Custom, Excise & Service Tax Tribunal
Tokyo Chemical Industry India Private ... vs Cc Appeals-Air Ch-I on 26 June, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Customs Appeal No. 40485 of 2020
(Arising out of Order-in-Appeal Air Cargo.Cus.I.No. 152/2020 dated 22.06.2020 passed by
Commissioner of Customs (Appeals), Custom House, No. 60, Rajaji Salai, Chennai - 600 001)
M/s. Tokyo Chemical Industry India Private Limited ...Appellant
B-28, Phase II, 5th Cross Street,
MEPZ-SEZ, Tambaram,
Chennai - 600 045.
Versus
Commissioner of Customs ...Respondent
Chennai I Commissionerate, Custom House, No. 60, Rajaji Salai, Chennai - 600 001.
APPEARANCE:
For the Appellant : Ms. Tanushree Roy, Consultant Mr. Dushyant Minocha, Consultant For the Respondent : Mr. Anoop Singh, Authorised Representative CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER No. 40756 / 2024 DATE OF HEARING : 06.05.2024 DATE OF DECISION: 26.06.2024 Order :- Per Mr. VASA SESHAGIRI RAO M/s. TCI Chemicals (India) Private Limited, the Appellant herein has filed this appeal assailing the Order-in-Appeal No. 152/2020 dated 22.06.2020 passed by the Commissioner of Customs (Appeals-I), Chennai rejecting the appeal filed by the Appellant against the Speaking Order issued 2 C/40485/2020 vide letter dated 20.02.2020 in F.No.02/SO/2018/MEPZ/Cus., by the Specified Officer, MEPZ-SEZ, on the principle of Res Judicata. The Appellant's name has undergone a change to M/s. Tokyo Chemical Industry (India) Private Limited.
2.1 The brief facts are that the Appellant, engaged in warehousing and trading of Organic Lab Chemicals, Fine Chemicals and Speciality Chemicals, is a unit operating from the MEPZ, Special Economic Zone which is a wholly owned subsidiary of M/s Tokyo Chemical Industry Company Limited, Japan from whom products are imported and distributed in India. The Appellant was engaged in trading of these chemicals to Customers located in SEZ & 100% EOU Units and also into the Domestic Tariff Area (DTA). Before July 2018, the Appellant had supplied goods to its branch in DTA. However, from July 2018 onwards, the Appellant supplied goods to its wholly owned subsidiary Viz. Tokyo Chemical Industry (India) Private Limited, a DTA unit and also to SEZ & 100% EOU. The Appellant supplied goods to DTA unit at a value higher than the value of importation which appears to have been approved by SVB.
2.2 Since, the Appellant and their holding company i.e., Tokyo Chemical Industry (India) Private Limited holding 100% shares are related in terms of Customs Valuation Rules, 2007, they had applied to the Special Valuation Branch (SVB), Custom House, Chennai for determining the assessable value of the goods imported by the Appellant. The SVB vide Order-in-Original No. 22881/2013 dated 11.12.2013 held that the value 3 C/40485/2020 declared by the Appellant was at arm's length and could be accepted as the transaction value under Rule 3(3)(a) of CVR, 2007 for the purpose of assessment of duty in respect of imports up to December 2011 and since January 2012, the declared value could be adopted as transaction value with usual additions under Rule 10(2) ibid. Vide Circular No. 04/2016-Customs, the requirement for renewal of SVB orders every 3 years was done away with and the importer was required to file a one-time declaration in Annexure-I to Circular dated 46/2016, if there was no change in the terms and conditions of sale, etc. The Appellant have submitted the required declaration on 13.07.2017 and the SVB vide report dated 31st August 2017 forwarded the same to various directorates under CBIC for further necessary action with a copy endorsed to the Appellant.
2.3 The Appellant was required by the Specified Officer, MEPZ-SEZ to load 90% of the value of the import price and to discharge differential duty and accordingly the additional duty was discharged from 05.10.2016 without opting for "Payment under Protest". However, the Appellant submitted a letter dated 05.10.2016 to the specified officer, MEPZ SEZ clarifying that they are not in agreement with the value determined by Customs and were discharging higher duty, only to clear the goods. The Appellant requested the Specified Officer to issue a speaking order for enhancement of value which did not happen. Meanwhile, the Appellant filed an appeal seeking refund of duty paid under protest before Commissioner (Customs-Appeals) who vide Order-in-Appeal No. 82/2018 dated 18.06.2018 rejected the appeal as time barred. The Appellant again insisted on the 4 C/40485/2020 Specified Officer to issue a speaking order and the development Commissioner, MEPZ-SEZ vide letter bearing reference F.No. 02/SO/2015/MEPZ-Cus/4200 dated 04.09.2018 declined to issue any speaking order stating that assessment was already completed as per their self-declaration and duty was paid without any protest. 2.4 Vide Letter dated 20.02.2020 issued from F.No. 02/SO/2018/MEPZ/Cus., the Specified Officer, MEPZ, informed the Appellant that the value adopted for the clearance to their own branch was not accepted in terms of Section 14 of Customs Act, 1962 read with the Customs Valuation Rules (CVR), 2007. Aggrieved by such communication not revealing the methodology adopted for enhancement of value, the Appellant filed an appeal before Commissioner (Appeals) who vide Order-in- Appeal No. 152/2020 dated 22.06.2020 rejected the appeal on the principle of res judicata, mentioning the earlier Order-in-Appeal No. 82/2018 dated 18.06.2018.
