Custom, Excise & Service Tax Tribunal
Human Health Distribution vs Commissioner, Customs-Patparganj on 16 April, 2024
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH, COURT NO. 1
CUSTOMS APPEAL NO. 51855 OF 2021
[Arising out of Order-in-Appeal No. D-II/ICD/PPG/134/2021-22
dated 03.05.2021 passed by the Commissioner of Customs
(Import)New Delhi]
M/S HUMAN HEALTH DISTRIBUTION Appellant
101, Padma Tower-II,
22 Rajendra Place,
New Delhi-110008
Vs.
COMMISSIONER OF CUSTOMS - Respondent
PATPARGANJ ICD, Patparganj, Delhi-110096 WITH CUSTOMS APPEAL NO. 51856 OF 2021 [Arising out of Order-in-Appeal No. D-II/ICD/PPG/131/2021-22 dated 03.05.2021 passed by the Commissioner of Customs (Import)New Delhi] Appellant M/S HUMAN HEALTH DISTRIBUTION 101, Padma Tower-II, 22 Rajendra Place, New Delhi-110008 Vs. COMMISSIONER OF CUSTOMS- Respondent PATPARGANJ ICD, Patparganj, Delhi-110096 2 AND CUSTOMS APPEAL NO. 51857 OF 2021 [Arising out of Order-in-Appeal No. D-II/ICD/PPG/130/2021-22 dated 05.05.2021 passed by the Commissioner of Customs (Import)New Delhi] M/S HUMAN HEALTH DISTRIBUTION Appellant 101, Padma Tower-II, 22 Rajendra Place, New Delhi-110008 Vs. COMMISSIONER OF CUSTOMS - Respondent PATPARGANJ ICD, Patparganj, Delhi-110096 Appearance:
Shri Devesh Tripathi, Shri Faraz Anis, Shri Prasanjit Pathak, Advocates for the appellant Shri Rakesh Kumar, Authorised Representative for the Department CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P. V. SUBBA RAO, MEMBER ( TECHNICAL ) FINAL ORDER NOS. 55539-55541 /2024 Date of Hearing : 04/03/2024 Date of Decision : 16/04/2024 P V SUBBA RAO:
M/s. Human health distribution1 filed these three appeals to assail the orders passed by the Commissioner (Appeals).
2. The appellant imported goods which it declared as amino acid powder, whey protein powder, etc. and classified them 1 the appellant 3 under the Customs Tariff Item2 29379090. The Customs officers examined the goods, sent samples to the Central Revenue Control Laboratory3 for testing and assessed the Bills of Entry provisionally under CTI 21069099. After receiving the test reports, the assessments were finalized under the same CTI. Aggrieved, the appellant appealed to the Commissioner (Appeals) who, by the impugned, orders upheld the finalization of the assessments. Hence, these appeals.
3. We have heard learned counsel for the appellant and the learned authorised representative for the Revenue and perused the records.
Submissions on behalf of the appellant
4. Shri Devesh Tripathi, learned counsel for the appellant made the following submissions.
5. The details of the Bills of Entry in the these three appeals are as follows:
Point of Appeal No. Appeal No. Appeal No. Comparison C/51855/2021 C/51856/2021 C/51857/2021 Bill of Entry B/E No. 9670623 B/E No. 4437012 B/E No. 6471645 details dated 16.01.2019 dated dated 09.08.2019 14.01.2020 Issue/s Classification Classification Classification involved and valuation Re- Yes No Yes assessment Provisional Yes No Yes assessment Number of 3 1 4 assessments Date of first 16.04.2019 26.11.2019 19.02.2020 assessment Unit price No No Yes (from 2 CTI 3 CRCL 4 change 10.25$ to 12.5$) CTH claimed 2937 @ 7.5% 2937 @ 7.5% 2937 @ 7.5% along with BCD Total duty BCD Total duty BCD Total duty BCD and total @27.735- @ 27.735- @27.735-
rate of duty Specifically 3824 Specifically Specifically @ 7.5% BCD Total duty @ 27.735-Generally CTH as per 21069099 @ 21069099@ 21069099 @ OIA along 40% BCD Total 40% BCD Total 40% BCD Total with BCD and duty @ 69.92 duty @ 69.92 duty @ 69.92 total rate of duty Date of OIO 21.05.2019 26.11.2019 11.08.2020 Date of OIA 03.05.2021 05.05.2021 03.05.2021 Description of Insane Labz- -Psychotic -Insane Labz-
goods Amino Acid [Amino Acid Psychotic [Amino
Powder powder] acid powder]
-Psychotic -Samples-
-Psychotic Gold Shakers Cups,
-Insane Veinz Funnels,
-Insane Creatine Lanyards
Monohydrate -Amino Acid
-Iam God Powder-Dr.
-Insane Cutz Jekyll Stim- Free
-Insane Amino -Amino Acid
-Samples Packets Powder- Mr.
