Dhruvdesh Metasteel PVT LTD vs. Union Of INDIA

The petitioner is a company engaged in the manufacture of sponge iron and generation of power, importing steam coal as raw material including those High Sea Sale transactions. For the relevant period, the petitioner cleared imported steam coal by availing HC-KAR NC: 2026:KHC-D:612 concessional customs duty under Notification No.12/2012- Customs dated 17.03.2012, issued under Section 25 of the Customs Act, 1962. The Additional Director General, Directorate of Revenue Intelligence (DRI) conducted an investigation and, thereafter issued a show-cause notice dated 09.05.2013 under Section 28 of the Customs Act, 1962. 3. The show cause notice proposed reclassification of the imported coal, denial of confessional rate of duty, demand of differential duty, interest, penalty and confiscation, by applying a calorific value/formula not expressly provided in the exception notification. Aggrieved, the petitioner filed the present writ petition challenging the juri iction of DRI to issue show cause notice and contenting that the exemption under Section 25 could not be curtailed by introducing a new formula not contemplated by the notification. HC-KAR NC: 2026:KHC-D:612

Learned counsel for the petitioner submits that the impugned show-cause notice issued by respondent No.2 under Section 28 of the Act is not a proper officer as defined under Section 2(34) of the Act and the notification issued and hence the impugned show cause notice is unsustainable and without juri iction. He also submits that respondent No.2 issues a show-cause notice and directs the petitioner to appear before respondent No.3-Commissioner of customs for adjudication to submit his explanation, which according to the petitioner is totally contrary to Section 28 of the Act.

Sri Girish S. Hulmani, learned counsel appearing for the respondent submits and places reliance upon the decision of the Apex Court in the Commissioner of Customs Vs. Canon India (P) Ltd.1 (“Canon India” for short) and contends that the Additional Director General has been notified as a proper officer as defined under Section 1 2025 (4) SCC 509 HC-KAR NC: 2026:KHC-D:612 2(34) of the Act as per the decision of the Apex Court in Canon India and in view of the notification No.44 of 2011. 6. This court has considered the contentions urged and perused the material on record.

The Apex Court in Canon India as stated supra has held at paragraph No.104 as under: “104. In Canon India (supra), this Court held that DRI officers did not have the power of issuing show cause notices Under Section 28 as they did not fall within the meaning of the expression "the proper officers" used in Section 28 for the reason that they did not possess the power of assessment Under Section 17 of the Act, 1962. However, as we have discussed in the previous parts of the judgment, contrary to the aforesaid observations of the Court, DRI officers were notified as "the proper officer” for the purposes of Sections 17 and 28 of the Act, 1962 respectively vide Notification No.44/2011-Cus- N.T.:MANU/CUSN/0099/2011 dated 06.07.2011 issued by the Central Government. Hence, those officers of DRI who were designated as "the proper officer" for the purpose of Section 28 by the HC-KAR NC: 2026:KHC-D:612 aforesaid notification were competent to issue show cause notices Under Section 28.”

Further by placing reliance upon the notification No.44 of 2011, it is held at paragraph No.116 as under:

In N.C. Alexander [N.C. Alexander v. Commr. of Customs, WP No. 33099 of 2015, order dated 9-6- 2022 (Mad)], the High Court has extensively explained how officers of DRI are Officers of Customs. We quote the relevant observations: “236. The officers of the Directorate of Revenue Intelligence (DRI) have already been appointed as “Officers of Customs” under Notification issued under Section 4(1) of the Customs Act, 1962 vide Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 186-Cus, dated 4-8- 1981. The said Notification was later superseded by Notification No. 19/90-Cus (NT), dated 26-4-1990. 237. By Notification No. 19/90-Cus (NT), dated 26- 4-1990, the officers from the Directorate of Revenue Intelligence (DRI) were appointed as Collectors and Assistant Collectors of Customs in the area mentioned in Column I of the said notification.

