REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL NOS. 4294-4295 OF 2002

COMMISSIONER OF  CUSTOMS — APPELLANT  

VERSUS

SAYED ALI & ANR. — RESPONDENTS

WITH

[CIVIL APPEAL NOS.4603-4604 of 2005]

J U D G M E N T

D.K. JAIN, J.:

1. Challenge in these civil appeals, filed under Section 130E of the Customs  

Act, 1962 (for short “the Act”), is to the orders dated 1st October, 2001  

and 4th January, 2005 passed by the Customs, Excise & Gold (Control)  

Appellate Tribunal (for short “the CEGAT”) and the Customs, Excise &  

Service Tax Appellate Tribunal (for short “the CESTAT”) respectively.  

In the first set of appeals (Nos. 4294-4295 of 2002), the CEGAT has held  

that  the Commissioner  of Customs (Preventive),  Mumbai,  not being a  

“proper  officer”  as  defined in  Section 2(34)  of  the  Act,  did  not  have  

jurisdiction to issue show cause notice in terms of Section 28 of the Act.  

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However,  in the second set  of appeals  (Nos. 4603-4604 of 2005),  the  

CESTAT has, to the contrary, held that the Commissioner  of Customs  

(Preventive), Mumbai had jurisdiction to issue notice under Section 28 of  

the Act.  

2. Since the question of law arising in all the appeals is similar, these are  

being disposed of by this common judgment. However, to appreciate the  

controversy, facts in C.A. Nos. 4294-4295 of 2002 are adverted to. These  

are:  

Respondent  No.  1  is  a  partner  in  respondent  No.  2  firm viz.  M/s.  

Handloom  Carpet,  which  is  engaged  in  the  business  of  carpet  

manufacture/export.   Respondent  No.  2  was  charged  with  misusing  the  

Export  Pass Book scheme by selling goods cleared duty free in the open  

market  or  selling  the  pass  book  on  premium  in  violation  of  the  ITC  

restriction imposed on such sale. Investigations in the matter were conducted  

by the Marine and Preventive Wing of the Customs. On 28th August, 1991,  

the  Assistant  Collector  of  Customs  (Preventive),  Mumbai,  issued  to  the  

respondents  a  show cause  notice,  alleging  violation  of  the  provisions  of  

Section  111(d)  of  the  Act.  On  3rd February,  1993,  the  same  officer  

adjudicated upon the said show cause notice, confirming the demands raised  

in the show cause notice.

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3. Being aggrieved, the respondents preferred an appeal before the Collector  

of  Customs  (Appeals),  who  vide  order  dated  14th December,  1993,  

allowed the appeal holding that since the matter involved demand of duty  

beyond a period of six months, the show cause notice was required to be  

issued by the Collector, and not by the Assistant Collector. Nevertheless,  

the Collector (Appeals) granted liberty to the department to re-adjudicate  

the case by issuing a proper show cause notice.   

4. Accordingly, the Collector of Customs (Preventive) issued show cause  

notice dated 16th April, 1994 asking the respondents to show cause as to  

why  the  goods  under  seizure  valued  at  `1,04,118.52/-  should  not  be  

confiscated, and customs duty amounting to `5,07,274/- be not levied in  

terms of Section 28(1) of the Act, by invoking the extended period of  

limitation.  Penalties under Sections 112(a) and (b)(i) and (ii) of the Act  

were also proposed.  

5. In reply to the show cause notice,  the jurisdiction of the Collector  of  

Customs (Preventive) was questioned on the ground that the jurisdiction  

of  a  Commissioner  by  virtue  of  Notification  No.  251/83  being  more  

specific  and  limited  in  nature,  the  said  notification  will  prevail  over  

Notification  No.250/83.  Vide  order  dated  19th August,  1996,  the  

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Collector of Customs (Preventive) rejected the objections regarding his  

jurisdiction, holding thus:

