Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 13.08.2026
CESTAT Kolkata Overturns Customs Valuation and Penalties on Polyester Quilt Cover Imports
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata recently delivered a significant judgment in the case involving M/s. Annapurna Industries and the classification, valuation, and penalization of imported polyester quilt covers. This article provides a detailed analysis of the case, the legal issues involved, and the implications for importers and customs authorities.
Background of the Case
M/s. Annapurna Industries imported polyester quilt covers from China, declaring them under Customs Tariff Heading (CTH) 63022200 at a transaction value of USD 1.20–1.25 per piece (CIF). Customs authorities, after a first-check examination, observed that the goods were one-side folded and two sides stitched. They opined that these could be converted into bed sheets by removing the stitches, leading to:
Rejection of the declared value under Rule 12 of the Customs Valuation Rules, 2007.
Enhancement of the assessable value to USD 2.85 per piece.
Confiscation of goods under Section 111(m) of the Customs Act.
Imposition of redemption fine and penalty.
Faced with heavy demurrage and detention charges, Annapurna Industries paid the enhanced duty, fine, and penalty under protest to secure release of the goods, and subsequently appealed the decision.
Key Legal Issues Examined
The Tribunal addressed four main questions:
Can imported goods be re-characterized based on their potential for further processing?
Is it lawful to enhance valuation solely on the basis of contemporaneous imports?
Are confiscation and redemption fine sustainable without proven misclassification or undervaluation?
Is the penalty under Section 112(a) of the Customs Act justified in this context?
1. Classification of Goods: Actual Condition vs. Hypothetical Use
The Tribunal reaffirmed the principle that goods must be assessed in the condition in which they are imported, not on the basis of what they could become after further processing. The Department’s assumption that the quilt covers could be converted into bed sheets was deemed hypothetical and not a valid basis for reclassification. The Tribunal noted:
The goods were presented as stitched quilt covers, fitting the statutory definition of “made-up articles.”
The Textile Committee, an expert body, had previously classified similar goods under Heading 6302, supporting the appellant’s position.
Previous CESTAT decisions (e.g., Indra Fab, C.F. Inc., and M/s. Annapurna Industries & Others) upheld similar classifications.
2. Valuation: Transaction Value vs. Comparables
The Tribunal found that Customs had rejected the declared transaction value without objective evidence, relying instead on unrelated imports of “bed sheets” without ensuring comparability in terms of manufacturer, quality, GSM, construction, brand, finish, commercial level, or quantity. Key points:
Rule 12 of the Valuation Rules allows rejection of transaction value only with reasonable doubt supported by evidence.
No evidence of additional remittance, relationship, fabricated invoices, or false pricing was found.
Legal precedents (Eicher Tractors, Mirah Exports, Mahindra & Mahindra, etc.) require positive evidence for value rejection.
3. Confiscation and Redemption Fine
Since misclassification and undervaluation were not established, the foundation for confiscation under Section 111(m) and redemption fine under Section 125 was absent. The Tribunal also noted that Section 125 requires a market price determination before fixing redemption fine, which was not conducted in this case.
4. Penalty Under Section 112(a)
With the main allegations unproven, the Tribunal held that the ingredients for imposing a penalty under Section 112(a) did not exist, and thus the penalty was set aside.
Final Outcome and Implications
The CESTAT Kolkata set aside the impugned orders, allowing the appeals filed by Annapurna Industries with consequential relief. This judgment reinforces several important principles for importers and customs authorities:
Goods must be classified and valued as presented at import, not based on hypothetical future use.
Transaction value cannot be rejected without concrete evidence of undervaluation or misdeclaration.
Penalties and fines require a solid legal foundation and proper procedural compliance.
Conclusion
The Annapurna Industries case is a landmark in clarifying the approach to classification, valuation, and penalization of imported goods. It underscores the need for objective evidence and adherence to statutory procedures, providing valuable guidance for both importers and customs officials.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 12.08.2026
Gujarat High Court on Recovery of Duty Drawback from Exporters
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
This article analyzes a significant judgment by the Gujarat High Court regarding the recovery of duty drawback payments made to exporters under the Customs and Central Excise Duty Drawback Rules. The case, involving Pratibha Syntex Limited and others versus the Union of India, addresses the legality and timeliness of recovering excess drawback payments from exporters.
