Delhi High Court
Khandwala Enterprise Private Limited vs Union Of India And Ors. on 14 November, 2019
Author: C. Hari Shankar
Bench: Chief Justice, C.Hari Shankar
$~13 and 14
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 1st November, 2019
Pronounced on: 14th November, 2019
+ WP (C) 9225/2019 and CM No. 38058, 47439, 47440/2019
KHANDWALA ENTERPRISE PRIVATE LIMITED
..... Petitioner
Through: Mr. Tarun Gulati, Sr. Adv. with
Mr. Kishore Kunal and
Mr.Pratush Choudhary, Advs.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through: Mr. Ravi Prakash and
Mr. Farman Ali, Advs. for R-1
+ WP (C) 9230/2019 and CM Nos. 38071, 47442, 47443/2019
CREDENCE COMMODITIES EXPORTS ..... Petitioner
Through: Mr. Tarun Gulati, Sr. Adv. with
Mr. Kishore Kunal and
Mr.Pratush Choudhary, Advs.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through: Mr. Ashim Sood, CGSC with
Ms. Senu Nizar, Advs. for R-1,
3 and 4
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE C.HARI SHANKAR
% JUDGMENT
WP (C) 9225/2019 & WP (C) 9230/2019 Page 1 of 40
C. HARI SHANKAR, J
1. The dispute in these two writ petitions is identical; ergo, they
are being decided by this common judgment. For the sake of
convenience, reference would be made to the facts relating to M/s
Khandwala Enterprises Private Limited, the petitioner in WP (C)
9225/2019.
2. The writ petition seeks quashing of
(i) Office Memorandum, dated 16th February, 2018, issued
by the Central Board of Excise and Customs (CBEC),
(ii) Circular, dated 31st May, 2019, issued by the Central
Board of Indirect Taxes and Customs (the CBEC, as
rechristened after the advent of the GST regime, referred to,
hereinafter, as ―the CBIC‖),
(iii) Office Memorandum, dated 6th September, 2017, issued
by the Director General of Foreign Trade (DGFT),
(iv) Show Cause Notice dated 15th July, 2019, issued to the
petitioner by the Commissioner of Customs, ACC Import, New
Delhi (hereinafter referred to as ―the Commissioner‖), and
(v) Show Cause Notice dated 19th July, 2019, issued to M/s
Mink Tradecom Private Limited (hereinafter referred to as
―Mink‖) by the Commissioner.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 2 of 40
3. During the pendency of these proceedings, Circular dated 9th
July, 2019, was issued by the CBIC and Corrigenda dated 30th
September, 2019, and 7th October, 2019, to the impugned Show Cause
Notices dated 15th July, 2019, and 19th July, 2019, were issued by the
Principal Commissioner of Customs (hereinafter referred to ―the
Principal Commissioner.
4. This writ petition assails the Show Cause Notice dated 12th
July, 2019, issued to the petitioner, as well as the Show Cause Notice
28th June, 2019, issued to Mink, as the petitioner and Mink were
merged in 2018. The petitioner has moved CM 47439/2019, seeking
to amend the writ petition to challenge the said Circular dated 9 th
September, 2019, and Corrigenda dated 30th September, 2019, and 7th
October, 2019. Instead of formally allowing the said amendment and
going through the rigours of filing of amended writ petition, response
thereof etc., we have, with consent of parties, also heard the petitioner
on the changes sought to be brought in by way of the aforesaid
amendment.
5. The petitioner and Mink, we may note, were merged in 2018;
which is why the present writ petition, though filed by the petitioner,
also assails the Show Cause Notice issued to Mink, and the
Corrigendum thereto.
Facts
6. The subject matter of these proceedings is the import, by the
petitioner, of goods declared as ―gold coins of different purity (99.5%
WP (C) 9225/2019 & WP (C) 9230/2019 Page 3 of 40
and above (other than legal tenders)‖, from South Korea, under eight
Bills of Entry (hereinafter referred to as ―Bs/E‖), filed during the
period 9th August, 2017 to 23rd August, 2017. The assessable value
declared in respect of the said goods was ₹ 163,30,51,803/-.
7. The petitioner classified the imported gold coins under Sub-
Heading 7114 1910 of the Customs Tariff (hereinafter referred to as
―the Tariff‖). Tariff Heading 7114 of the Tariff, with its Sub-Headings
may be reproduced, for ready reference, thus:
"Tariff Item Descriptions of goods Unit Rate of
duty
7114 Articles Of Goldsmiths'
Or Silversmiths' Wares
And Parts Thereof, Of
Precious Metal Or Of
Metal Clad With Precious
Metal
- Of Precious Metal,
Whether Or Not Plated Or
Clad With Precious Metal
7114.11 -- Of Silver, Whether Or
Not Plated Or Clad With
Precious Metal
7114.1110 --- Articles Kg. 15%
7114.1120 --- Parts
Kg. 15%
7114.19 -- of other precious metal,
whether or not plated or
clad with precious metal
7114.1910 --- Articles of gold Kg. 15%‖
WP (C) 9225/2019 & WP (C) 9230/2019 Page 4 of 40
It would be seen that Sub-Heading 7114 1910, under which the
petitioner sought to clarify the gold coins imported by it, covers
―articles of gold‖.
8. The petitioner also claimed complete exemption, from the
requirement of payment of Customs duty, on the imported gold coins,
under S. No. 526 of Notification 152/2009-Cus, dated 31st December,
2009, as amended by Notification 66/2016-Cus, dated 31st December,
2016. The relevant portion of Notification 152/2009-Cus, dated 31st
December, 2009, as so amended, reads thus:
―In exercise of the powers conferred by sub-section (1) of
section 25 of the Customs Act, 1962 (52 of 1962), the Central
Government, being satisfied that it is necessary in the public
interest so to do, hereby exempts goods of the description as
specified in column (3) of the Table appended hereto and
falling under the Chapter, Heading, Sub-heading or tariff item
of the First Schedule to the Customs Tariff Act, 1975 (51 of
1975) as specified in the corresponding entry in column (2) of
the said Table, when imported into India from the Republic of
Korea, from so much of the duty of customs leviable thereon
as is in excess of the amount calculated at the rate specified in
the corresponding entry in column (4) of the aforesaid Table:
Provided that the importer proves to the satisfaction of the
Deputy Commissioner of Customs or Assistant Commissioner
of Customs, as the case may be, that the goods in respect of
which the benefit of this exemption is claimed are of the
origin of Republic of Korea, in accordance with the
provisions of the Customs Tariff (Determination of Origin of
Goods under the Preferential Trade Agreement between the
Governments of the Republic of India and the Republic of
Korea) Rules, 2009, published in the notification of the
Government of India in the Ministry of Finance (Department
of Revenue), No. 187/2009-Customs (N.T.), dated the 31st
December, 2009.
2. This notification shall come into force with effect from
st
1 January, 2010.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 5 of 40
Sr. Chapter Description Rate in
No. Heading percentage
526 711021 to 711890 All Goods 0.00‖
9. Notification 152/2009-Cus supra, therefore, completely
exempted goods classifiable under Sub-Heading 711021 to Sub-
Heading 71180 of the Tariff, from the requirement of payment of
customs duty, subject to the condition that
(i) the country of origin of the goods was the Republic of
Korea, and
(ii) the goods were imported in accordance with the Customs
Tariff (Determination of origin of goods under the preferential
Trade Agreement between the governments of the Republic of
India and the Republic of Korea) Rules, 2009 (hereinafter
referred to as ―the 2009 Rules‖), notified vide Notification No.