2.5 Aggrieved, the Appellant came on appeal before this forum.
3. The Appellant's submissions as found in their Grounds of Appeal are summarized as follows :-
(i) That the impugned order does not satisfy the provisions of the Customs Act,1962 read with Customs Valuation Rules, 2007 and that the assessing 5 C/40485/2020 officer has to record reasons for rejecting the declared transaction value of imported goods before proceeding further in the light of the decisions in:-
(a) Commissioner of Customs, Calcutta Vs. M/s. South India Television (P) Ltd. [2002 (145) ELT A159 (SC)]
(b) Commissioner of Central Excise and Service Tax, Noida Vs. Sanjivani Non-Ferrous Trading (P) Ltd. [2018 (11) GSTL J84 (SC)]
(c) Commissioner of Customs Vs Bayer Corp. Science Limited [2015 (324) ELT 17 (SC)]
(d) Century Metal Recycling Pvt. Ltd. Vs. Union of India.
(ii) It was pointed out that the Impugned Order is a cryptic and non-
speaking Order, devoid of any analysis, rationale or basis for confirming the demands against the Appellant and therefore, is clearly unsustainable and ought to be set-aside. In this regard, reliance was placed on the following decisions of the Hon'ble Supreme Court wherein the non-speaking orders have been set aside, the relevant abstracts of which have been reproduced below:
(a) M/s Tata Engineering & Locomotive Co. Ltd. v. Collector of Excise, Pune [2006 (203) ELT 360 (S.C.)]:-
"By cryptic and non-speaking order, the Tribunal has upheld the order passed by the Commissioner by applying the ratio of the decision of the Larger Bench in TISCO Ltd. (supra) without recording a finding of fact that the production carried out by it were not used for repair or maintenance of the machinery installed therein. It is not sufficient in a judgment to give conclusions alone but it is necessary to give reasons in support of the conclusions arrived at".
12.In the case in hand as already stated above, the impugned order is clearly cryptic and non-speaking order. While dealing with the appeal, the Commissioner (Appeals) has not taken the note of all the facts of the case. He has failed to consider the rival contentions raised in the matter. He has also not formulated the points which arise for determination. There are no analyses of the materials on record, nor the logical conclusions supported by reasons. The findings do not disclose consideration of all the relevant materials on record.
The Commissioner (Appeals) having failed to do the required exercise in the matter in hand, his order cannot be sustained."
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(b) M/s. Commissioner of Central Excise, Bangalore vs. Srikumar Agencies [2008 (232) ELT 577 (SC)]:-
"6. Since the factual position has not been analysed in detail, disposal of appeals by mere reference to decisions, was not the proper way to deal with the appeals. The CEGAT also does not appear to have dealt with the relevance and applicability of ITC's case (supra) on which strong reliance has been placed by learned Solicitor General. The CEGAT ought to have examined the cases individually and the articles involved. By clubbing all the cases together and without analyzing the special features of each case disposing of the appeals in the manner done was not proper..."
There are no analyses of the materials on record, nor the logical conclusions supported by reasons. The findings do not disclose consideration of all the relevant materials on record. The Commissioner (Appeals) having failed to do the required exercise in the matter in hand, his order cannot be sustained."
(iii) The Appellant further averred that the Department erred in as much as it sought to adopt the price on the basis of price charged to a prospective customers for determination of assessable value of the imported goods. It was pointed out that the impugned order did not properly provide the evidence available for enhancement of assessable value by 90%. The impugned order does not provide the rule referred by the Specified Officer to arrive at the enhanced assessable value relying on the following case law.
(a) Commissioner of Central Excise and Service Tax Noida v. M/s Sanjivani Non Ferrous Trading Pvt Ltd [2018 (11) G.S.T.L. J84 (S.C.)]
(b) Anil Kumar Anand vs Commissioner of Customs [2018 (361) E.L.T. A233 (S.C.)] "Once the statutory Rules exist and provide for sequential implementation, the assessing authority has no option but to proceed in accordance with those Rules, in that manner. We did put this squarely to learned senior counsel for the respondent, who really could not persuade us, or give a satisfactory answer as to why the concerned authority chose to ignore, in the given facts of the case, Rules 3 to 5, and did not proceed "sequentially"
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(iv) It was further submitted that the Specified Officer, MEPZ-SEZ erred in valuing the Bills of Entry referred in the letter dated 30 January, 2020 similar to the valuation of the initial Bills of Entry that was paid under protest (i.e. Bill of Entry No. 18514 dated 05.10.2016) and determined the value at the price at which goods are sold in DTA to the prospective customers. The Specified Officer, MEPZ-SEZ in his order referred to the value of clearance of goods to the branch by the SEZ unit was not acceptable. The Bills of Entry referred in the letter dated 30 January 2020 refers to goods cleared to the DTA Unit.
(v) It was submitted that the impugned order failed to appreciate that as per the Rule 11(11) of the SEZ Rules, 2006, SEZ is a port within India and on clearance of goods from SEZ, applicable duties are paid. What happens after the goods enter the DTA does not in any way affect the valuation of the goods at the time of clearance of the goods. The valuation of the goods based on the selling price in the DTA will be similar to valuation of goods cleared from the port at the final consumption area for which there is no backing of law. By no stretch of interpretation can the value of goods imported be determined based on the value charged to the prospective customers. Thus, an enhancement of assessable value by 90% cannot be made applicable in this case and the value originally charged by the Appellant to DTA Unit should be construed at arm's length / transaction value.
