Madras High Court
M/S.Huawei Telecommunications India ... vs Principal Commissioner Of Customs on 30 October, 2024
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
2024:MHC:3699
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Order reserved on 26.07.2024
Order pronounced on 30.10.2024
CORAM
THE HONOURABLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
W.P.No.2166 of 2024
&
WMP Nos.2359 & 2360 of 2024
M/s.Huawei Telecommunications India Co. Pvt. Ltd.
Having its registered office at 9th Floor, Capital Cyberspace,
Gurugram Manesar Urban Complex,
Sector 59, Ullahwas, Gurugram, Haryana 122 011
and local office at Survey No.:106104, Door No./Plot No.:146, 148
149, 6th Main Road, Sidco Industrial Estate,
Thirumazhisai, Poonanamallee Taluk,
Thiruvallur District-600 124
Represented by its Authorized Signatory
Mr.Alok Singh
DGM-Legal ... Petitioner
-vs-
Principal Commissioner of Customs, Air Cargo,
Chennai, VII Commissionerate,
New Custom House, Meenambakkam,
Chennai-600016. ... Respondent
PRAYER : Writ petition filed under Article 226 of the Constitution of
India, to issue a writ of Certiorari , to call for the records of the
1/41
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Impugned Notice No.204/2023 dated 10.11.2023 under File
No.GEN/ADJ/CIMMR/680/2023-GR 5A bearing DIN
20231173MU0000666B35 issued by the Respondent, and to quash the
same.
For Petitioner : Mr.Vijay Narayan, Senior Advocate
Mr.Tarun Gulati, Senior Advocate
Mr.Rajat Bose
Mr.Ankit Sachdeva
Ms.Amoolya S.Vinjamur
For Respondents : Mr.Sai Srujan Tayi,
Senior Standing Counsel
ORDER
Background
By this writ petition, show cause notice No.204/2023 dated
10.11.2023 is challenged.
2. The petitioner is engaged inter alia in the import of various
telecommunication-related goods from its parent company in
pursuance of its business activities. Between 15.11.2018 and
16.12.2022, the petitioner imported various products such as base
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stations and modules, servers and modules, long term evolution
(LTE) products and modules, multiple input-output (MIMO)
products, optical transport network (OTN) products and modules,
plain old technology services (POTS) products, private
telecommunication network (PTN) products and modules, session
border controller and modules, soft switch and modules, media
gateway (modules) and voice-over Internet protocol (VoIP)
equipment and modules as well as spare parts relating thereto. These
goods were imported by self-classification under Customs Tariff
Heading (CTH) 8517 and 8471. In respect of these imported goods,
the petitioner filed bills of entry for home consumption and paid the
appropriate customs duty based on the aforesaid classification under
the Customs Act, 1962 (the Customs Act). The Customs Department
did not challenge the classification of the petitioner in the relevant
bills of entry upon verification and prior to clearance or by way of
appeal thereafter.
3. While importing the above mentioned goods, the petitioner
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availed of Exemption Notifications, namely, Sl.No.427 of Notification
No.50/2017-Cus-dated 30.06.2017, Sl.Nos 5, 8, 20 and 22 of
Notification No.57/2017-Cus. dated 30.06.2017 and Sl.Nos.8, 10, and
13 of Notification No.24/2005-Customs, dated 01.03.2005. As a
consequence, basic customs duty was paid at the rate of 0% or 10%,
as applicable, at the time of clearance of the goods.
4. Summons was issued to the petitioner by the Senior
Intelligence Officer on 31.01.2022 in relation to the import of servers.
In response, on 15.02.2022, Shri Deepak Kumar Jain, Senior Product
Manager of the petitioner, appeared before the Senior Intelligence
Officer on 16.02.2022 and submitted a statement. Pursuant to
summons dated 24.02.2022, Shri Vivek Kumar, Head of Data
Solutions and Planning of Bharti Airtel Ltd., the petitioner's customer,
appeared and provided a statement. Thereafter, the impugned show
cause notice was issued to the petitioner on 10.11.2023. The said
notice states that the petitioner had misclassified the goods whereas
the same should have been classified under CTH 85176100 or
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85176290, as the case may be. The petitioner was also called upon to
show cause as to why it is not liable to pay basic customs duty at 10%
till 11.10.2018 and at 20% thereafter. Such notice was issued by
invoking the enlarged period of limitation under sub-section (4) of
Section 28 of the Customs Act. By letter dated 08.12.2023, the
petitioner informed the respondent that it requires eight weeks' time
to respond to the notice since it was consulting its legal experts and
consultants. The present writ petition was filed in the above facts and
circumstances.
