CONVERSION OF FREE SHIPPING BILL TO SEC 74 DRAWBACK SHIPPING BILL – INTERESTING CASE WHICH A SHIPPER & CB MUST KNOW !!!

 A Shipper has initially exported Phycocyanin and a part quantity of the same was rejected for quality reasons which was re-imported by him without payment of duty in terms of Notification No. 158/95-Cus dated 14.11.1995 on executing Bond with Bank Guarantee.

Also he has paid difference in duty as demanded by Customs. The shipper has re-exported 100% of the said goods after rectifying the defect and the identification of the re-exported good is not disputed by the Department.

The shipper then sought suitable amendment to the re-exported shipping documents to enable the appellant to claim drawback in terms of Section 74. Comment.

Yes. Shipper is eligible for conversion of free SB to Sec 74 DBK SB.

The shipper has re-exported the said goods after addressing the quality issues. Thereafter, the appellant requested the Department to cancel their RE bond and return the corresponding Bank Guarantee as the shipper has discharged the obligation thereunder. While processing the request of the appellant, the Customs Department found that a part of the re-export was effected few days after the permissible period and hence, informed them to pay applicable import duties and interest for the corresponding quantities of re-imports. The shipper has paid the same to cancel BG.

Thereafter, the appellant sought suitable amendment to the related re-export shipping documents to enable the appellant claim drawback in terms of Section 74. The shipper’s request was rejected without affording him an opportunity of hearing which is in violation of the principles of natural justice. Also, it is substantive right of the exporter to claim drawback and it has been consistently held by various High Courts that substantive right should not be denied on account of procedural irregularities.

CBEC issued Circular No. 1063/2/2018-CX dated 16.02.2018 whereby they have compiled orders of Hon’ble Supreme Court High Courts and CESTAT which have been accepted by the Department on which no review petitions have been filed by the Department. Further note that at SI. No. 2 of this Circular, the Department has accepted the judgment of the Hon’ble High Court in the case of CCE Vs Dashiyon Ltd. reported in 2016 (41) STR 884 and the judgment of Hon’ble High Court of Rajasthan in the case of CCE Jaipur Vs National Engineering Industries Ltd. reported in 2016 (42) STR 945. Further, as per Para 2.1 of the Circular “Department has accepted the judgment whereby the Hon’ble High Courts dismissed the Department’s Appeal inter alia holding that substantive benefits cannot be denied  because of procedural irregularities.

Hence Hon’ble CESTAT ordered to remand back the matter, to the Commissioner to consider the claim of the shipper for conversion of free shipping bills into drawback shipping bills.

M/S BIO GEN EXTRACTS PVT LTD VERSUS COMMISSIONER OF CUSTOMS BANGALORE, CESTAT BANGALORE, Order pronounced on 31/08/2020

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Instead of actual Ocean freight, declared 20% of FOB value while filing BoE by oversight - Amendment of bill of entry & refund of excess duty – is it possible to do so ??

While filing the Bill of Entry, the importer did not file any ocean freight bill and therefore, the value of freight was taken as 20% of the FOB value and the goods were assessed to duty accordingly.

The importer noticed the mistake and immediately furnished the freight bill for the transaction and sought amendment of the Bill of Entry under Section 149 of the Customs Act, 1962. They also filed a refund claim for the excess duty paid.

The refund claim was rejected on the ground that the importer did not challenge the assessment and, therefore, in view of the decision of the hon'ble apex Court in the case of Priya Blue Industries and Flock India Pvt. Ltd. the refund is not permissible. The importer  preferred an appeal before the lower appellate authority who vide the impugned order dismissed their appeal and hence the importer appealed before CESTAT.

Hon’ble CESTAT observations as follows :

When the Bill of Entry was filed they had also submitted the freight bill to the Customs Broker  but the CB committed an error and did not submit the freight bill and, therefore, the goods were assessed taking 20% of the FOB value towards freight and accordingly the appellant discharged duty liability.

But immediately thereafter, they noticed the error and submitted a letter to the Dy. Commissioner of Customs, Nhava Sheva enclosing therewith copy of the Bill of Entry, duty paid challans and the freight invoices received from the steamer agent and sought amendment of the Bill of Entry under Section 149 of the Customs Act, 1962. This matter was kept pending by the department without taking any decision thereon.

