Madras High Court
M/S. 3M India Ltd vs The Commissioner Of Customs on 8 June, 2017
Author: Rajiv Shakdher
Bench: Rajiv Shakdher, R.Suresh Kumar
In the High Court of Judicature at Madras
Dated: 08.06.2017
Coram
The Honourable Mr.JUSTICE RAJIV SHAKDHER
and
The Honourable Mr.JUSTICE R.SURESH KUMAR
Writ Petition No.16695 of 2016
and W.M.P.Nos.14425 and 15555 of 2017
M/s. 3M India Ltd.,
represented by its authorised signatory
Mr.M.S.Swaminathan
Concorde Block, UB City,
24, Vittal Mallya Road,
Bangalore - 560 001.
.... Appellant
Vs.
1. The Commissioner of Customs, (Sea-Imports)
Customs House, No.6, Rajaji Salai,
Chennai - 600 001.
2. The Commissioner of Customs (Appeals),
Customs House, No.6, Rajaji Salai,
Chennai - 600 001.
3. Deputy Commissioner of Customs,
Special Valuation Branch,
Customs House, No.6, Rajaji Salai,
Chennai - 600 001.
.... Respondents
PETITION filed under Article 226 of The Constitution of India praying for the issuance of Writ of Certiorarified Mandamus to call for the records of the impugned final order No.40420 of 2016 dated 08.03.2016 in Appeal No.C/42422/2013 of the CESTAT, South Zonal Bench, Chennai in so far as it deals with the issue outside the scope of Department's Appeal No.C/42422/2013 before the CESTAT, South Zone Bench being limited to includability of royalty in the transaction value of imports made by the petitioner and quash the same and consequently direct the 3rd respondent to pass appropriate order confining the remand to includability of royalty in the transaction value of the goods imported by the petitioner.
For Appellant : Mr.C.Saravanan
For Respondents:Ms.R.Hemalatha
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O R D E R
(Order of the Court was made by RAJIV SHAKDHER,J.)
1. This is a Writ Petition, filed under Article 226 of the Constitution, against the judgment and order dated 08.03.2016, passed by the Customs, Excise and Service Tax Appellate Tribunal (in short, the 'Tribunal'), in a statutory appeal, filed by the Revenue.
1.1. By virtue of the impugned judgment and order, the Revenue's appeal has been allowed and the Order-in-original and the Order-in-appeal have been set aside. The Tribunal has remanded the matter to the Original Authority to examine the issue afresh, in the light of the findings contained in their order and to proceed to determine the issue.
1.2. Furthermore, the Original Authority has also been directed to take into consideration the outcome of the investigation proceedings initiated by the Directorate of Revenue Intelligence (in short, the 'DRI'), while proceeding with the issue at hand.
2. Ms.Hemalatha, learned counsel appearing for the respondents/Revenue has taken a preliminary objection with regard to the maintainability of the Writ Petition. It is the submission of the learned counsel that the Writ Petition would not be maintainable, in view of the provisions of Section 130-E(b) of the Customs Act, 1962 (in short, the '1962 Act'). In terms of the said provision, learned counsel submits that, since, the issue, at hand, would effect the value of the goods, for the purpose of assessment, the Writ Petitioner ought to file an appeal before the Supreme Court.
3. Mr.Saravanan, learned counsel, who appears for the Writ Petitioner, while conceding that the order that may be passed, on remand, would effect valuation, submits that the observations made by the Tribunal, in paragraph 30 of the impugned judgment, to the effect, that the Original Authority should take into consideration the outcome of the investigation proceedings initiated by DRI, while proceeding the issue at hand, queers the pitch.
3.1. Mr.Saravanan says that the Writ Petitioner has no difficulty in joining the remand proceedings. It is submitted by the learned counsel that the Writ Petitioner is aggrieved by the fact that parallel proceedings have been initiated with respect to the same transaction, by the DRI.
4. We may only indicate that it is not disputed by Mr.Saravanan that the DRI has issued a Show Cause Notice dated 08.12.2016 (in short, the 'SCN') and that, during the pendency of the proceedings before the Tribunal, investigation have been commenced by DRI; a fact, which was, brought to the notice of the Tribunal by the authorised representative of the respondents/Revenue, while the proceedings were pending before it.
4.1. We may also note that this fact stands adverted to, in paragraph 7 of the impugned judgment.
5. In the instant case, the record shows that the parties are at lis with regard to the valuation of the subject goods. The Writ Petitioner had imported, at the relevant point in time, raw materials and finished goods, such as, label materials, plastic/paper, self-adhesive tape, jumper, printing ink etc., from its holding company, i.e., 3M, USA and its associates and subsidiaries (hereafter referred to as 'foreign supplier').