Background: Duty Drawback Scheme and Dispute
The petitioners, recognized export houses, exported fabrics made from 100% polyester filament yarn. Under the Drawback Rules, exporters of specified goods are entitled to a refund (drawback) of duties paid on inputs. The relevant schedule (Sub Serial No. 5404) initially allowed a 20% drawback (subject to a maximum of Rs. 62 per kg of filament yarn content) if certain conditions were met. Later, a reduced rate of 17% was introduced for cases where exporters could not provide specific excise certificates, but there was confusion about whether the Rs. 62 per kg cap applied to this reduced rate.
Sequence of Events
Initial Payments: Exporters received drawback at 17% of FOB value without the Rs. 62 per kg cap, based on the authorities’ interpretation at the time.
Clarifications Issued: In September 1996, the Commissioner (Drawback) clarified that the Rs. 62 per kg ceiling applied even to the 17% rate. This was later reinforced in 1999, stating the clarification was effective from the original notification date.
Recovery Notices: Over three years after the original payments, show cause notices were issued to recover the excess drawback paid above the Rs. 62 per kg limit.
Legal Proceedings: The exporters challenged these recovery actions, arguing that such delayed demands were time-barred and violated principles of fairness.
Key Legal Issues
1. Applicability of Limitation Period
Rule 16 of the Drawback Rules: Allows recovery of erroneously paid drawback but does not specify a time limit.
Petitioners’ Argument: Even if no explicit limitation is prescribed, a reasonable period must be implied, drawing on Supreme Court precedents.
Government’s Argument: The absence of a statutory limitation means recovery can be initiated at any time.
2. Judicial Reasoning
The High Court examined:
Supreme Court rulings (e.g., Government of India v. Citedal Fine Pharmaceuticals) that, in the absence of a statutory limitation, authorities must act within a “reasonable period.”
The facts: Drawback was paid between December 1995 and August 1996; recovery notices were issued only in February 2000, despite clarifications being available much earlier.
The Court’s Decision
The Court held that a delay of more than three years in issuing recovery notices was not reasonable.
It ruled that, although Rule 16 does not specify a limitation period, the concept of a reasonable period must be read into the rule to prevent arbitrary and disruptive actions against exporters.
The show cause notices and subsequent recovery orders were quashed as time-barred.
Implications of the Judgment
Protection for Exporters: The judgment safeguards exporters from indefinite exposure to recovery actions, ensuring administrative certainty.
Guidance for Authorities: Customs and excise authorities must act promptly and within a reasonable timeframe when seeking to recover excess payments.
Legal Precedent: The decision reinforces the principle that, in the absence of explicit statutory limitation, a reasonable period is implied by law.
Conclusion
This Gujarat High Court judgment is a landmark in balancing government powers and exporters’ rights under the duty drawback scheme. It underscores the necessity for timely administrative action and provides clarity on the interpretation of limitation in recovery proceedings under the Drawback Rules.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Aadrikaa Law Offices (ALO)- Customs I IDT Tax I Arbitration I Litigation
Date: 30.01.2026
“CAAR New Delhi Clarifies Classification of Smartphone Window Glass as ‘Parts’ under CTH 8529”
Adv Ravi Shekhar Jha
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.comor on his Mobile +91-9999005379.
Summary of the Case
The ruling concerns an application filed by M/s. Samsung Display Noida Private Limited before the Customs Authority for Advance Rulings (CAAR), New Delhi, seeking clarity on the tariff classification of imported “Window Glass” used in the manufacture of display assemblies for mobile phones and tablets.
The applicant argued that the product is not merely safety glass but an integral and indispensable component of the display assembly, providing protection, structural stability, optical clarity, and user interaction interface.
Two competing tariff headings were examined:
CTH 7007 – Safety glass (toughened or laminated)
CTH 8529 – Parts suitable for use solely or principally with apparatus of headings 8525–8528
After analysing the product’s function, industry usage, and HSN explanatory notes, the Authority concluded that the Window Glass functions as a part of the display assembly rather than standalone safety glass and therefore merits classification under CTH 8529 90 90 (“Other”).
