Gujarat High Court
Gujarat Narmada Valley Fertilizers And ... vs Commissioner Of Customs on 30 January, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
C/SCA/447/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 447 of 2014
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GUJARAT NARMADA VALLEY FERTILIZERS AND CHEMICALS
LTD....Petitioner(s)
Versus
COMMISSIONER OF CUSTOMS....Respondent(s)
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Appearance:
MR KAMAL TRIVEDI, SR. ADV WITH MR MAULIK NANAVATI & MS.NIKITA
MEHTA, ADVOCATE for the Petitioner(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 30/01/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Petitioner has challenged the validity of the show cause notice dated 7.10.2013 issue by the Commissioner of Customs, Kandla as wholly without jurisdiction.
Short facts are as under:
The petitioner imported coal in two consignments, on 16.1.2013 at Kandla and on 11.2.2013 at Pipalav Port in the State of Gujarat contending that the imported coal was steam coal classifiable under 27011920. Department, however, contends that Page 1 of 12 C/SCA/447/2014 ORDER the imported coal is bituminous coal attracting higher rate of duty.
The coal imported by the petitioner was allowed to be cleared on provisional assessment. At Kandla, it was cleared provisionally on payment of duty treating it as steam coal whereas at Pipalav, the department insisted on collecting higher rate of duty treating the imported coal as bituminous coal and provisionally releasing it on such condition. It is stated at the bar that subsequently, pursuant to DRI inquiry, for the consignment cleared at Kandla Port also, the petitioner was required to deposit differential duty, of course, on provisional basis subject to final assessment. Be that at it may, in the present petition what is under challenge is the show cause notice dated 7th October 2013 issued by the Commissioner. In such show cause notice, the Commissioner has given details why the department, prima facie contends that imported coal is bituminous coal and not steam coal. On such basis, the Commissioner called upon the petitioner to show cause why :
"24. Now, therefore, M/s.Gujarat Narmada Valley Fertilizers & Chemicals Limited, P.O. Narmadanagar - 392015, Dist. Bharuch, Gujarat, holder of the Import-Export Code Number 0888000685 are called upon to show cause to the Commissioner of Customs, Customs House, Near Balaji Temple, Kandla-370210, as to why :-
(i) Their claim for classification of impugned goods (as detailed in Annexure-B to this Notice) under Customs Tariff item / heading 27011920, should not be rejected and why the same should not be re-classified under Customs Tariff item/head 27011200 of the First Schedule to the Customs Tariff Act, 1975;Page 2 of 12 C/SCA/447/2014 ORDER
(ii) The 37,000.000 MTs imported Coal valued at Rs.22,17,69,407/- (declared Assessable Value) as detailed in Annexure-B to this Notice should not be confiscated / held liable for confiscation under the provisions of Section 111(d) and 111(m) of the Customs Act, 1962;
(iii) The Bill of Entry mentioned in Annexure-B to this Notice should not be finally assessed and as per correct classification, the Customs differential duty amounting to Rs.2,35,27,516/- (Rupees Two Crores Thirty Five Lakhs Twenty Seven Thousand Five Hundred and Sixteen only) on the 37,000.00 MTs of imported impugned Coal as detailed in Annexure-B to this Notice, should not be recovered from them under Section 18(2) of the Customs Act, 1962/the bond executed during the provisional assessment/Section 28 of Customs Act, 1962.
(iv) The said amount of Rs.2,35,27,516/- (Rupees Two Crores Thirty Five Lakhs Twenty Seven Thousand Five Hundred and Sixteen only) deposited by them vide TR6 Chellan No.109/12-13 dated 04.03.2013 towards payment of differential Customs duty in imports of Bituminous Coal vide B/E No. No.9035613 dated 16.01.2013 already Customs Cleared consignment, shown at Sr.No.1 of Annexure-B to this Notice should not be appropriated and adjusted towards their duty liability mentioned at (iii) above.
(v) Interest should not be recovered from them on the said differential Customs duty, as at (iii) above, under Sections 18(3) of the Customs Act, 1962/under section 28AA of the Customs Act, 1962.
(vi) Penalty should not be imposed on them under Section 112(a) of the Customs Act,1962."
It is this show cause notice that the petitioner has challenged only on the ground that even before finalisation of the provisional assessment, issuance of notice for recovery of the duty is without Page 3 of 12 C/SCA/447/2014 ORDER jurisdiction.
At the outset, leaned counsel Shri Trivedi for the petitioner did not dispute the competence of the Commissioner to undertake final assessment and the classification of the goods. He, however, contended that such classification must be first completed before any duty demand can be raised. He would contend that such classification must be first completed under section 18 of the Customs Act, 1962 and only thereafter, any duty demand under section 28 of the said Act could arise.