-Somoles- Hyde Icon
Transparent -Amino Acid
Black Powder-Mr.Hyde
Shaker Cups Nitrox
-Samples- -Amino Acid
Lanyards Liquid-L-
-samples- Carnitine 1500
Drawstring bags Berry
-samples- -Samples Not
Psychotic Gold For Sale
Shelf Talker -Conjugated
-Amino Acid Linoleic Acid-
Liquid CLA Lean 3000
-Hydrobcaa Capsules
-Whey Protein -Amino Acid
Powder-Ps ISO Powder-Hydro
-L-Carbitine BCAA
-L-Carnitine
-Mr.Hyde Nitrox
-Mr.Hyde
Signature Series
-Whey Protein
Powder-Ps Whey
-Samples Sachet-
Whey Protein
Powder
-Samples Sachet-
Amino Acid
Powder
-Samples Sachet-
Protein Powder
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6. He contested the impugned orders on five grounds:
a) The assessing officers resorted to multiple assessments in two of the Bills of Entry contrary to the provisions of section 17;
b) No Show Cause Notice4 was issued prior to finalizing the assessment although the appellant had provided written submissions;
c) The imported goods were correctly classifiable under CTI 29379090 as claimed by the appellant and not under CTI 21069099 as held in the orders of the original authority, which decisions have been upheld in the impugned orders;
d) The Assistant Commissioner of Customs who passed the orders in original was not the competent authority to pass the orders as per the judgment of the Supreme Court in Canon India5.
e) In Customs Appeal no. 51857 of 2021, the Assistant Commissioner wrongly enhanced the value of "Insane Labz Psychotic (Amino acid powder) 35 SU/220 grams"
from US $ 10.25 to US $ 12.50 relying on a past import by the appellant because the quantities of import were vastly different.
4 SCN 5 2021(376) ELT 3(SC) 6
7. Elaborating on the alleged multiple assessments, learned counsel submitted that Section 17 provides for (a) self- assessment by the importer and (b) re-assessment by the proper officer. Once the Bill of Entry is re-assessed, there is no scope for the proper officer to again reopen it and make a third or fourth assessment as has been done in these cases. Further, once final assessment is made, there is no provision under which it can then be converted into a provisional assessment. Therefore, the assessment in these cases were themselves against the provisions of the law. Reliance is placed on Priya Blue Industries Ltd. vs CC (Prev)6. Section 47 deals with clearing the goods for home consumption. Merely because the clearance for home consumption was not yet given under section 47, it does not mean that assessment was not completed under section 17. Once assessment is completed, it cannot be reopened. He also placed reliance on Escorts Ltd. vs UOI7. Learned counsel also submitted that once the assessment is completed and duty has been paid, it is impermissible for the officer to then change it to provisional assessment.
8. With respect to the assertion that no SCN was issued, learned counsel submits that no personal hearing was granted but written submissions were given by the appellant which 6 (2205) 10 SCC 433 7 1998(97) ELT 211 (SC) 7 were considered as personal hearing in the record of proceedings on 17.5.2019.
9. Regarding the classification, learned counsel submitted that the imported goods were correctly classifiable under CTI 29379090 and not under CTI 21069099.The test report of the CRCL says that the imported goods were 'other than separate chemically defined organic compounds' and therefore, the department, relying on chapter note 1(a) to chapter 29, held that they do not fall under this chapter and rejected the appellant's classification under it. However, as per Chapter note 1(c) of the same chapter, goods 'whether or not chemically defined' does not apply to goods falling under CTH 2936 to 2939 and the appellant's goods fall under CTH 2937. The finding in the impugned order that the other ingredients in the imported goods were not impurities but are deliberate mixtures is without any evidence and merely based on assumption. It was never enquired from the CRCL if these substances could help release hormones and if they help in releasing hormones, they should be classified as hormone releasing substances under chapter 29 (as per chapter note 8).
10. On the fourth issue of jurisdiction, learned counsel asserts that The Assistant Commissioner of Customs who passed the order is not the proper officer in terms of the decision of the Supreme Court in Canon India and therefore, the order is not valid.
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11. Regarding the enhancement of value of "Insane Labz Psychotic (Amino acid powder) 35 SU/220 grams" imported by the appellant which is the point of dispute in Customs Appeal No. 51857 of 2021, he submits that Assistant Commissioner enhanced the value from US$ 10.25 to US $12.50 per piece relying on another import by the same appellant. While the previous import by the appellant by Invoice No. 14967 dated 22.10.2018 was for 1,176 pieces only, the invoice in 19058 dated 24.09.2019 in this case was for 15,624 pieces and hence the price was lower at US$ 10.25 per piece.
Submissions on behalf of the Revenue
12. Shri Rakesh Kumar, learned authorised representative for the Revenue supported the impugned orders and made the following submissions.
13. On the first assertion of the appellant that there were multiple assessments in the same case contrary to the provisions of section 17, learned authorised representative for the Revenue submits that assessment is a dynamic process and it will end once the customs officer clears the goods for home consumption under section 47. Until then, the assessment is open and the officer can revise it, if necessary. For instance, in a case where the importer self-assesses the duty, the officer first re-assesses the duty based on the declarations. However, if during examination, the goods are found to be at variance with the declaration, based on the 9 examination report from the shed, the proper officer again re- assesses the duty. Once the proper officer clears the goods for home consumption, they cease to be imported goods and no duty can be charged on them. Until the order clearing the goods for home consumption is given under section 47, the assessment is open and can be changed as required.