In the instant case, it is clear from the records that the importer committed an error in not declaring the freight amount at the time of filing of the Bill of Entry and did not submit the invoice for the freight paid. But within a period of two weeks from the date of filing of the Bill of Entry, the importer produced the commercial invoice indicating the payment of freight vide invoice dated 02/04/2009 issued by the shipping agent and sought amendment of the Bill of Entry under Section 149 of the Customs Act, 1962.

Section 149 of the Customs Act, 1962 provides that:

  “Save as otherwise provided in sections 30 and 41, the proper officer may, in his discretion, authorise any document, after it has been presented in the custom house to be amended 1[in such form and manner, within such time, subject to such restrictions and conditions, as may be prescribed]:

Provided that no amendment of a bill of entry or a shipping bill or bill of export shall be so authorised to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the export goods have been exported, except on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported, as the case may be.

 Thus the only condition required to be satisfied for availing the provisions of Section 149 is that the documentary evidence on the basis of which the amendment is sought, should be in existence when the goods were cleared. In the instant case the Bill of Entry was filed on 21/04/2009 and the freight invoice indicating the amount of freight is dated 02/04/2009.

In other words, the documentary evidence which the appellant submitted was in existence when the Bill of Entry was assessed and the goods were cleared. It was only an inadvertent error committed by the CB in not furnishing the freight invoice along with the Bill of Entry. Powers of discretion under Section 149 has been provided to the Customs Officers to allow amendments in genuine cases. From the facts available on record and the notings made by the various sections of the Customs department, it is evident that the appellant's case is a genuine one.

In the present case there is a genuine error committed by the importer in not filing the freight bill at the time of filing of the Bill of Entry. When the error was noticed, immediately thereafter, the importer took action to rectify the mistake by making an application under Section 149 along with documentary evidence in support of the claim for actual freight.

Thus there is enough justification for the proper officer to exercise the power under Section 149. Powers are given to the officers to sub-serve justice and not to deny them. In the present case, the department ought to have allowed the amendment of the Bill of Entry under Section 149 and give consequential relief to the appellant hence declared importer is eligible for amendment of BoE and refund.

GABRIEL INDIA LTD VERSUS COMMISSIONER OF CUSTOMS (IMPORT) , NHAVA SHEVA, MUMBAI-II, CESTAT MUMBAI, Pronounced on 03 April 2013

Author Remarks :

1.      In the above case Judgement was given on 03.04.13. But later Hon'ble Supreme Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV on 18.09.2019 held that assessed Bill of Entry is appealable. Hence If importer wants to apply for refund of customs duty u/s 27, he should appeal against assessed bill of Entry within one year. The current position is that the importer has to appeal against self assessed BoE and simultaneously apply for refund.

2.      The claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings.

3.      Ocean Freight has to be declared as per actual cost and invoice has to be produced. If assessed higher side @20% by oversight , it is possible for BoE amendment and apply for refund of excess paid duty within one year.

 

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LEVY OF PENALTY ON CUSTOMS BROKER U/S 114 & 114AA AND PRESUMPTION OF CULPABLE MENTAL STATE U/S 138A

A shipper has exported inferior quality of RMG, blouses etc and  gained huge drawback amount. Customs Dept investigated the case and imposed penalty on Customs Broker u/s 114 & 114AA apart from their action against shipper. There were two middleman between the exporter and the Customs Brokers, who took cash from shippers. The allegation against the Customs Broker is that having received ₹ 1 lakh in cash per consignment over and above the usual charges, he has actively involved in the fraud.

The observations of Hon’ble CESTAT as follows ;

The Customs Broker in his normal course of business, did the clearance for exporter - RMG, blouses etc., He was merely acting in the capacity of facilitator of the customs transaction and was bound to facilitate the authorised clearance work of exporter. Therefore, in the present case as the Customs Broker was only facilitating the customs transaction on behalf of principal (exporter), penalty is not imposable, otherwise all the customs transaction will come to halt, if penalty is imposed on CB for the omission & commission of exporter/ importer.