Legal / Statutory Provisions Referred
Section 28E(c), Customs Act, 1962 — Defines “applicant” eligible to seek an advance ruling.
Section 28H — Governs the procedure for filing advance ruling applications.
Section 28-I(2) — Bars admission where the issue is pending before any customs authority or court.
Section 12, Customs Act, 1962 — Charging provision for levy of customs duty.
General Rules for Interpretation (GIR) — Classification must follow headings, section notes, and chapter notes; Rule 3(c) applies when goods are equally classifiable.
Section XVI Note 2(b) — Parts suitable for use solely or principally with a specific machine are classified with that machine.
HSN Explanatory Notes to Heading 7007 and 8529 — Provide interpretative guidance on “safety glass” versus “parts of apparatus.”
Judicial Citations Referred:
1. Saurashtra Chemicals v. Collector of Customs, 1997 (95) ELT 455 (SC)
Held that section and chapter notes override headings, establishing hierarchy in tariff interpretation.
2. O.K. Play (India) Ltd. v. CCE, Delhi III, 2005 (180) ELT 300 (SC)
Recognised the HSN as a dependable guide for resolving classification disputes.
3. I.M.L. Ltd. v. Commissioner of Customs, 2010 (258) ELT 321 (SC)
Confirmed that HSN explanatory notes carry persuasive value in tariff interpretation.
4. CC v. Gajra Beveling Electronics Ltd., 2005 (188) ELT 352 (SC)
Reaffirmed reliance on HSN where domestic tariff mirrors international nomenclature.
5. CCE v. Phil Corporation Ltd., 2008 (223) ELT 9 (SC)
Held that classification must consider functional characteristics of goods.
6. CAAR Mumbai Ruling — M/s Online Instruments India Pvt. Ltd. (01.05.2025)
Display cover glass designed solely for Interactive Flat Panel Displays classified under CTH 8529, not 7007.
Key Legal Principles Emerging from the Ruling
Functional test prevails over material composition in classification.
Goods forming an inseparable part of a larger apparatus should be classified as parts.
HSN explanatory notes remain a critical interpretative tool.
When dual classification is possible, GIR and section notes guide the final outcome.
Industry and commercial understanding can influence classification.
Order Issued
The CAAR held that the imported Window Glass is an integral component of the display assembly used in mobile phones and is therefore classifiable under CTH 8529 90 90 rather than CTH 7007.
Expert View:
This ruling is strategically important for the electronics manufacturing ecosystem, particularly for companies operating under India’s PLI-driven mobile manufacturing supply chains.
Why the ruling matters:
It reinforces the “sole or principal use” doctrine for parts classification.
Prevents revenue authorities from adopting a narrow, material-based approach.
Provides certainty for importers of high-value electronic components.
Aligns Indian classification with global HSN interpretation — reducing litigation risk.
Possible Future Impact:
The decision may influence classification disputes involving touch panels, cover glass, OLED layers, and display modules, where authorities often attempt classification under generic glass headings.
Caution:
Since advance rulings are binding only on the applicant and jurisdictional officers, broader applicability will depend on departmental acceptance or appellate affirmation.
ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 31.08.2025
The Canon India Saga- The Judgement & the journey going forward
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
Introduction
The jurisprudence surrounding the powers of the Directorate of Revenue Intelligence (DRI) under the Customs Act, 1962 has undergone dramatic shifts in recent years. The Supreme Court’s ruling in Canon India Pvt. Ltd. v. Commissioner of Customs (2021) appeared to decisively curtail DRI’s jurisdiction to issue show cause notices (SCNs) under Section 28. Yet, in Commissioner of Customs v. Canon India Pvt. Ltd. (2024 Review), the Court reversed course, validating DRI’s authority subject to statutory assignment. This oscillation, coupled with legislative intervention in 2022, has produced a recalibrated enforcement regime with profound implications for importers, exporters, and the State’s investigative machinery.
Canon India (Customs) — 2021 vs 2024
Item
2021 decision
2024 review decision
Case & date
M/s Canon India Pvt. Ltd. v. Commissioner of Customs, Civil Appeal No. 1827/2018 and batch (decided 9-Mar-2021)
Commissioner of Customs v. M/s Canon India Pvt. Ltd., Review Petition No. 400/2021 (judgment dated 7-Nov-2024)
Core question
Whether DRI officers are “the proper officer” competent to issue SCNs under S28(4) after clearance by jurisdictional customs officers.