14. On the second assertion of the appellant that no SCN was issued to the appellant, learned authorised representative for the Revenue submits that provisional assessment was made under section 18 and after receiving the test reports from the CRCL, assessments were finalized. There is no provision in the Act which requires an SCN to be issued before finalizing the assessment. SCNs are to be issued either under section 28 (to recover duty not levied, short levied, etc.) or under section 124 if goods are proposed to be confiscated or penalty is proposed to be imposed. The appellant's case is neither of the two. It is a simple case of finalization of the provisional assessment by the officer. As has been admitted by the learned counsel for the appellant, before finalizing the provisional assessment, the appellant had made written submissions which were considered. Thus, there is no violation of principles of natural justice in this case.
15. On the third assertion of the appellant with regard to the classification, learned authorised representative submits that on examination, it was found from the labels of the 10 imported goods themselves that they were food supplements and were not separately defined chemical substances. This was confirmed by the test reports of CRCL. Accordingly, the goods were correctly classified under CTI 21069099 and the appellant's claim of classification under CTI 29389090 was rejected.
16. On the fourth assertion of the appellant that Assistant Commissioner of Customs who had passed the impugned order is not the proper officer as per the Act as per Canon India, learned authorised representative submits that the ratio of Canon India was that the officers of DRI were not 'proper officers' to issue SCN under section 28. These cases are ones where provisional assessments made under section 18 were finalized by the assessing officer himself and no DRI officer is involved. Therefore, Canon India has no applicability to this case.
17. Learned authorized representative supports the enhancement of the value as it was based on the value of the same product by the same importer.
Findings
18. We have considered the submissions on both sides. The following questions need to be answered in these three appeals.
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a. Were there multiple assessments in the same Bills of Entry in these cases contrary to the provisions of section 17 as alleged by the appellant?
b. Was there any violation of principles of natural justice in these cases?
c. Was the Assistant Commissioner of Customs who passed the OIO the proper officer to do so?
d. Were the imported goods classifiable under CTI 29379090 as claimed by the appellant or CTI 21069099 as classified in the impugned orders?
e. Can the enhancement of value of Insane Lab Psychotic (Amino Acid Powder) 35 SU/220 grams be sustained? Assessments
19. According to the learned counsel for the appellant, once the importer self-assesses his Bill of Entry and the proper officer re-assesses it and the importer pays the duty, the assessment is complete. Thereafter, if the assessment has to be modified, the only course for the department is to either file an appeal before the Commissioner (Appeals) or issue an SCN under section 28. According to the learned counsel, the department has not only resorted to multiple assessments in the same Bills of Entry in these cases but has also, after initially making the final assessment, revised it to provisional 12 assessment pending test report. He relies on Priya Blue in support of his assertion.
20. According to the learned authorised representative, there is no infirmity in the officer revising the re-assessments before the goods are cleared for home consumption under section 47.
21. To examine this issue, we must refer to the relevant provisions of the Act. Duties of customs are levied under section 12 on the goods imported into or exported from India at the rates specified in the schedules to the Customs Tariff Act, 19758. The duties are not levied on an any person but on the goods and therefore, the liability of paying the duty is on the importer or exporter and it moves with the ownership of the goods. If the goods are sold while in the Custom bonded warehouse after import but before they were cleared, it is the new owner who will have to pay the duty. Similarly, if the imported goods are absolutely confiscated, the ownership shifts to the Central Government and so will the liability to pay duty. If the confiscated goods are released on payment of redemption fine, the person redeeming them will become the owner and he has to pay the duty in addition to the redemption fine as per section 125(2). Thus, duty is chargeable on the imported goods or as the case may be, export goods. Once the goods are no longer 'imported goods' 8 Tariff 13 no duty can be charged or assessed on them. Section 2(2) defines assessment, and section 2(25) defines 'imported goods'. These read as follows:
Section 2 Definitions-
In this Act, unless the context otherwise requires, (2) "assessment" means determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act) or under any other law for the time being in force, with reference to-
(a) the tariff classification of such goods as determined in accordance with the provisions of the Customs Tariff Act;
(b) the value of such goods as determined in accordance with the provisions of this Act and the Customs Tariff Act;
(c) exemption or concession of duty, tax, cess or any other sum, consequent upon any notification issued therefore under this Act or under the Customs Tariff Act or under any other law for the time being in force;
(d) the quantity, weight, volume, measurement or other specifics where such duty, tax, cess or any other sum is leviable on the basis of the quantity, weight, volume, measurement or other specifics of such goods;
(e) the origin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods;
(f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods, and includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil;
(25) "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;14
22. Thus, once the goods are cleared for home consumption, they cease to be imported goods and therefore, there can be no further assessment of duty. The assessment already made, can, of course be modified in appeal or through a process under section 28, etc. This leads us to the next question as to who can assess the duty and how. This is laid down in section 17 which reads as follows:
Section 17. Assessment of duty. - (1) An importer entering any imported goods under section 46, or an exporter entering any export goods under section 50, shall, save as otherwise provided in section 85, self-assess the duty, if any, leviable on such goods.
