Madras High Court Restrains CESTAT from Remanding DRI Jurisdiction Cases: Mandates Pendency till Supreme Court Ruling
The legal validity of Show Cause Notices (SCN) issued by the Directorate of Revenue Intelligence (DRI) has been a subject of intense judicial scrutiny and legislative amendments for over a decade. A recent judgment by the Madras High Court in the case of Principal Commissioner of Customs Vs Mohan C. Suvarna addresses a critical procedural question arising from this controversy: Can the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) remand matters back to the adjudicating authority merely because the Supreme Court is seized of the jurisdictional issue?
The High Court has clarified the procedural roadmap for such cases, emphasizing that appellate bodies must retain the appeals pending the final outcome from the Apex Court rather than disposing of them through remand.
The Core Legal Controversy: "Proper Officer" under Section 28
To understand the gravity of the judgment in Principal Commissioner of Customs Vs Mohan C. Suvarna, one must examine the legislative and judicial history governing Section 28 of the Customs Act, 1962.
The Sayed Ali Impact
The dispute originates from the Supreme Court's landmark ruling in Commissioner of Customs vs. Sayed Ali. In this case, the Apex Court held that officers of the DRI were not "proper officers" for the purpose of assessing duty under Section 28 of the Customs Act, 1962. This judgment effectively invalidated thousands of SCNs issued by DRI officers, creating a significant void in customs enforcement.
Legislative Response and Mangali Impex
To neutralize the impact of Sayed Ali, the Parliament introduced amendments via the Finance Act, 2011. Specifically, Section 28(11) was inserted into the Customs Act, 1962, aiming to retrospectively validate the actions taken by DRI officers.
However, the constitutional validity of this retrospective validation was challenged before the Delhi High Court in the case of Mangali Impex vs. Union of India. The Delhi High Court ruled in favor of the assessees, holding that the retrospective application of Section 28(11) could not cure the jurisdictional defect for the period prior to 08.04.2011.
The Revenue appealed this decision to the Supreme Court. The Supreme Court admitted the appeal and granted a stay on the operation of the Mangali Impex judgment. Consequently, the issue of whether a DRI officer is a "proper officer" remains sub judice.