Counsel and their contentions
5. Oral arguments on behalf of the petitioner were advanced by
Mr.Vijay Narayan, learned senior counsel, and by Mr.Tarun Gulati,
learned senior counsel. Arguments on behalf of the respondent were
advanced by Mr.Sai Srujan Tayi, learned senior standing counsel.
6. The first contention of Mr. Vijay Narayan was that the bills of
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entry were assessed by accepting the petitioner's self-classification.
By relying on Sections 17 and 18 of the Customs Act, learned senior
counsel contended that an elaborate mechanism is provided for
assessment, including provisional assessment. While sub-section (1)
of Section 17 enables an importer to self-assess the duty, if any,
leviable on such goods, learned senior counsel submitted that sub-
section (2) thereof enables the proper officer to verify such self-
assessment. He also pointed out that the proper officer is entitled to
examine or test any imported goods for purposes of verification.
Learned senior counsel pointed out that, after verification, if it is
concluded that the self-assessment was not done correctly, the proper
officer may re-assess the duty leviable on such goods. Therefore, he
contended that the Customs Act contains sufficient safeguards to
enable the proper officer to verify and reject the classification made
on self-assessment basis. In this case, he submits that such
verification was not carried out.
7. By referring to Section 47, learned senior counsel submitted
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that the said provision enables clearance of goods for home
consumption upon the proper officer being satisfied that goods
intended for home consumption are not prohibited goods. He also
pointed out that permission for such clearance is required to be
granted after being satisfied that the importer had paid the import
duty assessed thereon. According to learned senior counsel, the
proper officer could and should have resorted to the procedure
prescribed under sections 17 and 47 if such officer entertained any
doubts with regard to the self-classification by the petitioner.
8. In the alternative, learned senior counsel submitted that sub-
section (1) of Section 128 enables the customs authorities to file an
appeal against the self-assessment of the petitioner. He pointed out
that such appeal[s] were not filed by the customs authorities in
respect of goods imported by the petitioner under the relevant bills of
entry. By referring to sub-section (2) of Section 129D, he pointed out
that the said provision enables the Principal Commissioner of
Customs or Commissioner of Customs to suo motu examine the
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record of any proceeding in which a subordinate adjudicating
authority passed any decision or order. Pursuant thereto, he
submitted that the above mentioned officers may direct any
subordinate officer of the customs to appeal against the decision or
order before the Commissioner (Appeals). He contended that
recourse was not taken, in this case, either to sub-section (1) of
Section 128 or sub-section (2) of Section 129D.
9. Consequently, learned senior counsel submitted that the
impugned show cause notice is liable to be interfered with because
the respondent is endeavouring to reopen assessments, which
became final on account of the proper officer not undertaking
assessments under Section 17 or, in the alternative, filing an appeal
either under sub-section (1) of Section 128 or under sub-section (2) of
Section 129D. In support of these contentions, learned senior counsel
referred to and relied upon the following judgments:
(i) ITC Ltd. v. CCE, 2019 (368) ELT 216 (SC) (ITC), particularly
paragraphs 29 to 31 and 41 to 43.
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(ii) Escorts Ltd. v. Union of India, 1998 (97) ELR 211
(SC)(Escorts), particularly paragraph 6 thereof.
(iii) CCE v. Flock (India) Pvt. Ltd, 2000 (120) ELT 285 (SC) (Flock),
particularly paragraphs 8 to 10 thereof.
(iv) Eveready Industries Ltd. v. CESTAT, Chennai, 2016 (337) ELT
189 (Mad) (Eveready Industries), particularly paragraphs 28 to 39
thereof.
(v) CCE v. Jellalppore Tea Estate, 2011 (268) ELT 14 (Gau),
particularly paragraphs 13 to 15 thereof.
