section must fail.” [Emphasis supplied]

151Copy pinpoint151. Further, the finding in Mangali Impex (supra) that Section 28(11) is overbroad and confers the powers of the proper officer to multiple sets of customs officers without any territorial or pecuniary jurisdictional limit which in turn may lead to “utter chaos and confusion” as highlighted in Sayed Ali (supra), is misconceived in our view. The apprehension of the petitioner therein was that plurality of proper officers empowered under Section 28 would result in more than one show cause notice and a consequent misuse of the provision, which would be detrimental to the interests of the persons chargeable with the payment of duty. Although, Mangali Impex (supra) declared Section 28(11) to be invalid on this ground, it suggested that the Board should issue instructions in its administrative capacity that once a show cause notice is issued specifying an adjudicating authority

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subject to such an officer being the proper officer for the purposes of Section 28, then he or she alone should proceed to adjudicate that particular show cause notice to the exclusion of all other officers who may have power in relation to that subject matter. We find this to be a reasonable construal of the import and application of Section 28(11).

152Copy pinpoint152. It is a settled position of law that the possibility of misuse or abuse of a law which is otherwise valid cannot be a ground for invalidating it. This principle of law has been expounded by this Court in the case of Shreya Singhal v. Union of India reported in (2015) 5 SCC 1. The relevant portion of the judgment is reproduced below: “In The Collector of Customs, Madras v. Nathella Sampathu Chetty & Anr., [1962] 3 S.C.R. 786, this Court observed: “....This Court has held in numerous rulings, to which it is unnecessary to refer, that the possibility of the abuse of the powers under the provisions contained in any statute is no ground for declaring the provision to be unreasonable or void. Commenting on a passage in the judgment of the Court of Appeal of Northern Ireland which stated: “If such powers are capable of being exercised reasonably it is impossible to say that they may not also be exercised unreasonably” and treating this as a ground for holding the statute invalid Viscount Simonds observed in Belfast Corporation v. O.D. Commission [ 1960 AC 490 at pp. 520-521] : “It appears to me that the short answer to this contention (and I hope its shortness will not be regarded as disrespect) is that the validity of a measure is not to be determined by its application to particular cases.... If it is not so exercised (i.e. if the powers are abused) it is open to challenge and there is no need for express provision for its challenge in the statute.” The possibility of abuse of a statute otherwise valid does not impart to it any element of invalidity. The converse must also follow that a statute which is otherwise invalid as being unreasonable cannot be saved by its being administered in a reasonable manner. The constitutional validity of

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the statute would have to be determined on the basis of its provisions and on the ambit of its operation as reasonably construed. If so judged it passes the test of reasonableness, possibility of the powers conferred being improperly used is no ground for pronouncing the law itself invalid and similarly if the law properly interpreted and tested in the light of the requirements set out in Part III of the Constitution does not pass the test it cannot be pronounced valid merely because it is administered in a manner which might not conflict with the constitutional requirements.” (at page 825)” [Emphasis supplied]

153Copy pinpoint153. We were apprised by the learned Additional Solicitor General during the course of the hearing that the Customs department has been following the protocol suggested in Mangali Impex (supra) since 1999. Further, no substantial empirical evidence of the misuse of Section 28(11) which was enacted over a decade ago, was presented by the parties. Therefore, we are inclined to accept the policy of the Customs department that once a show cause notice is issued, the jurisdiction of other empowered proper officers shall be excluded for such notice. We find that such policy acts as a sufficient safeguard against the apprehension of chaos or confusion or misuse.

154Copy pinpoint154. Thus, we are of the considered view that the enactment of sub-section (11) of Section 28 cures the defect pointed out in Sayed Ali (supra) and the judgment in Mangali Impex (supra) deserves to be set aside.

155Copy pinpoint155. It follows from the above discussion that sub-section (11) of Section 28 is constitutionally valid, and its application is not limited to the period between 08.04.2011 and 16.09.2011.

