Abhishek Mundhra vs The Additional Director General

T.S. Sivagnanam, J.

The petitioner has filed this Writ Petition for issuance of a Writ of Certiorari to quash the show cause notice, dated 13.04.2014, issued by the

respondent, calling upon the petitioner (i) to explain as to why the seized 15.16kg of gold bars of foreign origin valued at Rs.4,53,89,040/-, should

not be confiscated under Sections 111(d) and 111(l) of the Customs Act, 1962, (Act) read with Section 120(1) of the Act; (ii) why the seized

packing material consisting of plastic box and Bengali newspapers should not be confiscated under Section 118 of the Act and (iii) why penalty

should not be imposed on each of them under Section 112 of the Act.

The petitioner was called upon to show cause to the Joint/Additional Commissioner of Customs (Airport), Chennai within 30 days from the date

of receipt of the notice. Apart from the petitioner there were 4 other noticees who were also directed to show cause as to why personal penalty

should not be imposed on them under Section 112 of the Act. The respondent is the Additional Director General, Directorate General of Revenue

Intelligence, Chennai.

A brief background as to under what circumstances, the impugned show cause was issued. Specific intelligence is said to have been received by

DRI that the petitioner Mr.Abhishek Mundhra, Director of Mundhra Bullion Pvt., Ltd., would be carrying smuggled gold bars from Kolkatta to

Chennai by Spice Jet flight SG324 arriving at Chennai on 14.10.2013 was intercepted at the Chennai Airport by the Customs and the DRI

officials. The petitioner was travelling along with his minor son and was found carrying a small hand bag, a trolley bag and while his son was

carrying a small shoulder bag. The petitioner is said to have stated that he has around 15kg of gold bars in his small hand bag. After the petitioner''s

son was sent home in the petitioner''s car, which was waiting at the Airport, the contents of the bag carried by the petitioner was examined and it

was found to contain 296 rectangular cut pieces of gold bars. The officers who had examined the same, found that the markings on the gold bars

have been erased. However on a closure scrutiny, it appeared to contain foreign markings. The petitioner stated that he received the gold bars

from one Mr.Goutham Chakraborty outside the Kolkata Airport and the gold bars were smuggled into India from Bangladesh and he had received

the same through one Raju @ Mukesh of Kolkata, the foreign markings in the gold bars have been removed by his friend Goutham Chakraborty.

Enquiry was done with the petitioner as to whether he is in possession of any documents for possession/import of the gold bars. The gold bars

were examined by the approved Assayer, who is said to have stated that it is a foreign origin and the residential premises of the petitioner was also

searched. Thereafter, the statements were recorded from the petitioner under Section 108 of the Act and further proceedings were taken and

mahazar was prepared. The petitioner was arrested on 15.10.2013 and was produced before the Additional Chief Metropolitan Magistrate, EO-

1, and remanded to Judicial custody. Subsequently, he was enlarged on bail. After the petitioner was enlarged on bail, a statement was given by

him on 20.11.2013 and while giving the second statement, the petitioner appears to have stated that certain portions of the statements recorded

earlier were incorrect, as he was very tensed at that point of time. However, the rest of the contents of the statement, dated 15.10.2013 were true.

Similar statements have been recorded from others and ultimately, the impugned show cause notice came to be issued.

Mr.V.T.Gopalan, learned Senior counsel appearing for the petitioner after elaborately referring to the factual contentions raised contended that

the petitioner has retracted all the statements and the other persons, who were examined also retracted the statements and the entire search and

seizure operations are vitiated by serious legal infirmities. It is submitted that the impugned show cause notice is bad in law on two grounds,

namely, the respondent has no jurisdiction to issue show cause notice and secondly the show cause notice has pre-judged and pre-determined the

entire issue. On the contention that the impugned show cause notice is without jurisdiction, the learned Senior counsel referred to Section 124 of

the Customs Act and submitted that no order confiscating of any goods or imposing penalty on any person shall be made, unless such person is

given a notice in writing with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs informing

him of the grounds on which it is proposed to confiscate the goods or to impose a penalty. By referring to clause (a) of Section 124, it is submitted

that there is no prior approval obtained as required under the statute. Further, it is submitted that even such notice cannot be issued by the

respondent, who is an Additional Director of DRI and such notice can be issued by a proper officer as defined under Section 2(34) of the Act,

which defines proper officer in relation to any functions to be performed under the Act to mean the officer of customs, who is assigned those

functions by the Board or the Commissioner. It is submitted that the respondent is not an Officer of customs in terms of the said definition and has

no jurisdiction to issue the impugned show cause notice. In support of his contention, the learned counsel referred to the decision of the Hon''ble