Moreover in the present case, the CB had no knowledge of the quality of goods being exported neither was capable to judge the quality of RMG, since he was never involved in the business of sale, purchase, procure and manufacture of RMG, MMF and ladies blouse. The sample provided to the CB firm was of decent quality. Further the CB was not aware and had no knowledge that the RMG, MMF and ladies blouse being exported is of inferior quality. In absence of mens-rea or malafide, the CB cannot be punished. The penalty upheld by ld. Commissioner of Customs (Appeals) is based on erroneous and ill-founded ground.

The Customs Broker has filed Shipping Bills on the basis of documents such as invoice, packing list, etc. supplied by client/ forwarder on the reasonable belief that such documents are genuine, that their filing of shipping bills were not with intent to fraudulently claim the drawback, or collude with the exporter.

That with respect to the said consignments, all the documents were procured such as invoices, packing list, SDF form and other export related documents including shipper’s authorisation. The CB has received work through from one of the freight forwarder and that the CB was not in direct contact with shipper/ exporter.

The ld. Commissioner of Customs (Appeals) erred in observing that the CB is involved in the preparation of inflated invoices without any corroborative evidence. The Commissioner has failed to assign any motive to substantiate the appellant’s involvement in the availment of duty drawback or any proceeds flowing to them.

The confessional statement made by the middlemen cannot be relied upon and made a ground to prosecute the Customs Broker,solely based on the statement recorded under Section 108 of the Customs Act, 1962.

Corroborative evidence is necessary to initiate proceedings against the Customs Broker, as held by the Hon’ble Supreme Court in Vinod Solanki vs. Union of India (2008) 16 SCC 537 and Noor Aga vs. State of Punjab and Anr -2008 (56) BLJR 2254; Criminal Appeal No. 1034 of 2008 (arising out of SLP (Crl.) No. 5597 of 2006, which is missing in the present case.

Ld. Commissioner has completely disregarded Section 138A of Customs Act, 1962, as the CB has been penalised merely on the basis of preponderance of probability. He has not been able to assign any motive or knowledge of cheap quality RMG, MMG and ladies blouses to the appellant, beyond reasonable doubt.

The allegation against the Customs Broker of their having received ₹ 1 lakh per consignment is not substantiated, over and above the usual charges. Thus, receipt of ₹ 1 lakh by middlemen is not the amount received by the Customs Broker

There is no allegation of any flow back of ill gotton draw back money to the Customs Broker. The consignment under seizure was to be exported to Dubai for which as per the inspection norms, prescribes 100% examination of the export consignment. Further, it has nowhere come on record that Customs Broker was present at the time of packing and stuffing of container for shipping. Further, there is no allegation that Customs Broker has cooked or concocted any document for presenting it to the Customs, knowing it to be false.

Penalty is imposable under Section 114 of the Act where any person who, in relation to any goods, does or omits to do any act, which act or omission would render such goods liable to confiscation under section 113 or abets the doing or omission of such an act. From the facts on record, that the CB has not done any act of omission or commission leading to violation of any of the provisions mentioned in Section 113 of the Customs Act.

Section 114AA provides for penalty, if a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty.

The Customs Broker has given cogent explanation as regards the valuation that the samples shown to them were of good quality and hence on such reasonable belief they have undertaken the clearance work. No case is made out that the Customs Broker knowingly filed the shipping bills that the goods are overvalued. Accordingly, penalty under Section 114AA is also not imposable.

CUSTOMS BROKER VERSUS COMMISSIONER OF CUSTOMS, CESTAT NEW DELHI, Pronounced on 02.09.2020

Key takeaway for the fellow CB’s from this case :

1.    Make sure to get 100% KYC documents including an authorisation letter

2.    Deal directly with Importers and exporters & be careful when you deal through others.

3.    Whenever get doubt about the valuation or quality of the product shipped, try to get the sample of the product for your satisfaction and for records. In above case CB has verified the quality of the product shown to him, which saved  him from penalty. Try to study the value declared vs quality of the product.

4.    Make sure, service charges are received against proper tax invoice to bank account directly by chq/DD/NEFT/RTGS/IMPS.

