01. CUSTOMS LAW AND PROCEDURE
Proposed legislative changes in the Customs Act, 1962
- Vide the amendments proposed to various provisions pertaining
to classes of officers and proper officers under customs law, the
Finance Bill, 2022 seeks to legislatively overrule a judgment dated
March 2021 of the Supreme Court of India in Canon India
Private Limited vs Commissioner of Customs.
[Refer Sections 85 – 87 of the Finance Bill,
2022]
Further, a validation section has also been proposed which provides for all actions taken prior to the date of this amendment, as being correct in law. [Refer Section 96 of the Finance Bill, 2022]
Simultaneously, a new section is proposed to be inserted in the Customs Act, 1962 vide which any inquiry, investigation or audit caused by an officer of customs pursuant to an allegation of evasion of customs duty, erroneous refund/ drawback or the like will be adjudicated and dealt with the "the proper officer of customs". It is incumbent on the officer of customs causing an investigation, inquiry or audit to relay a report to such proper officer having jurisdiction over the importer/ export. [Refer Section 93 of the Finance Bill, 2022]
To recap, the Supreme Court in the aforementioned judgment held as follows:
- Officers of the Directorate of Revenue Intelligence (DRI) are not proper officers under the Customs Act, 1962. It was observed that a notification of 2012 which appointed officers of DRI as proper officer is non-est in law as it draws power from a definition provision, which is impermissible.
- The power to issue a show cause notice/ demand notice under Section 28 of the Customs Act, 1962 vests with "the proper officer". This provision, being in essence a power of re-assessment can only be exercised by the same officer who had initially caused the assessment and not a third authority. The usage of the word "the" as opposed to "any" or "a" similarly suggests that such power can only be exercised by the same officer who had caused assessment.
- Comments: The proposed
amendments seek to empower, retroactively, DRI officers to issue
demand notices. While the intent and reasons for the proposed
amendments is clear, there are a few grey areas which would be
addressed by courts.
The proposition of law enunciated by the Supreme Court, viz., that show cause notices/ demand notices are a power of reassessment and should be exercised only by the assessing officer as sought to be annulled by insertion of a specification provision which allows for two officers of customs to concurrently exercise powers runs contrary to the amendment which provides that proceedings pursuant to investigation, audit or inquiry should only be conducted by the proper officer who has initially caused assessment, which per the explanatory notes to the Finance Bill, 2022 itself is an affirmation of the principle of Canon India.
In fact, various courts have commented that allowing multiple officers to exercise jurisdiction will lead to a chaotic and unintended situation and should be avoided. In this context, allowing multiple officers of customs to exercise jurisdiction is amenable to challenge as stated earlier. This provision remains amenable to challenge as on the one hand, the ratio of Canon India is sought to be followed in law, while on the other, rejected. This will result in additional litigation for taxpayers.
The amendment also entails civil and criminal penalties and therefore, retrospective effect would also be tested on the principles of criminal jurisprudence.
- An additional obligation is being imposed on importers, viz.,
to provide such additional evidence as notified along with regular
import documents to justify the value of imported goods. Such
additional obligation will be imposed on specified classes of goods
where generally the trend is of undervaluation. [Refer Section
88 of the Finance Bill, 2022]
Comments: This amendment has been proposed to introduce a control and check mechanism in those classes of goods which suffer from systemic undervaluation. The nature, scope and validity of additional obligations imposed depends on the notification so issued, which is pending as of date. It also remains to be seen how this provision will operate apropos acceptance and/ or rejection of transaction value as provided for in the customs valuation rules of 2007.
- Publication of information pertaining to classification and/ or
valuation of import/ export goods either electronically or
otherwise, except where required by law is proposed to be a
criminal offence, attracting an imprisonment term of six months as
also a fine of Rupees fifty thousand. [Refer Section 94 of the
Finance Bill, 2022].
Comments: This amendment is to protect confidential data of importers/ exporters submitted to the customs authorities which was hitherto being done by various private organizations for access to public at large. The practice of publishing daily lists by various customs formation was stopped in November 2016 itself.
- Amendments under advance ruling regime under the Customs Act, 1962 allows withdrawal of application at any time prior to orders being issued and restricts validity of an advance ruling for a period of three years or change in law or facts. [Refer Sections 89 – 92 of the Finance Bill, 2022]
- The Customs (Import of Goods at Concessional Rate of Duty)
Rules, 2017 have been overhauled for providing procedural ease with
automation and electronic processing through a common portal being
the thrust. [Refer Notification No. 07/2022-Customs
(NT)]
Comments: This is a welcome step and will significantly increase ease of doing business for importers. It is also particularly important since various concessions/ exemptions in this budget are subject to compliance with these rules.
02. CUSTOMS DUTY RATE MOVEMENTS
Customs Duty Rate Movements
*Please click here for movement in rates of customs duty.
[Refer Notification Nos. 02/2022-Cus to 15/2022-Cus all dated 1 February 2022, effective as prescribed in the notification]
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