Supreme Court in the case of Commissioner of Customs Vs. Sayed Ali and Another, , wherein the Hon''ble Supreme Court held that only such of

those officers of customs, who have been assigned the specific functions would be proper officers in terms of Section 2(34) of the Act. That

specific instruction assigning specific function by either the Board or the Commissioner of Customs is therefore, the governing test to determine

whether an ""officer of customs"" is ""proper officer"". It is submitted that to get over the said decision, sub-section (11) was inserted in Section 28 of

the Act and even in terms of sub-section (11) of Section 28, the power is for the purpose of exercise of the powers under Section 28 of the Act.

By referring to Section 122 of the Act, it is submitted that the officers of DRI are not empowered to issue notice under Section 124 of the Act, that

too without the prior approval. Therefore, the impugned show cause notice is wholly without jurisdiction.

On the second issue, the learned Senior counsel elaborately referred to the allegations contained in the notice, more particularly in paragraphs

39, 40, 43, 43.2, 43.4, 43.5, 52, 54 and 57 and submitted that the authority has pre-judged the entire issue and the impugned proceedings is not a

show cause notice, but in effect it is an order of adjudication except, it has been termed as a show cause notice. To support his contention that the

authority has pre-judged and pre-determined the issue and the petitioner would not have reasonable opportunity in defending himself, reliance was

placed on the decision of the Hon''ble Supreme Court in the case of ORYX Fisheries Private Limited Vs. Union of India (UOI) and Others, . It is

further submitted that even though the show cause notice is answerable to another officer, namely, the Joint/Additional Commissioner of Customs,

yet the inherent defect cannot be cured, as the show cause notice has pre-determined the issue and it is the pre-meditated in nature and in such

circumstances, a Writ of Certiorari is maintainable to quash such a notice. In support of such contention, reliance has been placed on the decision

of the Hon''ble Supreme Court in the case of Siemens Ltd. Vs. State of Maharashtra and Others,

Mr.Velayutham Pichaiya, learned Senior Standing Panel counsel appearing for the respondent after referring to the factual averments as set out

in the counter affidavit, submitted that in terms of Section 124 of the Act, any officer of Customs not below the rank of Assistant Commissioner

has authority to issue the show cause notice for confiscating of goods and in the instant case, the Additional Director General of DRI has issued the

show cause notice and the question would be whether the respondent is an officer of Customs not below the rank of an Assistant Commissioner of

Customs. It is submitted that the Central Government vide notification No. 38/F.No. 4/1/6-CAR, in exercise of its powers under Section 4 of the

Act has appointed all officers of DRI to be officers of Customs. Further, by customs notification No. 19/1990(N.T), dated 26.04.1990, the

Central Government in super-session of an earlier notification in No. 186-Cus, dated 04.08.1981 has appointed to be the officers of the

respondent mentioned in column Nos. 2,3 & 4 of the table mentioned therein to be Commissioner of Customs, Joint Commissioner of Customs

and Assistant Commissioner of Customs or Deputy Commissioner of Customs respectively and therefore, these DRI officers are proper officers

under the Customs Act and competent to initiate proceedings. It is further submitted that the Central Board of Excise and Customs (CBEC) by

circular dated 15.02.1999, instructed that the officers of DRI of different categories have been notified and appointed as Commissioner of

Customs, Deputy Commissioner of Customs or Assistant Commissioner of Customs for the act specified and these officers, therefore, can legally

be entrusted with discharge of functions, normally performed by Commissioners, Deputy Commissioners or Assistant Commissioners of Customs

in their jurisdiction, as the case may be. It was directed that the officers of DRI to undertake investigation of cases deducted by them and issue

show cause notice on completion of investigation. Similar instructions were issued to officers of Directorate General Anti Evasion and in terms of

the said circular, the respondents were competent to issue show cause notice and the adjudication will be done by the jurisdictional

Commissionerate. Therefore, it is submitted that the respondent is competent to issue the impugned show cause notice proposing confiscation of

the seized goods and imposition of penalty. In support of such contention, the learned counsel placed reliance on the decision of this Court in the

case of S. Kannan Vs. Assistant Collector of Customs, Madras, .