156Copy pinpoint156. For the reasons in the foregoing paragraphs, we hold that the Bombay High Court judgment in Sunil Gupta (supra) lays down the correct position of law, whereas the Delhi High Court decision in Mangali Impex (supra) is incorrect and is consequently set aside.

xi. Amendments made by the Finance Act, 2022

157Copy pinpoint157. The third cluster of the present batch of cases relates to the challenge to the constitutional validity of Sections 86, 87, 88, 94 and 97 of the

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Finance Act, 2022 respectively. We take this opportunity to consider this issue as the constitutional validity of the said provisions has been challenged with specific reference to the findings made in Canon India (supra), which is the judgment under review herein.

158Copy pinpoint158. The validation amendment vide Section 97 has been challenged before this Court specifically in WP (C) 526 of 2022 titled Daikin Air Conditioning India Pvt. Ltd. v. Union of India. The respondent herein has canvassed the following grounds for declaring the provision unconstitutional on the touchstone of Article 14 of the Constitution: (i) The Finance Act, 2022 does not cure the defect pointed out in Canon India (supra) and no notification or amendment of law deeming DRI officers to be the proper officers would cure the defect of ouster of jurisdiction of DRI once the original act of assessment has been undertaken by a different group of officers. The Finance Act, 2022 is manifestly arbitrary as no attempt has been made to cure the defect highlighted in Canon India (supra). (ii) This Court in Canon India (supra) made a determination of fact that the DRI officers did not have jurisdiction to perform functions under Section 28 of the Act, 1962. Such judicial determination of fact relating to actual exercise of jurisdiction cannot be retrospectively overruled. (iii) The legislature has selectively adhered to the legal findings made in Canon India (supra) only for future actions by enactment of Section 110AA and has proceeded to ignore the findings for past show cause notices by validating the same vide Section 97 of the Finance Act, 2022. Such a distinction creates two classes of assessees without any reasonable basis for this differentiation. (iv) Section 97 of the Finance Act, 2022 fails the test of proportionality as it is a sweeping validation of all acts under the chapters specified in the section and does not provide certainty to the assessees as to which rights have been abrogated. (v) The writ petitioner in the WP (C) No. 520 of 2022 titled Dish TV India Ltd. v. Union of India and Ors. has also challenged the application of Section 97 on the ground that Section 97(iii) of the Finance Act, 2022 gives the amendments made to Sections 2, 3 and 5 retrospective effect which would make sub-sections (4) and (5) of Section 5 applicable to the show cause notices issued

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in the past. It is the case of the writ petitioner that Customs Notifications Nos. 44/2011 dated 06.07.2011 and 40/2012 dated 02.05.2012 do not in any way satisfy the mandatory and salutary criteria laid down in Sections 5(4) and 5(5).

159Copy pinpoint159. From the grounds summarized above, we find that the writ petitioners have challenged the constitutionality of the validation of past actions by Section 97 of the Finance Act, 2022. Therefore, we shall limit our ruling to this provision alone.

160Copy pinpoint160. It is a settled position of law that the legislature is empowered to enact validating legislations to validate earlier acts declared illegal and unconstitutional by courts by removing the defect or lacuna which led to the invalidation of the law. With the removal of the defect or lacuna resulting in the validation of any act held invalid by a competent court, the act may become valid, if the validating law is lawfully enacted.