(2) The proper officer may verify the entries made under section 46 or section 50 and the self assessment of goods referred to in sub-section (1) and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary.
Provided that the selection of cases for verification shall primarily be on the basis of risk evaluation through appropriate selection criteria.
(3) For the purposes of verification under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any document or information, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained and thereupon, the importer, exporter or such other person shall produce such document or furnish such information.
(4) Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re-assess the duty leviable on such goods.
(5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re- assessment in writing, the proper officer shall pass a speaking order on the re-assessment, within fifteen days from the date of re-assessment of the bill of entry or the shipping bill, as the case may be.
15Explanation.- For the removal of doubts, it is hereby declared that in cases where an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 before the date on which the Finance Bill, 2011 receives the assent of the President, such imported goods or export goods shall continue to be governed by the provisions of section 17 as it stood immediately before the date on which such assent is received.
23. Thus, assessment has to be done by the importer himself and the proper officer can (a) verify the entries made, i.e., the details provided in the Bill of Entry with regard to the nature of goods, specifications, value, etc; and (b) verify the self-assessment of the goods; and then re-assess the duty. Both the self-assessment and the re-assessment are assessments as per section 2(2). But there could be occasions when the assessment cannot be done at that stage because of some details or test report, etc. are required. In such cases, the goods are provisionally assessed to duty and the goods are cleared for home consumption and thereafter, the provisional assessment is finalized. In such a case, although the goods cease to be imported goods once they are cleared for home consumption, the assessment which was only provisional before such clearance has to be finalized. This finalization is not a new assessment but a completion of the assessment which was left incomplete before the goods were cleared. Section 18 of the Act reads as follows:
" Section 18. Provisional assessment of duty. - (1) Notwithstanding anything contained in this Act but without prejudice to the provisions of section 46 and section 50,-16
(a) where the importer or exporter is unable to make self-
assessment under sub-section (1) of section 17 and makes a request in writing to the proper officer for assessment; or
(b) where the proper officer deems it necessary to subject any imported goods or export goods to any chemical or other test; or
(c) where the importer or exporter has produced all the necessary documents and furnished full information but the proper officer deems it necessary to make further enquiry; or
(d) where necessary documents have not been produced or information has not been furnished and the proper officer deems it necessary to make further enquiry, the proper officer may direct that the duty leviable on such goods be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed or re- assessed as the case may be, and the duty provisionally assessed.
(1A) Where, pursuant to the provisional assessment under sub-section (1), if any document or information is required by the proper officer for final assessment, the importer or exporter, as the case may be, shall submit such document or information within such time, and the proper officer shall finalise the provisional assessment within such time and in such manner, as may be prescribed.
(2) When the duty leviable on such goods is assessed finally or reassessed by the proper officer in accordance with the provisions of this Act, then -
(a) in the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty finally assessed or re-assessed, as the case may be, and if the amount so paid falls short of, or is in excess of the duty finally assessed or re-assessed, as the case may be, the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund, as the case may be;
(b) in the case of warehoused goods, the proper officer may, where the duty finally assessed or re-assessed, as the case may be, is in excess of the duty provisionally assessed, require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty.
(3) The importer or exporter shall be liable to pay interest, on 17 any amount payable to the Central Government, consequent to the final assessment order or re-assessment order under sub- section (2), at the rate fixed by the Central Government under section 28AA from the first day of the month in which the duty is provisionally assessed till the date of payment thereof. (4) Subject the sub-section (5), if any refundable amount referred to in clause (a) of sub-section (2) is not refunded under that sub-section within three months from the date of assessment, of duty finally or re-assessment of duty, as the case may be, there shall be paid an interest on such un-refunded amount at such rate fixed by the Central Government under section 27A till the date of refund of such amount. (5) The amount of duty refundable under sub-section (2) and the interest under sub-section (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to:
(a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal use;
(c) the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(d) the export duty as specified in section 26;
(e) drawback of duty payable under sections 74 and 75.
24. Once the assessment is done under section 17 and duty is also paid, the proper officer issues an order under section 47 clearing the goods for home consumption. Even if only provisional assessment is done but the duty is paid accordingly, the proper officer issues an order under section 47 clearing the goods for home consumption. Section 47 reads as follows:
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"Section 47. Clearance of goods for home consumption.
(1) Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption:
Provided that such order may also be made electronically through the customs automated system on the basis of risk evaluation through appropriate selection criteria:
Provided further that] the Central Government may, by notification in the Official Gazette, permit certain class of importers to make deferred payment of said duty or any charges in such manner as may be provided by rules.