It is further submitted that pursuant to notification No. 44/2011-Customs (N.T)., dated 06.07.2011, as amended by Notification No. 53/2012-

Cus, (N.T) dated 21.06.2012, the Central Board of Excise and Customs has assigned the functions of ""proper officer"" to a list of officers of the

respondent for the purposes of Sections 17, 28 and 28AAA of the Act. Therefore, the officers of the respondent Department are proper officers

as contemplated under Section 2(34) and are empowered to exercise powers under Sections 28 and 124 of the Act. It is further submitted that

issuance of show cause notice under Section 124 contemplates that the petitioner''s response will be considered and the petitioner has full

opportunity to explain to the satisfaction of the authorities that there was no improper importation warranting confiscation and only thereafter, the

matter will be considered. In support of such contention, reliance has been placed on the decision of the Hon''ble Supreme Court in the case of

Union of India and others Vs. Jain Shudh Vanaspati Ltd. and another, .

It is further submitted that Section 122 of the Act relates to adjudication for confiscation of goods and imposition of penalties and Section 124

of the Act relates to the issue of show cause notice before confiscation of goods or imposition of penalty. The argument of the petitioner is that the

adjudication proceedings under Section 122 of the Act has been entrusted with the Commissioner of Customs and his subordinates depending on

the value of goods and since the issuance of show cause notice forms part of adjudication proceedings, it is only the Adjudicating Authority who

can adjudicate on the question of adjudication and consequently he alone can issue the show cause notice. It is further submitted that pursuant to

notification No. 44/2011-Cus (N.T) , dated 06.07.2011, the officers of the respondent including the Additional Director General were appointed

as proper officer for the purpose of Sections 17 and 28 of the Act. Section 28 was first amended on 08.04.2011 and subsequently, on

16.09.2011. As per the statement of objects and reasons, appended to the Customs (Amendment and Validation) Bill, 2011, the purpose of

insertion of sub-section (11) of Section 28 was to clarify the true legislative intent that show cause notices issued by the Customs Officers i.e.,

officers of the Commissionerates of Customs(Preventive), DRI, DGCEI and Central Excise Commissionerates demanding Customs duty not levied

or short-levied or erroneously refunded in respect of goods imported are valid, irrespective of the fact that any specific assignment of proper

officer was issued or not and it is therefore proposed to amend retrospectively and to validate anything done or action taken under the said Act in

pursuance of the provisions of the Act at all material times irrespective of issuance of any specific assignment on 06.07.2011.

It is further submitted that Section 124 of the Act only stipulates that no order confiscating any goods or imposing any penalty on any person

shall be made unless the owner of the goods or such person is given notice in writing with prior approval of the officer of Customs not below the

rank of Deputy Commissioner of Customs and in the case on hand, the impugned show cause notice does not violate the statutory provisions. The

learned counsel relied on the decision of the Hon''ble Division Bench of the High Court of Gujarat in the case of Swati Menthol and Allied Chem.

Ltd. Vs. Jt. Dir., DRI, .