10. Mr.Tarun Gulati, learned senior counsel, made submissions
next on behalf of the petitioner. He opened his submissions by
pointing out that imports were made between 15.11.2018 and
16.11.2022, whereas the first summons was issued on 31.01.2022 and
the show cause notice followed on 10.11.2023. In these
circumstances, learned senior counsel contended that the self-
assessments had become final because verification was not done
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under sub-section (2) of Section 17. As a consequence, he contended
that proceedings cannot be initiated under sub-section (4) of Section
11. His next contention was that the bills of entry did not
contain any misstatement. By referring to the show cause notice, he
pointed out that such show cause notice is based on inferences drawn
from facts set out in the bills of entry, and is not based on
misstatements made by the petitioner. According to him, it cannot be
concluded that there was a misstatement by the petitioner on the
basis of such inferences by the respondent. By referring to the
judgment of the Hon'ble Supreme Court in Calcutta Discount Co. Ltd.
v. Income Tax Officer, Companies District 1, Calcutta and another 1960
SCC Online SC 10, especially paragraphs 10 and 25 thereof, he
submitted that inferences of fact and law may be drawn by the
assessing officer, but such inferences cannot form the basis of a
conclusion of misstatement. He also relied upon paragraph 10 of the
judgment of the Hon'ble Supreme Court in Parashuram Pottery Works
Co. Ltd. v. ITO (1977) 1 SCC 408, and that of the Customs, Excise and
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Gold Control Appellate Tribunal (CEGAT) in Asian Paints (India) Ltd.
v. Collector of Central Excise, Bombay, 1994 (73) ELT 433 (Tribunal)
(Asian Paints), to contend that the extended period of limitation
cannot be invoked on the basis of inferences.
12. Mr.Sai Srujan Tayi, learned senior standing counsel,
responded to the above contentions. His first submission was that the
exporter and importer are related parties and, therefore, the
documents submitted by them cannot be accepted at face value.
According to him, the show cause notice deals with about 1870 bills
of entry pertaining to multiple products, which were classified under
different customs tariff headings, such as 85176100 and 85177090. He
next submitted that the importer had earlier imported the same
goods under a different CTH and changed the classification once the
exemption in respect of the earlier classification was withdrawn. In
order to substantiate this contention, he relied upon paragraph 10.17
of the show cause notice. With further reference to such show cause
notice, he contended that allegations of wilful suppression and wilful
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misstatement are contained in multiple paragraphs thereof. He
further submitted that it is entirely open to the customs authorities to
invoke sub-section (4) of Section 28 read with Section 110 AA even
after the assessment.
13. In support of his contentions, he relied upon the following
judgments:
(i) Priya Blue Industries Ltd. v. Commissioner of Customs, AIR
2004 SC 5115 (Priya Blue), especially paragraph 6 thereof, for the
proposition that review of assessment is permissible under Section
(ii) Union of India v. Jain Shudh Vanaspati Ltd, (1996) 10 SCC 520
(Jain Shudh Vanaspati), especially paragraphs 4 and 7 thereof,
regarding the implications of clearance under Section 47 of the
Customs Act.
(iii) Canon India Private Limited v. Commissioner of Customs
(2021) 18 SCC 563 (Canon India), especially paragraph 13 thereof.
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14. As regards judgments cited by Mr.Vijay Narayan, learned
senior standing counsel contended that all those judgments pertain to
refund applications and that, in that context, the Hon'ble Supreme
Court held that re-assessment should not be undertaken to decide an
application for refund. He next contended that the power under
Section 28 is not controlled by the power under Section 17 or Section
47. As regards the judgment of CESTAT Mumbai in Huawei
Telecommunication Private Limited v. Commissioner of Customs
(Appeals), Mumbai III, 2023 (10) TMI 323 (Huawei), he submitted that
the said decision pertained to a single product. He also pointed out
that such decision was made after inquiry and not at the show cause
notice stage. As regards the judgment in Collector of Central Excise,
Baroda v. Cotspun, 1999 taxmann.com 667 (SC), he submitted that the
classification list was expressly approved by the Central Excise
Department in that case.
15. By way of rejoinder, Mr.Tarun Gulati, learned senior
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counsel, submitted that queries were raised in respect of the relevant
imports and such queries were responded to by the petitioner before
clearance. By way of substantiation, he referred to the documents at
pages 14 to 16, 21, 23, 24 to 41 of volume III of the compilation of
documents and case law. On this basis, he submitted that it is
incorrect to state that verification under Section 17 was not possible.