6. Given this background, the issue pertaining to the impact of the relationship between the Writ Petitioner, i.e., importer, and the foreign supplier has been the subject matter of investigation by the Special Valuation Branch (in short, 'SVB'), since, 23.10.1991.
6.1. It appears, that upon investigation being conducted, SVB has passed review orders from time to time, including two most recent orders, which are dated 08.02.2008 and 04.02.2011.
6.2. The review orders, passed by the SVB are generally valid for a period of three (3) years, subject to the conditions contained therein. Therefore, the order dated 08.02.2008 expired in and about February, 2011. The review order for the following peirod, as indicated herein above, was passed on 04.02.2011. The efficacy of the second order came to an end, admittedly, on 08.02.2014.
6.3. As alluded to above, these orders continued to accept the declared invoice values as "transaction value", under Rule 3(3)(a) of the Custom Valuation Rules, 2007 (in short, the '2007 Valuation Rules').
6.4. It may only be noted that the Rules, which obtained prior to the 2007 Valuation Rules, were the Customs Valuation Rules, 1988 (in short, the '1988 Valuation Rules'). Therefore, the corresponding provision, under which, such proceedings were conducted would be, Rule 4(3)(a) of the 1988 Valuation Rules.
6.5. As adverted to above, these orders were passed subject to conditions. One of the conditions, which is contained in the two review orders, referred to above, is that, the order passed would not take cover instances of suppression or misdeclaration, effected in the invoice value; which, according to the said stipulation, would be dealt with appropriately under the extant provisions of law.
6.6. The Writ Petitioner was also put to notice that, if, there was any change in the method of invoicing, or the terms of the relationship obtaining between itself and the supplier, or any other material fact, which would affect the valuation of goods under the 2007 Valuation Rules read with Section 14(1) of the 1962 Act, the importer or its concerned assessing group, would be obliged to inform SVB immediately, about such fact or circumstance, so as to enable a review of the decision in force. In such an eventuality, the review order stipulates, that the imports made would be assessed provisionally with Extra Duty Deposit (in short, the EDD), equivalent to 1% of the assessable value.
6.7. As adverted to above, since, the validity of the review order dated 04.02.2011 came to an end on 08.02.2014, the Writ Petitioner, we are told, had furnished bank guarantee, in the sum of Rs.10.00 Crores, towards EDD, pursuant to the orders obtained from this Court dated 07.04.2014, passed in W.P.No.2887 of 2014.
6.8. We also noticed that the said Writ Petition was disposed of on 11.11.2016.
7. The record shows that, the Writ Petitioner has entered into an Intellectual Property Agreement (in short, 'IP'), effective from 01.07.2006, that it is U.S. holding company.
7.1. We are told that the IP agreement of 2006 was amended on 16.12.2009, whereby, inter alia, the Writ Petitioner undertook the obligation to pay royalties to its U.S. holding company, with effect from 01.07.2009, an obligation, which did not obtain, according to the Writ Petitioner, in the original agreement dated 01.07.2006.
8. This aspect of the matter came to fore when the second review order of SVB dated 04.02.2011 was passed. Thereafter, it came to the conclusion that since, the payment of royalty was not related to the imported goods and given the fact that it was not a condition of sale, no additions were warranted to the invoice price of imported goods under Rule 10(1)(c) of the 2007 Rules.
9. The Respondents/Revenue were aggrieved by this conclusion reached in the second review order, and accordingly, took a decision to prefer an appeal, (after complying with the internal mechanism put in place, for that purpose), with the Commissioner of Customs (Appeals) [in short 'Commissioner (Appeals)'].
9.1. The Commissioner (Appeals), however, vide order dated 30.08.2013 dismissed the appeal of the respondents/Revenue. In other words, it sustained the view taken in the second review order dated 04.02.2011.
9.2. The respondents/Revenue, being aggrieved by the decision arrived at by the Commissioner (Appeals), preferred, as indicated above, a statutory appeal, with the Tribunal. The Tribunal via the impugned judgment and order has reversed the view taken by the Commissioner (Appeals).
9.3. It is to assail the said judgment of the Tribunal, that the instant Writ Petition has been filed.
10. Mr.Saravanan, learned counsel for the Writ Petitioner says that, the impugned order is flawed, as it directs the remand authority to take into account the factum of alleged suppression of the royalty arrangement obtaining between the Writ Petitioner and the holding company.
10.1. Learned counsel says that this was not the ground, based on which, the appeal had been preferred by the respondents/Revenue. According to the learned counsel, the appeal was confined to the issue, as to whether the royalty, which is to be paid by the Writ Petitioner, with effect from 01.07.2009 should be factored in the transaction value of the goods, under Rule 10(1)(c) of the 2007 Rules.
