Madras High Court
M/S.Ingram Micro India Private Limited vs The Principal Commissioner Of Customs
Author: Rajiv Shakdher
Bench: Rajiv Shakdher
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 18.01.2017
DELIVERED ON : 18.04.2017
Coram
The Honourable Mr.Justice RAJIV SHAKDHER
Writ Petition No.26874 of 2016
M/s.Ingram Micro India Private Limited
represented by its Senior Manager Impex,
Mr.T.Godwin
.. Petitioner
Vs.
1. The Principal Commissioner of Customs,
New Custom House, Air Cargo Complex,
Meenambakkam, Chennai 600 027.
2. The Deputy Commissioner of Customs (Group -5A)
New Custom House, Air Cargo Complex,
Meenambakkam, Chennai 600 027.
3. The Deputy Director General (SR),
Regional Telecom Engineering Centre (South),
2nd Floor, BSNL Telephone Exchange Building,
35th Cross, 9th Main First, 4th Block,
Jayanagar, Bangaluru 560 011.
.. Respondents
PETITION filed under Article 226 of The Constitution of India praying for the issuance of Writ of Mandamus directing the second respondent herein to make available the test results/expert opinion, if any, provided by the third respondent to the petitioner company and issue speaking orders for Bills of Entry No.6478354 dated 19.08.2014, 6500843, 6501271 and 6500841 all dated 21.08.2014, 6527174 dated 23.08.2014, 6567801 dated 27.08.2014 and 2968893 dated 19.10.2015 after giving an opportunity to the petitioner company to present their case within a time frame.
For Petitioner : Mr.S.Murugappan
For Respondents : Mr.V.Sundareswaran R1 & R2
No appearance R3
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O R D E R
Prefatory facts:
1. This is a Writ Petition, whereby, the petitioner seeks two (2) directions from this Court. i) That a direction be issued to respondent No.2, to make available to it, the test results/expert opinion, if any, provided by respondent No.3. ii) That a speaking orders be passed qua the following Bills of Entries (in short BEs):
S.No. Bill of Entry/Date 1 6478354/19.08.2014 2 6500843/21.08.2014 3 6501271/21.08.2014 4 6500841/21.08.2014 5 6527174/23.08.2014 6 6567801/27.08.2014 7 2968893/19.10.2015
2. The short issue, which arises for consideration before this Court is whether or not, respondent Nos.1 and 2 are required to pass speaking orders, with respect to BEs, referred to above, filed by the petitioner, at the time of seeking clearance of the subject goods.
3. The first prayer referred to above is only, in a sense, a pre-cursor to the second prayer.
3.1. The matter, essentially, as would be evident during the course of discussion, which will follow hereafter, revolves around the second prayer.
4. As a matter of fact, in so far as one of the BEs is concerned, i.e., BE No.2968893, dated 19.10.2015, respondent No.2 has already asked respondent No.3 to have the subject goods tested.
4.1 Though, the test report has not been supplied, it appears that, the petitioner has gained access to the report by triggering the provisions on the Right to Information Act, possibly via a third party. I would be referring to this aspect of the matter in the course of my narration.
5. Briefly, the facts and circumstances, which have led to the institution of the present petition, are as follows:
5.1. The petitioner, which is in the business of import and distribution of Telecommunication and IT Accessories, had imported products, known as, Ethernet Switches. 5.2. It is the petitioner's case that these Ethernet Switches are, essentially, used to connect personal computers, laptops and printers, within the defined area, such as an enterprise campus/building. 5.3. The petitioner, it appears, had been importing the Ethernet Switches over a period of time and claiming exemption from customs duty under notification No.24/2005 dated 01.03.2005.
6. Evidently, on 11.07.2014, the notification dated 01.03.2005 was amended, which, inter alia, excluded from the exemption regime, the "Carrier Ethernet Switches". With the issuance of the notification dated 11.07.2014, the Customs Authorities took the view that the Ethernet Switches, which were being cleared at 'nil' rate of duty under the unamended notification dated 01.03.2005, could no longer be cleared without payment of Basic Customs Duty (BCD).