By relying on the said decision, it is submitted that the said decision squarely covers the case on hand and the contentions raised are identical

and the Gujarat High Court rejected the similar contention and held that the Officer of DRI having been assigned to carry out the functions under

Sections 17 and 28 of the Act by a valid notification, his action of issuing show cause notice after the date of notification cannot be seen as one

without jurisdiction. It is further submitted that the Writ Petition is not maintainable and this Court would not interfere at the stage of issuance of

show cause notice by the authorities and the petitioner has ample opportunity to put forth his contentions before the concerned authority. To

support such contention, reliance has been placed on the decision of the Hon''ble Supreme Court in the case of Union of India (UOI) and Another

Vs. Kunisetty Satyanarayana, and The Special Director and Another Vs. Mohd. Ghulam Ghouse and Another, and Union of India (UOI) and

Another Vs. Vicco Laboratories, and the unreported decisions of this Court in Sterlite Industries Ltd., Vs CBES in W.P.Nos. 9744 & 9745 of

2010, and Nakoda India Pvt Ltd., Vs Union of India in W.P.No. 31842 of 2012. On the above submissions, the learned counsel seeks to sustain

the impugned show cause notice.

In reply, the learned Senior counsel submitted that the decision of the Gujarat High Court referred by the respondent deals with Sections 17

and 28 of the Act and the contention of the petitioner is with regard to the power under Section 124(a) of the Act, which contemplates prior

concurrence and action be initiated by Officer of customs and both these conditions have not been fulfilled in the instant case and therefore, the

show cause notice is bad in law.

Heard the learned counsels appearing on either side and perused the materials placed on record.

As noticed above, the impugned show cause notice has been challenged on two grounds, firstly by contending that it is without jurisdiction and

secondly that the authority pre-judged and pre-decided the issue and no useful purpose would be served by responding to the show cause notice.

On the question of jurisdiction, the learned Senior counsel referred to Section 124 of the Act and submitted that to exercise the power under

Section 124, there are twin requirements namely, the prior approval of the officer of customs not below the rank of an Assistant Commissioner of

Customs has to be obtained and other being such approval should be by an Officer of Customs. The contention is that the respondent being an

Additional Director of Directorate of Revenue Intelligence is not an Officer of customs. That apart, there is nothing to show that prior approval has

been obtained from the Officer of Customs not below the rank of an Assistant Commissioner, therefore, the show cause notice is vitiated for want

of jurisdiction. To support such arguments, the definition of ""proper officer"" as defined under Section 2(34) is pressed into service and by relying

on the decision in the case of Sayed Ali & Anr., (supra), it is submitted that only such officers of customs, who have been assigned specific

functions would be proper officers in terms of Section 2(34) of the Act. After the decision was rendered by the Hon''ble Supreme Court in the

case of Sayed Ali & Anr., (supra) on 18.02.2011, Section 28 of the Act underwent an amendments by Customs (Amendment and Validation)

Act, 2011, firstly on 08.04.2011, then again on 16.09.2011. By virtue of the amendment, sub-section (11) was inserted to Section 28. Thus, the

objection, which is being raised based on the decision in the case of Sayed Ali & Anr., (supra) is no longer available in the light of the insertion of

sub-section (11) to Section 28. Learned Senior counsel appearing for the petitioner would state that such amendment inserting sub-section (11) to

Section 28 was for the purpose of exercising the power under the said provision and would not empower the respondent to exercise power under

Section 124 of the Act.

Section 28 of the Act deals with notice for payment of duties, interest, etc. In terms of sub-section (1) of Section 28 when any duty has not

been levied or has been short-levied or erroneously refunded or when any interest payable has not been paid, part paid or erroneously refunded,

the proper officer within the time stipulated, serve notice on the person chargeable with the duty or interest requiring to show cause as to why he

should not pay the amounts specified in the notice. Section 28 falls in Chapter V, which deals with ''levy of and exemption from customs duty''. In

terms of Section 47(1) of the Act, where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and

the importer has paid the import duty, if any, assessed thereon and any charges payable under the Act in respect of the same, the proper officer

may make an order permitting clearance of the goods for home consumption. In case of improper importation are where the goods have been

cleared either clandestinely or by fraud, Chapter 14 of the Act would get attracted. The said Chapter deals with ''confiscation of goods and

conveyance and imposition of penalties''. The impugned show cause notice proposes to confiscate 15.16 gold bars foreign origin under Section

111(d) and 111(l) of the Act read with Section 120(1) which deals with ''confiscation of smuggled goods'' notwithstanding any change in form

apart from proposing to confiscate the seized packing material under Section 118 and proposing to impose penalty under Section 112. The

proposal for confiscation and penalty is in terms of the powers falling under Chapter 14 of the Act and for which purpose, the procedure required

to be followed is Section 124 of the Act. Therefore, the contention of the learned Senior counsel that the insertion of sub-section (11) to Section