We may record that with respect to the central controversy between the parties, namely, whether the coal imported is bituminous coal or steam coal, the petitioner has not raised any contentions before us. Even otherwise, we notice that two previous importers under similar circumstances had challenged the show cause notices, in which in our two separate orders both dated 9.5.2013 passed in Special Civil Application Nos.7228 of 2013 and 8659 of 2013, we had refused to interfere holding that at the show cause notice stage, it would not be appropriate for us to examine the highly disputed questions of facts and law. In one such order, we had observed as under:
"4. We are, however, of the opinion that the challenge of the petitioner being at the stage where mere show-cause notice has been issued by the department, at this stage no interference is called for. It is by now well settled that the court would not encourage litigation at the stage of show cause Page 4 of 12 C/SCA/447/2014 ORDER notice. The noticee would have sufficient opportunity to meet with all the allegations and produce such material on record as may be required. In case of Special Director and anr. vs. Mohd. Ghulam Ghouse and anr. reported in AIR 2004 SC 1467, it was held and observed as under:
"5. This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning the legality of the show cause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless, the High Court is satisfied that the show cause notice was totally nonest in the eye of law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine and the writ petitioner should invariably be directed to respond to the show cause notice and take all stands highlighted in the writ petition. Whether the show cause notice was founded on any legal premises is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the Court. Further, when the Court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose are not initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is accorded to the writ petitioner even at the threshold by the interim protection, granted."
5. In case of Commissioner of Customs and Central Excise and ors. vs. M/s. Charminar Nonwovens Ltd. reported in 2004 AIR SCW 3122 the Department had challenged the Excise judgement of the High Court. There was a dispute between the manufacturer and the department with respect to classification of certain goods. The department had issued detention Page 5 of 12 C/SCA/447/2014 ORDER order and also a show cause notice why the same may not be classified under a particular sub-heading. The manufacturer filed a writ petition before the High Court challenging the show cause notice and the detention order on the ground that on an earlier occasion on similar adjudication the appellate authority had upheld the claim of the assessee. The High Court allowed the petition. The Supreme Court in appeal held and observed as under:
2. .... ....The High Court proceeded on the basis that the appellate order had become final and expressing agreements with the same, quashed the notice. The argument on behalf of the appellant is that if the view of the High Court is correct a classification cannot be reviewed and any such classification once made cannot be reviewed even if the earlier view is erroneous, and such a course would result in great loss of revenue was not accepted and allowed their petition and quashed the show cause notice. Hence this appeal.
3. The matter relating to commodity classification whether it falls under one heading or the other or attracts higher or lower duty has to be decided on facts arising in each case. Even though, the decision may have been taken earlier at one point of time but on further investigation discover new fact or the law has changed, as is the stand in the present case, the matter has to be re-examined. It is not at all proper for the High Court to interfere in such matters at the stage of issue of the show cause notice. We, therefore, set aside the order made by the High Court and remit the matter to the concerned authority for adjudication.... ... ..."
6. In the present case, we are all the more reluctant to entertain this litigation at the stage of show cause notice since in our opinion, several questions of facts as well as law would arise. What exactly the nature of classification between steam coal and bituminous coal, what are the properties of the coal imported by Page 6 of 12 C/SCA/447/2014 ORDER the petitioner, whether such parameters would classify the coal as steam coal and not bituminous coal etc. are questions which cannot be judged by us even without first adjudication by the departmental authorities. Further, whether there was any mis- declaration is also a pure question of fact. It may be that in reply to the show cause notice the petitioner may be in a position to produce on record material to contend that the imported coal is steam coal and none other and/or that there was no mis-declaration on part of the petitioner. In any case these issues involve highly disputed questions of facts. We would therefore, be well adviced not to undertake such exercise in a writ petition.
7. All the more so, since after the show cause notice is, adjudicated, the order that may be passed by the Commissioner if adverse to the petitioner could be challenged by way of a statutory appeal first before the Tribunal and thereafter before the High Court or the Supreme Court in further tax appeal depending on the subject matter. When the statute provides for such detailed mechanism for adjudication of disputes between the department and the importer, we would not like to short-circuit such proceedings and plunge straightaway into examining such questions in a writ jurisdiction at the first instance. In a recent decision, in case of Union of India vs. Guwahati Carbon Ltd. reported in (2012) 278 ELT 26 (SC), the Apex Court while commenting on the tendency of the High Court to entertain a writ petition where against the judgement of the Tribunal appeal to the Supreme Court was maintainable, held and observed as under:
"18. In our opinion, the assessee ought not to have filed a writ petition before the High Court questioning, the correctness or otherwise of the orders passed by the Tribunal. The Excise Law is a complete code in order to seek redress in excise matters and hence may not be appropriate for the writ court to entertain a petition under Article 226 of the Constitution. Therefore, the learned Single Judge Page 7 of 12 C/SCA/447/2014 ORDER was justified in observing that since the assessee has a remedy in the form of a right of appeal under the statute, that remedy must be exhausted first, the order passed by the learned Single Judge, in our opinion, ought not to have been interfered with by the Division Bench of the High Court in the appeal filed by the respondent/assessee."