(Vi) It was contested that the impugned order failed to appreciate that as per law the Appellant is entitled to a speaking order against which a valid 8 C/40485/2020 appeal could be filed under Section 128 of the Customs Act. A mere endorsement on the BOE, finalizing the assessment to the prejudice of the Appellant is not an appealable order. The Specified Officer, MEPZ-SEZ has not issued any Impugned Speaking Order to the payment that is made under protest since 05 October 2016. The first Order was issued as per Section 17(5), for the duty paid under protest for the Bills of Entry dated 24 January 2020 to 29 January 2020. For the earlier Bills of Entry on which duty was paid under protest, there is no speaking order issued. Section 17 of the Customs Act requires the importer to self-assess the duty. However, on verification, if the proper officer finds that the self-assessment is not done correctly, then he may re-assess the duty leviable on such import of goods. If the re-assessment is contrary to the self-assessment done by the importer, the proper officer is required to pass a speaking order on the re- assessment, within 15 days from the date of re-assessment of the Bills of Entry as per section 17(5) of the Customs Act. The adjudicating authority is under obligation to pass a speaking order disclosing the grounds for loading or enhancement in the declared value under section 17(5) of the Customs Act. The impugned order has erred by rejecting the appeal, stating it is barred by the period of limitation. Without issuance of speaking order the Specified Officer cannot assess the duty leviable on importation of goods. The limitation for filing appeal under Section 128 would start only from the date of communication of the decision or order to the petitioner. BOE is not a decision or order contemplated under Section 128 of the Act. In this regard, reliance is placed on the following instruction and judicial precedents:
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(a) The Central Board of Indirect Taxes and Customs (erstwhile known as "CBEC") has time and again directed the officers to issue speaking order where there is a dispute between the importer and the exporter.
Instruction No. 07/2018-Customs dated 05 April 2018 provides the need for issuance of speaking order. The relevant extract of the said instruction is reproduced below for ease of reference:-
"It has been observed that the officers exercising the powers under the above mentioned subsection are not issuing a speaking order in each and every case particularly where the importer or the exporter has an inalienable right to know the reasons for loading of value, change of classification, any decision regarding entitlement to an exemption notification etc. Omission to issue speaking orders in the matters of re- assessment, may not prejudicially affect the right of the importer or exporter to appeal as such, but nevertheless deprives him of knowing the grounds of such reassessment. At the same time, any such re- assessment without the support of a speaking order could be perceived as legally questionable. Time and again courts have frowned upon the instances of non- issuance of speaking orders under the said subsection."
(b) HDFC Ltd vs. Union of India in [2011 (271) E.L.T. 175 (Ker.)],
5."Going by sub-section (5) when Assessee objects to the assessment against their claim, the appropriate authority is duty bound to pass a speaking order".
"Even if without having for a speaking order, the petitioner files an appeal based on BOE that would also be maintainable. I am of opinion that in view of the categoric provision under Section 17(5) it was mandatory on the part of the 3rd respondent to pass a speaking order, in so far as in the BOE itself the petitioner has registered against such assessment which were followed by Ext. P4. Therefore, the petitioner was perfectly justified in finding for speaking order without which the petitioner cannot know the reasons for the assessment made by the 3rd respondent".
"In fact the limitation for filing appeal under Section 128 would start only from the date of communication of the decision or order to the petitioner. Clearly BOE is not a decision or order contemplated under Section 128. It can only be an order under Section 17(5) which has to be a speaking order".10
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(c) Ingram Micro India (P) Ltd vs. Principal Commissioner of Customs, Chennai in [2017 (358) E.L.T. 125 (Mad.)]:-
"27. The submission of the revenue that the petitioner should have filed an appeal after entering the BOE's does not impress me, as without a speaking order, the appeal, if any, preferred before the concerned authority under Section 128 of the Act, would clearly be inefficacious. A non-speaking order would present the appellate authority with a situation akin to, in a manner speech, "an inscrutable face of a sphinx"
(d) Commissioner of Customs, Patparganj vs. M/s Artex Textile Private Limited [2018 (360) E.L.T. 382 (Tri. - Chan.)] "The assessment of imported goods have to be done as per transaction value in view of Rule 3 read with Rule 12 of Customs Valuation Rules and adjusted in accordance with the provisions of Rule 10. Unless the particular transaction falls within the exceptions in Rule 3(2) of CVR, the Customs authorities are bound to assess the duty on the transaction values.
The adjudicating authority is under obligation to pass a speaking order disclosing the grounds for loading or enhancement in the declared value"
(e) M/s. Karan Associates v. Commissioner of Customs (Import) [2015 (330) E.L.T. 321 (Tri. - Mumbai)] "By inserting section 17(5) into the Customs Act, 1962 with effect from 13/7/2006 the legislature has made it mandatory for the assessing officer to pass a speaking order within the time stipulated therein.
Even before the insertion of the above provisions, the assessing officer was bound to pass a speaking order wherever demanded."
(vii) It was vehemently pointed out that the Impugned Order has been passed in violation of the Principle of Natural Justice. The value at which Appellant clears the goods to DTA Unit is over and above the assessable value declared and fixed by the Special Valuation Bench, which has been enhanced without indicating the reasons / legal basis for arriving at the enhanced value. The Impugned Speaking Order issued by the Specified Officer, MEPZ-SEZ has confirmed that the assessment of Bills of Entry shall be made in line to the earlier assessment of Bills of Entry made in the year 11 C/40485/2020 2016 without mentioning any basis for the said assessment nor mentioning the relevant Rule of the CVR 2007.No personal hearing was granted to the Appellant nor was the Appellant informed about the reasons for the variation being made to Bills of Entry. In this regard, reliance was placed on the following decisions, extract of which have been reproduced below:-
(a) Zuari Agro Chemicals Ltd vs Union of India in [2014 (307) E.L.T. 874 (Bom.)],
13. "However, even if the statute does not specifically provide that the BOE 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".