161Copy pinpoint161. This Court in the case of Empire Industries Ltd. v. Union of India reported in (1985) 3 SCC 314 observed that: “51. In the view we have taken of the expression “manufacture”, the concept of process being embodied in certain situation in the idea of manufacture, the impugned legislation is only making “small repairs” and that is a permissible mode of legislation. In 73rd vol. of Harvard Law Review p. 692 at p. 795, it has been stated as follows: “It is necessary that the Legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called “small repairs”. Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature’s or administrator’s action had the effect it was intended to and could have had, no such right would have arisen. Thus, the interest in the retroactive curing of such a defect in the administration of government outweighs the individual’s interest in benefiting from the defect .... The Court has been extremely reluctant to override the legislative judgment as to the necessity for retrospective taxation, not only because of

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the paramount governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the costs of government among those who benefit from it…” [Emphasis supplied]

162Copy pinpoint162. This Court has laid down the tests for determining whether a validating law is enacted within permissible limits in the case of Indian Aluminium Company Co. vs. State of Kerala reported in (1996) 7 SCC 637 and the relevant observations therein are reproduced below: “56. From a resume of the above decisions the following salient principles would emerge: … (3) In a democracy governed by rule of law, the Legislature exercises the power under Articles 245 and 246 and other companion Articles read with the entries in the respective Lists in the Seventh Schedule to make the law which includes power to amend the law. (4) The Court, therefore, need to carefully scan the law to find out: (a) whether the vice pointed out by the Court and invalidity suffered by previous law is cured complying with the legal and constitutional requirements; (b) whether the Legislature has competence to validate the law; (c) whether such validation is consistent with the rights guaranteed in Part III of the Constitution. (5) The Court does not have the power to validate an invalid law or to legalise impost of tax illegally made and collected or to remove the norm of invalidation or provide a remedy. These are not judicial functions but the exclusive province of the Legislature. Therefore, they are not an encroachment on judicial power. (6) In exercising legislative power, the Legislature by mere declaration, without anything more, cannot directly overrule, revise or override a judicial decision. It can render judicial decisions ineffective by enacting valid law on the topic within its legislative field,

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fundamentally altering or changing its character retrospectively. The changed or altered conditions are such that the previous decision would not have been rendered by the Court, if those conditions had existed at the time of declaring the law as including power to amend the law. It is also empowered to give effect to retrospective legislation with a deeming date or with effect from a particular date.” [Emphasis supplied]

163Copy pinpoint163. We shall now proceed to determine whether the enactment of Section 97 of the Finance Act, 2022 fulfils the tests laid down by this Court for a validation Act to be legally sustainable. The first leg of such determination would be to satisfy ourselves as to whether Section 97 cures the defect pointed out by this Court in Canon India (supra). In this respect, the following aspects are relevant: a) The Coordinate Bench in Canon India (supra) observed that: “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 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)] ” [Emphasis supplied]

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b) According to Canon India (supra), only “the proper officer” empowered to undertake the exercise of assessment or re-assessment under Section 17 in a jurisdictional area can perform the functions of “the proper officer” under Section 28 of the Act, 1962 as the exercise involved in Section 28 is the re-assessment of duty. The defect pointed out by the Court in Canon India (supra) is that the DRI officers were not “the proper officers” who undertook the exercise of assessment under Section 17. Hence, they lacked the jurisdiction to issue show cause notices under Section 28. The reasoning given by the Court was that any other reading of the expression “proper officers” would lead to a multiplicity of proper officers competent to perform functions under Section 28, which would result in the perpetuation of chaos and confusion as pointed out in Sayed Ali (supra). c) However, the apprehension expressed is unfounded in our opinion especially in context of the Customs department’s policy of exclusion of jurisdiction of other competent proper officers once a particular proper officer empowered to issue a show cause notice under Section 28 has issued it. Such a policy acts as an adequate safeguard in our view. d) We find that the ouster of jurisdiction of DRI to issue show cause notices under Section 28 once an assessment has been done under Section 17 is not a defect at all in light of Notification No. 44/2011 dated 06.07.2011 and new Section 17 as amended by the Finance Act, 2011. We have already recorded a finding in the foregoing segments of this judgment that these facts were not considered in Canon India (supra) and therefore, become the basis of the review petition herein. e) Notification No. 44/2011 dated 06.07.2011 specifically assigned the functions of the proper officers under Sections 17 and 28 to DRI officers. Such assignment of functions of assessment is sufficient for the DRI officers to fall in the category of “any other officer who has been assigned the function of assessment” as mentioned in Canon India (supra). f) Furthermore, as discussed previously, the functions of assessment and re-assessment under Section 17 and recovery

