HC Restores Customs Appeal After Supreme Court’s Decision Upholds DRI Officers as Proper Officers

The appeal before the High Court was filed by the department under Section 130 of the Customs Act, 1962, challenging the final order dated July 24, 2017, passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). The tribunal had remanded the matter to the adjudicating authority to await the final decision of the Supreme Court in Mangali Impex Ltd. v. Union of India, which had examined whether officers of the Directorate of Revenue Intelligence (DRI) could be treated as “proper officers” empowered to issue show cause notices under Section 28 of the Act. The tribunal had followed its own earlier order passed in Jetlite (India) Ltd. & Ors. and similar cases, where identical issues had arisen. It pointed out that different High Courts had rendered conflicting judgments, whereas the Delhi High Court in Mangali Impex had ruled that DRI officers were not authorised to issue such notices; the other High Courts had ruled otherwise in Sunil Gupta and Vuppalamritha Magnetic Components Ltd., respectively.

The tribunal decided to await the Supreme Court’s determination and remanded the proceedings to the original authority. The department, dissatisfied with the tribunal’s approach, preferred the present appeal, contending that the question of jurisdiction now stood resolved by the Supreme Court in Canon India Pvt. Ltd. v. Commissioner of Customs and the subsequent review judgment (Canon-II).

Central Issue: Whether officers of the Directorate of Revenue Intelligence were “proper officers” within the meaning of Section 28 of the Customs Act, 1962, and whether the CESTAT erred in remanding the matter despite the settled legal position established by the Supreme Court.

High Court Held: The High Court noted that the controversy surrounding the jurisdiction of DRI officers was comprehensively addressed by the Supreme Court in its review decision in Canon India Pvt. Ltd. (Canon-II). The apex court had examined earlier rulings and clarified that DRI officers were duly appointed as officers of customs under relevant notifications and were authorised to issue show cause notices under Section 28. It had specifically set aside the Delhi High Court’s earlier view in Mangali Impex. The Supreme Court had further held that the earlier judgment in Canon-I was rendered without considering certain notifications and circulars that explicitly empowered DRI officers, and therefore required correction. Thereafter, it was affirmed that DRI officers, along with other similarly placed officers, were competent to issue notices and adjudicate proceedings under Section 28.

The High Court noted that the Supreme Court in Canon-II had thoroughly analysed the statutory notifications and circulars dating back to 1990 that had conferred functions of “proper officer” on DRI and other officers. The High Court concluded that the issue of jurisdiction no longer survived for consideration and that the tribunal’s remand order was unsustainable. It held that the ruling in Mangali Impex cannot be regarded as good law, as the Supreme Court had finally acknowledged DRI officers as proper officers under the Customs Act. Thus, the appeal was allowed, and the order dated 24 July 2017 passed by CESTAT was set aside.

The appeal before CESTAT was restored to its original position for decision on merits. Both sides were ordered to appear before the CESTAT , which was ordered to proceed according to law after it had decided whether the main issue stood pending before it or the adjudicating authority.

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