DRI Officers Have Jurisdiction To Issue SCN In Drawback Cases: CESTAT

DRI Officers Have Jurisdiction To Issue SCN In Drawback Cases: CESTAT

Introduction

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has clarified that the Directorate of Revenue Intelligence (DRI) has jurisdiction to issue show cause notices (SCNs) in drawback cases. The ruling settles the question of competence of DRI officers in such matters under the Customs Act, 1962.

Factual Background

The case arose from an investigation into alleged fraudulent export activities by M/s SSK Knit Apparels, Tirupur. The DRI issued an SCN to the appellant, a Custom House Agent/Customs Broker (CHA/CB), alleging that it had filed shipping bills without proper verification, thereby facilitating wrongful drawback claims.

Procedural History

The appellant challenged the validity of the SCN, arguing that DRI officers were not competent to issue notices under Section 75 of the Customs Act, read with Rules 16 and 16A of the Drawback Rules, 1995.

Contentions

• Assessee: Maintained that SCNs issued by DRI were without jurisdiction, as only proper Customs officers could issue them.
• Department: Contended that DRI officers were duly appointed as “officers of Customs” and therefore had full authority to issue SCNs in drawback matters.

Tribunal’s Reasoning

The Bench comprising P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) referred to Circular No. 24/2011-Cus (31.05.2011). It held that the circular recognizes SCNs by officers of Customs, and since DRI officers are also notified as such under the Act, their jurisdiction cannot be doubted.

Further, the Tribunal emphasized that a circular cannot override a statutory notification that designates DRI as “officers of Customs.”

On the penalty imposed on the CHA, the Tribunal observed that Section 117 of the Customs Act (a general penalty provision) could not be applied when the allegations specifically related to duties governed by the Customs House Agents Licensing Regulations (CHALR), which is a special law. The Revenue also failed to prove any act of abetment on the part of the CHA.

Outcome

The Tribunal allowed the appeal, set aside the impugned order, and also quashed the penalty imposed on the CHA.

Significance

This decision reaffirms the authority of DRI officers in drawback cases, while also clarifying the limits of penal provisions applicable to customs brokers. It reinforces the principle that special law prevails over general provisions in cases of conflict.

Representation

In this case the appellant was represented by Mr. S. Murugappan, Advocate. Meanwhile the respondent was represented Ms. Anandalakshmi Ganeshram, Advocate.