He denied the contention that the petitioner had changed the
classification earlier after the exemption was withdrawn.
16. As regards the power under Section 28, by referring to the
judgment in Priya Blue, he pointed out that the factual context in that
case was the filing of a refund application in the teeth of an
assessment order. As per the judgment in Canon India, he pointed out
that such power may only be exercised by the same proper officer
because it is a power of review. He also pointed out that section 28(4)
can only be invoked if there is fraud, collusion or wilful
misstatement. By referring to the judgment of the CESTAT in Huawei,
he submitted that the classification adopted herein was upheld. With
reference to the judgment in Eveready Industries, he pointed out that
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this Court distinguished the judgment in Jain Shudh Vanaspati and
explained the scope of Asian Paints. By relying on the judgment in
Jayaraj International v. Union of India, 2019 (370) ELT 118 (Punjab and
Haryana), especially paragraphs 15 and 16 thereof, he pointed out
that the judgment of the Hon'ble Supreme Court in ITC was relied on
therein.
Discussion, analysis and conclusion:
17. At the outset, it should be borne in mind that the challenge
is to a show cause notice. Except under exceptional circumstances,
the writ court does not entertain a challenge to a show cause notice.
One of the exceptions is if the show cause notice was issued without
jurisdiction. Both the learned senior counsel for the petitioner
contended that the respondent does not have the jurisdiction to issue
a show cause notice in respect of goods that were previously
assessed unless such order of assessment is challenged successfully
in appeal. Therefore, the said contention warrants close scrutiny.
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18. Since the above contention was raised by relying on Section
17 of the Customs Act, the said provision is set out below:
"17. Assessment of duty
(1) An importer entering any imported
goods under section 46, or an exporter entering
any export goods under section 50, shall, save as
otherwise provided in section 85, self-assess the
duty, if any, leviable on such goods.
(2) The proper officer may verify [the
entries made under section 46 or section 50 and
the self-assessment of goods referred to in sub-
section (1)] and for this purpose, examine or test
any imported goods or export goods or such part
thereof as may be necessary:
[PROVIDED that the selection of cases for
verification shall primarily be on the basis of risk
evaluation through appropriate selection criteria.]
[(3) For [the purpose of verification] under
sub-section (2), the proper officer may require the
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importer, exporter or any other person to produce
any document or information, whereby the duty
leviable on the imported goods or export goods, as
the case may be, can be ascertained and
thereupon, the importer, exporter or such other
person shall produce such document or furnish
such information.]
(4) Where it is found on verification,
examination or testing of the goods or otherwise
that the self-assessment is not done correctly, the
proper officer may, without prejudice to any other
action which may be taken under this Act, re-
assess the duty leviable on such goods.
(5) Where any assessment done under sub-
section (4) is contrary to the self-assessment done
by the importer or exporter and in cases other
than those where the importer or exporter, as the
case may be, confirms his acceptance of the said
re-assessment in writing, the proper officer shall
pass a speaking order on the re-assessment,
within fifteen days from the date of re-assessment
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of the bill of entry or the shipping bill, as the case
may be."
19. As is evident from the above, sub-section (1) of Section 17
enables an importer to self-assess the duty, if any, leviable on the
imported goods. It is common ground between the parties that the
petitioner self-assessed the duty in respect of the relevant bills of
entry. Sub-section (2) of Section 17 empowers the proper officer to
verify the self-assessment. For such purpose, the proper officer is
entitled to examine or test such imported goods or part thereof. As
per the proviso to sub-section (2), the selection of cases for
verification shall primarily be on the basis of risk evaluation through
appropriate selection criteria. Sub-section (3) enables the proper
officer to call upon the importer or any other person to produce any
documents or provide information in relation to such verification. As
per sub-section (4), the proper officer is empowered to re-assess the
duty, if it is concluded on verification that the self-assessment was
not done correctly. The right to re-assess is qualified in sub-section
(5) by providing that a speaking order of re-assessment should be
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issued within 15 days from the date of re-assessment. Thus, it is clear
that the proper officer is empowered to undertake verification in
respect of goods imported by self-assessment and to re-assess the
duty leviable on such goods. The question that arises is whether the
failure of the proper officer to undertake such verification, and,
consequential re-assessment, would denude the customs authorities
of the right to initiate proceedings under Section 28. This entails an
examination of Section 28.