“It is not disputed by the parties that by virtue of notification  No. 250/83 the commissioner of customs (preventive) Mumbai  is  appointed  as  Commissioner  of  Customs  in  the  areas  comprising  Districts  of  Mumbai,  Thane  and  Kolaba  and  a  concurrent jurisdiction is thus vested in respect of Mumbai port  also.  What  is  being  contended  is  that  the  jurisdiction  of  commissioner  of  customs,  Mumbai  under  Notification  No.  251/83 is more specific and limited. In this regard it is relevant  to refer to the definition of smuggling under the provisions of  customs Act, 1962. Under the Act Smuggling is defined as any  act or omission which renders the goods to confiscation under  the  provisions  of  the  Act.  In  this  case  M/s  handloom carpet  manufacturer  (sic)  are  charged  with  trafficking  of  the  goods  imported and cleared only free in violation of the provisions of  notification  No.  117/88  dated  30-3-1988  and  fabrication  of  documents  to  show receipt  and  consumption  of  the  same  in  their factory. The goods imported and cleared duty free were  thus rendered liable for confiscation under the provisions of the  customs  Act,  1962  and  the  customs  (preventive)  Commisionerate  created  for  the  purpose  of  prevention  of  smuggling  and  detention  of  cases  of  smuggling  including  commercial  frauds  is  thus  (sic)  competent  to  investigate  and  adjudicate the case.”

The Collector confirmed the demand of duty of  `  5,07,274/-under Section  

28(1) of the Act. He also ordered confiscation of two consignments of dyes  

sulphur blue and sulphur blue green valued at ` 1,34,118.52/-, and imposed a  

redemption fine of ` 1,50,000/-.

6. Aggrieved,  the  respondents  preferred  appeals  before  the  CEGAT.  As  

afore-mentioned, accepting the preliminary objection of the respondents  

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regarding jurisdiction of the Collector (Preventive), the CEGAT has, vide  

the impugned order, allowed the appeals, observing that:

“it is very clear that the Commissioner of Customs (Preventive)  does not have jurisdiction to issue the impugned show cause  notice and in view thereof he could not have the jurisdiction to  adjudicate the matter when imports have taken place at Bombay  Customs House.”

7. At the sake of repetition, it may be noted that although the facts obtaining  

in C.A. Nos. 4603-4604 of 2005 were similar to those in C.A. Nos. 4294-

4295 of 2002, but, in the former case,  following the decision of its larger  

bench in Konia Trading Co. Vs. Commissioner of Customs, Jaipur1, the  

CESTAT  while  upholding  the  issue  of  show  cause  notice  by  the  

Collector of Customs (Preventive) under Section 28 of the Act, set aside  

the order of adjudication passed by the said officer with a direction that  

the issues be determined afresh by the jurisdictional Collector of Customs  

who had earlier assessed the bill of entry in question at Bombay Port.  

8. Hence, the present cross appeals by the revenue and the importers. At the  

very outset, we may clarify that these appeals  are confined only to the  

question  of  validity  of  the  demands  raised by  virtue  of  re-assessment  

orders  passed  by  the  Collector  of  Customs  (Preventive)  Mumbai,  

pursuant to the issue of show cause notices under Section 28 of the Act.  

1 2004 (170) E.L.T. 51 (Tri.-LB)

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For the sake of convenience, hereinafter, both the CESTAT and CEGAT  

are referred to as “the Tribunal”.

9. Mr. Harish Chander, learned senior counsel appearing on behalf of the  

Revenue in one set of appeals, contended that once the Commissioner  

(Preventive) had been appointed as Collector of Customs (Preventive),  

Bombay by virtue of the Notification Nos. 250/83 and 251/83, issued by  

the Central Government under Section 4 of the Act, the former became  

“proper officer” in terms of Section 2(34) of the Act, and was competent  

to issue notice under Section 28 of the Act as the goods were cleared for  

home consumption  in  Bombay.  In  support  of  the  proposition  that  an  

officer of Customs who has been assigned certain functions, which are to  

be performed under the Act is a “proper officer” and such assignment can  

be done by the Board or  the  Commissioner  of  Customs,  reliance was  

placed on the decision of this court in  Union of India & Ors. Vs. Ram  

Narain Bishwanath & Ors.2 as also on a larger bench decision of the  

Tribunal  in   Konia  Trading  Co.  (supra) and  another  decision  of  the  

Tribunal in  Manohar Bros. (Capacitors)  Vs.  Collector of Customs-II,   

2 (1998) 9 SCC 285

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Bombay3, the latter having attained finality on the dismissal of revenue’s  

appeal by this Court (See : Collector Vs. Manohar Bros. (Capacitors)4).