Whether Canon-2021 erred; whether DRI and certain other officers are “proper officers” for S28; validity/effect of later statutory changes/validations.
Holding (short)
DRI not “the proper officer” to issue S28(4) notices; SCNs by ADG-DRI set aside.
Review allowed; DRI are proper officers for S28 (subject to assignment via notifications). Canon-2021’s reasoning corrected; validation of past SCNs upheld.
Key statutory provisions discussed
S2(34) (definition of “proper officer”); S6 (entrustment to other govt officers); S28(4) (extended-period SCN); linkage emphasized to S17 (assessment). Court read S28 power as confined to the officer who handled assessment/re-assessment.
S2(34) (incl. post-2022 text linking assignment to S5); SS3–5 (classes/appointment/powers of customs officers); S6 (distinct from S2(34)/S5 assignment); S17 & S28 (no mandatory inter-dependence for jurisdiction under S28); S110AA (inserted 2022; prospective scheme); S28(11) (Validation Act 2011); S97, Finance Act 2022 (validation of past actions).
Notifications & Circulars considered / reproduced
• Notif. 17/2002-Cus (N.T.), 07-03-2002 (appointing ADG-DRI as Commissioner of Customs). • Notif. 40/2012-Cus (N.T.), 02-05-2012 (assignment table incl. S28 to DC/AC and above). • Context: exemption Notif. 2005 + amending 15/2012 for DSICs (background facts).
Appointments / assignment • Notif. 19/90-Cus (N.T.), 26-04-1990 (DRI appointed as customs officers; later superseded). • Notif. 17/2002-Cus (N.T.), 07-03-2002 (superseding earlier; DRI appointments). • Notif. 44/2011-Cus (N.T.), 06-07-2011 (assigning “proper officer” functions incl. SS17 & 28 to DRI); amendments: 53/2012, 43/2019; rescinded/superseded by 25/2022-Cus (N.T.) aligned with Finance Act 2022. • Notif. 40/2012-Cus (N.T.), 02-05-2012 (assignment table). • Notif. 60/2015-Cus (N.T.), 04-06-2015 (common adjudicating authority—delegation to Principal DG, DRI). Circulars • Circular 4/99-Cus, 15-02-1999 (DRI may issue SCNs in cases they investigate; adjudication by jurisdictional officers). • Circular 18/2015-Cus, 09-06-2015 (guidelines on common adjudicator after Notif. 60/2015). • Circular 44/2011-Cus, 23-11-2011 (referred to alongside 4/99).
Treatment of earlier case-law
Relied heavily on Sayed Ali (2011) to insist that the S28 “proper officer” must be the officer vested with S17 assessment; read S6 as the only entrustment route.
Explains Sayed Ali did not involve DRI with proper assignments; treats its S17–S28 “linkage” as erroneous/obiter; sets aside Delhi HC’s Mangali Impex; affirms Bombay HC’s Sunil Gupta on S28(11) validation.
Reasoning snapshot
• Notif. 40/2012 issued under S2(34) was held ultra vires (since S2(34) only defines; entrustment must be under S6). • Thus ADG-DRI lacked authority to issue S28(4) SCN.
• Distinguishes assignment of “proper officer” functions (S2(34) read with S5) from entrustment under S6 (for non-customs officers). • Confirms multiple proper officers can exist if functions are properly assigned by notification; no statutory need that the S28 officer must be the S17 assessor (pre-S110AA). • Notes post-2022 amendments (to SS2,3,5 and S110AA) and Section 97 validating earlier SCNs; upholds constitutionality of S97.
Outcome / effect
SCNs by DRI quashed; ripple effect invalidated many DRI SCNs.
Review allows department’s plea; DRI recognized as proper officers for S28 where assigned; S97 Finance Act 2022 validation upheld; Mangali Impex overruled; Sunil Gupta approved.
A. Legal provisions canvassed
2021 (Canon-I): S2(34); S6; S28(4); linkages to S17 (assessment); reliance on Sayed Ali (2011).