"While finalizing the BOE 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 BOE 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 BOE is uncalled for. If the explanation of the importer is accepted then the BOE 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 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". even after having finalized the said BOE 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 BOE arbitrarily.
Therefore, we hold that the assessment of the said BOE are in breach of natural justice and bad in law"
(b) Ram Niwas Bansal vs. State Bank of Patiala & Another I [(1999) IILLJ 126 P H], [(1998) 119 PLR 7681] "The main grievance of the petitioner, interalia is that the copy of the enquiry report was not communicated to the petitioner prior to the passing of the impugned order of punishment. Further it is 12 C/40485/2020 alleged that the appellate authority did not provide hearing to the petitioner in spite of the fact that there was a specific request made by him for this purpose. Thus, it was contended that the impugned orders are liable to be set aside on these grounds alone. Various other grounds have also been raised to state that the order was non-speaking and cryptic one, there is violation of principles of natural justice and the enquiry officer has not conducted the enquiry in accordance with rules and principles of natural justice.
It should pass a speaking order which would at least prima-facie show that the authority concerned has applied its mind to the various contentions or points of determination raised before it. Further that it has particularly examined whether the penalty imposed is excessive and/or inadequate."
(viii) It was stressed that the impugned order erred in law by rejecting the appeal filed by the Appellant against the order issued by the Specified Officer, MEPZ-SEZ, stating it was hit by the principles of res-judicata. In the earlier appeal filed with Commissioner of Customs (Appeals) on 21 February 2018, the appeal was dismissed merely on the ground of limitation and held time barred and had not gone into the merits of the case. It was further pointed out that in the earlier appeal filed before Commissioner of Customs (Appeals) on 21 February 2018 was not against a speaking order, whereas the appeal filed on 20 February 2020 is against the Impugned Speaking Order passed under Section 17(5), for the duty paid under protest on the BOE's filed between 24 January 2020 to 29 January 2020. The transaction in the earlier appeal was duty paid under protest on the clearances made from SEZ to Branch in DTA Unit. In the current appeal, the duty is paid under protest on the clearances made from SEZ to Wholly owned subsidiary unit in DTA. The Learned Commissioner of Customs (Appeals) erred that the principle of res-judicata can be invoked when the first judgment was not passed on merits. The Appellant's earlier appeal in the given case was 13 C/40485/2020 rejected vide Order-in-Appeal C.Cus. I No. 82/2018 dated 18 June 2018, on the ground that the appeal filed was time barred. In this regard reliance was placed on the following decisions:-
(a) Tilokchand Motichand & Ors. Vs. H.B. Munshi & An [1970 AIR 898 (SC)] held that if a petition under Art. 226 is dismissed not on merits but because an alternative remedy was available to the petitioner or that the petition was dismissed in limine without a speaking order such dismissal is not a bar to the subsequent petition under Art.
(b) Apex court in Virudhunagar Steel Rolling Milis vs The Government Of Madras [1968 AIR 1196, 1968 SCR (2) 740] held that while negativing the contention on the facts of the case this Court reaffirmed that if the petition is dismissed in limine without passing a speaking order then such a dismissal cannot be treated as creating a bar of res judicata.
(ix) It was submitted that the SVB had confirmed in the Order-in-Original No. 22881/2013 dt. 11 December 2013 and also vide their renewal order dated 31 August 2017, that the relationship of the exporter and the importer has not influenced the valuation of the goods. The Appellant had obtained clearance from Special Valuation Bench regarding the fairness of the value of the imported goods. The Appellant has further added value to the import price and then sold from SEZ to DTA Unit. In other words, the value on which goods are cleared into DTA are higher than the import price and also the value as determined by the SVB authorities. The Specified Officer, MEPZ-
SEZ, in the order asked the Appellant to load 90% on the import price and discharge the liability. The Appellant has discharged the same under protest. The Learned Commissioner of Customs (Appeals) failed to appreciate that the Appellant are importing the impugned goods and selling these goods in the local market as allowed under Rule 47(1) of the SEZ Rules, 2006 on the payment of applicable duty on the transaction value. 14
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(x) It was pointed out that the Appellant had been discharging duty on enhanced value since 05 October 2016 under protest and hence the time limit prescribed under section 27 of the Act does not apply and hence the refund application cannot be considered time barred. CESTAT Bangalore in the case of Commissioner of Cus, C. Ex. & ST., Guntur Vs. Fairway Trading Company Pvt. Ltd. [2014 (10) TMI 506 - CESTAT Bangalore] held that since there is no procedure prescribed for payment under protest in Customs law, the letter written by the Assessee stating that they have been compelled to pay higher duty by the Customs tantamount to payment under protest. Once the payment is made under protest, it means assessment also has been challenged. In such cases, either an assessment order confirming the original assessment has to be issued or the refund claim has to be considered. It was further held that the officers of Customs are also required to follow the law and the refusal to collect correct rate of duty, compelling the Assessee to pay higher duty itself was wrong. The correct procedure would have been to resort to provisional assessment in which case, the Assessee would not have paid higher duty at all. Reliance was placed on the Hon'ble CESTAT decision in the case of Redington India Ltd. vs Commissioner of Customs, Chennai [2011 (269) E.L.T. 233 (Tri.- CHENNAI)] wherein it was held that:-