10.2. It is, therefore, the learned counsel's submission that the remand directions are beyond the scope of the appeal.
11. Ms.Hemalatha, on the other hand, has submitted, in reply, that these are issues, which can be sorted out, in case, the Writ Petitioner is aggrieved, by way of an appeal, which will have to be preferred before an appropriate forum, which, in this case, would be the Supreme Court.
12. We have heard the learned counsel for the parties and perused the records placed before us.
13. The broad facts and circumstances adverted to above by us are not in dispute. Clearly, the impugned judgment will impact the transaction value of the goods. Therefore, under the provisions of Section 130-E(b) of the 1962 Act, the remedy, if any, which is available to the Writ Petitioner, would only be by way of an appeal before the Supreme Court.
14. Qua the issue, as to whether, the remand directions go beyond the scope of appeal, we can only say that, since, there is an appeal remedy available, this is an aspect, which can be agitated in the appeal, if any, filed by the Writ Petitioner. These are not matters, which go to the root of the jurisdiction of the Tribunal. The Tribunal, being an authority, which is empowered to deal with the issues, of both, fact and law, the error, if any, can be corrected by way of an appeal remedy.
15. For this purpose, we may only note the following observations of the Supreme Court in the matter of: Smt.Ujjam Bai V. State of Uttar Pradesh, 1962 AIR 1621.
76. Now, I come to the controversial area. What is the position with regard to an order made by a quasi-judicial authority in the undoubted exercise of its jurisdiction in pursuance of a provision of law which is admittedly intra vires? It is necessary first to clarify the concept of jurisdiction. Jurisdiction means authority to decide. Whenever a judicial or quasi-judicial tribunal is empowered or required to enquire into a question of law or fact for the purpose of giving a decision on it, its findings thereon cannot be impeached collaterally or on an application for certiorari but are binding until reversed on appeal. Where a quasi-judicial authority has jurisdiction to decide a matter, it does not lose its jurisdiction by coming to a wrong conclusion whether it is wrong in law or in fact. The question, whether a tribunal has jurisdiction depends not on the truth or falsehood of the facts into which it has to enquire, or upon the correctness of its findings on these facts, but upon their nature, and it is determinable "at the commencement, not at the conclusion, of the inquiry'. (Rex v. Bolten [1841] I Q.B. 66. Thus, a tribunal empowered to determine claims for compensation for loss of office has jurisdiction to determine all questions of law and fact relating to the measure of compensation and the tenure of the office, and it does not exceed its jurisdiction by determining any of those questions incorrectly but it has no jurisdiction to entertain a claim for reinstatement or damages for wrongful dismissal, and it will exceed its jurisdiction if it makes an order in such terms, for it has no legal power to give any decision whatsoever on those matters. A tribunal may lack jurisdiction if it is improperly constituted, or if it fails to observe certain essential preliminaries to the inquiry. But it does not exceed its jurisdiction by basing its decision upon an incorrect determination of any question that it is empowered or required (i.e.) had jurisdiction to determine. The strength of this theory of jurisdiction lies in its logical consistency.....
The characteristic attribute of judicial act or decision is that it binds, whether it be right or wrong. An error of law or fact committed by a judicial or quasi-judicial body cannot, in general, be impeached otherwise than on appeal unless the erroneous determination relates to a matter on which the jurisdiction of that body depends. These principles govern not only the findings of inferior courts stricto sensu but also the findings of administrative bodies which are held to be acting in a judicial capacity. Such bodies are deemed to have been invested with power to err within the limits of their jurisdiction; and provided that they keep within those limits, their decisions must be accepted as valid unless set aside on appeal...."
16. For the foregoing reasons, we are not inclined to entertain the Writ Petition. The same is, accordingly, dismissed, with liberty to the Writ Petitioner to take recourse to a statutory remedy, albeit, in accordance with law. Consequently, connected Miscellaneous Petitions are also dismissed.
17. At this stage, Mr.Saravanan says that since, the remand proceedings have commenced, the Writ Petitioner will keep the bank guarantee, in the sum of Rs.10.00 Crores, furnished to the respondents/Revenue, pursuant to the order of this Court, alive, during the pendency of the aforementioned proceedings.
18. The said statement is taken on record.
Index: Yes/No Speaking order/Non-speaking order (R.S.A.,J) (R.S.K.,J) 08.06.2017 sl To
1. The Commissioner of Customs, (Sea-Imports) Customs House, No.6, Rajaji Salai, Chennai - 600 001.
2. The Commissioner of Customs (Appeals), Customs House, No.6, Rajaji Salai, Chennai - 600 001.
3. Deputy Commissioner of Customs, Special Valuation Branch, Customs House, No.6, Rajaji Salai, Chennai - 600 001.
RAJIV SHAKDHER,J.
AND R.SURESH KUMAR,J.
sl Writ Petition No.16695 of 2016 and W.M.P.Nos.14425 and 15555 of 2017 08.06.2017 http://www.judis.nic.in