187/2009-Cus(NT) dated 31st December, 2009.
10. Show Cause Notice, dated 12th July, 2019, stands issued, to the
petitioner, in respect of the aforesaid gold coins imported by it. The
Show Cause Notice requires the petitioner to show cause as to why
(i) the gold coins imported by the petitioner under the
aforesaid eight Bs/E be not confiscated under Section 111 (d) of
the Customs Act, 1962 (hereinafter referred to as ―the Customs
Act‖), for having been imported in violation of Section 3 (3) of
the Foreign Trade (Development and Regulation) Act, 1992,
(hereinafter referred to as ―FTDR Act‖), and para 2.08 of the
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Foreign Trade Policy, 2015-2020 (hereinafter referred to as ―the
FTP‖),
(ii) the benefit of Notification 152/2009-Cus supra, as
amended, be not denied to it,
(iii) Customs duty, already deposited by the petitioner against
the aforesaid imports of gold coins, be not adjusted against the
duty which would be payable consequent on denial of the claim
for exemption under Notification 152/2009-Cus supra, and
differential duty be not confirmed and demanded,
(iv) penalty be not imposed on the petitioner under Section
112 (a) of the Act, and
(v) the assessment of one of the aforesaid eight Bs/E, which
was provisional, be not finalized on the above lines.
11. As we do not intend to comment on the merits of the allegations
in the impugned Show Cause Notices, we refrain from entering into
the specifics of the various Notifications involved therein.
12. The FTP, it may be noted, is notified under Section 5 of the
FTDR Act, which reads thus:
―5. Foreign Trade Policy. - The Central Government
may, from time to time, formulate and announce, by
notification in the Official Gazette, the foreign trade policy
and may also, in like manner, and that policy:
Provided that the Central Government may direct that, in
respect of the Special Economic Zones, the foreign trade
WP (C) 9225/2019 & WP (C) 9230/2019 Page 7 of 40
policy shall apply to the goods, services and technology with
such exceptions, modifications and adaptations, as may be
specified by it by notification in the Official Gazette.‖
13. According to the Revenue, the gold coins imported by the
petitioner under the aforesaid eight BS/E were appropriately
classifiable, not under Sub-Heading 7114 1910, but under Sub-
Heading 7118 9000 of the Tariff. Tariff Heading 7118 of the Tariff,
with its Sub-Headings, may be reproduced thus:
"Tariff Item Descriptions of goods Unit Rate of
duty
7118 COINS
7118 1000 -Coins (other than gold
coin) not being legal Kg 10%
tenders
7118 9000 Other Kg 10%‖
14. Reliance has been placed, in the impugned Show Cause Notice
dated 12th July, 2019, on the Explanatory Note to Heading 7118 in the
Harmonised System of Nomenclature (HSN), which provides that,
―this heading applies to coins of any material (including precious
metals) of official prescribed weight and designed, issued under
government control for use as legal tender‖. The Show Cause Notice
observes that the Explanatory Note also postulates that the heading
also includes coins which are no longer legal tender.
15. It may be noted, here, that the Customs Tariff, in its eight-digit
avatar, which came into being with effect from 2003, is based on the
WP (C) 9225/2019 & WP (C) 9230/2019 Page 8 of 40
HSN, and the Explanatory Notes to the HSN are treated as practically
of binding value, in interpreting entries under the Customs Tariff,
where the entries in the Tariff are aligned to the entries in the HSN1.
16. On the basis of the aforesaid, the Show Cause Notice alleges
that Sub-Heading 7118 1000 covers coins other than gold coins,
which are no longer legal tender, and Sub-Heading 7118 9000 covers
all other coins, including legal tender and gold coins. It is, therefore,
alleged that the gold coins imported by the petitioner were
appropriately classifiable under Sub-Heading 7118 9000, rather than
Sub-Heading 7114 1910, of the Tariff.
17. The reason why the alleged classifiability, of the imported gold
coins, under Sub-Heading 7118 9000 of the Tariff, in preference to
Sub-Heading 7114 1910, makes a difference, is to be found in Chapter
71 of the Imported Trade Control (Harmonised System) [hereinafter
referred to as ―ITC (HS)‖], being the harmonized system of
classification of imported goods for the purposes of the FTP, which is
in sync, more or less, with the Tariff. The ITC (HS) is issued under
Section 5 of the FTDR Act read with para 2.01 of the FTP. Section 5
of the FTDR Act, which already stands reproduced hereinabove,
provides for notification of the FTP. Para 2.1 of the FTP, whereunder
the ITC (HS) is notified, reads as under:
―2.01 Exports and Imports-'Free', unless regulated
(a) Exports and Imports shall be ‗free' except when
regulated by way of ‗prohibition', ‗restriction' or
1C.C.E. v. Wood Craft Products Ltd, 1995 (77) ELT 23 (SC); C.C. v. Business Forms Ltd, 2002 (142) ELT
18 (SC)
WP (C) 9225/2019 & WP (C) 9230/2019 Page 9 of 40
‗exclusive trading through State Trading Enterprises
(STEs)' as laid down in Indian Trade Classification
(Harmonised System) [ITC (HS)] of Exports and
Imports. The list of ‗Prohibited', ‗Restricted' and STE
items can be viewed by clicking on ‗Downloads' at
http://dgft.gov.in.
(b) Further, there are some items which are ‗free'
for import/export, but subject to conditions stipulated
in other Acts or in law for the time being in force.‖
Notification 36/2015-2020, dated 17th January, 2017, whereby the
DGFT notified the ITC (HS), 2017, reads thus:
"Notification No 36/2015-2020
New Delhi, Dated: 17 January, 2017
Subject: Notification of ITC (HS), 2017 - Scheduled-1
(Import Policy)
S.O. (E): In exercise of powers conferred by Section 5 of
the Foreign Trade (Development & Regulation) Act, 1992 (as
amended from time to time) read with paragraph 2.01 of the
Foreign Trade Policy, 2015-2020, the Central Government
hereby notifies ‗Indian Trade Classification (Harmonised
System) of Import Items, 2017 [ITC (HS), 2017] as enclosed
in the Annexure to this Notification.
2. ITC (HS), 2017 contains ―Schedule 1 - Import
Policy‖. Against each item of this schedule, the current
import policy has been indicated along with policy conditions
to be fulfilled, if any. The same is available in the DGFT's
website www.dgft.gov.in.
3. This shall come into force with immediate effect.
Effect of this Notification: ITC (HS) 2017 Schedule-1
Import Policy is notified.‖
18. Heading 7118 of the ITC (HS), with its sub- headings, reads
thus:
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―Exim Item Description Policy Policy
Code conditions
7118 Coins
7118 10 00 Coin (other than gold Free
coin), not being legal
tender
7118 90 00 Other Free Subject to
RBI
Regulations‖
19. Under the ITC (HS), therefore, ―coins (other than gold coins
not being legal tender)‖ fall under Heading 7118 1000, and are freely
importable, whereas import of other coins (which would include gold
coins), which fall under Heading 7118 9000, though also free, is
subject to regulations framed by the Reserve Bank of India (RBI).