(2) The importer shall pay the import duty-
(a) on the date of presentation of the bill of entry in the case of self assessment; or
(b) within one day (excluding holidays) from the date on which the bill of entry is returned to him by the proper officer for payment of duty in the case of assessment, reassessment or provisional assessment; or
(c) in the case of deferred payment under the proviso to sub-
section (1), from such due date as may be specified by rules made in this behalf, and if he fails to pay the duty within the time so specified, he shall pay interest on the duty not paid or short-paid till the date of its payment, at such rate, not less than ten per cent. but not exceeding thirty-six per cent. per annum, as may be fixed by the Central Government, by notification in the Official Gazette.
Provided that the Central Government may, by notification in the Official Gazette, specify the class or classes of importers who shall pay such duty electronically. Provided further that where the bill of entry is returned for payment of duty before the commencement of the Customs (Amendment) Act, 1991 and the importer has not paid such duty before such commencement, the date of return of such bill of entry to him shall be deemed to be the date of such commencement for the purpose of this section. Provided also that] if the Board is satisfied that it is necessary in the public interest so to do, it may, by order for reasons to be recorded, waive the whole or part of any interest payable under this section."
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25. Once an order under section 47 is issued, the goods cease to be 'imported goods' as per section 2(25) and therefore, no assessment of duty is possible. Thus, it puts an end to the process of assessment under section 17. Thereafter, the assessment already made can be modified either on appeal to the Commissioner (Appeals) by either side or an appeal by higher appellate authorities or it can be reopened and revised by the department by issuing an SCN under section 28. While there appear to be no restrictions except the time limit on appeals to the Commissioner (Appeals), the SCN under section 28 is restricted by WHO, WHEN and WHY. Only 'the proper officer' can issue the SCN 'within the normal period or, as the case may be, the extended period of limitation' and 'to recover the duties not levied, short levied, not paid, short paid or erroneously refunded'.
26. The contention of the appellant in these appeals is that although section 17 provides for re-assessment, it can only be done once. If the re-assessment is done by the officer and the importer pays duty, the proper officer is then estopped and cannot again re-assess the duty even if new facts come to light which require a modification of the assessment. Further, it is the contention of the appellant that once the assessment is done finally under section 17 by the officer, it is no longer open for him to then pass another order of provisional assessment.
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27. These contentions of the appellant are not correct and are not supported by the legal provisions. If these contentions are accepted, it will also result in chaos and undue difficulties to both the trade and the department.
28. Nothing in section 17 says that the officer can re-assess only once and not more than once. In olden days when trade was small, the norm was for the proper officer to first examine the goods, test, weigh and then assess the duty accordingly. This very neat system became impossible with efflux of time as volumes of trade grew. An alternative system was developed which is commonly called as second appraisement or second check where the duty is assessed first based on whatever is declared and then the goods are examined and cleared. Thus, the importer does not have to travel back and forth between the import shed where the goods are physically present and the assessing officer in the Custom House. Since in vast majority of the cases, the goods will be as declared, this alternative system of second appraisement expedited clearances. However, where, on examination of the goods discrepancies are found, the examining officer writes his report and refers it back to the proper officer who has done the assessment. By this time, the importer would have already paid duty as per the initial assessment but the proper officer would have to revise his assessment with respect to duty or even restrictions on imports. Thus, an assessment is not 21 always a one-shot affair and the proper officer who does the assessment will have to revise the assessment on receiving additional inputs from the examining officer or otherwise.
29. There could be other cases where after assessment, intelligence is received that some non-declared items were in the same container. This would also require the assessment to be modified as it will still be open before the goods are given out of charge under section 47.
30. After the self-assessment of the Bills of Entry and the selective re-assessment based on risk management have been introduced, many Bills of Entry are cleared without any re- assessment. The system clears the goods based on self- assessment by the importer. It happens on a daily basis that the importer realizes either after self-assessment or even after re-assessment by the officer and after duty has been paid that he was eligible for some exemption notification which would reduce his duty liability but which he had erroneously not claimed. In such cases, the importer or his customs broker gives a written request to the proper officer to recall the Bill of Entry from the system and re-assess it after applying the notification and if convinced of the grounds, the officer recalls it from the system and re-assesses the duty and the importer claims refund of the excess duty paid over the assessed amount.
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31. However, once the proper officer issues an order under section 47 clearing the goods for home consumption, no changes in the assessment are possible. In fact, the Customs electronic data interchange9 system is designed accordingly. Therefore, what is not permissible under the law with respect to assessment or re-assessment is not possible in the Customs EDI system.
32. If the appellant's contention that once re-assessment is completed and duty is paid, the officer cannot re-open the assessment is accepted, it will result in absurd consequences. For example:
a) If after assessment and duty is paid, on examination the goods were found to be more or different, the officer will not be able to change his assessment;
b) If the importer forgets to claim the benefit of a notification and realizes his mistake, he cannot ask the officer to recall the Bill of Entry and reassess the Bill of Entry;
c) If after re-assessment by the officer based on documents, intelligence is received about mis-
declarations, the officer will not be able to change even the assessment.
