Bombay High Court
Zuari Agro Chemicals Limited vs Union Of India on 21 January, 2014
Author: M.S. Sanklecha
Bench: Mohit S. Shah, M.S. Sanklecha
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
CIVIL WRIT PETITION NO.11794 OF 2013
1 Zuari Agro Chemicals Limited ]
A company incorporated under the ]
Companies Act having its registered ]
office at Jai Kisaan Bhavan, Zuari ]
Nagar, Goa 403 726. ]
2 Shri R. Y. Patil, B-2, Zuari ]
Residential Colony, Zuarinagar, ]
Goa, Adult Indian Inhabitant, ]
having his office at Jai Kisann ]
Bhavan, Zuari Nagar, Goa 403 726
ig ] .. Petitioners.
V/s.
1 Union of India ]
(through the Secretary), Ministry ]
of Law and Justice, Department ]
of Legal Affairs, Branch Secretariat ]
Aaykar Bhavan, Annexe, 2nd floor, ]
New Marine Lines, Mumbai 400020 ]
2 Deputy Commissioner of Customs ]
(Preventive), Alibag, M & P Wing ]
Alibag Division, Koliwada, Alibag ]
Dist. Raigad, Maharashtra 402201 ]
3 Assistant Commissioner of Customs ]
(Preventive), Alibag, M & P Wing, ]
having his office at Alibag Division ]
Koliwada, Alibag, Dist. Raigad, ]
Maharashtra 402 201. ]
4 Superintendent of Customs ]
(Preventive), Alibag, M & P Wing, ]
having his office at PNP ]
(Dharamatar) Port, Shahbj, ]
Post Poynad, Tal. Alibag, Dist. ]
Raigad, Maharashtra 402 108. ] .. Respondents.
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Mr.D.B.Shroff, Sr. Advocate i/by Chitnis & Co. for the Petitioners.
Mr. Pradeep S. Jetly with Ms. Suchitra Kamble for Respondent Union of
India.
CORAM : MOHIT S. SHAH, C.J. AND
M.S. SANKLECHA, J.
Reserved on : 08 January 2014
Pronounced on : 21 January 2014
JUDGMENT ( PER M.S. SANKLECHA, J.):-
Rule, returnable forthwith. By consent of the parties the petition is taken up for final hearing.
2) By this petition under Article 226 of the Constitution of India the petitioners are challenging demand notices dated 21 April 2011, 2 May 2011, 5 May 2011 and 18 November 2013 for an aggregate amount of Rs.17.51 crores. The above demand is made consequent to finalization of assessment of five Bills of Entry, two dated 29 November 2006 while others are dated 27 October 2007, 7 December 2007 and 16 April, 2008. All the above five bills of entry were finalized by making an endorsement thereon without having given an opportunity of personal hearing to the petitioners or furnishing of reasons which led to modifying the bills of entry as filed by the petitioners.
3) The issues arising for our consideration in the present petition are:-
(I) Whether an endorsement made on the bills of entry on finalization of a provisionally assessed bills ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 3/13 Writ petition No.11794.sxw of entry on a basis different from that claimed by the importer would require the following the principles of natural justice and including a speaking order justifying the variation made on the bills of entry?
and
(II) Whether a speaking order justifying the
variation made on the bills of entry at the time of its finalization to the prejudice to the importer is a sine qua non to enable a filing of an appeal under the Customs Act, 1962 (" the Act")?
4) The petitioners had during the period 2006 to 2008 imported Muriate of Potash (MOP). The import of MOP by the petitioners during the above period was under two bills of entry dated 29 November 2006 while one each dated 25 October 2007, 7 December 2007 and 16 April 2008 (said Bills of entry) declaring its value and claiming benefit of certain exemption Notifications. However, as the petitioner was unable to submit documents in original to support its imports, the said bills of entry were provisionally assessed under Section 18(1) of the Act by respondent No.3 Assistant Commissioner of Customs.
5) The petitioners thereafter submitted the documents in original in respect of the said bills of entry and requested the Assistant Commissioner of Customs to finalize the assessment of the said bills of entry.