20. The impugned Show Cause Notices, dated 12th July, 2019/15th
July, 2019, issued to the petitioner, and 28th June, 2019/19th July,
2019, issued to Mink, allege that, as per RBI guidelines, gold coins
are freely importable, provided they are imported by the following
agencies:
(i) agencies nominated by the DGFT,
(ii) Banks authorised by the RBI, and
(iii) Star and Premier Trading Houses
Apart from these agencies, other entities are not permitted, as per RBI
guidelines, to import gold coins. The RBI, on being queried in this
regard, especially with respect to the gold coins imported by the
petitioner - vide letters dated 8th August, 2017 and 24th August, 2017,
issued by the customs authorities - clarified, vide its letter, dated 13th
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September, 2017, that the gold coins imported by the petitioner (or by
Mink) were not freely importable inasmuch as they were not agencies
falling within any of the aforesaid three categories, who alone were
entitled to import gold coins.
21. The impugned Show Cause Notices also rely on para 2.08 of
the FTP, which reads thus:
―Any goods /service, the export or import of which is
‗Restricted' may be exported or imported only in accordance
with an Authorisation / Permission or in accordance with the
procedure prescribed in a Notification / Public Notice issued
in this regard.‖
22. On the basis of the above, the impugned Show Cause Notices
allege that the gold coins imported by the petitioner and Mink, having
been imported in violation of the FTP, were not entitled to the benefit
of exemption under S. No. 526 of Notification. 152/2019-Cus supra.
It is essentially on the basis of the aforesaid facts and allegations that
the impugned Show Cause Notices call on the petitioner, and Mink, to
show cause against confiscation of imported gold coins, demand of
differential duty with interest, and imposition of penalty.
23. The petitioner claims to be particularly aggrieved by para 8 of
the impugned Show Cause Notices, dated 12th July, 2019/15th July,
2019, issued to the petitioner, and 28th June, 2019/19th July, 2019,
issued to Mink, which reads as under:-
―8. Further, in a case involving import of similar article
viz. gold granules, CBIC vide letter F. No. 450/67/2019-
Cus.IV dated 31.05.2019 has taken a stand that import of said
items can only be made by a nominated agency bank/star
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house etc. In this regard, CBIC has held two recent orders
passed by the CESTAT in the cases of Sri Export versus
Commissioner of Customs, Hyderabad [Final Order
No.A/31494/2018, dated 27.11.201 8 in Appeal No.
C/30812/2018] and Sri Export Versus CC Bangalore Cus
[arising out of No. 344/2018 dated 12.10.2018 passed by
Commissioner of Customs, Bangalore-1], as not being legal
and proper. In the said orders, import of Gold Granules has
been allowed to be imported by an importer which was not a
nominated agency bank/star house etc. It has decided by
CBIC that the said orders should be appealed against.
Directions have also been issued by CBIC that any similar
consignments pending clearance at the port/airports may be
dealt in terms of the FTP 2015-2020.‖
24. We proceed to examine these challenges, seriatim.
Circular No. 450/67/2019-Cus.IV dated 31st May, 2019
25. Circular No. 450/67/2019-Cus.IV dated 31st May, 2019, on
which the afore-extracted para 8 of the impugned Show Cause
Notices, dated 12th July, 2019/15th July, 2019, issued to the petitioner,
and 28th June, 2019/19th July, 2019, issued to Mink, places reliance,
reads thus:
―F. NO. 450/67/2019. CUS IV
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
(CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS)
Room 227B, North Block
New Delhi, dated 31st May, 2019
To
All Principal Chief Commissioners/Chief Commissioners of
Customs/Customs (Preventive)
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All Principal Chief Commissioners/Chief Commissioners of
Customs & Central Taxes
All Principal Commissioners/Commissioners of Customs/
Customs (Preventive)
Subject:- Import of Gold Granules by entities other than
nominated agency/bank/ star house etc. reg.
Sir/ Madam,
.
Attention is invited to two CESTAT Judgments Sri
Exports versus Commissioner of Customs. Hyderabad
(Final Order No. A/31/194/2018, dated 22.11.2018 in Appeal
No. C/30812/2018) and Sri Exports Versus C.C. Bangalore-
Cus [arising out of No. 344/2018 dated 12.10.2018 passed by
Commissioner of Customs, Bangalore-I) respectively. In the
said orders passed by the Hyderabad and Bangalore benches
of CESTAT, import of Gold granules has been allowed to be
imported by an importer not being a nominated
agency/bank/star house etc.
The said CESTAT orders have been examined in the
Board. It is observed that the said orders are not legal and
proper. Therefore, the Board has taken a decision that the said
orders should be appealed against. Customs authorities at
Hyderabad and Bangalore have been requested to take
necessary action.
It is therefore, requested that any similar consignments
pending clearance at the ports/airports may be dealt in terms
of the FTP 2015-2020 and the Board's decision above.
Yours Sincerely
Sd/-
(Zubair Riaz)
Director (Customs)‖
(Emphasis supplied)
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26. The petitioner submits that it was grossly improper, as well as
ex facie illegal, on the part of the Director (Customs), to observe, in
the afore-extracted Circular dated 31st May, 2019, that the judgments
of the Customs, Excise and Service Tax Appellate Tribunal
(hereinafter referred to as ―the Tribunal‖), in the Final Orders dated
12th August, 2018 and 27th November, 2018, both of which were
passed in appeals filed by M/s Sri Exports, were not legal and proper.
The petitioner submits that, while the right and entitlement, of the
Customs authorities, to appeal against the said final orders passed by
the Tribunal, could not be gainsaid, the CBIC had no authority,
whatsoever, to castigate the said final orders - which were binding on
all customs formations - as not being legal and proper. Neither, it is
submitted, could the impugned Circular dated 31 st May, 2019, direct
that consignments, pending clearance at ports and airports, be dealt
with in accordance with the said decision, as contained in the Circular,
contrary to the decisions of the Tribunal.
27. It is submitted by Mr. Tarun Gulati, learned Senior Counsel for
the petitioner, that, even on first principles, the CBIC had no
jurisdiction, whatsoever, to place any fetter or control over
adjudicatory proceedings, relating to imported goods. Reliance is
placed, by Mr. Gulati, for this proposition, on the judgment of this
Court in Baliyan and Jewellers Associations v. U.O.I.2.
28. On going through the impugned Circular, dated 31st May, 2019,
we find ourselves in agreement with Mr. Gulati. The concluding
2
2016 (335) ELT 639 (Del)
WP (C) 9225/2019 & WP (C) 9230/2019 Page 15 of 40
paragraph of the impugned Circular, dated 31st May, 2019, issued by
the CBIC is, even on a first reading, plainly objectionable. It discloses
a woeful lack of appreciation, by the author of the said Circular, of the
most rudimentary principles of law and precedent. Decisions of the
Tribunal are, in the absence of any rulings to the contrary, by
authorities higher in the judicial echelons, binding on all field
formations, as well as adjudicating authorities. Any act or decision,
by an officer, lower in judicial hierarchy to the Tribunal - which
would include all officers of the Department of Revenue and, in any
case, every Customs or Central Excise Officer in the Government -
which is contrary to the law laid down by the Tribunal, is not only ex
facie unsustainable, but is also contemptuous of the Tribunal. The
following well-known passages, from the judgment of the Supreme
Court in U.O.I. v. Kamlakshi Finance Corporation Ltd3, merit
reproduction, in this context:
―5. The learned Additional Solicitor General, however,
submits that the learned Judges have erred in passing severe
strictures against the two Assistant Collectors who had dealt
with the matter. He submitted that these officers had given
reasons for classifying the goods under Heading 39.19 and
not 85.46 and could do no more. He submitted that they acted
bona fide in the interests of Revenue in not accepting a claim
which, they felt, was not tenable.