"the main provision under Section 27(1) requires a refund claim to be filled within six months from the date of payment of duty. The second proviso to Section 27 (1) states that the limitation of Six month shall not apply where any duty has been paid under protest. Subsequently the forth proviso states that where the duty becomes refundable as a consequence of any judgement, degree, order or direction of the Appellate Authority, Appellate Tribunal or any Court, the limitation of six months shall be computed from the date of such judgement, decree, order or direction. Both these provisions require to be read harmoniously. It was held that the dispute in assessment came to finality once 15 C/40485/2020 the matter was decided in favour of the appellants by the lower appellant authority and the department choose not to file any further appeal against the same. Once the very cause of the protest came to an end by the resolution of the assessment dispute at the hands of the Lower Appellate Authority, it cannot be held that the protest would survive beyond the date of the order passed by the lower appellate authority in favour of the appellants. Thereafter, it was the duty of the appellants to take steps to file necessary refund claims within the time limit prescribed. The forth proviso prescribing limitation of six months from the date of a judgment order of the appellate authority, applicable in this case. The appellant had only six months time from 24.5.2007(Date of decision in favour of the appellant) to file a refund claim. As they have not filed refund claim within the prescribed time limit, the refund claim is not admissible. No interference required with the orders of the Lower Authority"
4. Ld. Advocate for the Appellant submitted additional submissions during the course of hearing which are as follows:-
4.1 It was submitted that the value of supply of goods from SEZ to DTA unit would be determined as applicable to goods when imported into India, in terms of Rule 48 of SEZ Rules, 2006 read with Section 30 of SEZ Act,2005, the relevant extracts of which have been reproduced below:-
Section 30. Domestic clearance by Units.--
Subject to the conditions specified in the rules made by the Central Government in this behalf:--(a)any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where applicable, as leviable on such goods when imported; and Rule 48 of SEZ Rules, 2006 (2) Valuation of the goods and/or services cleared into Domestic Tariff Area shall be determined in accordance with provisions of Customs Act and rules made thereunder as applicable to goods when imported into India:
It was pointed out that Appellant during the relevant period had cleared goods at a value higher than the import price confirmed by SVB order.16
C/40485/2020 4.2 It was stressed that the Department was duty bound to pass a speaking order under Section 17(5) of the Customs Act, 1962 and reliance was placed in this regard in the matter of Sanjivani Vs. Union of India [2015 (325) ELT 571 (All.)].
4.3 It was averred that the declared value should be accepted for payment of Customs duty as the enhanced value is arbitrary and baseless. In this regard, it was pointed out that the interpretative notes to Rule 3(3) of Customs Valuation Rules, 2007, clarify the approach required to be followed to determine the price in case of imports from related person. Thus, it is sufficient, if condition stipulated in clause (a) of Rule 3(3) of the valuation Rules is satisfied. The interpretative notes also clarified that the Department is not required to investigate relationship if there no doubts about the acceptability of the price. It was pointed out that the department neither provided reasonable grounds for enhancement of value nor they have raised any doubts about the acceptability of the price. Accordingly, the declared price should have been accepted as the transaction value. Reliance was placed on the following decisions in support of this contention:-
(a) Commissioner of Customs (Import), Mumbai Vs. Viacom Electronics Pvt.
Ltd. [2017 (357) ELT 754 (Tri-Mumbai)]:-
"4. We have carefully considered the submissions made by ld. AR and perused the records. It is observed from the original order that except the allegation that the respondent has not submitted any documents, no reason was given for enhancement of 20%. Even there is no whisper of relationship between the importer and the foreign supplier. Since no material was available, even though the appellant has not produced any documents, the adjudicating authority could not have enhanced 20%. The Commissioner (Appeals) rightly allowed the appeal of the respondent. Considering the fact that, there is no incidence of any agreements such as joint venture, transfer of technical know-how, patents, trademarks, etc., the result of which could have influenced the 17 C/40485/2020 invoice value. Thus, there is absolutely no tip of evidence by which the declared value of the respondent can be doubted. On going through the grounds of appeal also except non-submission of document by the respondent there is nothing on merit that why the transaction value declared by the respondent can be doubted. We therefore do not find any substance in the appeal of the Revenue, the impugned order is upheld. Revenue's appeal is dismissed".
(b) Thermon Heat Tracers Ltd. Vs. Commissioner of Customs, Mumbai [2006 (198) ELT 37 (Tri.-Mumbai)] affirmed by Hon'ble Supreme Court in [2016 (341) ELT A 219 (SC)] "4. Heard both sides and considered the material and it is found -
(a) there is no material in the records or produced before us to find that the invoice value could not be transaction value as per Rule 4(3)(a) of the Valuation Rules. Therefore no infirmity in the order of Dy. Commissioner GATT Valuation Cell could be found where he concluded that the relationship in this case did not influence the price for the reasons recorded by him and extracted hereinabove. In this view of the matter the transactions value has to be the invoice value."
4.4 It was submitted that in the instant case, there is no evidence that the declared value was not genuine or did not represent the correct transaction value. Thus it was averred that the enhancement of transaction value by the Customs authorities was wholly arbitrary and contrary to Customs Act read with valuation Rules and relevant judicial precedents, extracts of which have been reproduced below:-
(a) L.R. Maurya Vs. Commissioner of Customs, Bhopal- [2019 (37) ELT 906 (Tri.-Del.)] "12. That so far the enhancement of value is concerned, we find that Rule 12(2)(iii)(d) is not applicable inasmuch as there is no mis-declaration of goods. We further find that the Department has not produced any evidence to show that the relationship between the parties has influenced the price.