20. Sub-sections 1 to 4 of Section 28 are set out below:
"28. Recovery of [duties not levied or not
paid or short-levied or short-paid] or erroneously
refunded
(1)When any [duty has not been levied or
not paid or has been short-levied or short paid] or
erroneously refunded, or any interest payable has
not been paid, part paid or erroneously refunded,
for any reason other than the reasons of collusion
or. any wilful mis-statement or suppression of
facts,-
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(a) the proper officer shall, within
[two years) from the relevant date, serve notice on
the person chargeable with the duty or interest
which has not been so levied [or paid] or which
has been short-levied or short-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:
[PROVIDED that before issuing notice, the
proper officer shall hold pre-notice consultation
with the person chargeable with duty or interest
in such manner as may be prescribed.)
(b) the person chargeable with the duty or
interest, may pay, before service of notice under
clause(a) on the basis of,-
(i) his own ascertainment of such duty, or
(ii) the duty ascertained by the proper
officer, the amount of duty along with the interest
payable thereon under section 28AA or the
amount of interest which has not been so paid or
part-paid: [PROVIDED that the proper officer
shall not serve such show cause notice, where the
amount involved is less than rupees one
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hundred.) (2) The person who has paid the duty
along with interest or amount of interest under
clause (b) of sub-section (1) shall inform the
proper officer of such payment in writing, who,
on receipt of such information shall not serve any
notice under clause (a) of that sub-section in
respect of the duty or interest so paid or any
penalty leviable under the provisions of this Act
or the rules made thereunder in respect of such
duty or interest:
[PROVIDED that where notice under
clause (a) of sub-section(1) has been served and
the proper officer is of the opinion that the
amount of duty along with interest payable
thereon under section 28AA or the amount of
interest, as the case may be, as specified in the
notice, has been paid in full within thirty days
from the date of receipt of the notice, no penalty
shall be levied and the proceedings against such
person or other persons to whom the said notice is
served under clause (a) of sub-section(1)shall be
deemed to be concluded.]
(3) Where the proper officer is of the
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opinion that the amount paid under clause (b) of
sub- section (1) falls short of the amount actually
payable, then, he shall proceed to issue the notice
as provided for in clause (a) of that sub-section in
respect of such amount which falls short of the
amount actually payable in the manner specified
under that sub-section and the period of [two
years shall be computed from the date of receipt of
information under sub-section(2).
(4) Where any duty has not been [levied or
not paid or has been short-levied or short-paid] or
erroneously refunded, or interest payable has not
been paid, part-paid or erroneously refunded, by
reason of,-
(a) collusion; or
(b) any wilful mis-statement; or
(c) suppression of facts,
by the importer or the exporter or the agent or
employee of the importer or exporter, the proper
officer shall, within five years from the relevant
date, serve notice on the person chargeable with
duty or interest which has not been [so levied or
not paid] or which has been so short-levied or
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short-paid or to whom the refund has erroneously
been made, requiring him to show cause why he
should not pay the amount specified in th notice."
21. From the plain language of sub-section (1) of Section 28, it
appears that proceedings may be initiated under any of the following
circumstances:
(i) Where any duty has not been levied
(ii) Where any duty has not been paid
(iii) Where any duty has been short levied
(iv) Where any duty has been short paid
(v) Where any duty was erroneously refunded
(vi) Where any interest, which is payable, has not been paid
(vii) Where any interest, which is payable, has been part paid
(viii) Where any interest was erroneously refunded.
In all the above circumstances, such non-levy, non-payment, short
levy, short payment, erroneous refund, etc. should be for reasons
other than collusion or wilful misstatement or suppression of facts.
As regards sub-section (4), it may be invoked in the same
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circumstances as those listed above except that non-levy, non-
payment, short levy, short payment, erroneous refund, etc., should
be by reason of collusion or any wilful misstatement or suppression
of facts. The other difference between sub-sections (1) and (4) is that
the period of limitation under sub-section (1) is two years from the
relevant date, whereas it is five years from the relevant date as
regards sub-section (4).