6. Sri Reddy is perhaps right in saying that the officers
were not actuated by any mala fides in passing the impugned
orders. They perhaps genuinely felt that the claim of the
assessee was not tenable and that, if it was accepted, the
Revenue would suffer. But what Sri Reddy overlooks is that
we are not concerned here with the correctness or otherwise
of their conclusion or of any factual mala fides but with the
fact that the officers, in reaching their conclusion, by-passed
two appellate orders in regard to the same issue which were
3
1991 (55) ELT 433 (SC)
WP (C) 9225/2019 & WP (C) 9230/2019 Page 16 of 40
placed before them, one of the Collector (Appeals) and the
other of the Tribunal. The High Court has, in our view,
rightly criticised this conduct of the Assistant Collectors and
the harassment to the assessee caused by the failure of these
officers to give effect to the orders of authorities higher to
them in the appellate hierarchy. It cannot be too vehemently
emphasised that it is of utmost importance that, in disposing
of the quasi-judicial issues before them, revenue officers are
bound by the decisions of the appellate authorities. The order
of the Appellate Collector is binding on the Assistant
Collectors working within his jurisdiction and the order of
the Tribunal is binding upon the Assistant Collectors and the
Appellate Collectors who function under the jurisdiction of
the Tribunal. The principles of judicial discipline require that
the orders of the higher appellate authorities should be
followed unreservedly by the subordinate authorities. The
mere fact that the order of the appellate authority is not
"acceptable" to the department - in itself an objectionable
phrase - and is the subject-matter of an appeal can furnish no
ground for not following it unless its operation has been
suspended by a competent Court. If this healthy rule is not
followed, the result will only be undue harassment to
assessees and chaos in administration of tax laws.
7. The impression or anxiety of the Assistant Collector
that, if he accepted the assessee's contention, the department
would lose revenue and would also have no remedy to have
the matter rectified is also incorrect. Section 35E confers
adequate powers on the department in this regard. Under sub-
section (1), where the Central Board of Excise and Customs
Direct Taxes comes across any order passed by the Collector
of Central Excise with the legality or propriety of which it is
not satisfied, it can direct the Collector to apply to the
Appellate Tribunal for the determination of such points
arising out of the decision or order as may be specified by the
Board in its order. Under sub-section (2) the Collector of
Central Excise, when he comes across any order passed by an
authority subordinate to him, if not satisfied with its legality
or propriety, may direct such authority to apply to the
Collector (Appeals) for the determination of such points
arising out of the decision or order as may be specified by the
Collector of Central Excise in his order and there is a further
right of appeal to the department. The position now,
therefore, is that, if any order passed by an Assistant
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Collector or Collector is adverse to the interests of the
Revenue, the immediately higher administrative authority has
the power to have the matter satisfactorily resolved by taking
up the issue to the Appellate Collector or the Appellate
Tribunal as the case may be. In the light of these amended
provisions, there can be no justification for any Assistant
Collector or Collector refusing to follow the order of the
Appellate Collector or the Appellate Tribunal, as the case
may be, even where he may have some reservations on its
correctness. He has to follow the order of the higher
appellate authority. This may instantly cause some prejudice
to the Revenue but the remedy is also in the hands of the
same officer. He has only to bring the matter to the notice of
the Board or the Collector so as to enable appropriate
proceedings being taken under S. 35E(1) or (2) to keep the
interests of the department alive. If the officer's view is the
correct one, it will no doubt be finally upheld and the
Revenue will get the duty, though after some delay which
such procedure would entail.
8. We have dealt with this aspect at some length, because
it has been suggested by the learned Additional Solicitor
General that the observations made by the High Court, have
been harsh on the officers. It is clear that the observations of
the High Court, seemingly vehement, and apparently
unpalatable to the Revenue, are only intended to curb a
tendency in revenue matters which, if allowed to become
widespread, could result in considerable harassment to the
assessee-public without any benefit to the Revenue. We
would like to say that the department should take these
observations in the proper spirit. The observations of the High
Court should be kept in mind in future and utmost regard
should be paid by the adjudicating authorities and the
appellate authorities to the requirements of judicial discipline
and the need for giving effect to the orders of the higher
appellate authorities which are binding on them.‖
(Emphasis and underscoring supplied)
29. It was, therefore, completely impermissible for the CBIC to, in
the impugned Circular dated 31st March, 2019, direct field formations
to deal with consignments pending clearance at airports in accordance
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with the view of the CBIC, rather than the orders of the Tribunal in Sri
Exports versus Commissioner of Customs. Hyderabad (Final Order
No. A/31/194/2018, dated 22.11.2018 in Appeal No. C/30812/2018)
and Sri Exports Versus C.C. Bangalore-Cus [arising out of No.
344/2018 dated 12.10.2018 passed by Commissioner of Customs,
Bangalore-I), merely because the CBIC felt that the said orders were
not ―legal and proper‖. This direction flies in the face of two of the
most fundamental principles governing adjudication, viz., firstly, that
it is not open to any executive, or administrative, authority to control,
in any manner, the adjudicatory process, and, secondly, that no
adjudicating authority can be directed to act in conscious violation of
the law. These principles are, indeed, so elementary, that we are
astonished at the directions contained in the impugned circular dated
31st May, 2019. The authority issuing the said circular ought to have
been aware of the fact that ―dealing with‖ consignments pending
clearance at ports and airports involves a process of adjudication, and
that it was not open to any such authority, dealing with such
consignments, to act in violation of binding decisions of the Tribunal.
The concluding paragraph of the impugned Circular dated 31st May,
2019, issued by the CBIC, in our view, flies directly in the face of the
law, as laid down by the Supreme Court in Kamlakshi Finance
Corporation Ltd3.
30. The said directions also infract, directly, Section 151A of the
Customs Act, which reads thus:
―151A. Instructions to officers of customs. -- The Board
may, if it considers it necessary or expedient so to do for the
WP (C) 9225/2019 & WP (C) 9230/2019 Page 19 of 40
purpose of uniformity in the classification of goods or with
respect to the levy of duty thereon, or for the implementation
of any other provision of this Act or of any other law for the
time being in force, in so far as they relate to any prohibition,
restriction or procedure for import or export of goods issue
such orders, instructions and directions to officers of customs
as it may deem fit and such officers of customs and all other
persons employed in the execution of this Act shall observe
and follow such orders, instructions and directions of the
Board :
Provided that no such orders, instructions or directions shall
be issued -
(a) so as to require any such officer of customs to make a
particular assessment or to dispose of a particular case in a
particular manner; or
(b) so as to interfere with the discretion of the
Commissioner of Customs (Appeals) in the exercise of his
appellate functions.‖
(Emphasis supplied)
31. In directing field formations to deal with consignments pending
clearance at ports and airports, in accordance with the views expressed
by it, in preference to the law laid down by the Tribunal, it is clear that
the CBIC has acted in direct and conscious violation of the proviso to
Section 151A of the Customs Act.
32. We have no hesitation, therefore, in declaring the said diktat, as
contained in the concluding paragraph of the impugned Circular dated
31st May, 2019, issued by the CBIC whereby consignments, pending
clearance at ports and airports, were directed to be dealt with, ―in
terms of FTP 2015-2020 and the Board's decision above‖ to be illegal.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 20 of 40
Para 8 in the impugned Show Cause Notices (before amendment)
33. Para 8, in each of the impugned Show Cause Notices in this writ
petition, i.e. the Show Cause Notice dated 12th July, 2019, issued to
the petitioner, as well as Show Cause Notice dated 28 th June, 2019,
issued to Mink, invokes the aforesaid Circular, dated 31st May, 2019,
issued by the CBIC. The Circular, dated 31st May, 2019, having been
found by us to be in contravention of the law, the invocation of the
said Circular, in para 8 of the Show Cause Notices dated 12 th July,
2019 and 28th June, 2019, too, therefore, cannot be legally sustained.