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of duty under Section 28 are distinct. Canon India (supra) held erroneously that Section 28(4) involves the function of re-assessment. The function of recovery of short-levy, non-levy, part-paid, non-paid and erroneous refund under Section 28 is not the same as the assessment or re-assessment of the bill(s) of entry. It necessarily has to be a process subsequent to the completion of functions under Section 17. Further, such function of determining duty to be recovered requires application of judicial mind and therefore, cannot be an administrative review of an act. This is especially so after the introduction of self-assessment in Section 17 vide the Finance Act, 2011. g) Therefore, the validating provision under Section 97 of the Finance Act, 2022 is a mere surplusage with respect to validation of the show cause notices issued by DRI officers under Section 28. It cannot be challenged on the ground that it does not cure the defect pointed out in Canon India (supra) when no defect can be made out therein as a result of this review petition.

164Copy pinpoint164. The contention that Section 97 could not have overruled the finding of fact relating to the actual exercise of jurisdiction in Canon India (supra) is untenable for the following reasons: (a) The argument that once a particular officer has exercised the function of assessment, it is a jurisdictional fact that has occurred to the exclusion of all other groups in the Customs Department and therefore, only that officer or his superiors, who had undertaken assessment under Section 17 in the first place, shall have the jurisdiction to issue notices for recovery of duty under Section 28, does not hold water. (b) As discussed above, the functions of assessment and re-assessment under Section 17 and the recovery of duty under Section 28 are distinct. Therefore, the exercise of functions under Section 17 can only act as a “jurisdictional fact” for the purpose of excluding the jurisdiction of other proper officers empowered under that section for the exercise of the rest of the functions specified therein. Similarly, the exercise of the function of issuing show cause notices under Section 28 by a particular proper officer serves as a jurisdictional fact which would exclude the jurisdiction of other proper officers empowered under Section 28.

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(c) Canon India (supra) proceeded on an erroneous assumption that the jurisdiction of the proper officer under Sections 17 and 28 is linked. This is due to the erroneous understanding of the provisions of Act, 1962 that functions under Section 28 involve re-assessment. (d) Therefore, the very basis of the determination of jurisdictional fact for exercise of functions under Section 28 has been clarified by us. Thus, we are of the considered view that the challenge to Section 97, on the ground of inability of a validating Act to overrule a finding of fact, is unfounded and liable to be dismissed.

165Copy pinpoint165. While challenging the constitutional validity, it was argued that the insertion of Section 110AA for future actions while validating the past actions (which in words of the writ petitioners was contrary to the intent of Section 110AA) does not create a reasonable classification as there is no intelligible differentia. It was further argued that Section 97 is manifestly arbitrary and fails the test of proportionality under Article 14. In our view, these submissions are not tenable in law for the following reasons: a) It is a settled position of law that matters of economic policy are best left to the wisdom of the legislature and in policy matters, the accepted principle is that the courts should not interfere. This principle has been laid down in the case of Bhavesh D. Parish v. Union and India reported in (2000) 5 SCC 471, wherein this Court held that: “26. The services rendered by certain informal sectors of the India economy could not be belittled. However, in the path of economic progress, if the informal system was sought to be replaced by a more organised system, capable of better regulation and discipline, then this was an economic philosophy reflected by the legislation in question. Such a philosophy might have its merits and demerits. But these were matters of economic policy. They are best left to the wisdom of the legislature and in policy matters the accepted principle is that the courts should not interfere. Moreover in the context of the changed economic