Exemption notifications (factual background): 2005 exemption notification (the judgment text references No. 20/2005/25/2005) as amended by 15/2012 for digital still image video cameras. (India Budget)
2024 review judgment
Notif. 19/90-Cus (N.T.), 26-04-1990; superseded by Notif. 17/2002-Cus (N.T.), 07-03-2002 (appointment of DRI as officers of customs).
Notif. 44/2011-Cus (N.T.), 06-07-2011 (assigns “proper officer” functions incl. SS17 & 28 to DRI); amended by 53/2012 & 43/2019; superseded by 25/2022-Cus (N.T.).
Notif. 40/2012-Cus (N.T.), 02-05-2012 (assignment table; to be read with SS4/5).
Notif. 60/2015-Cus (N.T.), 04-06-2015 (common adjudicating authority—delegation to Principal DG, DRI).
Circular 4/99-Cus, 15-02-1999 (DRI to issue SCNs they investigate; adjudication by field formations).
Who can issue S28 SCNs? • 2021: Only the officer who did (re)assessment under S17 (or was otherwise assigned) could issue S28 SCN—DRI’s SCNs were invalid. • 2024: The Act does not require the S28 SCN issuer to be the same person who did S17 assessment (pre-S110AA). What matters is a valid assignment of S28 functions to that officer via proper notifications (read S2(34) with S5; S6 is for non-customs officers). DRI officers were validly appointed/assigned.
Effect of later legislation • S110AA (2022) prospectively ties issuance of S28 SCN to the proper officer assigned to conduct S17 assessments; it doesn’t retrospectively invalidate earlier practice. • S97, Finance Act 2022 validated past SCNs; SC upheld its constitutionality and clarified scope vis-à-vis S28(11) & Explanation-2.
Companion High Court rulings • Delhi HC (Mangali Impex) set aside; Bombay HC (Sunil Gupta) approved.
Practical takeaways for customs disputes (post-2024)
Jurisdictional objections to DRI SCNs (pre-2022) now generally fail if the Department shows valid appointment & assignment via the above notifications.
For SCNs issued after 31-Mar-2022, consider S110AA: the issuing officer must be the assigned S17 officer; challenges should scrutinize post-2022 assignment orders.
Validation under S97 Finance Act 2022 covers past SCNs; constitutional challenges were rejected in the review.
1. Scope of the Review
The Supreme Court in 2024 was deciding a review petition against its earlier 2021 ruling. Its focus was:
Whether the 2021 reasoning (that DRI officers were not “proper officers”) was legally sustainable, and
Whether the post-2011 Validation Act (S28(11)) and Finance Act 2022 (S97) covered past SCNs.
Because of this limited scope, the Court concentrated on notifications and circulars that existed at the time of the disputed SCNs (2005–2015 era), and the validating provisions enacted later, not on fresh notifications meant to operate prospectively.
2. Temporal Relevance
Notifications 25/2022 and 26/2022 (N.T.) were issued after 31-03-2022, expressly to align officer-assignments with the newly inserted S110AA (Finance Act 2022).
Circular 07/2022-Cus (N.T.) clarified field implementation under the new law.
Since the SCNs in dispute in Canon India dated back years earlier, the Court treated these 2022 instruments as not directly applicable to the lis (dispute) before it. Instead, the Court examined:
older appointment/assignment notifications (17/2002, 40/2012, 44/2011, 60/2015, etc.), and
The 2024 judgment did consider S110AA and S97 of Finance Act 2022 in detail. Those provisions themselves were the statutory foundation upon which Notifications 25/2022 & 26/2022 and Circular 07/2022 were based. Thus, by upholding S97 and clarifying S110AA’s prospective effect, the Court implicitly accepted the validity of the 2022 notification/circular regime, without needing to cite each by number.
4. Judicial Practice
The Supreme Court often:
Cites only those notifications/circulars that form the crux of the dispute or which were argued before it.
Leaves out subsequent administrative instruments if their effect is prospective or merely implementational.
The 2024 bench emphasized that post-31.03.2022 SCNs would fall under S110AA and fresh notifications, but it was not ruling on those—so it found no need to reproduce or analyze 25/2022, 26/2022, or Circular 07/2022.