Notification No. 19/90-Cus (NT), dated 26-4- 1990 was later superseded by Notification No. HC-KAR NC: 2026:KHC-D:612 17/2002-Cus. (NT) dated 7-3-2002, whereby, various officers from the Directorate General of Revenue Intelligence and Directorate of Revenue Intelligence were appointed as Commissioner of Customs and as Additional Commissioner and Joint Commissioner of Customs and Deputy Commissioner/Assistant Commissioner of Customs. Thus, they were appointed as Officers of Customs. Relevant portion of Notification No. 17/2002-Cus. (NT) dated 7-3-2002 is reproduced below:— Directorate of Revenue Intelligence (DRI) Officers appointed as Customs Officers — Notification No. 19/90-Cus. (NT) superseded. In exercise of the powers conferred by sub-section (1) of Section 4 of the Customs Act, 1962 (52 of 1962) and in supersession of Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 19/90-Customs (NT), dated 26-4-1990, the Central Government appoints the officers mentioned in Column (2) of the table below to the Commissioner of Customs, the officers mentioned in Column (3) thereof to be the Additional Commissioners or Joint Commissioners of Customs and Officers mentioned in Column (4) thereof to be the Deputy Commissioners or Assistant Commissioners of Customs for the areas mentioned in the corresponding entry in Column (1) of the said table with effect from the date to be notified by the Central Government in the Official Gazette: HC-KAR NC: 2026:KHC-D:612 Area of juri iction Designation of the officers (1) (2) (3) (4) Whole of India Additional Director Additional Directors or Joint Deputy Directors, or General, Directorate General of Revenue Intelligence posted at Headquarters and Zonal/region al units. Directors, of Directorate of Revenue Intelligence posted at Headquarters and Zonal/region al units. Assistant Directors of Directorate of Revenue Intelligence posted at Headquarter s and Zonal/regio nal units.

Notification No. 17/2002-Cus. (NT), dated 7-3-2002 came into force on 25-10-2002 vide Notification No. 63/2002- Cus. (NT) dated 3-10-2002. Notification No. 17/2002-Cus. (NT), dated 7-3-2002 was further amended by Notification No. 82/2014-Cus. (NT), dated 16-9-2014. 240. Thus, the officers from the Directorate of Revenue Intelligence have been appointed as “Officers of Customs” under Section 4 of the Customs Act, 1962 and therefore they are “proper officers” for the purpose of Section 2(34) of the Customs Act, 1962. This aspect was not brought to the attention of the Hon'ble Supreme Court in Canon case [Canon India (P) Ltd. v. Commr. of Customs, (2021) 18 SCC 563 : (2021) 16 GSTR-OL 1] referred to supra.

With a view to streamline the allocation of work and for the purposes of Section 17 and Section 28 of the Customs HC-KAR NC: 2026:KHC-D:612 Act, 1962, Notification No. 44/2011-Cus. (NT), dated 6-7- 2011 was issued by the Board under Section 2(34) of the Act.

Notification No. 44/2011-Cus. (NT), dated 6-7-2011 was issued under Section 2(34) of the Customs Act, 1962 for the purpose of identifying Officers of Customs for exercising the power and function under the Customs Act, 1962. 243. Notification No. 44/2011-Cus. (NT), dated 6-7-2011 was later amended by Notification No. 53/2012-Cus. (NT) dated 21-6-2012 and still later by Notification No. 43/2019- Cus. (NT) dated 18-6-2019 and eventually has been rescinded/superseded by Notification No. 25/2022-Cus. (NT) dated 31-3-2022 in tune with the amendment proposed in the Finance Bill, 2022 and passed by Finance Act, 2022. 244. Among various Officers of Customs, following officers were also assigned to act and function as the “proper officer” under Notification No. 44/2011-Cus. (NT) dated 6-7-2011: TABLE Sl. No. Designation of the officers (1) (2)