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scenario the expertise of people dealing with the subject should not be lightly interfered with. The consequences of such interdiction can have large-scale ramifications and can put the clock back for a number of years. The process of rationalisation station of the infirmities in the economy can be put in serious jeopardy and, therefore, it is necessary that while dealing with economic legislations, this Court, while not jettisoning its jurisdiction to curb arbitrary action or unconstitutional legislation, should interfere only in those few cases where the view reflected in the legislation is not possible to be taken at all.” [Emphasis supplied] b) A Constitution Bench of this Court in the case of Shri Prithvi Cotton Mills Ltd. and Ors. v. Broach Borough Municipality & Ors., reported in (1969) 2 SCC 283 set out the modus of validation of tax through validating statutes and observed as follows: “4. … Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. Sometimes the Legislature gives its own meaning and interpretation of the law under which tax was collected and by legislative fiat makes the new meaning binding upon courts. The Legislature may follow any one method or all of them and while it does so it may neutralise the effect of the earlier decision of the court which becomes ineffective after the change of the law. Whichever method is adopted it must be

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within the competence of the legislature and legal and adequate to attain the object of validation. If the Legislature has the power over the subject-matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a Validating Law, therefore, depends upon whether the Legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the Validating Law for a valid imposition of the tax.” [Emphasis supplied] c) We are of the opinion that the introduction of Section 110AA was a valid exercise of legislative power to amend the provisions of the Act, 1962 and it was done with the objective of following the principle of comity to give effect to the suggestions of this Court in Sayed Ali (supra) and Canon India (supra). However, we clarify that a change in law, which the legislature was competent to enact, having prospective application cannot be a ground for the writ petitioners to question the sanctity and wisdom of the legislature in following a different mechanism to assess/ re-assess bills of entry(s) and recover duty under Sections 17 and 28 respectively. d) No occasion arises for us to discuss the validity of Section 97 with respect to the test of reasonable classification as the introduction of Section 110AA does not create a class of assessees to whom the law would apply differentially to, at the same point in time. The differential mechanism for the exercise of functions under Section 28 is not for a different class of assessees but rather for the show cause notices issued during different periods of time that is, prior to the Finance Act, 2022 and after its enactment. e) On the strength of such reasoning, we are of the view that Section 97 is not manifestly arbitrary and discriminatory and is not disproportional to the object sought to be achieved by it.

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166Copy pinpoint166. It is also the contention of the writ petitioners that Section 97(iii) gives retrospective effect to the amendments made in Section 5 thereby making previous show cause notices subject to the provisions of the newly inserted provisions, i.e., sub-sections (4) and (5) of Section 5. It is their case that the previous notifications empowering DRI officers to issue show cause notices under Section 28 do not fulfil the mandate of Section 5(4) as they cannot be placed in any of the criteria envisaged therein. We find no merit in the said contention: a) Section 5(4) reads as follows: “(4) In specifying the conditions and limitations referred to in sub-section (1), and in assigning functions under sub-section (1A), the Board may consider any one or more of the following criteria, including, but not limited to (a) territorial jurisdiction; (b) persons or class of persons; (c) goods or class of goods; (d) cases or class of cases; (e) computer assigned random assignment; (f) any other criterion as the Board may, by notification, specify.” [Emphasis supplied] b) From a plain reading of the above-referred sub-section, we find that the Board has been entrusted with wide powers in respect of determination of criteria and the use of the word “may” is indicative of the Board’s discretion in this regard. Therefore, the writ petitioners are wrong in construing the sub-section as a mandatory provision for the purpose of invalidation of the show cause notices issued. c) A purposive interpretation of Section 97 indicates that clause (i) therein is the object of its enactment and clause (iii) is an extension thereof to further clarify that any deficiencies in law under Sections 2, 3 and 5 of the Act, 1962 as they stood prior to the Finance Act, 2022 would not be an obstacle to the validating act under clause (i).