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6) Thereafter, all of a sudden on 22 May 2011, the petitioners
received three communications dated 21 April 2011, 2 May 2011 and 5 May 2011 (demand notices) from Assistant Commissioner of Customs along with finally assessed said Bills of entry. The demand notices informed the petitioners that the said Bills of entry have been finally assessed in December 2010. The petitioner learned from the said Bills of entry that final assessment had enhanced the value of the imported MOP as well as not extended the benefit of the notification claimed resulting in the differential duty payable by the petitioners at Rs.17.51 crores in the aggregate. The petitioner was called upon to pay the differential duty of customs along with interest thereon.
7) In response the petitioners by three letters all dated 25 May 2011, called upon the Assistant Commissioner of Customs to withdraw the demand notices as they objected to the finalization of the said bills of entry. Thereafter there was no movement on either side.
8) However, on 18 November 2013, the petitioners received a notice (further demand notice) from the Superintendent of Customs i.e. respondent No.4, inter alia, demanding an amount of Rs.17.51 crores payable consequent to the finalization of said bills of entry in respect of import of MOP during the period 2006 to 2008. The petitioners by their letter dated 19 November 2013 requested for a personal hearing. Consequent to the above on 4 December 2013, the petitioners' were orally informed by the Officers of Customs to pay the amount of Rs.17.51 crores, within one week. The Petitioner was also informed ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 5/13 Writ petition No.11794.sxw that on failure to pay the above dues, the respondent-revenue would initiate recovery proceedings in respect of the said bills of entry which were finalized way back in 2010.
9) It is in the above circumstances that the present petition has been filed.
10) Mr. D. B. Shroff, Senior Advocate appearing in support of the petition submitted as under:-
a) The ex-parte finalization of the said bills of entry and the consequent demand notices and further demand notice are all bad in law as the said bills of entry have been finalized in breach of principle of natural justice. The assessable value declared by the petitioner of the MOP on the said bills of entry has been enhanced and the claim for exemption notification was also denied without indicating the reasons for the same and hearing the petitioners thereon. Therefore, the assessment order passed on the said bills of entry by mere endorsement be set aside and the respondents be directed to finalize the said Bills of entry after following the principles of natural justice; and
b) A mere endorsement on the said Bills of entry, finalizing the assessment to the prejudice of an assessee is not an appealable order. It is only when a speaking order is issued in respect of said bills of entry as finalized, would the assessment on the bills of entry became appealable.
Therefore, in the absence of a speaking order, the petitioner is unable to avail of its remedy of appeal. This requirement of a speaking order is ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 6/13 Writ petition No.11794.sxw found in Section 17(5) of the Act. In the circumstances, it is obligation of the Assessing Officer to issue a speaking order in support of its finalization of Bills of entry when the same is done to the prejudice of the petitioner.
11) As against the above, Mr. Pradeep Jetly, learned Counsel on behalf of the revenue in support of the action of respondent revenue submitted as under :
a) The finally assessed bills of entry were communicated to the petitioner along with the demand notice way back in May 2011.
The petitioners accepted the same and chose not to file the statutory appeal to the Commissioner of Customs (Appeals) under Section 128 of the Act from the finally assessed said Bills of entry. The finally assessed Bills of entry is now binding upon the petitioner and it must be honoured by making the payment as demanded in the the demand notice and further demand notice issued to them;
b) There is no requirement under the Act which requires the respondent revenue to issue a show cause notice, grant personal hearing or pass a speaking order while finalizing provisionally assessed Bills of entry. The said Bills of entry were finally assessed under Section 18 of the said Act and there is no obligation therein to issue show cause notice or grant a hearing before doing so.
c) The said Bills of entry were finally assessed to duty under
Section 18 of the Act and this assessment would by itself be a
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appealable order without the requirement of a speaking order. It was emphasized that the requirement of a speaking order is found only under Section 17(5) of the Act and it cannot be read into Section 18 of the Act under which the said Bills of entry were finally assessed to duty.
Therefore, it was open to the petitioner to file an appeal from the said bills of entry on being finally assessed in 2010 without the requirement of a speaking order. This the petitioner failed to do and this is an attempt to reopen a closed issue.