6.1. Consequently, the petitioner's attempts at clearing the BEs, to which I have made a reference above, met with resistance. The petitioner, therefore, cleared the goods, which were subject matter of the aforementioned BEs, save and except BE No.2968893 dated 19.10.2015, on self-assessment basis, after registering its protest.
7. The common ground obtaining between the parties is that, the protest letters were filed and registered at the time of payment of duty and all the BEs, save and except BE No.2968893 dated 19.10.2015, therefore, indicated the rate of BCD.
7.1. For the sake of convenience, the number of BEs, the date of the BEs and the number and date of the letter of protest registered with respondent Nos.1 and 2 is set forth hereafter in the form of a table:
S.No. Bill of Entry/Date Duty Under Protest Registered in ACC No./Date 1 6478354/19.08.2014 413/22.08.2014 2 6500843/21.08.2014 412/22.08.2014 3 6501271/21.08.2014 411/22.08.2014 4 6500841/21.08.2014 414/22.08.2014 5 6527174/23.08.2014 417/23.08.2014 6 6567801/27.08.2014 434/28.08.2014 7.2. In so far as BE No.2968893 dated 19.10.2015 is concerned, the record demonstrates that the petitioner's attempt at registering the protest were thwarted, as respondent No.2 refused to register the same and instead, directed clearance of goods, based on the execution of a bond, to enable testing of the cleared goods. 7.3. This endorsement was made by respondent No.2, on 08.03.2016 qua BE No.2968893, dated 19.10.2015.
8. As indicated right at the beginning of my narration, respondent No.2 directed respondent No.3 to have the Ethernet Switches imported by the petitioner tested, so as to ascertain, whether or not, they are Carrier Ethernet Switches.
9. The record also shows that apart from the letters of protest filed by the petitioner, at the time of clearance of the subject goods, the petitioner has been also repeatedly writing to respondent No.2 to pass speaking orders, in respect of the aforementioned BEs, and, accordingly, seeking to persuade him to vacate the protest registered with the Customs Authorities, to enable it, to take recourse to the appellate remedy, as provided under the Customs Act, 1962 (in short 'the Act'). 9.1 This stand of the petitioner is discernible upon perusal of the following communication: letter dated 15.10.2015, two (2) letters of even date, i.e.,19.10.2015, letter dated 10.2.2016 and finally, letter dated 11.3.2016. 9.2. It appears that, the attempt of the petitioner in having respondent No.2 to pass a speaking order has had no effect.
10. The only instance where there has been some movement is, with regard to, as indicated above, BE No.2968893 dated 19.10.2015, in which case, the subject goods have been sent for testing. 10.1. The petitioner, thus, being aggrieved by the inaction of the respondents, has preferred the instant Writ Petition. Submissions of counsels:
11. In this background, arguments, on behalf of the petitioner, were advanced by Mr.Murugappan, while submissions on behalf of the respondents were made by Mr.V.Sundareswaran.
12. The arguments of Mr.Murugappan can, broadly, be paraphrased as follows:
12.1. The subject goods, which are non-carrier Ethernet Switches, continue to be exempt from BCD and, are, therefore, ought to have been cleared without imposition of customs duty.
12.2. Since, the Customs Authorities insisted on payment of duty, prior to clearance, based on their reading of notification dated 01.03.2005, read with the amendment notification dated 11.07.2014, duty was paid, albeit, under protest, in each case, at the time of payment of duty and, accordingly, the protest was also duly registered.
12.3 Since, protest was registered, the respondents were duty bound to pass a speaking order, as envisaged under Section 17 of the Act and, if, found necessary, also have the goods tested, as was done in the case of goods, which were cleared via BE No.2968893 dated 19.10.2015.
12.4. The letter of the Director, Department of Telecommunication (DoT) dated 11.05.2016, written to respondent No.2, would reveal that the opinion rendered in the matter is suggestive of the fact that classification of Ethernet Switches into Carrier Ethernet Switch, and Enterprise Ethernet Switch, would be difficult as there may be overlapping features, which will vary from one Original Equipment Manufacturer (OEM) to the other.
12.5. In sum, the opinion of DoT appears to be that classification would have to be done, according to the information rendered, based on the usage of the Ethernet Switch.