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d) Therefore, the retrospective application of Sections 2, 3 and 5 of the Act, 1962 respectively is not stand-alone but is restricted to achievement of the ultimate object of validation under clause (i) of Section 97. Any interpretation of the amended Sections 2, 3 and 5 arising from the retrospective application thereof, which is contrary to or not in furtherance of the Section 97(i) would not hold good in law. e) This Court in the case of Vivek Narayan v. Union of India reported in (2023) 3 SCC 1 has held that: “140. The principle of purposive interpretation has also been expounded through a catena of judgments of this Court. A Constitution Bench of this Court in M. Pentiah v. Muddala Veeramallappa [M. Pentiah v. Muddala Veeramallappa (1961) 2 SCR 295 : AIR 1961 SC 1107] was considering a question, as to whether the term prescribed in Section 34 would apply to a member of a “deemed” committee under the provisions of the Hyderabad District Municipalities Act, 1956. An argument was put forth that, upon a correct interpretation of the provisions of Section 16, the same would be permissible. Rejecting the said argument, K. Subba Rao, J., observed thus : (AIR pp. 1110-11, para 6) “6. Before we consider this argument in some detail, it will be convenient at this stage to notice some of the well-established rules of construction which would help us to steer clear of the complications created by the Act. Maxwell on the Interpretation of Statutes, 10th Edn., says at p. 7 thus: ‘… if the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that Parliament would legislate

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only for the purpose of bringing about an effective result.’…” [Emphasis supplied] f) A seven-Judge Bench of this Court in the case of Abhiram Singh v. C.D. Commachen (Dead) By Lrs. & Ors., reported in (2017) 2 SCC 629 has held that: “36. The conflict between giving a literal interpretation or a purposive interpretation to a statute or a provision in a statute is perennial. It can be settled only if the draftsman gives a long-winded explanation in drafting the law but this would result in an awkward draft that might well turn out to be unintelligible. The interpreter has, therefore, to consider not only the text of the law but the context in which the law was enacted and the social context in which the law should be interpreted. This was articulated rather felicitously by Lord Bingham of Cornhill in R. (Quintavalle) v. Secy. of State for Health [R. (Quintavalle) v. Secy. of State for Health, 2003 UKHL 13 : (2003) 2 AC 687 : (2003) 2 WLR 692 (HL)] when it was said : (AC p. 695 C-H, paras 8-9) “8. The basic task of the court is to ascertain and give effect to the true meaning of what Parliament has said in the enactment to be construed. But that is not to say that attention should be confined and a literal interpretation given to the particular provisions which give rise to difficulty. Such an approach not only encourages immense prolixity in drafting, since the draftsman will feel obliged to provide expressly for every contingency which may possibly arise. It may also (under the banner of loyalty to the will of Parliament) lead to the frustration of that will, because undue concentration on the minutiae of the enactment may lead the court to neglect the purpose which Parliament intended to achieve when it enacted the statute. Every statute other than

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a pure consolidating statute is, after all, enacted to make some change, or address some problem, or remove some blemish, or effect some improvement in the national life. The court’s task, within the permissible bounds of interpretation, is to give effect to Parliament’s purpose. So the controversial provisions should be read in the context of the statute as a whole, and the statute as a whole should be read in the historical context of the situation which led to its enactment.” [Emphasis supplied] g) Thus, we are of the opinion that the retrospective application of Section 5(4) cannot be the basis for the challenge to the validity of Section 97 of the Finance Act, 2022.

