Supreme Court’s Ruling on DRI Officers as ‘Proper Officers’ for Issuing SCNs

Initial Controversy (Sayed Ali Case, 2011)

• The Supreme Court in “Sayed Ali” held that the Commissioner of Customs (Preventive) (CCP) was not a “proper officer” under Section 2(34) of the Customs Act.
• Without this designation, CCP lacked jurisdiction to issue SCNs under Section 28.
• As a result, SCNs issued by CCP were invalid, raising doubts about the authority of other officers, including those from DRI, to issue SCNs.

Legislative Response (Post- Sayed Ali)

To counter the implications of Sayed Ali, the government introduced:
1. Amendments via Finance Act, 2011: Section 28 was revamped, and Explanation 2 was added to specify that non-levy, short-levy, or erroneous refunds before April 8, 2011, would be governed by the old provisions of Section 28.
2. Section 28(11) via Validation Act, 2011: This provision retrospectively deemed all customs officers, appointed under Section 4(1), as “proper officers” under Section 28 for both past and future cases.
3. Notification No. 44/2011 (July 6, 2011): Assigned proper officer functions to DRI officers for assessment and reassessment purposes under Sections 17 and 28.

Conflicting High Court Rulings

1. Sunil Gupta (Bombay High Court): Upheld the jurisdiction of DRI officers as proper officers under Section 28.
2. Mangali Impex (Delhi High Court): Held that Section 28(11) did not empower DRI officers to issue SCNs for periods before April 8, 2011

Both judgments were challenged before the Supreme Court. Canon India Case (2021)

The Supreme Court in Canon India ruled:
1. DRI officers are not proper officers unless explicitly entrusted with functions under Section 6 or through specific assignments by CBIC or the Commissioner of Customs.
2. This ruling invalidated many SCNs issued by DRI officers.