22. The relevant date is defined as under in Explanation 1 to
Section 28:
“Explanation 1: For the purposes of this
section, "relevant date' means,-
(a) in a case where duty is (not levied or
not paid or short-levied or short-paid] or interest
is not charged, the date on which the proper
officer makes an order of the clearance of goods;
(b) in a case where duty is provisionally
assessed under section 18, the date of adjustment
of duty after the final assessment thereof or re-
assessment, as the case may be;
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(c) in a case where duty or interest has been
erroneously refunded, the date of refund;
(d) in any other case, the date of payment of
duty or interest."
Under sub-section (5) of Section 28, the recipient of a notice under
sub-section (4) may pay the duty demanded under such notice in full
or in part, i.e., to the extent admitted by him. Such payment is
required to be made within 30 days from the date of receipt of the
notice. If payment is made in terms of sub-section (5), the
determination of duty by the proper officer is to be done in
accordance with sub-section (6). Sub-section (8) enables the proper
officer to determine the duty after providing an opportunity of being
heard to the person concerned and after considering the
representation, if any, by such person. As per sub-section (9), this
exercise is to be carried out within six months from the date of notice,
if such notice was issued under sub-section (1) and within one year
from the date of notice, if such notice was issued under sub-section
(4).
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23. Since sub-sections (8) and (9) of Section 28 are also relevant
for the purposes of this case, the said subsections are set out below:
"(8) The proper officer shall, after allowing the
concerned person an opportunity of being heard
and after considering the representation, if any,
made by such person, determine the amount of
duty or interest due from such person not being
in excess of the amount specified in the notice.
(9) The proper officer shall determine the
amount of duty or interest under sub-section(8),-
(a) within six months from the date of
notice, in respect of case falling under clause (a)
of sub-section (1);
(b) within one year from the date of notice,
in respect of cases falling under sub-section(4):
PROVIDED that where the proper officer
fails to so determine within the specified period,
any officer senior in rank to the proper officer
may, having regard to the circumstances under
which the proper officer was prevented from
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determining the amount of duty or interest under
sub-section (8), extend the period specified in
clause (a) to a further period of six months and he
period specified in clause (b) to a further period of
one year:
PROVIDED FURTHER that where the
proper officer fails to determine within such
extended period, such proceeding shall be deemed
to have concluded as if no notice has been issued."
24. The conclusion that flows from the text of sub-sections (5),
(6), (8) and (9) of Section 28 is that the proper officer is empowered to
determine the amount payable as customs duty, including interest
liability, under this provision. It is significant to notice that there is
nothing in the text of Section 28 which indicates that the exercise of
power under Section 28 is subject to the assessment being reopened
by appellate proceedings or otherwise. Indeed, conspicuous by its
absence from the text of Section 28 is any reference to Section 17 or to
assessment under the said provision.
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25. Keeping in mind the above statutory context, it is relevant to
consider the judgments relied upon by the petitioner. In ITC, the
question that arose for consideration was whether the refund
application could be entertained in the absence of a challenge to the
order of assessment. In that context, the Hon'ble Supreme Court
examined Sections 17, 27 and 28. Thereafter, the Court recorded the
following conclusions in paragraphs 41 to 43 thereof:
"41. It is apparent from provisions of
refund that it is more or less in the nature of
execution proceedings. It is not open to the
authority which processes the refund to make a
fresh assessment on merits and to correct
assessment on the basis of mistake or otherwise.
42. It was contended that no appeal lies
against the order of self-assessment. The
provisions of Section 128 deal with appeals to the
Commissioner (Appeals). Any person aggrieved
by any decision or order may appeal to the
Commissioner (Appeals) within 60 days. There is
a provision for condonation of delay for another
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30 days. The provisions of Section 128 are
extracted hereunder:
"128. Appeals to [Commissioner
(Appeals)].(1) Any person aggrieved by any
decision or order passed under this Act by an
officer of customs lower in rank than a (Principal
Commissioner of Customs or Commissioner of
Customs) may appeal to the [Commissioner
(Appeals)] [within sixty days) from the date of
the communication to him of such decision or
order.
[Provided that the Commissioner (Appeals)
may, if he is satisfied that the appellant was
prevented bry sufficient cause from presenting the
appeal within the aforesaid period of sixty days,
allow it to be presented within a further period of
Thirty days]
[(1A) The Commissioner (Appeals) may, if
sufficient cause is shown, at any stage of hearing
of an appeal, grant time, from time to time, to the
parties or any of them and adjourn the hearing of
the appeal for reasons to be recorded in writing.