28 is only with regard to the power exercisable under Section 28 of the Act and would not apply to Section 124 is not tenable in the light of the

fact that the notifications referred to supra states that all officers of the Directorate of Revenue Intelligence to be officers of Customs and the

Notifications dated 26.04.1990, 06.07.2011 and 21.06.2012 and the Circulars dated 15.02.1999 and 23.09.2009, make it manifestly clear that

DRI officials have been appointed as customs officers by in exercise of the powers conferred under Section 4(1) of the Act and the notification

reads as follows:-

Notification: 19/89-Cus.(NT) dated 26-Apr-1990 Appointment of D.R.I., Officials as Customs Officers

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 the notification

of the Government of India in the Ministry of Finance (Department of Revenue) No. 186-Cus., dated 4th August, 1981 (as amended), the Central

Government hereby appoints the officers mentioned in column (2) of the Table below to be the Collector of Customs, the officers mentioned in

column (3) thereof to be Deputy Collectors of Customs, and officers mentioned in column (4) thereof to be Assistant Collectors of Customs for

the areas mentioned in the corresponding entry in column (1) of the said Table:

Area/Jurisdiction Designation of the officer

1.

2.

3.

4.

. .............

States of Tamil Nadu, Andhra Pradesh, Karnataka and Kerala and Union Territories of Pondicherry and Lakshadweep Island. Addl. Director

General Directorate of Revenue Intelligence, Madras

States of Tamil Nadu and Andhra Pradesh and Union Territory of Pondicherry. Deputy Director, Directorate of Revenue intelligence, Madras

Zone Assistant Collectors, Directorate of Revenue Intelligence, Madras Zone.

[Notification No. 19/90-Cus. (N.T), dated 26.04.1990]

Further, the circular issued by the CBEC, dated 15.02.1999 and 23.09.2011, clearly states that the Directorate of Revenue Intelligence

Officers can undertake investigation of cases deducted by them and to issue show cause notices on completion of investigation. Admittedly, the

petitioner has not questioned the statutory notification or the circular issued by the CBEC and hence, this Court is of the view that the impugned

show cause notice does not suffer from want of jurisdiction.

In the light of the above discussion, the legal position that emerges is that an act or omission which will render the goods liable for confiscation

under Section 111 or 113 of the Act, is an act of smuggling as defined under Section 2(39) and where there is smuggling, Chapter 14 would get

attracted. Section 113 provides for confiscation of goods attempted to be improperly exported and Section 122 refers only to the question of

adjudication process and the limit of officers and it is only under Section 124, which says that before confiscating the goods or imposing any

penalty, the show cause notice should be given to the person concern. At this stage, it would be beneficial to refer to the decision of the Hon''ble

Supreme Court in the case of Union of India Vs Jain Sudh Vanaspathi Ltd., (supra), wherein it has been held as hereunder:-

It is patent that a show cause notice under the provisions of Section 28 for payment of Customs duties not levied or short-levied or erroneously

refunded can be issued only subsequent to the clearance under Section 47 of the concerned goods. Further, Section 28 provides time limits for the

issuance of the show cause notice thereunder commencing from the ""relevant date"" is defined by sub-section (3) of Section 28 for the purpose of

Section 28 to be the date on which the order for clearance of the goods has been made in a case where duty has not been levied; which is to say

that the date upon which the permissible period begins to run is the date of the order under Section 47. The High Court was, therefore, in error in

coming to the conclusion that no show cause notice under Section 28 could have been issued until and unless the order under Section 47 had been

first revised under Section 130.

Section 124 in the Customs Act, 1962

Issue of show cause notice before confiscation of goods, etc. ""No order confiscating any goods or imposing any penalty on any person shall

be made under this Chapter unless the owner of the goods or such person

(a) is given a notice in 1[writing with the prior approval of the officer of customs not below the rank of a Deputy Commissioner of Customs,

informing] him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;

(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of

confiscation or imposition of penalty mentioned therein; and

(c) is given a reasonable opportunity of being heard in the matter: Provided that the notice referred to in clause (a) and the representation referred

to in clause (b) may at the request of the person concerned be oral.