12.6 The petitioner, essentially, uses the Ethernet Switches, which are, in effect, non-carrier Ethernet Switches or Enterprise Switches, within a defined area, such as, a campus or a building. The carrier Ethernet Switch, on the other hand, are used over a dispersed geographical areas. These are switches, which are used by service providers, such as BSNL, Airtel and Vodafone. The petitioner, therefore, clearly falls within the ambit of the exemption notification dated 01.03.2005.
12.7. Notwithstanding the amendment made via notification dated 11.07.2014, the fact, that a protest has been registered, has made it incumbent on the part of the respondents to pass a speaking order.
12.8 In support of his submissions, counsel for the petitioner relied upon, not only two orders of the Commissioner (Appeals) to demonstrate as to how they dealt with a like situation, but also, on the following judgments. For the sake of convenience, the orders of the Commissioner (Appeals) and the judgments relied upon are referred to hereafter:
i) Order in Appeal passed by Commissioner (Appeals) in C.Cus.No.1152 & 1153/2013 dated 27.08.2013;
ii) Order in Appeal passed by Commissioner (Appeals) in C.Cus.No.398 & 399/2014 dated 10.03.2014;
iii) Sanjivani V. Union of India - 2015 (325) ELT 571 (All)
iv) Karan Associates v. Commissioner of Customs (Import), Mumbai - 2009 (236) E.L.T. 23 (Bom) and
v) HDFC Bank Limited V. Union of Inda - 2011 (271) ELT 175 (Ker.).
13. On the other hand, Mr.V.Sundareswaran submitted that the petitioner had imported "Network Switches", which fall under customs tariff heading (CTH) 85176290. The subject goods were exempted from BCD, pursuant to the provisions of notification dated 01.03.2005. With the issuance of notification dated 11.07.2014, exemption was denied to Carrier Ethernet Switch.
13.1 It was stated that the petitioner had imported network switches in 2014 under the cover of the aforementioned BEs. According to the learned counsel, the petitioner had, consequently, self-assessed the subject goods, i.e., network switches by classifying them under CTH 85176290. Consequently, the petitioner had paid BCD at the rate of 10%. Thus, all BEs, save and except BE 6500843 dated 21.08.2014, were processed through Risk Management System (RMS), based on self-assessment made by the petitioner, without any intervention by the respondents.
13.2. In so far as BE No.6500843, dated 21.08.2014, was concerned, it was referred for assessment and examination, but ultimately, no re-assessment was carried out. Therefore, in effect, self-assessment made by the petitioner was accepted.
13.3. As regards BE No.2968893, dated 19.10.2015, was concerned, the subject goods were cleared as Enterprise Ethernet Switch and via the said BE, the petitioner self-assessed the subject goods, albeit, by indicating 'nil' rate of BCD, in view of the provisions of notification dated 01.03.2015.
13.4. The respondents, on the other hand, converted the self-assessment into a provisional assessment and imposed BCD at the rate of 10%.
13.5. Furthermore, samples were drawn and sent to Regional Telecom Engineering Centre (SR), i.e., respondent No.3, for testing. It was averred that, consequent thereto, the DOT had informed that the items tested have a dual use and could, therefore, be classified by having regard to their end use. The respondents are in the process of seeking further clarifications from DOT. Therefore, in so far as BE No.2968893 dated 19.10.2015 is concerned, a speaking order can be passed after receiving necessary clarifications from DOT.
13.6. In so far as the other BEs were concerned, learned counsel submitted that, since, the petitioner failed to contest the BEs, which were filed based on self-assessment, the respondents were not required to pass a speaking order. The submission was that the BEs, which adopted the self-assessment route, were orders against which, an appeal ought to have been preferred by the petitioner, within the period of limitation prescribed under Section 128 of the Act. Since, appeals were not preferred, the petitioner cannot use the writ route to first obtain a speaking order and then, prefer an appeal, as is sought to be, clearly, attempted by the petitioner.