9 EDI 23
33. Thus, the submission of the appellant that a second re- assessment is not permissible after re-assessment by the officer under section 17 is not correct. It is also incorrect to say that once the re-assessment order is issued, another order of provisional assessment cannot be issued. The initial assessment is based on declarations. On examination, if some testing or enquiry is felt necessary, assessment cannot be finalized without them and provisional assessment will be necessary. Of course, it will be open to the importer to not execute the test bond or other bonds as required and wait for the test report and the final assessment and not clear the goods. However, to say that provisional assessment cannot be done after initial re-assessment is contrary to the legal provisions. It will also cause undue trouble and harassment to importers if the importers are not allowed to clear the goods on provisional assessment because initially assessment was done on the basis of declaration.
34. It also needs to be noted that the goods were cleared in this case because the appellant had executed a test bond. It was open to the appellant to have not executed a test bond, but to have waited for the test report and cleared the goods only after the final assessment.
35. In short, until the order clearing the goods for home consumption under section 47 is issued, the goods continue to 24 be imported goods and assessment and re-assessment is permissible more than once. It is this flexibility within the system which greatly facilitates trade and expedites clearances while providing an opportunity to the assessing officer to make changes in the assessment if necessitated before clearing the goods for home consumption.
Principles of natural justice
36. Learned counsel for the appellant submitted that the principles of natural justice were violated because no SCN was issued to the appellant before finalizing the assessment. He, however, concedes that the appellant had made written submissions which were considered.
37. We find that as per the Customs Act, SCN has to be issued under section 28 (if a demand is being raised) or under section 124 (if the goods are to be confiscated or penalty is to be imposed). Regular assessment under section 17 or its finalization under section 18 have no provision for issue of SCN. However, if the duty is re-assessed under section 17(2) by the proper officer, unless the importer accepts such re- assessment in writing, he has to issue a speaking order within 15 days. Similarly, nothing in section 18 which deals with provisional assessment or its finalization provides for issue of an SCN. In these cases, initially, the Bills of Entry were provisionally assessed awaiting the test reports of CRCL on receiving which the assessments were finalized. The appellant 25 was provided copies of the test reports and the appellant made written submissions which were considered. We, therefore, find no violation of either any provision of the Act or the principles of natural justice in not issuing an SCN to the appellant before finalizing the assessment. Whether the Deputy Commissioner, ICD, Piyala is the proper officer to finalise the assessment?
38. Learned counsel for the appellant submitted that as per the judgment of the Supreme Court in Canon India, the Deputy Commissioner, ICD, Piyala was not the proper officer to finalise the assessment. This submission is completely misplaced. Canon India was on the question as to whether an officer of DRI is the proper officer to issue a notice under section 28 and the Supreme Court held in negative. In this case, neither was a notice issued under section 28 nor is an officer of DRI involved. The provisional assessment order was issued by Assistant Commissioner, ICD, Piyala and it was finalized by the Deputy Commissioner, ICD, Piyala. A successor in office naturally completes the action by the predecessor. We, therefore, find no infirmity in the order of finalization of assessment being done by the successor officer. Classification of the imported goods
39. The names of the goods imported is indicated by the appellant in the table reproduced above. Labels of the products 26 have also been photocopied and enclosed with the appeal. All these leave no manner of doubt that they are mixtures of amino acids meant to enhance the health of the consumers. They also contain vitamins and some other substances such as caffeine and tea extracts. These are not meant to treat illnesses but are meant to provide strength to the consumer and delay fatigue. The recommended dosage is also prescribed on these goods.
40. Amino acids, as is well known, are the building blocks of proteins just as glucose is the building block of carbohydrates. If protein is consumed in any form- say, milk, eggs, dal, meat, etc., the digestive system breaks it down into amino acids which are then used by the body to build its own proteins. Vitamins are also essential ingredients. Caffeine, tea extract, etc. add flavour and act as stimulants.
41. The question is whether these products are classifiable under CTI 29379090 as claimed by the appellant or under CTI 21069099 as classified by the department. These two competing entries are reproduced below:
2937 HORMONES, PROSTAGLANDINS, THROMBOXANES AND LEUKOTRIENES, NATURAL OR REPRODUCED BY SYNTHESIS; DERIVATIVES AND STRUCTURAL ANALOGUES THEREOF, INCLUDING CHAIN MODIFIED POLYPEPTIDES, USED PRIMARILY AS HORMONES
- Polypeptide hormones, protein hormones and glycoprotein hormones, their derivatives and structural analogues:
2937 11 00 -- Somatotropin, its derivatives and structural 2937 12 00 -- Insulin and its salts 2937 19 00 -- Other
- Steroidal hormones, their derivatives and structural analogues 2937 21 00 -- Cortisone, hydrocortisone, prednisone (dehydrocortisone) 27 and prednisolone (dehydrohydrocortisone) 2937 22 00 --Halogenated derivatives of corticosteroidal harmones 2937 23 00 -- Oestrogens and progestogens 2937 29 00 -- Other 2937 31 00 omitted 2937 50 00 - Prostaglandins, thromboxanes, leukotrienes, their derivatives and structural analogues 2937 90 - Other:
--- Catecholamine hormones, their derivatives and structural analogues:
2937 90 11 ---- Epinephrine
2937 90 19 ---- Other
2937 90 20 --- Amino-acid derivatives
2937 90 90 --- Other
2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR
INCLUDED
2106 10 00 - Protein concentrates and textured protein substances
2106 90 - Other:
---Soft drink concentrates
2106 90 11 ---- Sharbat
2106 90 19 ---- Other
2106 90 20 --- Pan masala
2106 90 30 --- Betel nut product known as "Supari"
2106 90 40 --- Sugar-syrups containing added flavouring or colouring
matter, not elsewhere specified or included; lactose syrup;
glucose syrup and malto dextrine syrup
2106 90 50 --- Compound preparations for making non-alcoholic
beverages
2106 90 60 --- Food flavouring material
2106 90 70 --- Churna for pan
2106 90 80 --- Custard powder
---Other :
2106 90 91 ---- Diabetic foods
2106 90 92 ---- Sterilized or pasteurized millstone
2106 90 99 ---- Other
42. Learned counsel for the appellant relies on Chapter notes 1(c) and 8(a) to Chapter 29. Department relies on Chapter note 5(b) to Chapter 21 and Chapter note 1(a) to Chapter 29.