The case of the appellants in the show cause notices is that the stainless steel containers in which the said oil was imported were banned, that the

stainless steel containers were deliberately camouflaged by painting them to resemble mild steel containers, and that this was done with a view to

enabling their clearance. A clearance order under Section 47 obtained by fraudulent means such as this (if it, in fact, be so) cannot debar the

issuance of a show-cause notice for confiscation of goods under Section 124. Fraud, if established, unravels all. An order under Section 47

obtained by the employment of fraudulent methods does not have to be set aside by the exercise of revisional powers under Section 130 before

the ill-effects of the fraud can be set right by initiation of the process of confiscation of the fraudulently cleared goods under Section 124.

On the second issue with regard to the allegation that the show cause notice has pre-judged the issue, it is a pre-meditated notice and

foreclosed the materials rights, the learned Senior counsel referred to the decision of the Hon''ble Supreme Court in the cases of Oryx Fisheries

Private Limited (supra) and Siemens Ltd.,(supra) to contend that the Writ Petition is maintainable and even though the show cause notice is

answerable to the Joint/Additional Commissioner of Customs, yet the defect cannot be cured.

I have carefully perused the allegations made in the show cause notice. On a reading of the entire allegations in the show cause notice, it

appears that the respondent has narrated the sequence of events, it is seen that the petitioner alone is not the only noticees and along with him,

there are four other noticees. The officer has referred to the series of statements recorded from each of the noticees and other persons, who have

been examined and has in fact elaborately set out all the statements and come to the prima facie conclusion that at one or more places the words

admittedly"", ""invariably"", ""wilfully"" are sprinkled in the show cause notice. In my view mere use of these expressions by the respondent in the show

cause notice by itself cannot be a basis to hold that the show cause notice has pre-judged the issue or it is a premeditated show cause notice or a

foregone conclusion. In fact, the show cause notice runs to 41 pages and most of which are the summary of the statements given by the petitioner

and other co-noticees, the material which was recovered the result of the search conducted in the residence etc. Therefore, this Court has no

hesitation to hold that the show cause notice is neither pre-meditated nor pre-conceived rather it is an attempt to place all the facts, which have

been recorded by the officers of the DRI in the course of investigation. Therefore, by elaborately setting out all the facts in the show cause notice in

fact provides full and effective opportunity to the petitioner to put forth his objections to the show cause notice, which will be adjudicated by a

different officer and not the respondent, who issued the show cause notice. Therefore, this Court is of the view that when the adjudication is to be

done by an independent officer, where there is no role played by the Investigating Officer, no prejudice could be caused to the petitioner and the

scheme of the Act sufficiently safeguards the rights of the petitioner. In fact, the notification and circular empowers the officers of DRI to undertake

investigation and issue show cause notice in cases, where they have investigated and the adjudication is to be done by the jurisdictional

Commissionerates.

The decisions of the Hon''ble Supreme Court in the case of Oryx Fisheries Private Limited (supra) and Siemens Ltd.,(supra) have referred to

the show cause notices which were subject matter of the case and on facts came to the conclusion that the authority has virtually pre-decided the

matter. As pointed out earlier even though in the impugned show cause notice, the expression ""admittedly"" has been used in more than one place,

those words alone cannot be read to interpret the impugned show cause notice as being pre-conceived or pre-meditated. The allegations in the

show cause notices have to be read in its entirety and if done, the true picture emerges and it can be clearly deciphered that the respondent has

sought to bring on record, all the statements recorded from all the noticees and all persons, who were examined on more than two occasions.

Therefore, the decisions relied on by the learned Senior counsel appearing for the petitioner are clearly distinguishable on facts and does not render

support to the case of the petitioner.

Accordingly, the Writ Petition fails and it is dismissed. The petitioner is directed to submit his reply to the show cause notice, within a period of

thirty days from the date of receipt of a copy of this order. No costs. Consequently, connected miscellaneous petitions are closed.