Therefore, we find that the reasons for rejecting the transaction value is not in consonance with law and therefore liable to be set aside. We also find the goods are not liable for confiscation as well.
13. Since the charges of misdeclaration & undervaluation are not sustainable in law, the differential duty demand is liable to be set aside along with penalties imposed and redemption fine imposed."
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(b) Sanjivani Non-ferrous Trading Pvt. Ltd. Vs. CCE & ST, Noida [2017 (7) GSTL 82 (Tri.-All.)
(c) Commissioner of Customs, Mumbai Vs. Clariant (India) Limited [2007 (210) ELT 481 (SC)] "11. In the present case that is not so. The respondent here had conceded before the appellate authority that the two companies are related. We make it clear that merely because the two parties are related to each other will not amount to undervaluation per se. It will depend on the facts and circumstances of each individual case."
5. The Ld. Authorised representative Sh. Anoop Singh representing the department justified the enhancement of value of import clearances to a related DTA Unit and prayed for dismissal of appeal filed by the Appellant.
6. Heard both sides and carefully considered the submissions and evidences on record.
7. The following issues arise for decision in this appeal:-
i. Whether the order of enhancement of the declared values by the specified officer, MEPZ-SEZ in respect of DTA clearances by the Appellant to their wholly owned branch / subsidiary is legal and proper in terms of provisions of Section 14 of the Customs Act, 1962 read with the Customs Valuation Rules, 2007?
ii. Whether the payments made by the Appellant are to be treated as payments under protest?19
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8.1 The Appellant has cleared the goods to DTA unit at a value higher than the value of importation. The transaction values were found to be not influenced by the relationship by the SVB, Chennai Custom House. The entire dispute revolves around the value to be adopted for the clearances made to the DTA Unit. Before July 2018, the Appellant supplied the imported chemicals to its branch in DTA. However, from July 2018 onwards, the Appellant supplied the goods to its wholly owned subsidiary Viz. Tokyo Chemical Industry (India) Private Limited, a DTA unit. The SVB vide Order-in-Original No.22881/2013 dated 11.12.2013 held that the declared value could be accepted as transaction value under Rule 3(3)(a) of CVR, 2007 for the purpose of assessment of duty in respect of imports up to December 2011 and since January 2012, declared value could be adopted as transaction value with usual additions under Rule 10(2) ibid. The order portion of SVB's Order-in-Original No. 22881/2013 dated 11.12.2013 reads as below:-
1. The Importer M/s. TCI Chemicals India Private Limited., Chennai and the Foreign supplier M/s. Tokyo Chemical Industry Company Limited., Japan are related in terms of Rule 2(2)(i)(iv)(iv) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
2. The declared value for the goods imported upto the period December 2011 (i.e., from 01/2010 to 12/2011) shall be accepted as transaction value under Rule 3(3)(a) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
3. The declared value of the raw materials may be accepted as transaction value under Rule 3(3)(a) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 with usual additions under Rule 10(2) ibid for the period since January 2012. However, if any contemporary imports at higher prices are noticed, assessment groups may evaluate the goods under appropriate provisions of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
4. The importer shall make annual declaration to the undersigned regarding any change in mode of invoicing or terms of agreements and relationship with the Foreign Supplier.20
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5. This decision will remain in force till present method of invoicing remains unchanged. Any changes, affecting the invoice value materially, shall be informed to this SVB suo moto by the importer without delay.
6. If there is any change in the method of invoicing, terms of relationship or any other material facts affecting the valuation of goods under Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14(1) of the Customs Act, the importer of the concerned assessing Group shall inform the same to SVB immediately so as to enable the review of the decision in force. The imported goods thereafter will be assessed provisionally with Extra Duty Deposit (EDD) equivalent to 1% of the Assessable Value. In case, there is any factual error or omission, the same shall be brought to the notice of this office suomoto by the importer without delay.
7. This order does not take into account any suppression or mis-declaration affecting the invoice value, which shall be dealt with appropriately under the law and procedure as and when noticed.
8. This decision is subject to a periodical review after a period of 3 years. To facilitate prompt and timely review, the importer is directed to come forward with necessary data before 3 months from the date of the expiry period.
9. On expiry of 3 years period, if no renewal is done, the Order will stand expired and the Assessing Groups shall resort to Provisional Assessment with EDD equivalent to 1% of the Assessable Value.
10.All pending provisional assessments shall be finalized accordingly.
11.This order is operative for three years upto 10.12.2016. 8.2 The relationship is not in dispute as the appellant is a subsidiary company of the Japanese Exporter who holds 100% shares in the appellant's company. The appellant has submitted that their pricing is based on their International Price List. All the buyers are given a discount of 45.6% on this International Price List which is passed on to their end customers depending upon the volume of purchases. The appellant's declared values have been accepted as the transaction value under Rule 3(3)(a) of Customs Valuation Rules, 2007 for the purpose of assessment of duty. It was also observed that the exporting company in Japan was selling to unrelated buyers in India prior to January 2012 at a slightly lower side than the prices at which these were sold to the appellant. The above decision will be valid if there is no change in the present method of invoicing or terms of the agreement and their relationship with the foreign supplier. Whenever, if it is noticed that 21 C/40485/2020 contemporary imports at higher prices, the SVB, Chennai Customs has to be informed by the assessing groups to review the decision taken.