 

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INTEREST ON DELAYED REFUND OF EXTRA DUTY DEPOSIT – WHAT IS THE ELIGIBILITY CRITERIA ?

As we are aware there is abnormal delay in final assessments of Provisional Bill of entries. Let us discuss who will be eligible for interest on delayed refund amount sanctioned ;

 

Customs Act, 1962 Provisional assessment of duty SECTION 18 (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 unrefunded amount at such rate fixed by the Central Government under section 27A till the date of refund of such amount”

 

CASE FAVOURING INTEREST ON DELAYED REFUND OF EXTRA DUTY DEPOSIT :

M/S. DALMIA CEMENT (BHARAT) LIMITED VERSUS THE ASSISTANT COMMISSIONER OF CUSTOMS (REFUNDS) , THE DEPUTY COMMISSIONER OF CUSTOMS (GR. 2), MADRAS HIGH COURT, decided on January 3, 2020

The stand of the Revenue is that there is no time limit for finalisation of the provisional assessments and hence there is no limitation that would apply. This argument is unacceptable in the light of Circular No.11/2001 dated 23.02.2001, wherein at paragraph-9 the Board states as follows:

‘9.The amount of extra duty deposit presently kept at 1% will be continued. Board has however decided that if the importer does not furnish complete reply to the questionnaire within 30 days, of receipt of the ‘Questionnaire’ by the importer, the extra duty deposit will be increased to 5% till the date of receipt of reply by the Department. It should therefore be impressed upon the concerned importers (in the public notice that is issued) to ensure timely replies being sent to the Questionnaire to avoid any higher deposit being insisted.

Furthermore, where provisional assessment is being resorted to, the investigation and finalisation of the assessment must be completed within four months from the date of reply. If no decision is taken within 4 months, the extra duty deposit should be discontinued and the concerned Deputy Commissioner/Assistant Commissioner will be held responsible for inexplicable delay in finalisation.’

Hon’ble Madras High Court observed as follows;

Despite the elapse of nearly 15 years from the dates of the Provisional assessments of the Bills of Entry, no final assessments have been completed till date in the matters.

There is no justification for the Customs Department in this case to have tarried so long and to delay finalisation of assessments as well as consequential refunds to the Dalmia Cement.

The refund will be paid over to the petitioner within a period of four weeks from date of receipt of copy of this order along with interest in terms of Section 27(a) of the Customs Act, computed from three (3) months from 17.12.2007 being date of receipt of the application in respect of one claim and three (3) months from 10.09.2007 in regard to the other claim

Hence Dalmia is awarded with interest on refund amount for almost 13 years !!!

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CASE AGAISNT INTEREST ON DELAYED REFUND OF EXTRA DUTY DEPOSIT:

M/S. GMMCO LIMITED VERSUS COMMISSIONER OF CUSTOMS, CHENNAI, CESTAT CHENNAI, decided on May 31, 2018

The customs Department has sanctioned refund of Extra Duty Deposit and assesse has claimed Interest on delayed Refund. The finalization of assessment was not done within time frame.

There was litigation pending before various forums for entire period till finalization of assessment. The contention of the appellant is that there has been inordinate delay in finalizing the assessment and granting refund which resulted in withholding of legitimate amount causing monetary loss and hardships to the assessee which has to be compensated by way of paying interest on the sanctioned refund.

CESTAT held that on facts, it is brought out that the refund has been sanctioned within three months from the date of finalization of provisional assessment. Section 18(4) provides to pay interest only when the refund is delayed beyond three months after finalization of assessment.

For the entire period till the finalization of assessment, there were litigations pending before various legal forums and after the finalization of assessment, refund has been sanctioned within a period of three months. When the statute does not provide to pay interest, the Tribunal which is a creature of the statute cannot grant any amount in the nature of compensation.

The claim of the assessee for interest on delayed refund is dismissed.

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Conclusion:

1.*After final assessment, If amount is not refunded within three months from the date of final assessment then only interest has to be paid by Revenue to assessee.

2.*Period of Litigations if any in any legal forum will not be considered for interest purpose. Final assessment order date is the basic criteria.