Neither could any authority, adjudicating the said Show Cause
Notices, be bound by para 8 thereof.
Circular No. 450/67/2019-Cus. IV and Corrigenda to impugned Show
Cause Notices, issued during the course of these proceedings
34. Aware of the above legal position, the respondent, in an
apparent bid to salvage the situation, issued Circular dated 9 th
September, 2019, as well as corresponding Corrigenda dated 30 th
September, 2019 and 7th October, 2019, replacing para 8 in the
impugned Show Cause Notices dated 12th July, 2019 (issued to the
petitioner) and 28th June, 2019 (issued to Mink).
35. The Circular, dated 9th September, 2019, issued by the CBIC,
reads thus:
―F No. 45G/67/2019-Cus.IV.
Government of India
Ministry of Finance
WP (C) 9225/2019 & WP (C) 9230/2019 Page 21 of 40
Department of Revenue
(Central Board of Indirect Taxes & Customs)
Room 227B, North Block
New Delhi, dated 9th September, 2019
To
All Principal Chief Commissioners/Chief Commissioners of
Customs/ Customs(Preventive)
All Principal Chief Commissioners/Chief Commissioners of
Customs & Central Taxex
All Principal Commissioners/Commissioners of
Customs/Customs (Preventive)
Subject: Import of Gold Granules by entities other than
nominated agency/bank/ star house etc.-reg.
Sir/ Madam,
Attention is invited to the instruction from even F. No.
dated 31.5.19 on the above subject informing inter-alia that
CBIC has directed respective field formations to appeal
against CESTAT judgments in Sri Exports Versus
Commissioner of Customs, Hyderabad [Final Order No.
A/31494/2018, dated 27-11-2018 in Appeal No.
C/30812/2018] and Sri Exports Versus G.G Bangalore-Cus
[arising out of No. 344/2018 dated 12/10/2018 passed by
Commissioner of Customs, Bangalore-I] respectively (copy
enclosed).
2. As per the information received from the Principal
Commissioner of Customs, Hyderabad, the said order passed
by CESTAT Hyderabad has been suspended. Appeal has also
been filed against the order of CESTAT, Bengaluru in the
Karnataka High Court.
3. Subsequent to above Instructions. RBI vide letter dt. 18
June 2019 has stated that as per Master Direction dated July 1,
2016, it has been mentioned that Nominated banks and
nominated agencies, as notified, by DQFT are permitted to
WP (C) 9225/2019 & WP (C) 9230/2019 Page 22 of 40
import gold on consignment basis. Further, DGFT vide F. No,
01/89/180/36/AM-11/PC-2 (A)/Pt.II/P-321 dated 21.6.19 has
clarified that 'individual parties not falling under the
category of nominated agencies are not eligible for
importing gold', (copy enclosed)
4. In view of the above, last para of instruction dated
31.5.19 is modified to the effect that field formations may
take suitable action in accordance with the above
instructions of RBI/relevant master circulars/ extant FTP
provisions and the clarification from DGFT dated 21.6.19
cited above besides provisions of the Customs Act with
regard to pending or future imports of gold consignments.
Yours Sincerely
Sd/-
9.9.2019
(Zuber Riaz)
Director (Customs)‖
(Emphasis and underscoring in original)
36. Para 8, in the impugned Show Cause Notices dated 12th July,
2019/15th July, 2019 and 28th June, 2019/19th July, 2019, as amended
by the said Corrigenda dated 30th September, 2019 and 7th October,
2019, reads thus:
―Further, in a case involving import of similar article viz.
gold granules, CBIC vide letter F. No. 450/67/2019-Cus. IV
dated 31.05.2019 has taken a stand that import of said items
can only be made by a nominated agency bank/star house etc.
in this regard CBIC has held 2 recent orders passed by the
CESTAT in the cases of Sri Export versus Commissioner of
Customs, Hyderabad [Final Order No. A/3149/2018, dated
27.11.2018 in Appeal No C/30812/2018] and Sri Export
versus CC Bangalore Cus [arising out of No 344/2018 dated
12.10.2018 passed by Commissioner of Customs, Bangalore-
1], as not being legal and proper. In the said orders, import of
Gold Granules has been allowed to be imported by an
importer which was not a nominated agency bank/star house
WP (C) 9225/2019 & WP (C) 9230/2019 Page 23 of 40
etc. It has been decided by CBIC that the said orders should
be appealed against. Directions have also been issued by
CBIC that field formations may take suitable action in
accordance with the instructions of RBI/relevant master
circulars/extant FTP provisions and the clarification from
DSE dated 21.06.2019 besides provisions of the Customs Act
with regard to pending or future imports of gold/gold coin
consignments.‖
Circular No. 450/67/2019-Cus. IV, dated 9th September, 2019
37. Mr. Tarun Gulati submits that the Circular, dated 9 th September,
2019, does not, in any way, cure the defect in the impugned Circular
dated 31st May, 2019 supra, and we are inclined to agree with him. No
doubt, the Circular dated 31st May, 2019, was somewhat more brazen,
in directing adjudication of pending consignments, at ports and
airports, to be undertaken in accordance with the views of the CBIC,
rather than the views of the Tribunal. By comparison, para 4 of the
Circular dated 9th September, 2019, which ―modifies‖ the directions
contained in the Circular dated 31st May, 2019, does not expressly
direct field formations to act contrary to the view expressed by the
Tribunal, but, rather, directs them to ―take suitable action in
accordance with the above instructions of RBI/relevant master
circulars/extant FTP provisions and the clarification from DGFT dated
21.6.19 cited above besides provisions of the Customs Act with regard
to pending or future imports of gold consignments.‖ In our view,
however, the distinction between the concluding paragraph of the
Circular dated 31st May, 2019, and paragraph 4 of the Circular dated
9th September, 2019, is merely superficial. The CBIC has, effectively,
reiterated its direction, to all authorities assessing pending imports, to
ignore the judgments of the Tribunal. We reiterate that this is
WP (C) 9225/2019 & WP (C) 9230/2019 Page 24 of 40
completely impermissible. Administrative and executive authorities,
in the Indirect Tax hierarchy, are completely proscribed from
directing field formations to act in violation of judicial orders. We are
aware that para 2 of the Circular dated 9th September, 2019, states that
―as per the information received from the Principal Commissioner of
Customs, Hyderabad‖, the ―order passed by CESTAT Hyderabad has
been suspended‖. The Circular does not condescend, however, to even
refer to the date of the ―information received from the Principal
Commissioner of Customs‖, let alone the details thereof. The order, if
any, of the superior judicial authority, ―suspending‖ the order passed
by the Hyderabad bench of the Tribunal, is also not disclosed. Even if
it were, for the nonce, to be assumed that the order of the Tribunal had
been ―suspended‖, that, by itself, would not justify the directions
contained in para 4 of the Circular dated 9th September, 2019. The
effect of such ―suspension‖, if any, and the issue of whether such
―suspension‖ would eviscerate the precedential value of the order of
the Tribunal, could be assessed only on perusing the order
―suspending‖ the order of the Tribunal. Such vagueness, in a Circular
issued by the CBIC, which has pan-India ramifications, is completely
intolerable. We are also unable to appreciate the further recital, in para
2 of the Circular, dated 9th September, 2019, that an appeal had been
filed, against the order of the Tribunal, Bangalore, in the High Court
of Karnataka. Filing of an appeal against an order of a judicial
authority, it is fundamental, does not even dilute, far less erode, the
precedential value of the judgment appealed against.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 25 of 40
38. Having said that, the CBIC may, quite legitimately, in exercise
of the powers conferred on it by Section 151A of the Customs Act,
issue circulars, or instructions, informing field formations of orders,
passed by superior judicial authorities, if any, staying, setting aside, or
otherwise interfering with orders passed by judicial authorities lower
in the hierarchy, including the Tribunal. Indeed, this may be
advisable, so that authorities, adjudicating similar cases would have,
before them, the latest legal position, without having to spend time on
research. Circulars issued in this regard must, however, stop there.