12) We have considered the rival submissions. It is an undisputed position that the petitioner imported MOP under the said bills of entry during the period 2006 to 2008. The said Bills of entry were assessed provisionally to duty under Section 18 of the Act for the reason that the petitioner was required to submit certain documents in original in support of the import of MOP.. This the petitioners did in 2008 itself and sought finalization of the assessment in accordance with the claim made by the petitioner therein. However, the respondent-
revenue again sought the original documents in 2010. The petitioners replied to the same, pointing out that the same had been submitted and sought finalization of the bills of entry. Thereafter instead of initiating the process of finalization of the Bills of entry involving the petitioner, the respondent finalized the said Bills of entry exparte in December 2010 to the prejudice of the petitioner. This was informed to the petitioner in May 2011. It is also undisputed that no personal hearing was granted to the petitioner nor was the petitioner informed about the reasons for the variation being made to said Bills of entry as filed by the petitioner before making the same. It is also undisputed that no ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 8/13 Writ petition No.11794.sxw speaking order in support of the finalized bills of entry which has been varied has been issued to the petitioner till date.
13) The contention of the revenue is that the Act does not require finalization of bill of entry which was originally provisionally assessed should be preceded by following the principle of natural justice. However, even if the statute does not specifically provide that the bills of entry being finalized should be preceded by issue of notice, grant of personal hearing and a speaking order in case the contention of the importer is not accepted, yet the principles of natural justice have to be read into the Stature. It is only when a party is given an opportunity to point out its case against the proposed variation that mistakes in making the assessments could be prevented as the importer may have a complete answer to the objections of the revenue. Similarly, if the authority is unable to accept the response of the importer/party then the reasons for the same can be reflected in the speaking order. The above process in finalizing the assessment of Bills of entry only ensures that no arbitrary orders are passed. Therefore, while finalizing the bill of entry for the purpose of assessment, it would be incumbent upon the Assessing Officer to inform the importer what variation he proposes to make to the Bills of entry as filed by the importer and the reasons for the same. This would give an opportunity to the importer to explain why the proposed variation in the bill of entry is uncalled for. If the explanation of the importer is accepted then the Bill of entry would be assessed in accordance with the claim made by the importer or even if not accepted, the authority would be required to give reasons in support of its conclusion. This would undoubtedly curtail/reduce ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 9/13 Writ petition No.11794.sxw unwarranted litigation. The above process of natural justice is only in compliance with elementary principles of Rule of law. The above process may not be elaborate but must meet the essence of fair play so that no person is left with a feeling of being a target of arbitrary and unfair behavior on the part of the authorities. In this case, the revenue does not dispute that while finalizing the assessment of the said bills of entry, value of imported MOP has been enhanced and the benefit of notification as claimed was not extended without giving any opportunity to the petitioner to explain away the view of the Assessing Officer. In this case the finalization of the said Bills of entry was done merely by making an endorsement on them without disclosing the reasons which led to enhancement of the value of MOP from that declared by the petitioners leading to differential duty being payable.
Moreover even after having finalized the said Bills of entry there is no communication from the Assessing officer indicating the reasons for enhancing the duty payable on final assessment. In case reasons are given, it is likely that the petitioner/ importer may see merit in the same and accept it. However, in the absence of reasons, the party does not know why its contention /explanation was not acceptable. This alone prevents the authority from exercising unbridled powers in arbitrary manner while finalizing the Bills of entry arbitrarily. Therefore, we hold that the assessment of the said bills of entry are in breach of natural justice and bad in law.