167Copy pinpoint167. For the foregoing reasons, we hold that the challenge to the constitutional validity of the Finance Act, 2022 and more particularly Section 97 thereof, being unfounded should fail. We say so more particularly in light of the judgment in the review of Canon India (supra) and the various judicial pronouncements of this Court. Therefore, we hold that Section 97 of the Finance Act, 2022 is constitutionally valid and the challenge to it is rejected accordingly. F. CONCLUSION

168Copy pinpoint168. In view of the aforesaid discussion, we conclude that: (i) DRI officers came to be appointed as the officers of customs vide Notification No. 19/90-Cus (N.T.) dated 26.04.1990 issued by the Department of Revenue, Ministry of Finance, Government of India. This notification later came to be superseded by Notification No. 17/2002 dated 07.03.2002 issued by the Department of Revenue, Ministry of Finance, Government of India, to account for administrative changes. (ii) The petition seeking review of the decision in Canon India (supra) is allowed for the following reasons: a. Circular No. 4/99-Cus dated 15.02.1999 issued by the Central Board of Excise & Customs, New Delhi which empowered the officers of DRI to issue show cause notices

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under Section 28 of the Act, 1962 as well as Notification No. 44/2011 dated 06.07.2011 which assigned the functions of the proper officer for the purposes of Sections 17 and 28 of the Act, 1962 respectively to the officers of DRI were not brought to the notice of this Court during the proceedings in Canon India (supra). In other words, the judgment in Canon India (supra) was rendered without looking into the circular and the notification referred to above thereby seriously affecting the correctness of the same. b. The decision in Canon India (supra) failed to consider the statutory scheme of Sections 2(34) and 5 of the Act, 1962 respectively. As a result, the decision erroneously recorded the finding that since DRI officers were not entrusted with the functions of a proper officer for the purposes of Section 28 in accordance with Section 6, they did not possess the jurisdiction to issue show cause notices for the recovery of duty under Section 28 of the Act, 1962. c. The reliance placed in Canon India (supra) on the decision in Sayed Ali (supra) is misplaced for two reasons – first, Sayed Ali (supra) dealt with the case of officers of customs (Preventive), who, on the date of the decision in Sayed Ali (supra) were not empowered to issue show cause notices under Section 28 of the Act, 1962 unlike the officers of DRI; and secondly, the decision in Sayed Ali (supra) took into consideration Section 17 of the Act, 1962 as it stood prior to its amendment by the Finance Act, 2011. However, the assessment orders, in respect of which the show cause notices under challenge in Canon India (supra) were issued, were passed under Section 17 of the Act, 1962 as amended by the Finance Act, 2011. (iii) This Court in Canon India (supra) based its judgment on two grounds: (1) the show cause notices issued by the DRI officers were invalid for want of jurisdiction; and (2) the show cause notices were issued after the expiry of the prescribed limitation period. In the present judgment, we have only considered and reviewed the decision in Canon India (supra) to the extent that it pertains to the first ground, that is, the jurisdiction of the DRI officers to issue show cause notices under Section 28. We clarify that the observations made by this Court in Canon India

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(supra) on the aspect of limitation have neither been considered nor reviewed by way of this decision. Thus, this decision will not disturb the findings of this Court in Canon India (supra) insofar as the issue of limitation is concerned. (iv) The Delhi High Court in Mangali Impex (supra) observed that Section 28(11) could not be said to have cured the defect pointed out in Sayed Ali (supra) as the possibility of chaos and confusion would continue to subsist despite the introduction of the said section with retrospective effect. In view of this, the High Court declined to give retrospective operation to Section 28(11) for the period prior to 08.04.2011 by harmoniously construing it with Explanation 2 to Section 28 of the Act, 1962. We are of the considered view that the decision in Mangali Impex (supra) failed to take into account the policy being followed by the Customs department since 1999 which provides for the exclusion of jurisdiction of all other proper officers once a show cause notice by a particular proper officer is issued. It could be said that this policy provides a sufficient safeguard against the apprehension of the issuance of multiple show cause notices to the same assessee under Section 28 of the Act, 1962. Further, the High Court could not have applied the doctrine of harmonious construction to harmonise Section 28(11) with Explanation 2 because Section 28(11) and Explanation 2 operate in two distinct fields and no inherent contradiction can be said to exist between the two. Therefore, we set aside the decision in Mangali Impex (supra) and approve the view taken by the High Court of Bombay in the case of Sunil Gupta (supra). (v) Section 97 of the Finance Act, 2022 which, inter-alia, retrospectively validated all show cause notices issued under Section 28 of the Act, 1962 cannot be said to be unconstitutional. It cannot be said that Section 97 fails to cure the defect pointed out in Canon India (supra) nor is it manifestly arbitrary, disproportionate and overbroad, for the reasons recorded in the foregoing parts of this judgment. We clarify that the findings in respect of the vires of the Finance Act, 2022 is confined only to the questions raised in the petition seeking review of the judgment in Canon India (supra). The challenge to the Finance Act, 2022 on grounds other than those dealt with herein, if any, are kept open.

