In today's Finshots we talk about custom duties, "THE" English language and a monument judgment that could have far-reaching repercussions.
The Story
A consignment of cameras arrives in Delhi on 15th March 2012. About a week later, the Deputy Commissioner of Customs inspects the goods. After a thorough assessment, the officer declares that the consignment is exempt from duties and the importer retrieves the cameras.
Two years later, however, they receive a show-cause notice from the Directorate of Revenue Intelligence (DRI) — a different department, alleging that they wilfully suppressed facts about the cameras. In particular, the DRI argues that the cameras were capable of recording a single movie for more than 30 minutes, considering it had the memory/bandwidth to do so. And since the importers were shipping cameras with these specific features, the officers argue that they can’t possibly be exempt from paying duties.
Now bear in mind, the original customs officer that assessed the cameras wasn’t exactly duped. The brochure on the cameras explicitly stated that — “… the maximum recording time for a single movie is 29 minutes, even when there is sufficient free space on the memory card for longer recording.” Meaning, although it was theoretically possible for the camera to record more than 30 minutes in a single shot, the camera didn’t allow for it. So the officer simply took the view that they were fully compliant with the law that allowed them to claim the supposed exemptions.
Unfortunately, the DRI didn’t see it this way and they persisted with their demands. The importers, meanwhile, had no choice but to go to court. However, instead of arguing whether they could claim exemptions or not, they did something else entirely. They argued that the DRI had no right to reopen the assessment in the first place.
See, the Directorate of Revenue Intelligence or the DRI has been responsible for combating customs duty evasion for a while now. On many occasions they’ve gone out of their way, to scrutinize consignments they believed had been shipped without being taxed in full by the relevant authorities. And when they did notice a discrepancy, they would issue a show-cause notice to the concerned party demanding an explanation. If the explanation was not deemed satisfactory, they would confiscate goods and impose penalties. So there was nothing out of the ordinary here.
However, the likes of Nikon and Canon (the people importing these cameras) alleged that the DRI was acting outside the ambit of the law. And this was a bold claim to make — especially considering the DRI has been doing these very same things since 1957.
Yeah… Imagine that. It's totally outrageous.
At least, it would have been, if the top court hadn’t sided with them. That’s right — the Supreme Court of India ruled that the DRI had no business reassessing the claims in this particular case.
Why? you ask.
Well, any time duties aren’t paid or partly paid due to willful misstatements or suppression of facts, then the Customs Act empowers “the proper officer” to reassess claims within a fixed time frame.
Who on earth is “the proper officer?”
The answer to that question depends on how you interpret the English language.
The Customs Act explicitly states that the power to reassess claims is conferred on “THE proper officer” and not “A proper officer”. This distinction is important because as the court states —
There are only two articles ‘a (or an)’ and ‘the’.
A (or an)’ is known as the Indefinite Article because it does not specifically refer to a particular person or thing. On the other hand, ‘the’ is called the Definite Article because it points out and refers to a particular person or thing. There is no doubt that, if Parliament intended that any proper officer could have exercised power under Section 28 (4) [of the Customs Act], it could have used the word ‘any’.
But as the court argues — The lawmakers didn’t use the word any. They used the word “the” possibly alluding to a very specific officer. Who might this officer be, you ask? Well, as the court goes on to elaborate —
It is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone. As in this case, when the statute directs that “the proper officer” can determine duty not levied/not paid, it does not mean any proper officer but that proper officer alone...
And so...
Where one officer has exercised his powers of assessment, the power to order re-assessment must also be exercised by the same officer or his successor and not by another officer of another department though he is designated to be an officer of the same rank.
Bottom line — “The proper officer” in this case has to be the Customs officer who assessed the goods the first time around. The DRI cannot reopen assessments once they’ve been cleared by an officer from a different department.
And the implications of this judgement?
Well, they're likely to be far-reaching. Some experts believe custom demands to the tune of 50,000 crores could be jeopardized if the DRI is rendered toothless. Even others believe the interpretation of what constitutes a proper officer was flawed, considering the court wasn't made aware of some very important facts. So yeah, the judgment is ruffling many feathers and now you know why.
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Until then...