10. Per contra,  Mr. Joseph Vellapally, learned senior counsel appearing on  

behalf of the respondents in C.A. Nos. 4294-4295 of 2002, contended  

that the statutory powers conferred under Section 28 of the Act must be  

exercised  by  an  officer  of  Customs,  who  has  been  assigned  those  

functions either by the Central Board of Excise and Customs or by the  

jurisdictional Commissioner of Customs (Imports). As the Commissioner  

(Preventive) has not been appointed as a “proper officer” for the purposes  

of assessment or re-assessment, nor assigned any functions under Section  

28 of the Act or under any other Section related to assessment of goods  

entered  for  home consumption,  he  was  not  competent  to  issue  notice  

under Section 28 of the Act, argued the learned counsel. It was also urged  

that  mere  appointment  of  a  person  as  an  officer  of  Customs  with  

territorial jurisdiction over the Mumbai port under Section 4 of the Act,  

does  not  ipso  facto  confer  authority  on  him to  exercise  the  statutory  

powers entrusted to proper officers, as under the Act, while all proper  

officers must be ‘officers of Customs’, all ‘officers of Customs’ are not  

“proper officers”. In support of the proposition, learned counsel heavily  

3 1998 (98) E.L.T. 821 (Tri) 4 2004 (166) E.L.T. A152 (S.C.)

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relied on a decision of the Karnataka High Court in  Devilog Systems  

India Vs. Collector of Customs, Bangalore5 and orders of the Tribunal in  

Orient Arts & Crafts  Vs.  Commissioner of Customs (Prev.), Mumbai6  

and  Informatika  Software  (P)  Ltd.  &  Anr.  Vs.  Commissioner  of   

Customs (P), Calcutta7.  Learned counsel submitted that the use of the  

expression “proper officer” in contradistinction to “officer of customs” in  

certain Sections in the Act makes it clear that the two expressions cannot  

be  used  interchangeably.  Learned  counsel  contended  that  if  the  

Revenue’s contention that all “officers of customs” are “proper officers”  

is accepted, it would render Section 2(34) otiose, and would amount to  

re-writing the Act, leading to administrative anarchy.  In support, reliance  

was placed on the decision of this Court in  The Commissioner, Sales  

Tax, U.P. Vs. M/s. Suraj Prasad Gouri Shankar8.

11.   Explaining the procedure for  clearance of  imported goods for home  

consumption, learned counsel submitted that the Act clearly delineates  

the functions to be performed by the Commissioner of Customs (Imports)  

and the Commissioner (Preventive).   According to the learned counsel  

under Section 30 of the Act, the owner of a vessel, on arrival or prior to  5 1995 (76) E.L.T. 520 (Kar.) 6 2003 (155) E.L.T .168 (Tri-Mum) 7 1997 (73) ECR 348 (Tri.-Kolkata) 8 (1974) 3 SCC 230

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arrival, is required to file an Import General Manifest (“IGM”) with the  

proper  officer  i.e.  the  Commissioner  of  Customs  (Imports),  the  

Rummaging and Intelligence Wing of the Preventive Division checks the  

conveyance to ensure that all goods in the vessel are mentioned in the  

IGM; then, in terms of Section 31 of the Act, an order allowing “entry  

inwards” is granted by the proper officer, i.e. Commissioner of Customs  

(Imports); the goods are unloaded under the supervision of the Preventive  

Officer in terms of Section 34; and then, the importer files a bill of entry,  

which is  assessed by the “proper officer” i.e.  Commissioner  (Imports)  

who, on payment of all duties by the importer, issues an order allowing  

clearance of goods for home consumption under Section 47 of the Act. It  

was thus, asserted that once goods are manifested, the jurisdiction to pass  

any  order  of  assessment  or  re-assessment  vests  in  the   Collector  of  

Customs (Imports) and not in the Collector of Customs (Preventive). To  

bring home the point, reference was made to a decision of the Calcutta  

High Court in  Sharad Himatlal Daftary  Vs.  Collector of Customs9.  It  

was submitted that in the instant case, the import manifest and the bill of  

entry were filed before the Additional  Collector  of Customs (Imports)  

Mumbai;  the  bill  of  entry  was  duly  assessed,  and  the  benefit  of  the  

exemption was extended, subject to execution of a bond by the importer  9 1988 (36) E.L.T. 468 (Cal.)