Provided that no such adjournment shall be
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granted more than three times to a party during
hearing of the appeal.]
(2) Every appeal under this section shall be
in such form and shall be verified in such manner
as may be specified rules made in this behalf.
43. As the order of self-assessment is
nonetheless an assessment order passed under the
Act, obviously it would be appealable by any
person aggrieved thereby. The expression 'Any
person' is of wider amplitude. The revenue, as
well as assessee, can also prefer an appeal
aggrieved by an order of assessment. It is not
only the order of re- assessment which is
appealable but the provisions of Section 128 make
appealable any decision or order under the Act
including that of self-assessment. The order of
self-assessment is an order of assessment as per
Section 2(2), as such, it is appealable in case any
person is aggrieved by it. There is a specific
provision made in Section 17 to pass a
reasoned/speaking order in the situation in case
on verification, self-assessment is not found to be
satisfactory, an order of re-assessment has to be
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passed under Section 17(4). Section 128 has not
provided for an appeal against a speaking order
but against "any order" which is of wide
amplitude. The reasoning employed by the High
Court is that since there is no lis, no speaking
order is passed, as such an appeal would not lie,
is not sustainable in law, is contrary to what has
been held by this Court in Escorts (supra)."
26. The basis of the Hon'ble Supreme Court's judgment is
evident from paragraph 41 wherein it is recorded that proceedings
for refund are more or less in the nature of execution proceedings
and that it is not open to the authority which processes the refund
claim to make a fresh assessment on merits and correct the
assessment on the basis of mistake or otherwise. As discussed earlier,
by contrast, the power under Section 28 clearly takes within its fold
the power to determine duty or interest. In that respect, the power
under Section 28 cannot be equated with or compared to the power
under Section 27. The judgment in Escorts also arose in the factual
context of an application for refund. After noticing the period of
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limitation under Section 27 of the Customs Act, the Hon'ble Supreme
Court affirmed the rejection of the refund application. Except for
recognizing that self-assessment qualifies as assessment, these
judgments do not advance the cause of the petitioner.
27. The petitioner also relied on Flock and Eveready Industries to
contend that a show cause notice cannot be issued without
challenging the order of assessment. As in the case of ITC and
Escorts, Flock also arose in the context of a refund claim under the
Central Excise and Salt Act, 1944 (as it was then named). In Eveready
Industries, the Division Bench of this Court was called upon to decide
whether it was permissible for the Central Excise authorities to take
recourse to Section 11A of the Central Excise Act without taking
recourse to the provisions of Section 35E. Section 11A is analogous to
Section 28 of the Customs Act and Section 35E is analogous to Section
129D. The Division Bench concluded that these two provisions are
required to be considered harmoniously by citing with approval the
judgment of the CEGAT in Asian Paints. The Division Bench further
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concluded that Section 11A cannot be invoked in respect of an
alleged erroneous refund in a case where the application for refund
was allowed under Section 11B. Thus, none of these judgments lay
down the proposition that Section 28 cannot be invoked without
reopening the self-assessment under Section 17 or by way of appeal.
28. Learned senior standing counsel for the respondent relied
on Priya Blue, particularly paragraph 6 thereof, with regard to the
power under Section 28. In paragraph 6, the Hon'ble Supreme Court
concluded that an order of assessment could be reviewed under
Section 28 of the Customs Act. He also relied on the judgment of the
Hon'ble Supreme Court in Jain Shudh Vanaspati. In paragraph 7 of the
said judgment, the Hon'ble Supreme Court concluded that the power
under Section 28 can be invoked only subsequent to the clearance of
goods under Section 47 and that the High Court had erred in
concluding that a show cause notice could not be issued under
Section 28 unless the order under Section 47 had been first revised
under Section 130. In Canon India, which is another judgment relied
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upon by learned senior standing counsel, the Hon'ble Supreme Court
equated the power under Section 28 to the power of review.
29. Upon consideration of the language of Sections 17 and 28
and the judgments relied upon by the contesting parties, I conclude
that the power under Section 28 is a power to determine duty and
interest. Such power is not subject to or conditional upon the
assessment being reopened or set aside. Consequently, it cannot be
concluded that the respondent does not have the jurisdiction to
invoke Section 28 either on account of not having verified the self-
assessment in terms of Section 17 of the Customs Act or not
appealing against such self-assessment.