Once the CBIC informs field formations - or adjudicating authorities
- of the fact that orders passed by the Tribunal stand stayed by
superior authorities, or that appeals, thereagainst, have been filed
before higher fora, the decision, of whether to follow the order of the
Tribunal, or not, has to be left to the adjudicating authority concerned.
It is obvious that every authority, from the lowest to the highest, in the
Indirect Tax echelons, would be aware of the fact that a judicial order,
which stands set aside by a higher authority, has no precedential
value. Whether, however, a judicial order, which stands stayed by a
superior authority, retains, or loses, it is precedential value, is a more
involved question. We do not wish to express any opinion thereon,
essentially because the Show Cause Notices, issued to the petitioner
and Mink, are pending, and we - unlike the CBIC - do not wish to
place fetters on the exercise of judicial discretion, by the authorities
entrusted with the task of the adjudication thereof. Suffice it to state
that there is no absolute proposition, in law, that an order, of a lower
judicial authority, completely loses, on its being stayed by a higher
WP (C) 9225/2019 & WP (C) 9230/2019 Page 26 of 40
judicial authority, its entire precedential value. We prefer to rest our
observations at that.
39. In any event, in view of the above discussion, we are convinced
that the Circular, dated 9th September, 2019 may, at best, serve as a
source of information about the fact that appeals, against the orders
passed by the Tribunal in the Appeals preferred by Sri Exports, before
the Hyderabad and Bangalore benches of the Tribunal, are pending
before higher judicial fora, and nothing more. The directions
contained in para 4 of the said Circular are, in any case, ultra vires the
powers conferred on the CBIC by Section 151A of the Customs Act,
and would require to be set aside. At the same time, we clarify that,
while examining, in any individual case, whether Final Order, dated
27th November, 2018, passed by the Hyderabad bench of the Tribunal,
and 12th October, 2018, passed by the Bangalore Bench of the
Tribunal, are required to be followed, or not, the concerned
adjudicating/assessing authority may deem it appropriate to examine
whether the said orders stand stayed/set aside, by any superior judicial
fora and, if so, the effect of the order of such forum, staying/setting
aside the decision(s) of the Tribunal..
(The amended) para 8 of the impugned Show Cause Notices
40. Subject to this clarification, para 8 of Show Cause Notice dated
12th July, 2019/15th July, 2019, issued to the petitioner, and para 8 of
the Show Cause Notice dated 28th June, 2019/19th July, 2019, issued
to Mink, would also be required to be set aside.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 27 of 40
Re. merits of the Show Cause Notices
41. Proceeding further, we may note that extensive submissions
have been advanced, both in the writ petition, as well by Mr. Tarun
Gulati, learned Senior Counsel, during the course of submissions on
behalf of the petitioner, regarding the merits of the allegations in the
Show Cause Notice, and the case that has been sought to be built up,
therein, against the petitioner.
42. We, however, do not propose to enter into the merits of the
allegations in the Show Cause Notice. Interdiction of adjudicatory
proceedings, emanating from a Show Cause Notice, issued by a
competent authority under the provisions of a fiscal statute, is
completely proscribed in law. The merits of the Show Cause Notice,
and of the allegations contained therein, would have to be thrashed out
by the petitioner before the competent adjudicating authority, against
whose decision, if the petitioner is aggrieved, appropriate, and
adequate, appellate, or revisional, remedies, are provided by statute.
These adjudicatory, and subsequent appellate/revisional procedures,
have their own sanctity, and interference, therewith, by courts, is to be
scrupulously avoided.
43. It is only where a show cause notice has been issued by an
authority which is incompetent to do so, that, ordinarily, a court would
interfere therewith. In the present case, the petitioner does not even
remotely suggest that the Commissioner was not competent to issue
the impugned Show Cause Notices. The challenge of the petitioner,
WP (C) 9225/2019 & WP (C) 9230/2019 Page 28 of 40
qua the allegations in the Show Cause Notice, and the proposals
following thereupon, are on merits.
44. Article 226 of the Constitution of India is no akshaya patra, in
which every sort of grievance can find absolution, even where
adequate and efficacious alternative remedies are available. In
Special Director v. Mohd Ghulam Ghouse4 , which questioned the
propriety of the interference, by the High Court, with a Show Cause
Notice issued by the Enforcement Directorate under the provisions of
the Foreign Exchange Management Act, 1999, the Supreme Court
held thus (in para 5 of the report):
―This Court in a large number of cases has deprecated the
practice of the High Courts entertaining writ petitions
questioning legality of the show-cause notices stalling
enquiries as proposed and retarding investigative process to
find actual facts with the participation and in the presence of
the parties. Unless the High Court is satisfied that the show-
cause notice was totally non est in the eye of the law for
absolute want of jurisdiction of the authority to even
investigate into facts, writ petitions should not be entertained
for the mere asking and as a matter of routine, and the writ
petitioner should invariably be directed to respond to the
show-cause notice and take all stands highlighted in the writ
petition. Whether the show-cause notice was founded on any
legal premises, is a jurisdictional issue which can even be
urged by the recipient of the notice and such issues also can
be adjudicated by the authority issuing the very notice
initially, before the aggrieved could approach the court.
Further, when the court passes an interim order it should be
careful to see that the statutory functionaries specially and
specifically constituted for the purpose are not denuded of
powers and authority to initially decide the matter and ensure
that ultimate relief which may or may not be finally granted
in the writ petition is not accorded to the writ petitioner even
at the threshold by the interim protection granted.‖
(Emphasis supplied)
4
(2004) 3 SCC 440
WP (C) 9225/2019 & WP (C) 9230/2019 Page 29 of 40
Similarly, in U.O.I. v. Kunisetty Satyanarayana5, the Supreme Court
observed that ―writ jurisdiction is discretionary jurisdiction and hence,
such discretion under Article 226 should not ordinarily be exercised
by quashing a show-cause notice or charge-sheet‖.
45. It is not necessary to multiply references to authorities, for the
principle, which may be treated as legally fossilised. Suffice it to state
that we are not convinced that either of the Show Cause Notices
impugned in this writ petition, namely Show Cause Notice dated 11th
July, 2019/15th July, 2019, issued to the petitioner, or Show Cause
Notice dated 28th June, 2019/19th July, 2019, issued to Mink, suffers
from any such inherent infirmity, as would justify interdiction, by us,
under Article 226 of the Constitution of India, of the adjudicatory
proceedings which would follow thereupon.
Office Memorandum, dated 6th September, 2017, issued by the DGFT
46. We proceed, now, to examine the challenge , by the petitioner,
to Office Memorandum, dated 6th September, 2017, issued by DGFT,
Office Memorandum dated 16th February, 2018 , issued by the CBEC
and Circular, dated 31st May, 2019, issued by the CBIC.