13.7. In support of his submissions, learned counsel for the respondents, relied upon the following judgments, which also include the judgments of the Central Excise and Service Taxes Appellate Tribunal (CESTAT):
i) Escorts Limited V. Union of India - 97 ELT 211 (SC)
ii) Commissioner of Customs V. ACE Designers - 329 ELT 109 (DB-Mad)
iii) Redington India Ltd. V. CC - 212 ELT 187 (Mad)
iv) Payal Petropack Pvt. Ltd. V. CC - 251 ELT 533 (Tri-Del)
v) Max India Limited V. CC - 192 ELT 246 (Tri.Del)
vi) CEAT V. CC - 335 ELT 693 (Tri-Bom) Reasons :
14. I have heard learned counsel for the parties and perused the record.
15. According to me, what clearly emerges is that, the petitioner has cleared goods via seven (7) BEs. In six (6) BEs, the goods are described as 'network switches', while in the seventh (7th) BE, i.e., BE No.2968893 dated 19.10.2015, the goods are described as "Enterprise Ethernet Switch".
15.1. In respect of all BEs, save and except BE No.2968893 dated 19.10.2015, the petitioner had paid duty under protest, which has been registered with the concerned authority. As a matter of fact, each of the letters of protest, which is on record, bears a stamp, to that effect. The fact that the letters of protest have been filed and registered with the customs authorities has not been disputed by the respondents before me.
16. The record, as indicated hereinabove, also shows that the petitioner has written a series of letters to respondent No.2 to pass a speaking order. Since, I have already made a reference to those letters, I intend not to repeat the dates once again. Suffice it to say, that these letters span between 15.10.2015 and 11.03.2016 (see paragraph No.9.1).
17. The record would show that only in one case, i.e., in respect of goods cleared under BE No.2968893 dated 19.10.2015, a test report is sought.
17.1. As per the stand taken by the respondents in their counter affidavit, quite clearly, there is no clarity as to how the goods cleared by the petitioner are to be classified.
17.2. The respondents, on their own showing are wanting to seek further clarification from the DOT. The opinion so far received by the respondents, as is evident, even from their counter affidavit points to the direction that the classification of the switches imported by the petitioner would depend on their end use.
17.3. The petitioner, has taken the stand that the goods cleared by it under the aforementioned BEs are non-carrier Ethernet Switches/Enterprise Ethernet Switches, which are used in a defined area, such as, a campus or a building. The Ethernet Switches imported by the petitioner are, according to the petitioner, used in a Local Area Network, i.e, LAN, as against the Wide Area Network, i.e, WAN.
17.4. These are matters, though, which pertain to the merits.
18. The petitioner is, at present, essentially, aggrieved by the fact that it ended up paying the customs duty at the time of clearance of goods, despite its stand, as it was not in a position to take further steps to secure its rights, since, no speaking order has been passed by the respondents, inspite of a protest having been with the concerned authority.
18.1. The respondents, on the other hand, take the stand that the petitioner had followed the self-assessment route and therefore, the goods cleared via subject BEs were not put through any verification or examination or testing.
18.2. In other words, only if, the petitioner's assessment was doubted, verification, examination or testing of goods would have taken place and thereafter, perhaps, led to reassessment of duty. The respondents, thus, took the stand that, it is only when re-assessment of duty is carried out under sub-section (4) of Section 17 of the Act, and, it is contrary to self-assessment carried out by an importer or an exporter (as the case may be), with respect to valuation of goods, classification, exemption or concession of duty availed consequent to any notification that an obligation is cast on the respondents to pass a speaking order, under sub-section (5) of Section 17 of the Act within the defined period.
19. The question, therefore, which arises is: whether there was a duty cast on the "proper officer" to verify, examine or test the subject goods, in view of the protest registered by the petitioner.
19.1. For this purpose, one may have to bear the statute in mind, i.e. the provisions of Section 171, as it appeared prior to its amendment and thereafter, post amendment.
20. Prior to the amendment, sub-section (1) of Section 17 of the Act, inter alia, required that once an importer had entered imported goods under Section 46, it was incumbent on the proper officer to examine and test the goods in issue without undue delay. It was, only thereafter, that under sub-section (2) of Section 17, that duty leviable on such goods, save as otherwise, provided under Section 85 of the Act, was assessed.
20.1. To facilitate the assessment of duty, the proper officer could require the importer or any other person to produce any contract, progress note, policy of insurance or catalogue or other documents, whereby, the duty leviable could be ascertained. Information, if any, which was required for carrying out such exercise, which was within the power and possession of the importer or such other person could also be asked to be produced and/or to be furnished.