3.*Importers whose Bill of entries are provisionally assessed, has to follow and complete the final assessment at the earliest and from the final assessment date, follow up and get the refund within three months. If refund  is not sanctioned within three months, then assessee has to follow up and get interest also.

 

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IMPORTANCE OF DATE AND TIME STAMP OF CUSTOMS BROKER’S DIGITAL SIGNATURE IN BILL OF ENTRY

 As you are aware there was a terrorist attack took place at Pulwama on 14 February 2019. On 16 February 2019, the Union Government issued a notification under Section 8A of the Customs Tariff Act 1975. The notification introduced a tariff entry by which all goods originating in or exported from the Islamic Republic of Pakistan were subjected to an enhanced customs duty of 200%. The precise time at which the notification was uploaded on the e-Gazette was 20:46:58 hours. But the bill of entry filed on same day i.e 16th February 2019 seeking clearance of the PAK origin goods for home consumption and was self- assessed at 18:08 hours on same day under the provisions of Section 17(1) of the Customs Act 1962

Customs authorities at the land customs station at Attari sought to enforce the enhanced rate of duty on importers who had already presented bills of entry for home consumption before the enhanced rate was notified in the e-Gazette. Their action led to a challenge before the High Court of Punjab and Haryana. The consignments of import covered a diverse range of goods, ranging from dry dates to cement.

The High Court of Punjab and Haryana allowed a batch of writ petitions under Article 226 of the Constitution. The High Court held that since the importers, who had imported goods from Pakistan, had presented their bills of entry and completed the process of “self assessment” before the notification enhancing the rate of duty to 200 per cent was issued and uploaded, the enhanced rate of duty was not attracted. The High Court held that the importers were liable to pay the duty applicable at the time when the bills of entry for home consumption were filed under Section 46 of the Customs Act, 1962.  The Union of India was ordered to release the goods within seven days on the payment of duty ‘as declared and assessed’ without applying the notification enhancing the rate of duty on goods originating in Pakistan.

The Union of India has appealed to Supreme Court. Apex Court’s important observations as follows ;

The notification contains a reference to the date (16 February 2019) and time (20:46:58) at which it was uploaded and published in the e-Gazette of the Government of India. Based on the enhancement in the rate of duty brought about by the notification, the customs authorities refused to release the goods which were assessed earlier. The bill of entry was recalled and reassessed on 20 February 2019 at 18:14 hours by levying customs duty at 200 per cent and IGST at 28 per cent, enhancing the duty from ₹ 73,342/- to 8,10,952/-. Aggrieved by the action of the customs authorities, the importer filed a petition under Article 226 for setting aside (i) the assessment of the bill of entry to a duty of 200%; (ii) Notification 5/2019 dated 16 February 2019; and for a direction to CWC to issue a detention memo and the release of the goods.

Section 46(1) stipulates that the bill of entry has to be presented in the form and in the manner ‘prescribed’. The expression ‘prescribed’ is defined in Section 2(32) to mean prescribed by regulations made under the Act. The Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations 2018 have been made in pursuance of the enabling power conferred by Sections 46 and 47 and Section 157 which contains a general power to make regulations.

Section 157(2)(a) was amended by the Finance Act 2018 (Act 13 of 2018) to allow for the power to frame regulations on the form and manner of delivering or presenting inter alia a bill of entry. Regulation 2(c) of the 2018 Regulations defines the expression bill of entry in the following terms:

“(c) “bill of entry” means electronic integrated declaration accepted and a unique number generated and assigned to that particular bill of entry by the Indian Customs Electronic Data Interchange System, and includes its electronic records or print-outs” 

Regulation 2(d) defines the expression electronic integrated declaration:

“(d) “electronic integrated declaration” means particulars relating to the imported goods that are entered in the Indian Customs Electronic Data Interchange System”

Under Regulation 2(e), “ICEGATE” is the customs automated system of the Central Board of Indirect Taxes and Customs. Regulation 3 requires the authorized person (defined in Regulation 2(b) 7 2(b) “authorised person” means an importer or a person authorised by him who has a valid licence under the Customs Brokers Licensing Regulations, 2013 or any other regulation dealing with the similar matters and it also includes an employee of the Customs broker who has been issued a photo identity card in Form G under the Customs Brokers Licensing Regulations, 2013 or any other regulation dealing with the similar matters), which includes the importer, to enter the electronic integrated declaration and supporting documents by affixing a digital signature. Regulation 3 is as follows:

“The authorised person shall enter the electronic integrated declaration and the supporting documents himself by affixing his digital signature and enter them on the Customs Automated System and he may also get the electronic integrated declaration made on the customs automated system along with the supporting documents by availing the services at the service centre.”