14) The contention of the revenue that this Court should not entertain this petition as an alternative remedy of an appeal is available under Section 128 of the Act and the petitioner has chosen not to avail it. The said bills of entry were finalized in December 2011. The ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 10/13 Writ petition No.11794.sxw petitioner was informed of the same in May 2012. The petitioner accepted it as is evident from not having filed an appeal to the Commissioner of Customs (Appeal) or any other authority. An Appeal under Section 128 of the Act to be an efficacious appeal must be from an order with reasons. It is for this reason that Section 17(5) of the Act itself provides that on a bill of entry being assessed finally in a manner contrary to the claim of the importer, then within 15 days of making the final assessment of the bill of entry, a speaking order will be issued. In this case, there is a mere endorsement of variation on the said bill of entry and no reasons which led to the enhancement of the value have been disclosed. In the absence of reasons being mentioned on the said Bills of entry itself or by issue of a separate communication containing the reasons for the same an importer would be at loss to the manner in which the same could be challenged. In fact, in such cases an appeal to the appellate authority would be futile as it would be impossible for the petitioners to contend why the enhancement of value done by the Customs Department is unjustified and/or bad in law nor would it be possible for the appellate authority to decide on the merits of the final assessment of the Bills of entry. Therefore, there has been failure on the part of the Customs Department to carry out its mandatory obligation as provided under Section 17(5) of the Act. It is only when a speaking order is issued to the importer that an efficacious appeal can be made to the Commissioner of Customs (Appeals) under Section 128 of the Act. The petitioners have correctly relied upon the decision of the Kerala High Court in HDFC Bank Ltd. Vs. Union of India 2011 (271) ELT 175 wherein it has been held that where an assessee objects to the assessment being made contrary to its claim, the Assessing Officer is ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 11/13 Writ petition No.11794.sxw obliged to issue a speaking order in terms of Section 17(5) of the Act. The Court held that it is only on passing of a speaking order that the period for filing an appeal under Section 128 of the Act commences. As the Apex Court in Asstt. Commissioner Commercial Tax Department vs. Shukla Brothers Bombay 254 ELT 16 has observed that "Reasons are the soul of orders. Non recording of reasons could lead to duel infirmities, firstly, it may cause prejudice to the affected party and secondly more particularly, hamper the proper administration of justice. These principles are not only applicable to administrative or executive actions but they apply with equal force and, in fact, with a greater degree of precision to judicial pronouncements".
Further it quotes from H.W.R. Wade's book "Administrative Law, 7th Edition, as under:-
"A right to reasons is therefore, an indispensable part of a sound system of judicial review. Natural justice may provide the best rubric for it, since the giving of reasons is required by the ordinary man's sense of justice...
Reasoned decisions are not only vital for the purposes of showing the citizen that he is receiving justice they are also a valuable discipline for the tribunal itself.."
15) The objection of the revenue to invocation of Section 17(5) of the Act is that in this case the assessment was made provisional under Section 18(1) of the Act and were also being finalized under Section 18(2) of the Act. Therefore, it is submitted that Section 17(5) of the Act requiring an issuance of a speaking order will not apply. According to us any quasi judicial decision which could be subject matter of appeal would require reasons to be given. However, in this ::: Downloaded on - 27/01/2014 23:10:53 ::: ASN 12/13 Writ petition No.11794.sxw case in any view of the matter Section 18(2) of the Act at the relevant time read as "when the duty leviable on such goods is assessed finally in accordance with the Act then" certain consequences on finalization of assessment are set out. However, the final assessment of the goods which have been provisionally assessed has to be in terms of Section 17 of the Act. This is so as Section 18(2) of the Act itself does not provide for finalization of assessment but merely states the action to be taken by the Assessing Officer consequent to the finalization of provisionally assessed bill of entry under Section 17 of the Act. Thus the objection of the revenue is unsustainable.
16) In the above view of the matter, we set aside the final assessments made on the said bills of entry in December 2010. The consequent demand notices and further notice calling upon the petitioners to pay an amount of Rs.17.51 crores are also set aside. We direct that a fresh order of finalization of assessment of the said bills of entry be made by the Assistant Commissioner of Customs after following the principle of natural justice i.e. indicating to the petitioner the reasons why the bills of entry as filed by the petitioners is not acceptable before hearing the petitioners on its objections and thereafter passing a reasoned order within 15 days of having made an endorsement on the said bills of entry finalizing the assessment. In case the petitioner is aggrieved by the final assessment order as indicated in the reasoned assessment, it would be open to the petitioner to file an appeal to the Commissioner of Customs (Appeal) under Section 128 of the Act.
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17) In the above view, we answer both the issues raised in this
petition as under:-
(I) Yes. The principles of natural justice
including a speaking order in cases where provisionally assessed Bills of entry are being finally assessed differently from that claimed by the importer;
and (II) Yes. A speaking order is necessary wherever the Bills of entry are finally assessed differently from that claimed by the importer.
18) Accordingly, the petition is allowed in the above terms. No order as to costs.
CHIEF JUSTICE (M.S. SANKLECHA, J.) ::: Downloaded on - 27/01/2014 23:10:54 :::