Thus, over a period of time, the officers of Directorate of Revenue Intelligence (DRI) who are primarily drawn from the Customs Department were also given the task of issuing show-cause notice and adjudicating the same in terms of notifications issued as “proper officer”, as defined in Section 2(34) of the Customs Act, 1962. 246. Now, under the amended Section 2(34), the word “under Section 5” has been inserted. Thus, what was implicit in the Customs Act, 1962 has now been made explicit in the amendment to the Customs Act, 1962 vide Finance Act, 2022. 247. As per Section 5(1) of the Act, an “Officer of Customs” may exercise the powers and discharge the duties conferred or imposed on him under the Customs Act, 1962, subject to such conditions and limitations as the Board may impose.

The power to be exercised may be subject to such conditions and limitations as the Board may impose on such an “Officer of Customs”. Such officers can also exercise the powers and discharge the duties HC-KAR NC: 2026:KHC-D:612 conferred or imposed on any other Officers of Customs who is subordinate to such officers. This aspect was also not brought to the attention of the Hon'ble Supreme Court in Canon India (P) Ltd. v. Commr. of Customs [Canon India (P) Ltd. v. Commr. of Customs, (2021) 18 SCC 563 : (2021) 16 GSTR-OL 1] case referred to supra.

Only exception that has been provided was in sub-section (3) to Section 5 of the Act. As per sub- section (3) to Section 5 of the Act, a Commissioner (Appeals) cannot exercise the power and discharge the duties conferred or imposed on an “Officer of Customs” other than those specified in Section 108 of the Act and Chapter XV deals with the Appeals and Revisions.

Section 5 of the Customs Act, 1962 has also been amended in the Finance Act, 2022. Sub-sections (1-A), (1-B) and sub-sections (4) and (5) to Section 5 of the Customs Act, 1962 have been now inserted. Section 5 as it stood prior to amendment and as it stands after amendment read as under: ‘TABLE

Powers of Officers of Customs of the Customs Act, 1962 Before the amendmen t Section After the 2022 Amendment (1) Subject to such conditions and limitations as the Board may impose, an Officer of Customs may exercise HC-KAR NC: 2026:KHC-D:612 the powers and discharge the duties conferred or imposed on him under this Act. (1-A) Without prejudice to the provisions contained in sub-section (1), the Board may, by notification, assign such functions as it may deem fit, to an Officer of Customs, who shall be the proper officer in relation to such functions. (1-B) Within their juri iction assigned by the Board, the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may, by order, assign such functions, as he may deem fit, to an “Officer of Customs”, who shall be the “proper officer” in relation to such functions. (2) An Officer of Customs may excise the powers and discharge the duties conferred or imposed under this Act on any other Officer of Customs who is subordinate to him. (3) Notwithstanding anything contained in this section, a Commissioner (Appeals) shall not exercise the powers and discharge the duties conferred or imposed on an Officer of Customs other than those specified in Chapter XV and Section 108. (4) In specifying the conditions and limitations referred to in sub-section (1), and in assigning functions under sub-section (1-A), the Board may consider any one or more of the following criteria, including, but not limited to— (a) territorial juri iction; (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. (5) The Board may, by notification, wherever necessary or appropriate, require two or more Officers of Customs (whether or not of the same class) to have concurrent powers and functions to be performed under this Act.’

During the interregnum in 2012, a more comprehensive notification was issued vide Notification HC-KAR NC: 2026:KHC-D:612 No. 40/2012-Cus. (NT), dated 2-5-2012. This notification fell for consideration in Canon India (P) Ltd. v. Commr. of Customs [Canon India (P) Ltd. v. Commr. of Customs, (2021) 18 SCC 563 : (2021) 16 GSTR-OL 1] . However, No. 40/2012-Cus. (NT), dated 2-5-2012 cannot be read in isolation. It had to be read along with notifications issued under Section 4 of the Customs Act, 1962. 252. Notification No. 40/2012-Cus. (NT), dated 2- 5-2012 was also amended from time to time and has now been eventually rescinded/superseded by Notification No. 26/2022-Cus. (NT), dated 31-3-2022 in tune with the amendment proposed in the Finance Bill, 2022 and passed by the Finance Act, 2022. 253. Both Notification No. 44/2011-Cus. (NT), dated 6-7-2011 and Notification No. 40/2012-Cus. (NT), dated 2-5-2012 as amended from time to time have also not been challenged directly by any of the petitioners.