With the change in the manner of publishing gazette notifications from analog to digital, the precise time when the gazette is published in the electronic mode assumes significance. 

Notification 5/2019, which is akin to the exercise of delegated legislative power, under the emergency power to notify and revise tariff duty under Section 8A of the Customs Tariff Act, 1975, cannot operate retrospectively, unless authorized by statute.

In the era of the electronic publication of gazette notifications and electronic filing of bills of entry, the revised rate of import duty under the Notification 5/2019 applies to bills of entry presented for home consumption after the notification was uploaded in the e-Gazette at 20:46:58 hours on 16 February 2019.

Once it is found that the notification upon publication would take effect from the time of its publication then in regard to the bills of entries which stand presented within the meaning of Section 46 of the Customs Act read with 4(2) of the 2018 Regulations, earlier to such publication, the rate of duty in regard to the same would be only the rate of duty which prevailed at the time of the deemed presentation under Regulation 4(2) of the 2018 Regulations.

The purpose of the notification being to discourage the import of goods from Pakistan, it has prospective effect: the object and purpose is not to penalize Indian importers who had completed their imports, presented bills of entry for home consumption and had completed self-assessment in terms of the provisions of the Customs Act and the Regulations, prior to the issuance of the notification

Hence old rate of duty only applicable to the importers whose BoE self assessment digital signature date and time stamp is prior to new notification e gazette date and time stamp.

This case may become a landmark case in future !!!

UNION OF INDIA & OTHERS VERSUS M/S GS CHATHA RICE MILLS & ANOTHER, SUPREME COURT, decided 23.09.2020

 

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Importer fails to clear goods and refuses to give NOC for name amendment in IGM – How to handle such situation?

An importer failed to clear the goods within the time period stipulated and also refused to grant NOC for amendment to the IGM for substitution of the importer's name. Based on shipping lines request Customs has amended importer name in IGM. But original importer who refused to clear the consignment says without his NOC, IGM should not be amended. Whether Revenue’s action is right? 

Customs department's act of amending IGM without original importer's NOC is right. The first importer has failed to clear the goods within the time period stipulated and also refused to grant NOC for amendment to the IGM for substitution of the importer's name. 

Section 149 of the Customs Act provides for amendment of IGM as per the discretion of the proper officer after the IGM has been presented. In this case, the original importer indicated in the IGM did not clear the goods nor did he pay duty within thirty days from the date of unloading of the goods as stipulated under Section 48 of the Customs Act, 1962. This clearly shows that the party was not interested in clearance of the goods and had abandoned their claim of the goods. 

Hon’ble Delhi High Court in the case of Agrim Sampada Ltd. & Another vs. UOI held that "when an importer fails to pay for the goods and abandons/refuses them, the supplier continues to remain the owner of the goods and that he can transfer the document of title to another person and thereafter that new buyer will be entitled to clear the goods.

JAI DURGE TRADING CO. VERSUS COMMISSIONER OF CUSTOMS (IMPORT), CESTAT MUMBAI,  decided on January 2, 2015

  

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#Customs Law Quick Bites-28

HOW TO HANDLE ENHANCEMENT OF IMPORT ASSESSABLE VALUE ISSUES?

The Customs authorities do not clear a consignment as per the declared transaction value in the bill of entry but insisted that the importers should give a letter agreeing to pay customs duty as per the valuation by the customs authorities and compel them to forego their right to provisional assessment under Section 18 of the Customs Act. The appellants, coerced and intimated, have no option but to give in and issue a letter of consent agreeing to assessment/valuation by the customs authorities to avoid delay in clearance, levy of demurrage, ground rent and container detention charges, etc. 

Customs also discard the declared transactional value and recompute the consignment value based on a valuation alert. Is Revenue's actions tenable ?