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which was duly executed, undertaking the obligation of export.  Learned  

counsel  argued that the function of the preventive staff  is  confined to  

goods which are not manifested as in respect of manifested goods, where  

the  bills  of  entry  are  to  be  filed,  the  entire  function  of  assessment,  

clearance etc. is carried out by the appraising officers functioning under  

the Commissioner of Customs (Imports).  

12.Before adverting to the rival submissions, it would be expedient to survey  

the  relevant  provisions  of  the  Act.  Section  28  of  the  Act,  which  is  

relevant for our purpose, provides for issue of notice for payment of duty  

that has not been paid, or has been short-levied or erroneously refunded,  

and provides that:

“28. Notice for payment of duties, interest etc. — (1)  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 may, - (a)      in the case of any import made by any individual for  his personal use or by Government or by any educational,  research  or  charitable  institution  or  hospital,  within  one  year; (b)      in any other case, within six months, from  the  relevant  date,  serve  notice  on  the  person  chargeable  with the duty or  interest  which has not  been  levied or charged or which has been so short-levied or part  paid or to whom the refund has erroneously been made,  requiring him to show cause why he should not pay the  amount specified in the notice :

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Provided that where any duty has not been levied or has  been short-levied or the interest has not been charged or  has  been  part  paid  or  the  duty  or  interest  has  been  erroneously refunded by reason of collusion or any wilful  mis-statement or suppression of  facts  by the importer or  the exporter or the agent or employee of the importer or  exporter,  the  provisions  of  this  sub-section  shall  have  effect as if for the words “one year” and “six months”, the  words “five years” were substituted.

It  is  plain from the provision that the “proper officer” being subjectively  

satisfied on the basis of the material that may be with him that customs duty  

has not been levied  or short levied or erroneously refunded on an import  

made by any individual for his personal use or by Government or by any  

educational, research or charitable  institution or hospital, within one year  

and in all other cases within six months from the relevant date, may cause  

service of notice on the person chargeable, requiring him to show cause why  

he should not pay the amount specified in the notice.  It is evident that the  

notice under the said provision has to be issued by the “proper officer”.

13. Section 2(34) of the Act defines a “proper officer”, thus:

“ 2. Definitions.-…………………………………………… (34)“proper  officer”,  in  relation  to  any  functions  to  be  performed under this Act, means the officer of customs who is  assigned those functions by the Board or the Commissioner of  Customs;

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It  is  clear  from a  mere  look  at  the  provision  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.  Specific  entrustment  of  

function by either the Board or the Commissioner of Customs is therefore,  

the  governing  test  to  determine  whether  an  “officer  of  customs”  is  the  

“proper officer”.  

14.From  a  conjoint  reading  of  Sections  2(34)  and  28  of  the  Act,  it  is  

manifest  that  only such a  customs officer  who has  been assigned  the  

specific  functions  of  assessment  and  re-assessment  of  duty  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 in as much as the test contemplated under Section  

2(34)  of  the  Act  is  that  of  specific  conferment  of  such  functions.  

Moreover, if the Revenue’s contention that once territorial jurisdiction is  

conferred,  the  Collector  of  Customs  (Preventive)  becomes  a  “proper  

officer” in terms of Section 28 of the Act is accepted, it would lead to a  

situation  of  utter  chaos  and  confusion,  in  as  much  as  all  officers  of  

customs,  in  a  particular  area  be  it  under  the  Collectorate  of  Customs  

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(Imports) or the Preventive Collectorate, would be “proper officers”.  In  

our view therefore, it is only the officers of customs, who are assigned  

the  functions  of  assessment,  which  of  course,  would  include  re-

assessment,  working under the jurisdictional Collectorate within whose  

jurisdiction the bills of entry or baggage declarations had been filed and  

the consignments had been cleared for home consumption, will have the  

jurisdiction to issue notice under Section 28 of the Act.   