Although, the vires of Notification No. 40/2012-Cus. (NT), dated 2-5-2012 was neither challenged or questioned before the Court in Canon India (P) Ltd. v. Commr. of Customs [Canon India (P) Ltd. v. Commr. of Customs, (2021) 18 SCC 563 : (2021) 16 GSTR-OL 1] nor the issue of juri iction was canvassed before the Tribunal, the Hon'ble Supreme HC-KAR NC: 2026:KHC-D:612 Court has held that the officers of the Directorate of Revenue Intelligence were not “proper officers” as they are not Officers of Customs and therefore there had to be issue of an independent notification under Section 6 of the Customs Act, 1962.” (emphasis supplied)

The Apex Court further in regard to the pending writ petitions challenging the show-cause notices issued under Section 28 of the Act has prescribed the manner in which the proceedings has to be concluded and as observed as under: “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 writ petition, the respective High Court shall dispose of such wit 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 HC-KAR NC: 2026:KHC-D:612 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 juri iction 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. 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 juri iction 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 HC-KAR NC: 2026:KHC-D:612 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 juri iction 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.”

HC-KAR NC: 2026:KHC-D:612 under Section 28 of the Act. The Apex Court has further issued specific directions in paragraph No.183.6 governing the manner in which the pending writ petitions challenging show-cause notices are required to be dealt with. Paragraph No.183.6 reads thus.

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 juri iction 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 1962 Act 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 HC-KAR NC: 2026:KHC-D:612 observations made in this judgment and restore such notices for adjudication by the proper officer under Section 28 (Emphasis supplied). (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 juri iction 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' HC-KAR NC: 2026:KHC-D:612 time to the respective assessee to prefer appropriate appeals before CESTAT. (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 juri iction 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 CESTAT for hearing the matter on merits. (f) Where appeals against the orders-in-original involving issues pertaining to the juri iction of the proper officer to issue show-cause notices under Section 28 are pending before CESTAT, they shall now be decided in accordance with the observations made in this decision.”

The said paragraph at 183.6(a) mandates that where show cause notices issued by the officers of the Directorate of Revenue Intelligence are under challenge before the High Court, such writ petition shall be disposed of by relegating the parties to adjudication, leaving all contentions open to be urged before the competent HC-KAR NC: 2026:KHC-D:612 authority/proper authority, rather than quashing the notices at the threshold.

In view of the aforesaid binding pronouncement and the directions contained in paragraph 183.6(a) of the judgment, the contention of the petitioner with regard to lack of juri iction cannot be accepted at this stage and no interference is warranted in excess of juri iction.

Accordingly this Court pass the following: ORDER i. The writ petition is disposed of in terms of paragraph No.183.6(a) of the judgment in Canon India Private Limited. ii. The show-cause notice dated 09.05.2013 issued by the 2nd respondent shall be adjudicated in accordance with law by the competent authority. iii. The petitioner is at liberty to urge all the factual, legal and juri ictional contentions including those relating to classification, applicability of exemption notification and HC-KAR NC: 2026:KHC-D:612 levy of duty, interest and penalty before the adjudicating authority. iv. The adjudicating authority shall consider the reply of the petitioner and pass the reasoned order uninfluenced by any of the observations made by this Court. v. It is clarified that this court has not expressed any opinion on the merits of the allegations contained in the show-cause notice. vi. In view of the disposal of the writ petition all pending interlocutor applications, do not survive for consideration. JUSTICE K.S.HEMALEKHA