These notes are reproduced below:
"Chapter 21
5. Heading 2106 (except tariff items 2106 90 20 and 2106 90 30), inter alia, includes:
(a) protein concentrates and textured protein substances;
(b) preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption;28
Chapter 29 Notes
1. Except where the context otherwise requires, the headings of this Chapter apply only to:
(a) separate chemically defined organic compounds, whether or not containing impurities;
(b) mixtures of two or more isomers of the same organic compound (whether or not containing impurities), except mixtures of acyclic hydrocarbon isomers (other than stereoisomers), whether or not saturated (Chapter 27);
(c) the products of headings 2936 to 2939 or the sugar ethers, sugar acetals and sugar esters, and their salts, of heading 2940, or the products of heading 2941, whether or not chemically defined;
8. For the purpose of heading 2937:
(a) the term "hormones" includes hormone-
releasing or hormone-stimulating factors, hormone inhibitors and hormone antagonists (anti- hormones);
(b) the expression "used primarily as hormones" applies not only to hormone derivatives and structural analogues used primarily for their hormonal effect, but also to those derivatives and structural analogues used primarily as intermediates in the synthesis of products of this heading."
43. According to the learned counsel for the appellant, the imported goods should be classified under CTI 2937 90 90. The department does not agree with this contention because as per Chapter Note 1(a) to chapter 29, the headings of this chapter apply to only 'separate chemically defined organic compounds, whether or not containing impurities'. The test report of CRCL showed that the goods were not separate chemically defined compounds but were mixtures containing various amino acids, vitamins, caffeine, tea extract, etc. Learned counsel relies on Chapter note 1(c) to Chapter 29 29 according to which the products of headings 2936 to 2939 fall under those heads whether or not chemically defined.
44. The department also relies on Chapter note 5(b) to Chapter 21 which says that Heading 2106 (except tariff items 2106 90 20 and 2106 90 30), inter alia, includes:
(a) protein concentrates and textured protein substances;
(b) preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption;
45. It is the case of the department that since the imported goods are meant to be consumed either directly or dissolved in water, they are squarely covered by CTI 2106 90 20. Learned counsel for the appellant submits that the imported goods cannot fall under this CTI only because they are meant to be dissolved in water and consumed. They give energy and delay fatigue but are not necessary to maintain life and growth.
46. Learned counsel also asserts that the imported goods are hormone releasing substances which are also covered by CTI 2937 90 90 and relies on the Chapter note 8(a) according to which the term 'hormones' in CTH 2937 also includes hormone-stimulating factors. It is his submission that the 30 imported goods act as hormone stimulating factors and hence should be classified under CTI2937 90 90.
47. It is evident both from the test reports of CRCL as well as copies of the labels of the imported goods enclosed with the appeal that they are mixtures of amino acids and also contain vitamins and caffeine or tea extract and other similar substances. They are meant to be consumed as such or after mixing in water. They are not meant to be consumed in unlimited quantities and the recommended consumption is also indicated. However, they are not medicines and there is no requirement of any prescription by a doctor to consume them. They give strength and delay fatigue to the consumers. Nothing in the test reports or in the labels indicates that they are either hormones or hormone-stimulating factors as is claimed by the learned counsel.
48. As is well known, hormones have a profound effect on human metabolism in very small quantities because they act by switching on and switching off certain biological processes. For instance, one's blood sugar may increase after consuming, say, 100 grams of sweets. Sensing heightened levels of blood sugar, the pancreas releases a tiny additional amount of insulin which increases the permeability of the blood corpuscles to the sugar. As a result, the excess sugar is taken in by these blood corpuscles and the levels of free sugar in the blood plasma goes down immediately. Similarly, if a patient 31 suffers from hypothyroidism, a tiny reduction in the thyroxine produced by the thyroid greatly increases the weight of the person by altering the metabolism of the body resulting in more food getting converted into fat and getting deposited. Reverse will be the case of patients of hyperthyroidism who lose weight for no other reason. It is well known that hormones - say, insulin, thyroxine, steroids, etc. are all to be taken only on medical advice and indiscriminate or unsupervised usage can have disastrous consequences.