47. The Office Memorandum dated 6th September, 2017, of the
DGFT, reads thus:
―F. No. 01/89/180/36/AM-ll/PC-II(A)
Government of India
Ministry of Commerce & Industry
5
(2006) 12 SCC 28
WP (C) 9225/2019 & WP (C) 9230/2019 Page 30 of 40
Department of Commerce
Directorate General of Foreign trade
Udyog Bhawan, New Delhi
Dated the 6th September, 2017
Office Memorandum
Subject: Amendment in Import Policy of gold and silver
under Chapter 71 of the ITC(HS) 2017-regd.
The undersigned is directed to refer to letter No.
VIII(12) Import/Gr. III. IV 85 VI/KCPL/39/2016/1605 dated
30.08.2017 from the Commissioner (Customs) Air Cargo
Complex seeking clarification on the above mentioned
subject.
2. In the matter, it is clarified that date of reckoning of
import is decided w.r.t. the date of shipment, as per Para 2.17
read with para 9.11 of the HBP (2015-20). Accordingly,
shipments prior to 25.08.2017 may be considered for
clearance by Customs. However, of late there has been an
unprecedented surge in import of gold coins from South
Korea under INDIA - Korea CEPA. Customs being the
verifying agency for Rules of Origin (RoO) criteria of the
imported goods, may like to examine these consignments of
gold with due diligence to ensure that such imports have
complied with the (RoO) under the Indo-Korea CEPA.
3. To further amplify the point, since Korea is not a gold
producing Country, the point to be checked is whether the
exported gold articles from Korea are complying with the
'origin criteria' of Product Specific Rules of Origin under
India-Korea CEPA. It may so happen that gold coins are
being imported into Korea only for export purpose without
any conversion facility. This is the right time for India to
undertake a physical verification exercise (of manufacturing
facility/premises) in coordination with our counterpart in
Korea.
4. Further, as it has been observed that consignments of
gold coins are being imported under HS: 7114 from South
Korea, whereas the gold coins are classified under HS:
71189000 subject to RBI guidelines. This aspect may also be
examined while dealing with these consignments. In case, you
WP (C) 9225/2019 & WP (C) 9230/2019 Page 31 of 40
find any mis-declaration, you may take appropriate action
against the importer under the Customs Act.
This issues with the approval of DGFT.
Sd/-
(S.K. Mohapatra)
Dy. DGFT
Tel: 23061562 Ext: 277
E-mail: [email protected]
The Commissioner (Customs),
Air Cargo Complex (Import)
New Customs House, New Delhi-110037.‖
48. The grievance of the petitioner, needless to say, is directed
against para 4 of the aforesaid Office Memorandum dated 6th
September, 2017, whereunder gold coins are held to be classifiable
under Sub-Heading 7118 9000, which would, per consequence,
require the import thereof to be compliant with RBI guidelines.
49. Para 4 of the aforesaid Office Memorandum, dated 6th
September, 2017, issued by the DGFT, merely states that gold coins
are classifiable under Heading 7118 9000 of the ITC(HS), whereas
consignments of gold coins were being imported by wrongly
classifying them under Heading 7114. Headings 7114 and 7118 of
the ITC(HS) are completely aligned with the corresponding entries in
the Tariff. A comparison of Sub-Headings 7114 and 7118 of the Tariff
[or of the ITC(HS)] clearly reveals that, whereas Sub-Heading 7114
1910 of the Tariff [or of the ITC(HS)] deals with ―articles of gold‖,
Heading 7118 9000 covers all coins which do not come within Sub-
Heading 7118 1000, which deals with ―coins (other than gold coins)
not being legal tender‖. All gold coins are, therefore, classifiable
WP (C) 9225/2019 & WP (C) 9230/2019 Page 32 of 40
under Sub-Heading 7118 9000, of the Tariff, as well as of the ITC
(HS). It is well settled that where an item is covered by an entry
specific thereto, it has to be classified under the said entry and resort
to all other entries would, ex facie, stand proscribed.
50. Gold coins being specifically classified under Sub-Heading
7118 9000 of the Tariff as well as of the ITC (HS), there can be no
question of classifying gold coins under Sub-Heading 7114 1910.
51. In stating, in para 4 of the impugned Office Memorandum dated
6th September, 2017, issued by the DGFT, that gold coins fall within
Heading 7118 9000 of the ITC (HS), and that, therefore, their imort
would be subject to RBI guidelines, the CBEC merely sets out the
indisputable statutory position. We find no reason to interfere
therewith.
52. At the same time, it is also settled that the manner in which an
import item is described in the Bs/E, is not necessarily conclusive
regarding its classifiability. It is always open to an importer to contend
that an item is not exactly conforming to the description contained in
the Bs/E. It is only in cases in which an assessee avails certain
benefits, whether by way of exemption or otherwise, based on the
manner in which it describes or classifies its goods, that, at times,
courts have taken a view that the assessee cannot, having availed such
benefit, seek to resile from the description, or classification, advanced
by it. This, however, is not such a case. Irrespective, therefore, of the
manner in which the goods in question have been described in the
Bs/E filed by it, there can be no estoppel on the petitioner
WP (C) 9225/2019 & WP (C) 9230/2019 Page 33 of 40
establishing, before the adjudicating authority, by cogent and
convincing evidence, that the goods imported by it are, nevertheless,
entitled to the benefit of exemption. In case such a contention is
advanced, the authority, adjudicating the Show Cause Notices dated
12th July, 2019/15th July, 2019, issued to the petitioner, and 28th June,
2019/19th July, 2019, issued to Mink, would have to consider and
appreciate the contention on merits, and cannot refuse to do so merely
on the basis of the impugned Office Memorandum dated 6th
September, 2017, issued by the DGFT, or the impugned Office
Memorandum dated 16th February, 2018, issued by the CBEC.
53. In sum and substance, therefore, it is required to be clarified
that the impugned Office Memorandum, dated 6th September, 2017,
issued by the DGFT, and 16th February, 2018, issued by the CBEC,
cannot fetter, or bind, the adjudicating authorities, adjudicating the
impugned Show Cause Notices, issued to the petitioner and to Mink,
in any manner. In other words, while the position, in law, enunciated
in the said Office Memoranda, is correct, the extent to which the said
position in law affects the cases of the petitioner, and of Mink, would
have to be assessed, on their own merits, by the competent
adjudicating authorities.
Office Memorandum dated 16th February, 2018, issued by the CBEC
54. Office Memorandum, dated 16th February, 2018, wherewith,
too, the petitioner claims to be aggrieved, is reproduced thus:
―F.No: 20000/5/2015-0SD(ICD)
Govt. of India
WP (C) 9225/2019 & WP (C) 9230/2019 Page 34 of 40
Ministry of Finance
Dept. of Revenue
Central Board of Excise & Customs
Room No. 227 A North Block, New Delhi
Dated 16th Feb. 2018
Office Memorandum
Subject: Classification of Gold Coins
Kindly refer to the letter no. VIII/12/ACCI/Gr-III, IV,
VI dated 6‖' December 2017 from Commissioner of Customs
(Import) regarding the above subject.
