By TIOL News Service

BANGALORE, JAN 23, 2015: RULE 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 reads:

Rule 8. Recovery of duty in certain case.-The Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise shall ensure that the goods imported are used by the manufacturer for the intended purpose and in case they are not so used take action to recover the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of importation, alongwith interest, at the rate fixed by notification issued under Section 28AB of the Customs Act, 1962, for the period starting from the date of importation of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay.

The assessee challenged in the demand under the above Rule on the ground that the Deputy Commissioner of Central Excise is not proper officer to demand duty of customs under Section 28 of the Customs Act, 1962. Tribunal allowed the appeal of the assessee and the revenue is in appeal before the High Court.

After hearing both sides, the High Court held:

From the judgment of Apex Court in Syed Ali 2011-TIOL-20-SC-CUS, it is clear that only such Officers of the customs who have been assigned specified functions would be proper officers in terms of Section 2(34) of the Act. The specific entrustment of functions by either the Board or Commissioner of customs is the governing test to determine whether the Officer of customs is the proper officer. From a conjoint reading of Section 2(34) and 28 of the Customs Act, it is manifest that only such a customs officer who has been assigned the specific functions in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under Section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose.

While framing the Rules for registration of assesses who claim benefits under notifications, the Rule for recovery of duty in certain cases, entrusts the power to recover to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise who are not the customs officers under the Act. When the power of recovery of duty is expressly conferred on the customs officers under Section 28, who is the "proper officer" who should be entrusted with the responsibility, is vested with the Board or Commissioner of Customs under Section 2(34). The Central Government had no power to entrust that responsibility to a person who is not even a Customs Officer. Therefore the said Rule runs counter to Section 28 read with Section 2(34) of the Act and to that extent, it cannot be enforced.

A notification also came to be issued subsequently (44/2011-CUSTOMS (N.T.), Dated : July 06, 2011) in exercise of the powers conferred by subsection (34) of Section 2 of the Customs Act, 1962, the Central Board of Excise and Customs assigned the functions of the proper officer to the following officers mentioned in column (2) of the Table, for the purposes of section 17 and section 28 of the said Act, which is extracted hereunder:-

"4. Commissioners of Central Excise, Additional Commissioners or Joint Commissioners of Central Excise, Deputy Commissioners or Assistant Commissioners of Central Excise."

Therefore for the first time, the Board appointed Deputy Commissioners or Assistant Commissioners of Central Excise as proper officers for the purpose of section 17 and section 28 of the Act. Till such time, neither the Board nor the Commissioner of Customs had appointed them as proper officers. Though the Parliament amended Section 28, it has no application to the facts of this case, because the Deputy Commissioner of Central Excise who initiated the proceedings is not the officer of Customs. He had not been appointed as an officer of the Customs by issue of a notification under Section 4(1) by the Board. As there are several officers under the Customs Act, if a notification had been issued under Section 4(1) by the Board and if they did not constitute proper officers under Section 2(34), by virtue of the amendment they are deemed to be proper officers, notwithstanding the fact, no such appointment was made under Section 2(34). But the notification does not extend to recognize a Deputy Commissioner of Central Excise as a proper officer, because before they are recognized, the Deputy Commissioner of Central Excise ought to have been appointed as a Customs officer under Section 4(1).

Therefore, there is no error committed by the Tribunal in quashing the show cause notice and holding that he had no jurisdiction to initiate proceedings. The substantial question of law is answered in favour of the assessee and against the Revenue.

(See 2015-TIOL-190-HC-KAR-CUS)