20.2. Under sub-section (4), the proper officer was empowered to permit assessment of duty on the basis of the statements made in the BE, prior to its examination or testing, subject to it being re-assessed to duty, if, subsequent examination or testing of goods or other information, would reveal a contrary state of affairs.
20.3. Sub-section (5) of Section 17 require the proper officer to pass a speaking order within 15 days from the date of assessment of BE, where the assessment carried out by him was contrary to the claim made by the importer in the BE.
21. After 08.04.2011, the regime of assessment of duty has changed to the extent that the importer or the exporter (as the case may be) is permitted to self-assess the duty, if any, leviable on such goods. This procedure is prescribed under sub-section (1) of Section 17 of the Act.
21.1. Under sub-Section (2) of Section 17 of the Act, the proper officer is given the power to verify the self-assessment made qua the goods in issue and, if necessary, to test the goods.
21.2. For the purpose of verification of the self-assessment made by the importer or the exporter (as the case may be), like under the old regime, the proper officer has been vested with the power to seek documents and information.
21.3. Under sub-section (4) of Section 17 of the Act, where the proper officer finds that the self-assessment is not done correctly, he is empowered, without prejudice to any other action that he may take, to reassess the duty leviable on such goods.
21.4. Sub-Section (5) of Section 17 of the Act provides that where re-assessment is carried out under sub-section (4) of the very same Section, and, is found to be contrary to the self-assessment made or where re-assessment done, is not accepted, and this fact is conveyed, in writing by the importer or the exporter (as the case may be), the proper officer is duty bound to pass a speaking order, within 15 days from the date of reassessment of BE.
21.5. The amended Section 172 also includes sub-section (6), which provides that where re-assessent has not been done or a speaking order has not been passed on re-assessment, the proper officer may audit the assessment of duty of imported goods or exported goods (as the case may be), either at his office or the premises of the importer or the exporter, as may be expedient, in such manner, as may be prescribed.
21.6. The explanation only clarifies that where an Entry by the importer or exporter (as the case may be) has been made before the amendment, such imported or exported goods, shall continue to be governed by the unamended provisions of Section 17 of the Act.
22. Quite clearly, the amendment has been brought about to facilitate easy clearance of goods, whether imported or exported, without undue delay, being caused on account of the procedure envisaged for assessment of duty.
23. The unamended provisions of Section 17, at times, caused delay and hence, a statutory procedure was evolved to move to a "trust based customs control" regime. The same is exemplified by the circular dated 02.09.2011, on which, the respondents place reliance. Therefore, while amending Section 17, as discussed above, care has also been taken that the proper officer is not denuded of his power to verify the self-assessment made qua goods cleared, wherever it is felt necessary.
23.1. Sub-section (2) of Section 17 of the amended provision takes care of such a situation.
24. Therefore, the question, which arises for consideration, is that, when an importer or an exporter, in this case, the petitioner, registers a protest formally with the customs authorities, qua a BE, which is based on self-assessment, is it a clearance with a caveat.
24.1. To my mind, under sub-section (2) of Section 17 of the amended provision, it is incumbent on the part of the proper officer to verify the claim of the petitioner, in the light of the protest registered by him.
24.2. It is not the case of the respondents that the protests have been rejected and/or are not maintainable under Section 17 of the Act on the ground that there is no provision for the same under the amended provisions.
25. The only argument advanced before me, by Mr.V.Sundareswaran, is that, since, in all cases, except BE No.2968893, dated 19.10.2015, the goods were cleared against BEs, where the rates of BCD were referred to as 10%; (as against BE No.2968893 dated 19.10.2015 where the rate was referred to as 'nil') there was no legal obligation to pass a speaking order is, to my mind, a case of seeking to draw a distinction without a meaningful difference.
26. The fact of the matter, is that, in six (6) BEs (save and except BE No.2968893 dated 19.10.2015), while BCD rate of 10% was mentioned, simultaneously, protests were registered at the time of payment of duty.
26.1. In so far as BE No.2968893, dated 19.10.2015, was concerned, even though the BCD rate was mentioned as 'nil', the petitioner was not allowed to either clear the goods or, register a protest, in contrast to other BEs. The petitioner, in fact, paid duty at the very same rate and cleared the goods after executing a test bond.