15. In this behalf, our attention was also invited by Mr. Joseph Vellapally to  

standing order No. 35/89 dated 12th July, 1989, issued by a Collector of  

Customs,  holding dual  charges  of  Collector  of  Customs,  Calcutta  and  

Collector of Customs (Preventive) as also to certain notifications issued  

by  the  Board  under  Section  2  (34)  of  the  Act  clearly  defining  the  

functions of the Customs House and the Preventive Collectorate.

16. In the present cases, the import manifest and the bill of entry having been  

filed  before the  Collectorate  of  Customs (Imports)  Mumbai,  the  same  

having been assessed and clearance for home consumption having been  

allowed by the proper officer on importers executing bond, undertaking  

the  obligation  of  export,  in  our  opinion,  the  Collector  of  Customs  

(Preventive), not being a “proper officer” within the meaning of Section  

2(34) of the Act, was not competent to issue show cause notice for re-

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assessment under Section 28 of the Act.  Nothing has been brought on  

record  to  show that  the  Collector  of  Customs  (Preventive),  who  had  

issued the show cause notices was assigned the functions under Section  

28  of  the  Act  as  “proper  officer”  either  by  the  Board  or  the  

Collector/Commissioner  of  Customs.  We  are  convinced   that  

Notifications No. 250-Cus and 251-Cus., both dated 27th August, 1983,  

issued by the Central Government in exercise of the powers conferred by  

sub-section  (1)  of  the  Section  4  of  the  Act,  appointing  Collector  of  

Customs (Preventive) etc. to be the Collector of Customs for Bombay,  

Thane and Kolaba Districts in the State of Maharashtra did not ipso facto  

confer  jurisdiction  on him to  exercise  power  entrusted  to  the  “proper  

officers” for the purpose of Section 28 of the Act. In that view of the  

matter, we do not find any substance in the contention of Mr. V. Shekhar,  

learned Senior Counsel, appearing for the revenue in the second set of  

appeals, that the source of power to act as a “proper officer” is Sections 4  

and 5 of the Act and not sub-section 34 of Section 2 of the Act.  The said  

sections merely authorize the Board to appoint officers of Customs and  

confer  on  them the  powers  and  duties  to  be  exercised/discharged  by  

them, but for the purpose of Section 28 of the Act, an officer of customs  

has to be designated as “proper officer” by assigning the function of levy  

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and collection of duty, by the Board or the Commissioner of Customs.  

The argument is rejected accordingly.  Similarly, revenue’s reliance on  

the decision of this court in Ram Narain Bishwanath & Ors. (supra) is  

clearly misplaced.  In that case the issue for determination was that when  

goods imported and cleared at Paradip Port (Orissa State) were seized by  

the Customs authorities in West Bengal on the allegation that these had  

been imported on the strength of fictitious licences, whether the customs  

authorities at Paradip or West Bengal will have the jurisdiction to initiate  

adjudication proceedings.  By a short order it was held that it was for the  

customs  authorities  at  Paradip  to  initiate  proceedings  against  the  

importer.  Apart from the fact that none of the statutory provisions were  

considered in that case, the issue arising for consideration in the present  

appeals was not the subject matter therein.  Thus, the said decision is of  

no avail to the revenue.  

17.For the aforegoing reasons, we do not find any merit in the stand of the  

revenue. Resultantly, C.A. Nos. 4294-4295 of 2002, being devoid of any  

merit,  are dismissed, while C.A. Nos. 4603-4604 of 2005 are allowed.  

Before parting with the cases, we once again clarify that this judgment  

shall not preclude the revenue from initiating any proceedings against the  

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importers for recovery of duty and other charges payable in respect of the  

subject goods, if permissible under the Act.

18.However, in the facts and circumstances of these cases, there shall be no  

order as to costs.  

.……………………………………               (D.K. JAIN, J.)  

                             .…………………………………….              (H.L. DATTU, J.)

NEW DELHI; FEBRUARY 18, 2011. RS

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