9. But, the specified officer, MEPZ-SEZ entertained the view that the Appellant was required to discharge Customs duty on the basis of the prices sold by their DTA Unit to its prospective Customers and enhanced the value by loading 90% on the import prices after calling for information from the appellant. The Appellant was stock transferring goods to their branch office in DTA with applicable additions of USD 3 or USD 5 as the case may be. The Assessing Authority has ordered for enhancement of the transaction value w.e.f. 05.10.2016. It appears that the enhancement in the values was based on the Cost Sheet provided by the Appellant. We find that the SVB have not communicated to the Appellant the outcome of filing of Annexure-I to Circular dated 46/2016 for renewal of SVB order.
10. No speaking order was issued by the specified officer, MEPZ-SEZ for nearly a year despite many request letters and the Appellant filed an appeal before the Appellate Authority in respect of duty payment covering the Bill of Entry No. 18514 dated 05.10.2016 for clearance to their own branch. The Appellate Authority, prima facie, without going into the merits of the case, dismissed the appeal on the ground of limitation where no speaking order was issued by the Assessing Authority. The Appellant inadvertently failed to exercise the option of "Duty Payment under Protest"
and discharged the duty on the said Bill of Entry dated 05.10.2016 on self-
assessment basis. In spite of the Appellant intimating the assessing 22 C/40485/2020 authority of MEPZ-SEZ vide letter dated 05.10.2016 that they are not in agreement with the valuation determined by the department and are discharging duty on higher value only to service their customers, the Specified Officer, MEPZ has not issued any speaking order justifying the enhancement of value. The appellant has been communicating that they are not in agreement with the enhancement of the values by the specified officer, MEPZ-SEZ vide their Letter dated 05.10.2016 which is extracted below as a ready reference:-23
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11. Subsequently, this was followed up with Letters dated 17.01.2018 and 27.06.2018 asking for provisional assessment and also for passing a speaking order. Similarly, they have represented to the Development Commissioner, MEPZ-SEZ, Chennai (Letter dated 17.07.2018), the Additional Secretary, Ministry of Commerce, New Delhi (Letter dated 19.11.2018) and the Deputy Secretary, Ministry of Commerce & Industry, New Delhi (20.02.2019) which turned out be futile.
12. Finally, the specified officer of MEPZ-SEZ vide letter dated 04.09.2018 informed the Appellant that no speaking order could be issued as the assessment was already complete as per the self-declaration and the "payment under Protest Option was not exercised. We find that the letter dated 20.02.2020 of Specified Officer, MEPZ, without giving any reason for re-determination of the declared value, have merely by reference to earlier assessment dated 05.10.2016, sought to redetermine the value only based on the worksheet submitted by the Appellant and informed that the price was determined in terms of the provisions of the Customs Act, 1962 read with Customs Valuation Rules, 2007 basing on the price of goods sold to prospective Customers. The conduct of specified officer, MEPZ-SEZ in not issuing any speaking order while ordering enhancement of the values for clearances to DTA though repeatedly the appellant has made such a request is to be critically viewed. In respect of related parties transaction, it is the practice to refer it to SVB section for carrying out specialised investigation. At the relevant period, the Assessing Officer in MEPZ-SEZ is required to 24 C/40485/2020 comply with the directions issued in SVB order dated 11.12.2013. Further, the specified officer, MEPZ-SEZ has blatantly violated the principles of natural justice by not allowing the appellant to submit his defence and by not according any opportunity of hearing. We find that the Appellant filed an appeal before the Appellate authority who, instead of delving into the merits of the case, preferred to dismiss the appeal vide impugned order dated 22.06.2020 on the principle of res judicata, being aware that the appeal preferred previously was with reference to clearances to the branch Unit on 05.10.2016 whereas the subject clearances against which appeal was filed before the authority was in respect of clearances during 24th to 29th January 2020 to their subsidiary company. Hence, we find that the impugned order is not legal or logical and requires to be set aside.
13. We find that Section 17 of the Customs Act, 1962 requires the importer to self-assess the duty. However, on verification, if the proper officer finds that the self-assessment is not done correctly, then he may re- assess the duty leviable on such import of goods. If the re-assessment is contrary to the self-assessment done by the importer, the proper officer is required to pass a speaking order on the re-assessment, within 15 days from the date of re-assessment of the Bills of Entry as per section 17(5) of the Customs Act. The adjudicating authority is under obligation to pass a speaking order disclosing the grounds for loading or enhancement in the declared value which was never complied with. We also find that the Instruction No. 07/2018-Customs dated 05 April 2018 providing for issuance of speaking order was never followed by the Specified Officer from 25 C/40485/2020 05.10.2016 to the year 2020. Instead, the specified officer, MEPZ-SEZ enhanced the value relying solely on the worksheet provided by the Appellant. It is a settled law that orders which are cryptic and non- speaking without going into the merits of the case and without considering the points which arise for determination are illogical not being supported by any reasoning and are blatantly illegal and required to be set aside. In this regard, we find that the ratio of the following decisions relied upon by the Appellant support their cause:-
(a) M/s. Tata Engineering & Locomotive Co. Ltd. v. Collector of Excise, Pune [2006 (203) ELT 360 (S.C.)]