26.2. In both set of cases, therefore, the proper officer took the view that duty was payable in respect of the goods cleared. This view was applied across all seven (7) BEs.
27. The submission of Mr.V.Sundareswaran that the petitioner should have filed an appeal after entering the BEs 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". The Scheme of the Act does not exclude, to my mind, passing of a speaking order, where a BE is entered under the self-assessment process along with a protest letter at the time of payment of duty. It is only, when, no protest is lodged, could, one, perhaps, argue that no appeal would lie, as it would be a case of self-assessment without demur on the part of an importer or an exporter (as the case may be). However, much would depend on the facts and circumstances obtaining in a given case. A case in point is Aman Medical Products Limited V. Commissioner of Customs, Delhi, 2010 (250) ELT 30). In the said case, under unamended Section 17 and 27 of the Act, where, after the goods were cleared, the importer become aware of the fact that he was entitled to the benefit of an exemption notification. The Court allowed him to claim refund on the ground that duty had been borne by him, notwithstanding the fact that there was no appeal preferred by him.
27.1. Similarly, Courts have held that under the amended provisions of Section 17 and 27 of the Act, the importer / exporter could straightaway file for refund without having to file an appeal (see Micromax Informatics Limited V. Union of India and others, 2016 (335) ELT 446 (Del.).
27.2. The instant case is one, where, the appellant seeks issuance of a speaking order. Therefore, strictly, one is not dealing with a situation, which arose in Aman Medical Products Limited, or, Micromax Informatics Limited.
28. The fact that the respondents have taken the stand in their counter affidavit qua BE 2968893 dated 19.10.2015 that they would pass a speaking order, only demonstrates the untenability of the stand taken by the respondents vis-a-vis the remaining BEs.
28.1. In that case, as indicated above, the petitioner was prevented from lodging a protest and allowed to clear the subject goods only upon payment of duty or execution of a test bond.
28.2. In the other cases, the protest was registered at the time when duty was paid for clearance of goods.
28.3. In either case, there was no acquiescence on the part of the petitioner qua the stand taken by the proper officer with regard to exemption of duty.
29. Therefore, to my mind, the petitioner is right that the proper officer is duty bound to pass a speaking order in terms of sub-section (5) of Section 17 of the Act.
30. Having regard to the foregoing discussion, I am inclined to direct the proper officer to pass a speaking order in respect of the following BEs:
S.No. Bill of Entry/Date Duty Under Protest Registered in ACC No./Date 1 6478354/19.08.2014 413/22.08.2014 2 6500843/21.08.2014 412/22.08.2014 3 6501271/21.08.2014 411/22.08.2014 4 6500841/21.08.2014 414/22.08.2014 5 6527174/23.08.2014 417/23.08.2014 6 6567801/27.08.2014 434/28.08.2014
31. As is indicated above, in so far as BE No.2968893 dated 19.10.2015, the respondents themselves have taken the stand that they would pass a speaking order, after giving due opportunity of hearing to the petitioner. Therefore, there is no specific direction is required, vis-a-vis the said BE.
32. I may also make it clear that, in case, test reports are available, with regard to any of the aforementioned BEs, the same will be supplied to the petitioner.
33. Needless to say, the aforementioned exercise shall be carried out with due expedition, though, not later than 15 days from the date of receipt of a copy of the order.
34. The Writ Petition is disposed of with the aforementioned directions. However, there shall be no order as to costs.
Index: Yes/No 18.04.2017
Website: Yes/No
Speaking / Non-speaking order
sl/sra
To
1. The Principal Commissioner of Customs,
New Custom House, Air Cargo Complex,
Meenambakkam, Chennai 600 027.
2. The Deputy Commissioner of Customs (Group -5A)
New Custom House, Air Cargo Complex,
Meenambakkam, Chennai 600 027.
3. The Deputy Director General (SR),
Regional Telecom Engineering Centre (South),
2nd Floor, BSNL Telephone Exchange Building,
35th Cross, 9th Main First, 4th Block,
Jayanagar, Bangaluru 560 011.
RAJIV SHAKDHER,J.
sl/sra
Pre-Delivery order in
Writ Petition No.26874 of 2016
Dated: 18.04.2017
http://www.judis.nic.in