In short: The 2024 Supreme Court judgment did not consider those specific 31-03-2022 notifications and circular because they were prospective instruments implementing S110AA, while the Court’s task was to decide the validity of pre-2022 SCNs and the scope of validation under S97. Their effect was implicitly acknowledged, but not directly adjudicated.
That’s a very important concern. After the Canon India litigation saga and the March 2022 amendments, the powers of DRI officers have indeed been regularized, but they are not “unlimited” or unchecked. Let me explain in detail:
1. What changed in 2022?
Finance Act, 2022 inserted Section 110AA into the Customs Act, 1962. → It mandates that the same “proper officer” who is assigned functions of assessment under Section 17 will also have jurisdiction to issue show cause notices under Section 28.
To operationalize this:
Notification 25/2022-Cus (N.T.) and 26/2022-Cus (N.T.) (31-03-2022) were issued. They re-assigned functions clearly to DRI, Audit, Preventive, and Commissionerates, ensuring statutory backing.
Circular 07/2022-Cus (31-03-2022) gave field-level guidance, clarifying how officers should exercise powers under the new framework.
This effectively plugged the “jurisdictional defect” highlighted in Canon India (2021).
2. Checks on DRI powers post-2022
Even with these notifications, DRI officers are not beyond scrutiny:
(a) Statutory Limitation
Section 110AA ties issuance of SCNs to proper assignment; DRI can only act if lawfully assigned by notification.
Their jurisdiction flows strictly from Sections 2(34), 3, 5, 6, and 110AA read with the assignment notifications.
(b) Validation but Prospective Guardrails
The Supreme Court in 2024 (Canon India Review) upheld the validity of past SCNs via Section 97 of Finance Act 2022, but also emphasized that going forward, the post-2022 assignment regime applies.
This means future SCNs can be challenged if issued contrary to Section 110AA or without proper assignment.
(c) Procedural Safeguards
DRI must comply with natural justice (notice, reply, hearing).
SCNs are adjudicated by jurisdictional Commissioners/Principal Commissioners, not by DRI itself, preventing them from being “judge in their own cause.”
Circular 07/2022 reinforces this segregation of roles.
(d) Judicial Oversight
Courts and CESTAT remain open to review whether DRI officers exceeded statutory assignment, acted mala fide, or violated procedural safeguards.
Writ petitions under Article 226/227 and appeals under Section 129A (CESTAT) and Section 130 (High Court) continue to act as a check.
3. Practical Position Going Forward
Yes, DRI has regained legal authority (as “proper officers”), but their powers are not unfettered.
The 2022 notifications and circulars give them jurisdiction, but also bind them within the statutory scheme of Sections 17, 28, and 110AA.
Any SCN post-2022 must be tested for:
Correct assignment in the relevant notification;
Compliance with limitation under Section 28;
Observance of natural justice.
Conclusion: DRI officers’ powers will not go unchecked under Notifications 25/2022, 26/2022, and Circular 07/2022. These instruments regularize and define their jurisdiction, but checks still exist through Section 110AA, adjudication by separate authorities, and judicial review.
The Canon India Saga: Judicial U-Turn, Legislative Response, and the Recalibration of DRI Powers under the Customs Act, 1962
I. The 2021 Decision: Curtailing DRI Jurisdiction
In its 9 March 2021 judgment, the Supreme Court held that officers of DRI were not “proper officers” under Section 28 of the Act.
The Court relied on Section 2(34) (defining “proper officer”) and Section 6 (entrustment of functions to other government officers) to conclude that only the officer who originally assessed goods under Section 17 could subsequently reopen or reassess liability under Section 28.
Notifications such as Notification No. 40/2012-Cus (N.T.), issued to empower DRI, were held ultra vires, since Section 2(34) was merely definitional and could not serve as a source of power.
In effect, all SCNs issued by DRI under Section 28(4) were rendered invalid.
The judgment’s reasoning was strongly influenced by Union of India v. Sayed Ali (2011), which had emphasized a close nexus between the assessing officer and the officer reopening the assessment.
II. Legislative Response: Finance Act, 2022
The 2021 ruling created widespread disruption in anti-evasion enforcement. Parliament responded promptly through the Finance Act, 2022, which introduced two pivotal reforms:
Section 110AA (prospective): mandated that the “proper officer” assigned the functions of assessment under Section 17 would also have jurisdiction to issue notices under Section 28. This tied jurisdiction to statutory assignment rather than to the original assessing officer.