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(vi) Subject to the observations made in this judgment, the officers of Directorate of Revenue Intelligence, Commissionerates of Customs (Preventive), Directorate General of Central Excise Intelligence and Commissionerates of Central Excise and other similarly situated officers are proper officers for the purposes of Section 28 and are competent to issue show cause notice thereunder. Therefore, any challenge made to the maintainability of such show cause notices issued by this particular class of officers, on the ground of want of jurisdiction for not being the proper officer, which remain pending before various forums, shall now be dealt with in the following manner: a. Where the show cause notices issued under Section 28 of the Act, 1962 have been challenged before the High Courts directly by way of a writ petition, the respective High Court shall dispose of such writ petitions in accordance with the observations made in this judgment and restore such notices for adjudication by the proper officer under Section 28. b. Where the writ petitions have been disposed of by the respective High Court and appeals have been preferred against such orders which are pending before this Court, they shall be disposed of in accordance with this decision and the show cause notices impugned therein shall be restored for adjudication by the proper officer under Section 28. c. Where the orders-in-original passed by the adjudicating authority under Section 28 have been challenged before the High Courts on the ground of maintainability due to lack of jurisdiction of the proper officer to issue show cause notices, the respective High Court shall grant eight weeks’ time to the respective assessee to prefer appropriate appeal before the Customs Excise and Service Tax Appellate Tribunal (CESTAT). d. Where the writ petitions have been disposed of by the High Court and appeals have been preferred against them which are pending before this Court, they shall be disposed of in accordance with this decision and this Court shall grant eight weeks’ time to the respective assessee to prefer appropriate appeals before the CESTAT.

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e. Where the orders of CESTAT have been challenged before this Court or the respective High Court on the ground of maintainability due to lack of jurisdiction of the proper officer to issue show cause notices, this Court or the respective High Court shall dispose of such appeals or writ petitions in accordance with the ruling in this judgment and restore such notices to the CESTAT for hearing the matter on merits. f. Where appeals against the orders-in-original involving issues pertaining to the jurisdiction of the proper officer to issue show cause notices under Section 28 are pending before the CESTAT, they shall now be decided in accordance with the observations made in this decision.

169Copy pinpoint169. In view of the aforesaid, we allow the Review Petition No. 400/2021 titled Commissioner of Customs v. M/s Canon India Pvt. Ltd. and the connected Review Petition Nos. 401/2021, 402/2021 and 403/2021 insofar as the issue of jurisdiction of the proper officer to issue show cause notice under Section 28 is concerned. As discussed, the findings of this Court in Canon India (supra) in respect of the show cause notices having been issued beyond the limitation period remain undisturbed.

170Copy pinpoint170. We set aside the decision of the High Court of Delhi rendered in the case of Mangali Impex (supra) and uphold the view taken by the High Court of Bombay in the case of Sunil Gupta (supra). We also uphold the constitutional validity of Section 97 of the Finance Act, 2022.

171Copy pinpoint171. The Registry shall take steps to list the connected civil appeals and writ petitions before the appropriate Bench and they shall be disposed in terms of the observations made in this judgment.

172Copy pinpoint172. The review petitions are accordingly disposed of.

Result of the case: Review petitions disposed of.

† Headnotes prepared by: Nidhi Jain