49. The submission of the learned counsel for the appellant is that the imported goods should be considered as hormone- stimulating factors. Nothing on the labels suggests that they are hormone stimulating factors. Neither does the CRCL's test report say so. Hormones perform a delicate balancing act in maintaining the human body. Their secretion depends on the requirement often stimulated by the substrate or the condition of the body. For instance, if one consumes sweets, the blood sugar level rises and the pancreas secretes more insulin (a hormone) which brings down the sugar level. One perceives in a dangerous situation, a serious threat to one's life and limb, adrenaline levels surge in the body which stimulate the body and help it take quick, immediate action. Therefore, hormone levels do rise and fall with intake of foods, exercise, situations, etc. Merely for this reason, these food stuff do not become hormone-stimulating factors.
32
50. As is well known in biochemistry, hormone-stimulating factors and hormone inhibitors are certain types of chemicals whose function is to accelerate or reduce the secretion of hormones. In other words, while tiny quantities of hormones switch on and switch off metabolic processes resulting in large changes in the body, tiny quantities of hormone stimulating factors or hormone inhibitors similarly switch on or switch off the production of hormones themselves. For example, thyroid produces thyroid hormones commonly known as T3 and T4. The thyroid, in turn, is stimulated by another hormone called thyroid stimulating hormone (TSH) which is produced by the pituitary gland. The production of TSH by the pituitary gland, is, in turn, regulated by the thyrotropin-releasing hormone (TRH) produced by the hypothalamus. This system of multiple switches helps the body maintain perfect balance and maintain checks and balances between the functions of different glands producing hormones. In this example, TRH and TSH are hormone stimulating factors. Similarly, there are factors which inhibit the hormones. These hormone stimulating factors and hormone inhibitors, which are not hormones themselves, but regulate the other hormones, are covered by section not 8 (a). Not every substance which may cause some hormones to release or reduce is covered, by Chapter Note 8(a) as hormone releasing substances. If one consumes glucose, for instance, the blood sugar level rises triggering the pancreas to release more insulin (a hormone) but this does not 33 make glucose an insulin stimulating factor. It is only a substrate in response to which the production of insulin increases.
51. It is unnecessary for us to discuss further biochemistry of hormone stimulating factors and hormone inhibitors. Suffice it to say that these are a separate set of chemicals no less powerful than the hormones themselves. The composition of the imported goods as seen from the labels shows clearly that they are mixtures of amino acids, vitamins, a few stimulants like caffeine and tea and some flavours and nothing suggests that they are hormone stimulating or hormone inhibiting factors. We are therefore, of the considered view that they do not merit classification under CTI2937 90 90.
52. Department classified these goods under CTI 2106 90
99. This Chapter covers Miscellaneous edible preparations. Chapter heading 2106 covers "Food preparations not elsewhere specified or included" and of these the last residual category is CTI 2106 90 99. Chapter note 5(b) to this chapter says that 'Heading 2106 (except tariff items 21069020 and 21069030), inter alia, includes:
(a) protein concentrates and textured protein substances;
(b) preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids) for human consumption;34
......."
53. The imported goods are not protein concentrates (such as whey protein) but are mixtures of amino acids, vitamins, etc. for use by dissolving in water. In our considered view, Chapter Note 5(b) squarely puts the imported goods under heading 2106 and since they do not exactly fall under any of the other Customs Tariff Items, CTI 2106 90 99 is, in our considered view, the correct classification.
54. As far as the enhancement of the value of Insane Labs Psychotic (Amino acid powder) 35 SU/220 grams" in Customs Appeal No. 51857 of 2021 is concerned, we find that the assistant Commissioner, finding the value of US$ 10.25 per piece much lower, rejected it under rule 12 of the Customs Valuation Rules and enhanced it to US$ 12.50 per piece based on a previous import by the appellant itself, under Rule 4 of the Customs Valuation Rules. The Commissioner (Appeals), observing that the contemporaneous value adopted was for the same product imported by the same importer, upheld the re-determination of value. We find that the appellant's submission that the previous import by the invoice dated 22.10.2018 was for only 1176 pieces while this import by Invoice dated 24.09.2018 was for 15,624/- pieces deserves to be accepted. When 14 times as many goods are imported, a reduction in pieces per piece from US$ 12.50 to US $ 10.25 is 35 explicable in the normal course of business. The enhancement of value cannot, therefore, be sustained.
55. In view of the above, we answer four questions in favour of the Revenue and against the appellant and the question of valuation in Customs Appeal No. 51857 of 2021 against the Revenue. Accordingly, we dismisses Customs Appeal No. 51855 of 2021 and Customs Appeal No. 51856 of 2021. We partly allow Customs Appeal No. 51857 of 2021 setting aside the enhancement of value and upholding the rest of impugned order.
[Order pronounced on 16.04.2014] (JUSTICE DILIP GUPTA) PRESIDENT (P. V. SUBBA RAO) MEMBER ( TECHNICAL ) Tejo