6. 8. In view of the above discussion, when several questions of facts are involved, and in particular, when the petitioner has neither contended nor established any inherent lack of jurisdiction or gross violation of principles of natural justice on the part of the adjudicating authority, the petition which is directed against the show cause notice is rejected."
Learned counsel Shri Trivedi for the petitioner, however submitted that in the present case the petitioner has raised a contention not previously raised by the other importers namely that there has been no finalization of the provisional assessment and that therefore, no duty demand could have been raised. In this context, he relied on a decision of the Supreme Court in the case of Serai Kella Glass Works Pvt Ltd. v. CCE, (1997) 4 SCC 641 in which it was observed as under:
"17. Section 11-A deals with recovery of duty not levied or not paid or short-levied or short-paid or erroneously refunded. Proceedings under Section 11-A have to be commenced with a show cause notice issued within six months from the relevant date. 'Relevant date' has been defined under sub-section 3(ii) to mean in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof.
18. After final assessment, a copy of the order on the return filed by the assessee has to be sent to him. Duty has to be paid Page 8 of 12 C/SCA/447/2014 ORDER by the assessee on the basis of the final assessment within ten days' time from the receipt of the return. No question of giving any notice under Section 11-A arises in such a case. It is only when even after final assessment an payment of duties, it is found that there has been a short-levy or non-levy of duty, the Excise Officer is empowered to take proceedings under Section 11-A within the period of limitation after issuing a show cause notice. In such a case, limitation period will run from the date of the final assessment. The scope of Section 11- A and Rule 173I is quite different. In this case, the provisional assessment earlier made by the proper officer has been quashed and pursuant to the direction of the High Court, the proper officer has made the final assessment. No question of failure of issuance of show cause notice under, section 11-A arises in this case. Even otherwise, we do not find any infirmity in the order of the Tribunal."
Our attention was also drawn to a decision of the Supreme Court in the case of Commissioner, Central Excise &Customs v. ITC Ltd., (2007) 1 SCC 62 in which relying on the decision in the case of Serai Kella Glass Works Pvt. Ltd. (supra) and referring to the relevant provisions of the Central Excise Act and the Rules thereunder, the Supreme Court observed that the amount becomes payable only in the event the assessee does not deposit the amount levied within a period of 10 days from the date of completion of the order of assessment. Recourse to provisional assessment is resorted to only when the conditions laid down therein are satisfied, viz. where the assessee is found to be unable to produce any document or furnish any information necessary for assessment of duty on any excisable goods. It was, therefore, observed that:
"24. Whereas provisional duty is levied in terms of sub-rule (1) of Rule 9-B, final assessment is contemplated under sub-Page 9 of 12 C/SCA/447/2014 ORDER
rule (5) thereof by reason of which the duty provisionally assessed shall be adjusted against the duty finally assessed and in event the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee will pay the deficiency or will be entitled to a refund, as the case may be. Ultimately, thus, the liability of the assessee would depend upon the undertaking of exercise by the assessing Officer to compete the assessment proceeding as contemplated under the Rules."
In the present case, facts are substantially different. The notice as reproduced hereinabove, first and foremost proposes to adopt certain classification which, in the opinion of the department, would be correct for the imported goods rejecting the classification canvassed by the petitioner. It is in this context that in para 24(1) of the notice calls upon the petitioner show cause why the classification of the imported goods under heading 27011920 should not be rejected and why the same should not be re-classified under the heading 27011200 of the First Schedule to the Customs Tariff Act, 1975. Further proposals are only consequential in nature and includes proposal for adopting correct classification and quantifying the differential customs duty on 37000 MT of coal imported by the petitioner. Proposal is also for recovery of the differential customs duty with interest.
In our opinion, this is not a case where recovery of duty under section 28 of the Act is preceded the finalisation of the classification. As a matter of fact, the very notice issued is for finalization of the classification on the basis of the proposal and the prima facie opinion of the department rejecting the classification Page 10 of 12 C/SCA/447/2014 ORDER presented by the petitioner. We do not find that the same is without jurisdiction.
Learned counsel, however, contended that if the adjudication were to be undertaken by the Commissioner, the petitioner would lose its valuable right to appeal. As noted earlier, if there is no dispute about the competence of the Commissioner to issue show cause notice and adjudicate upon it, merely because by way of consequence, there is elimination of right of one appeal, that by itself would not convince us to hold that the show cause notice is without jurisdiction. Right of appeal is a creation of the statute. If the Commissioner under the provisions of the Act and the Rules framed thereunder is competent to adjudicate certain issues, merely because the noticee in such case may lose one stage of appeal would not render the action of the Commissioner per se without jurisdiction.
Counsel also submitted that the question of confiscation of goods would arise only after the duty demand is crystallized and the petitioner fails to pay the same. At his request we leave such a question open for the petitioner to raise before the Commissioner and the Commissioner to decide the same if so raised by the petitioner.
Under the circumstances, the petition is dismissed.
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