2. In the Customs Tariff heading 7118 reads as follows;
7118 Coin
7118 10 00 Coin (other than gold 100%
coin), not being legal
tender
-
7118 90 00 - Other 100%
2.1 Within this CTH, are included:
(i) coins (other than gold coin) which are "no longer
legal tender" - 7118 10 00
(ii) All remaining COINs (includes all legal tender,
regardless of constituent material, and Gold Coins)-
7118 90 00
Accordingly, the classification of GOLD COINS ought
to have been under 71 18 90 00.
3. Furthermore, the communication exchanged with RBI
dated 13"' Sept. 2017 which has been enclosed with the
subject letter, states that only nominated agencies can import
gold coins or gold in primary forms. They have also
categorically stated that other than the notified agencies /
banks / Star & Premier Trading houses, import of gold coins
and medallions is not permitted.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 35 of 40
4. In view of the above, it appears that the issue of
classification and eligibility of the entities who imported
"gold coins" during the period 1st July to 25th Aug 2017 under
India-Korea FTA requires action in terms of Foreign Trade
Policy.
5. This issue with the approval of the Board.
Sd/-
(Mandeep Sangha)
Senior Technical Officer
Chief Commissioner of Customs
New Customs House
Near IGI Airport
New Delhi.‖
55. We are unable to sustain, to any extent whatsoever, the
aforesaid Office Memorandum, dated 16th February, 2018, issued by
the CBEC. To us, it appears obvious that this Office Memorandum is
a transparent attempt, on the part of the CBEC, to shackle the
impartial exercise, by the competent adjudicating authorities, of
adjudication of the Show Cause Notices issued to the petitioner and to
Mink - and, quite possibly, to other similarly situated importers.
When the issue of classification, and entitlement to exemption, of the
gold coins, imported by the petitioner, and other similarly situated
importers, is at large before competent adjudicating authorities, who
are in seisin thereof, the CBEC was completely unjustified in issuing
the Office Memorandum dated 16th February, 2018. The powers of the
CBEC, as conferred by Section 151A of the Customs Act, cannot
extend to issuance of executive instructions, or Office Memoranda,
pronouncing on the merits of issues which are pending before
adjudicating authorities. Such an attempt would result in reducing the
adjudicatory process to a mockery, and deserves to be deprecated.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 36 of 40
56. If the Revenue is of the opinion that an assessee has imported
goods in violation of the law, or claimed the benefit of exemption to
which it is not entitled, the grounds for such an opinion are required to
be contained in the Show Cause Notice issued to the assessee. It is
completely impermissible for the Revenue to issue a Show Cause
Notice and, thereafter, seek to support, or even supplement, the
recitals in the Show Cause Notice by way of Office Memoranda, or
executive instructions, such as the Office Memorandum dated 16th
February, 2018, under challenge in these writ petitions. In this respect,
the Office Memorandum, dated 16th February, 2018, issued by the
CBEC, is clearly distinguishable from the Office Memorandum dated
6th September, 2017 supra, issued by the DGFT. While the latter
Office Memorandum, dated 6th September, 2017, of the DGFT,
merely recited the fact of imports from Korea possibly being made in
violation of the law, requiring that such imports be properly verified
and, thereafter, proceeded to reiterate the statutory position to be
found in the ITC (HS), the Office Memorandum, dated 16 th February,
2018, of the CBEC practically adjudicates, by executive fiat, Show
Cause Notices, such as those issued to the petitioners in these writ
petitions. This is completely impermissible. Being, as it is, in the
nature of executive trespass on the quasi-judicial terrain, the Office
Memorandum dated 16th February, 2018, must necessarily perish.
57. We say no more.
58. The above findings apply, mutatis mutandis, to WP (C)
9230/2019 which, too, deals with import of goods declared as ―gold
WP (C) 9225/2019 & WP (C) 9230/2019 Page 37 of 40
coins (other than legal tender)‖, from South Korea, under eight Bills
of Entry.
Conclusion
59. Resultantly, these writ petitions are disposed of, in the
following terms:
(i) Circular No 450/67/2019-Cus. IV, dated 31st May, 2019,
stands modified by Circular No 450/67/2019-Cus. IV, dated 9th
September, 2019, issued by the Central Board of Indirect Taxes
and Customs. While no orders are, therefore, required to be
passed in respect of Circular dated 31st May, 2019, Circular
dated 9th September, 2019, is quashed and set aside, to the
extent of the directions contained therein, especially in para 4
thereof. The effect of the said Circular shall be read as limited
to conveying of information, regarding the fact that Final Order
No.A/31494/2018, dated 27th November, 2018, of the
Hyderabad bench of the Tribunal, in Appeal No. C/30812/2018,
and the Final Order, passed by the Bangalore Bench of the
Tribunal against Order-in-Original No.344/2018, dated 12th
October, 2018, passed by the Commissioner of Customs
Bangalore-I, had been appealed against, and no more. The
authorities, adjudicating the Show Cause Notices impugned in
these writ petitions would be required, independently, and
uninfluenced by the Circular dated 9th September, 2019, to
examine, for themselves, whether such appeals have, in fact,
been filed and, if so, the effect of the orders passed therein.
WP (C) 9225/2019 & WP (C) 9230/2019 Page 38 of 40
(ii) Para 8 of the impugned Show Cause Notices, dated
(a) 12th July, 2019/15th July, 2019, issued to the
petitioner in WP(C) 9225/2019,
(b) 28th June, 2019/19th July, 2019, issued to M/s Mink
Tradecom Pvt. Ltd, and
(c) 5th July, 2019/9th July, 2019, issued to the
petitioner in WP(C) 9230/2019,
are quashed and set aside. The authorities, adjudicating the said
Show Cause Notices, would do so, uninfluenced by para 8
thereof, and keeping in view the directions/observations
contained in this judgment.
(iii) Office Memorandum No. 01/89/180/36/AM-11/PC-II(A),
dated 6th September, 2017, issued by the DGFT, is upheld, to
the extent of the position in law stated therein. However, the
authority, adjudicating the Show Cause Notices, impugned in
these writ petitions and enumerated in (ii) supra, would have to
assess the applicability, of this Office Memorandum, to the
facts of the case of the petitioners, on merits.
(iv) Office Memorandum No. 20000/5/2015-OSD (ICD),
dated 16th February, 2018, issued by the Central Board of
Excise and Customs, is quashed and set aside, to the extent it
seeks to opine on the classification of the gold coins imported
by the petitioners, and other importers similarly situated, and of
the eligibility, of such gold coins, to exemption. The Show
WP (C) 9225/2019 & WP (C) 9230/2019 Page 39 of 40
Cause Notices, impugned in these writ petitions, would be
adjudicated on their own merits, uninfluenced by the opinion
conveyed by the Office Memorandum dated 16th February,
2018. It is clarified, however, it is open to the Revenue to
canvass, before the adjudicating authority/authorities, the stance
reflected in the Office Memorandum dated 16th February, 2018
and, if it so chooses to do, the adjudicating authority/authorities
would consider the justifiability of the said stance on its own
merits.
(v) The prayers, in these writ petitions, for setting aside the
Show Cause Notices enumerated hereinabove, are rejected.
This Court clarifies that, subject to the observations made
hereinabove, it has expressed no opinion on the merits of the
said Show Cause Notices, or on the allegations made therein.
Needless to say, however, the adjudication of the Show Cause
Notices shall abide by the findings and observations recorded
herein above.
60. These writ petitions stand disposed of, in the aforesaid terms,
with no orders as to costs.
C.HARI SHANKAR, J.
CHIEF JUSTICE NOVEMBER 14, 2019 dsn WP (C) 9225/2019 & WP (C) 9230/2019 Page 40 of 40