Section 97, Finance Act 2022 (retrospective): validated all past actions of DRI and similar officers, curing the jurisdictional defect identified in Canon 2021.
To operationalize these amendments, the Government issued:
Notification No. 25/2022-Cus (N.T.) and 26/2022-Cus (N.T.) (both dated 31-03-2022), re-assigning assessment and demand functions across Customs Commissionerates, DRI, Audit, and Preventive formations.
Circular No. 07/2022-Cus (31-03-2022), clarifying procedural aspects of SCN issuance and adjudication under the new regime.
III. The 2024 Review Decision: A Judicial Recalibration
In its 7 November 2024 judgment, the Supreme Court allowed the Department’s review petitions, effectively reversing the 2021 ruling.
Assignment vs. Entrustment: The Court distinguished between assignment of functions (Sections 2(34) read with 3, 4, and 5) and entrustment of functions (Section 6). Since DRI officers were duly appointed and their functions assigned through statutory notifications (17/2002, 44/2011, 40/2012, 60/2015), they qualified as “proper officers.”
Rejection of Section 17–28 Nexus: The earlier insistence that the officer under Section 28 must be the same officer who assessed under Section 17 was held erroneous, save for the prospective effect of Section 110AA.
Validation: The Court upheld the constitutionality of Section 97, Finance Act 2022, thereby retrospectively validating past SCNs.
Precedents Revisited:Mangali Impex (Delhi High Court), which had invalidated DRI notices, was expressly overruled, while Sunil Gupta (Bombay High Court) was approved.
Thus, the Court restored DRI’s jurisdiction while acknowledging the legislative guardrails introduced in 2022.
IV. The Status of Notifications and Circulars
It is noteworthy that Notifications 25/2022, 26/2022 and Circular 07/2022 were not expressly discussed in the 2024 judgment. This was deliberate:
The Court’s task in review was confined to pre-2022 SCNs and the effect of retrospective validation.
Since the 2022 instruments were prospective, their role was implicitly recognized but not adjudicated upon.
Accordingly, future SCNs will be governed by Section 110AA and these notifications, while past SCNs stand validated by Section 97 of Finance Act, 2022.
V. Will DRI Powers Go Unchecked?
Concerns about unchecked investigative powers must be balanced against statutory safeguards:
Statutory Assignment – DRI’s jurisdiction flows strictly from notifications issued under Sections 3, 5, and 110AA; it cannot act beyond assigned functions.
Separation of Roles – While DRI investigates and issues SCNs, adjudication lies with jurisdictional Commissioners, ensuring impartiality.
Natural Justice and Limitation – Section 28 prescribes limitation periods and procedural fairness, binding on DRI.
Judicial Oversight – Writ jurisdiction under Article 226 and appeals under Sections 129A and 130 act as systemic checks on arbitrary exercise.
Thus, the new framework strengthens enforcement while embedding institutional and judicial safeguards.
VI. Conclusion
The Canon India saga exemplifies the dynamic interplay between judicial pronouncement, legislative correction, and administrative implementation.
The 2021 judgment underscored the dangers of empowering investigative agencies without statutory clarity.
The 2022 amendments created a prospective framework under Section 110AA and retrospectively validated past SCNs under Section 97.
The 2024 review judgment restored balance by recognizing DRI’s jurisdiction but within the bounds of statutory assignment.
Going forward, litigation will likely shift from jurisdictional challenges to questions of procedural compliance, limitation, and fairness in adjudication. For taxpayers and counsel, the message is clear: the battle has moved from “whether” DRI can issue SCNs, to “how” those SCNs are exercised under law.
Editorial Note: The Canon India trajectory—from invalidation, to legislative intervention, to judicial recalibration—is a striking illustration of how revenue enforcement, judicial oversight, and legislative sovereignty co-evolve. For customs law in India, it marks the end of jurisdictional uncertainty and the beginning of a new era of substantive procedural scrutiny.
Source: Canon-2021 judgment (9-Mar-2021) — Supreme Court of India (Reportable) & Canon-2024 review judgment (7-Nov-2024) — Supreme Court of India (Reportable)