(b) M/s. CCE, Bangalore v. Srikumar Agencies [2008 (232) ELT 577 (SC)]
14. We further find that the basis for arriving at the enhanced value or methodology adopted was not provided by the Specified Officer. In this regard, we refer to the ratio of the decision in the case of Sanjivani Non-
ferrous Trading Pvt. Ltd. Vs. CCE & ST, Noida [2017 (7) GSTL 82 (Tri-All.) as relied upon by the Appellant which is squarely applicable to the facts of the case. The said decision has been affirmed by the Hon'ble Supreme Court as reported in [2018 (11) G.S.T.L. J84 (S.C.)] which has been reproduced below for ready reference:-
"7. Having considered the rival contentions and on perusal of record, we find that the Original Authority was directed by the Hon'ble High Court to pass speaking order on the enhancement of assessable value. We find that the Original Authority in its Order-in-Original dated 25/03/2015 passed comments on the ground of writ petition and did not properly examine the evidence available with the department required to be examined for enhancement of assessable value. Further, we find that as held in the case laws stated above and as provided by Section 14 of Customs Act, 1962, the assessable value has to be arrived at on the basis of the price which is actually paid and in a case the price is not sole consideration or if the buyers and sellers are related persons then after 26 C/40485/2020 establishing that the price is not sole consideration the transaction value can be rejected and taking the other evidences into consideration the assessable value can be arrived at. Such exercise has not been done in these cases on hand. Therefore, we reject the enhancement of assessable value in respect of the Bills of Entry which are involved in all the appeals being decided and we restore the assessable value as declared by the appellant in said Bills of Entry.
8. In result, we set aside all the impugned Orders-in-Appeal and allow all the appeals. The appellant shall be entitled for consequential relief, if any, in accordance with law."
15. We find that the Appellant had been discharging the duty on the enhanced values since 05 October 2016. As many Letters were addressed asking for a Speaking Order, which was not issued, we order that all the payments made since 05.10.2016 at enhanced values are to be treated as having been made under protest and the time limit prescribed under Section 27 of the Act will not be applicable and the refund application cannot be considered as time barred. CESTAT Bangalore in the case of Commissioner of Cus, C. Ex. & ST., Guntur Vs. Fairway Trading Company Pvt. Ltd. [2014 (10) TMI 506 - CESTAT Bangalore] held as follows:-
"2. The facts in this case are very peculiar. The assessment is contrary to the law and the declaration filed was not accepted and subject to verification by the Revenue, higher duty was collected. That being the position, the correct procedure to be followed by the appellant was to pay duty under protest, in which case it would have meant that assessment is not final. Further, there is no procedure prescribed for payment under protest in Customs law. Therefore, the letter written by the appellant wherein they have specifically stated that they have been compelled to pay higher duty by the Customs and therefore they are paying it with an understanding that the amount will be refunded has to be treated as protest. Therefore, the refund could not have been rejected on the ground that the assessment was not challenged. Once the payment is made under protest, it means assessment also has been challenged. In such cases, either an assessment order confirming the original assessment has to be issued or the refund claim has to be considered. In any case, the appellant has the option to file an appeal against the assessment also in case the refund was rejected. In this case, the respondent did not have any grievance since the refund was sanctioned by the original authority as agreed upon between the two parties as emerging from the letter written by the party. No doubt there is no estoppel in law. At the same time, the officers of customs are also required to follow the law and the refusal to collect correct rate of duty compelling the assessee to pay higher duty itself was wrong. The correct procedure would have been to resort to 27 C/40485/2020 provisional assessment in which case, the appellant would not have paid higher duty at all. The facts and circumstances show that the refund sanctioned by the original authority was in accordance with law and there was no need to interfere with the same by filing an appeal. Fortunately, the Commissioner (Appeals) has agreed with the lower authority in this case. Accordingly, I do not find any merit in the appeal filed by the Revenue and reject the same. Cross-objections filed by the respondents also gets disposed of."
We find the that the ratio of the decision is applicable to the facts of the present case. Reliance was also placed by the Appellant on the decision of the CESTAT in the case of Redington India Ltd vs. Commissioner of Customs, Chennai [2011 (269) E.L.T. 233 (Tri.-CHENNAI)] which also supports the contention of the appellant.
16. To summarize, the impugned order dated 22.06.2020 of Commissioner of Customs (Appeals), Chennai deserves to be set aside, as there was no discussion in regard to blatant violation of principles of natural justice by the specified officer, MEPZ-SEZ in enhancement of the value unilaterally without intimating the reasons therefor. The appellant was forced to clear the goods to their DTA Unit at enhanced rates where the Special Valuation Branch, Chennai Customs after detailed investigation accepted the declared value as the transaction value. In case, there is any change in the method of invoicing or if any contemporary goods are imported at higher prices or for any other reason, the specified officer must have taken it up with the SVB, Chennai for review.
17. In view of the aforesaid discussion and appreciating the above case laws unilaterally enhancing the assessable value without issuing any speaking order though repeatedly asked for is in blatant violation of the 28 C/40485/2020 procedures and absolutely bad in law. As such, the impugned order dated 22.06.2020 issue by the Lower Appellate Authority is devoid of any merits and is required to be set aside. We are of the considered view that the entire issue of enhancement of the values of clearances to the DTA Unit by the appellant is required to be looked into afresh, and so, ordered to be remanded to the Original Authority for issuing a well-reasoned Speaking Order for determination of the values in terms of Section 14 of the Customs Act, 1962 read with Customs Valuation Rules, 2007. No need to mention that there should be strict observance of principles of natural justice before passing such an order. The duty payments made at enhanced rates since 05.10.2016 are treated as payments made under protest and no limitation could be applicable while processing the refund-claim, if the duties paid are found to be in excess when compared to such determined transaction values of the imported goods of the appellant. As substantial time has elapsed, the remand proceedings may be completed within a period of three months from the date of communication of this order.
18. In the result, the impugned order dated 22.06.2020 of the Commissioner of Customs (Appeals), Chennai is set aside. Thus, the appeal is allowed by way of remand.
(Order pronounced in open court on 26.06.2024)
Sd/- Sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
MK