30. The next question that falls for consideration is whether the
respondent had jurisdiction to invoke the enlarged period of
limitation under sub-section (4) of Section 28. As is noticeable from
the language of sub-section (4), such power may only be exercised if
the non-levy, non-payment, short levy, short payment, erroneous
refund, etc., was by reason of collusion or wilful misstatement or
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suppression of facts. The contention of the petitioner was that the
relevant goods were cleared by classifying such goods under CTH
8517 over a period of about four years, i.e. between 15.11.2018 and
16.12.2022, and that the enlarged period of limitation cannot be
invoked in those circumstances. From paragraph 6 of the petitioner's
affidavit, it appears that multiple goods, such as base stations and
modules, servers and modules, LTE products and modules, MIMO
products, OTN products and modules, POT products, PTN products
and modules, session border controllers and modules, soft switches
and modules, media gateway (modules) and VoIP equipment and
modules were imported by the petitioner. This is also evident from
the impugned show cause notice which expressly refers to the
relevant bills of entry.
31. According to the respondent, these goods are liable to be
classified under CTH 85176100 or CTH 85176290. If classified under
the tariff headings indicated by the respondent, the petitioner would
not be entitled to the benefit of the exemption notifications referred to
in paragraph 8 of the affidavit of the petitioner. This leads to the
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question whether the petitioner classified the goods in the bills of
entry based on the bona fide belief that the goods are classifiable
under the CTH specified by the petitioner or whether the petitioner
resorted to misclassification so as to unjustly enjoy the benefit of
exemption.
32. The show cause notice is detailed and deals extensively
with the nature of goods imported by the petitioner, and the self-
classification thereof in the relevant bills of entry. Mr.Tarun Gulati
contended that the show cause notice is replete with inferences of
fact and that such inferences cannot be the basis for invoking
jurisdiction under sub-section (4) of Section 28 on the ground of
wilful misstatement or suppression of facts. The said contention is
not entirely devoid of merit inasmuch as a finding of wilful
misstatement cannot be recorded without some basis to hold that the
petitioner's statements, as opposed to the inferences therefrom, were
made with knowledge of falsity. It bears repetition, however, that the
matter is at the show cause notice stage and only allegations have
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been made as on date.
33. On examining the show cause notice, it is apparent that
such allegations of wilful misstatement and suppression of facts have
been made in several paragraphs. In order to interfere at this stage, a
conclusion should be reached that the petitioner definitely did not
indulge in suppression of facts or make wilful misstatements while
importing the goods. Without closely and carefully considering
disputed facts and documents relating to the import of multiple
telecommunication-related products under a large number of bills of
entry, the veracity of the respondent's allegations cannot be
determined. Such detailed consideration is inappropriate at this
juncture for multiple reasons.
34. Hence, at this preliminary stage, in the factual matrix
outlined above, especially in exercise of discretionary and summary
jurisdiction, it cannot be concluded that the respondent invoked sub-
section (4) of Section 28 without jurisdiction. In this regard, it should
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also be noticed and recognized that it appears prima facie that the
notice was issued within the period of five years specified therein.
The upshot of this discussion is that the petitioner has failed to make
out a case to interfere with the show cause notice. Since the hearing
pursuant to the impugned show cause notice was deferred in view of
this case, it is, however, just and appropriate that the petitioner be
granted time to respond to the show cause notice.
35. For reasons aforesaid, W.P.No.2166 of 2024 is disposed of
by refusing to interfere with the show cause notice but by permitting
the petitioner to respond thereto within one month from the date of
receipt of a copy of this order. Upon receipt of such reply, it will be
open to the respondent to proceed with the matter in accordance with
law. Consequently, connected miscellaneous petitions are closed. No
costs.
30.10.2024
Index :Yes/No
https://www.mhc.tn.gov.in/judis
Internet :Yes/No
Neutral Citation :Yes/No
kal
To
Principal Commissioner of Customs, Air Cargo,
Chennai, VII Commissionerate,
New Custom House, Meenambakkam,
Chennai-600016.
SENTHILKUMAR RAMAMOORTHY J.
kal
https://www.mhc.tn.gov.in/judis
Pre-delivery order made in
&
WMP Nos.2359 & 2360 of 2024
30.10.2024
https://www.mhc.tn.gov.in/judis