 

No. The transaction value mentioned in the bill of entry should not be discarded unless there are contrary details of contemporaneous imports or other material indicating and serving as corroborative evidence of import at or near the time of import which would justify rejection of the declared value and enhancement of the price declared in the bill of entry.

Director General of Valuation based on the monitoring of valuation trends of sensitive commodities with a view to take corrective measures can provide guidance to the field formation in valuation matters. They help ensure uniform practice, smooth functioning and prevent evasion and short payment of duty. However, they should not be construed as interfering with the discretion of the assessment authority who is required to pass an Assessment Order in the given factual matrix. 

Declared valuation can be rejected based upon the evidence which qualifies and meets the criteria of certain reasons. 

In this landmark case, Apex Court also declared that this order is not issued under any general or omnibus direction that the transaction value declared in the bill of entries should invariably be accepted in all cases and/or that in all cases where imports of aluminium scrap are involved. The matter has to be examined on a case to case basis, the evidence before the authorities, the material placed on record and the enquiries conducted by the adjudicating authorities etc 

Takeaway from this case : 

On interpreting Section 18 of the Act, it is held that when there is a dispute between the customs authorities and the importer as regards the valuation of the imported goods, on satisfaction of the conditions enumerated in sub-section (1), the authorities should make provisional assessment of customs duty under Section 18 of the Act. This expedites clearance, pending final adjudication on merits which may take time. This is also the mandate of the Board Circular No.38/2016 dated 22nd August, 2016. Any insistence and compulsion by the authorities that the importer should disclaim and forgo his statutory right under Section 18 of the Act would not be correct. Neither would it be right to reject the valuation as declared by the importer without reasonable doubt for certain reasons. Hence Provisional assessment should be allowed by customs in such valuation dispute cases. 

CENTURY METAL RECYCLING PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND OTHERS, SUPREME COURT, decided on 17.05.2019

 

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MEIS SCHEME – DON’T FORGET TO PUT “Y” IN ALL LINE ITEMS – SMALL ERROR BUT BIG HEADACHE !!!

Exporter has informed Customs Broker to file Shipping Bill under MEIS Scheme. The customs Broker while submitting Shipping bills instead of entering 'Y' for each line item, selected 'Y' only for the first line item and did not make any selection for remaining items. Later Shipper approached DGFT for correction. DGFT’s contention is that they cannot be blamed for the lapse committed by the Shipper/Customs Broker and not in position to amend SB and release incentive scrip. Suggest a solution?

Shipper has filed writ petition in High Court. This case is absolutely similar  like Pasha International Vs Commissioner of Customs, Tuticorin and two others. Pasha International case has become landmark judgement in MEIS claim matter and so far referred in 11 such cases in various legal forums.

The exporter ought not to suffer for the inadvertent mistake committed by him/Customs Broker. When the filing was done manually, Section 149 of Customs Act provides for effecting corrections. Now, there has been a shift from the manual system to EDI System. In the EDI System, approval is also automated.

Since the Shipper had opted only for 'Yes', as far as the first line item is concerned and did not opt for the remaining items, by system default, for the remaining items the system opted 'No' automatically.

This was a sheer inadvertent mistake committed by the Customs Broker. The Shipper  had actually intended to claim the benefit under the aforesaid Scheme. The Shipper  deserves to be given one more opportunity to set right things.

The Shipper is permitted to make a formal request to the customs. The Customs Department has to issue No Objection Certificate to enable the shipper to avail the benefit and also instruct NSDL to transmit all the relevant SB data for amendment.

ATC TIRES PRIVATE LIMITED VERSUS ZONAL ADDITIONAL DGFT, DIRECTOR GENERAL OF FOREIGN TRADE, COMMISSIONER OF CUSTOMS, UNION OF INDIA, THE DEVELOPMENT COMMISSIONER, MEPZ,  MADRAS HIGH COURT decided on 11 September 2020

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DECLARATION FORMAT TO BE TAKEN FROM IMPORTER'S BEFORE FILING BoE CLAIMING FTA/PTA BENEFITS

 Dear CB friends

 As you are aware, With effect from 21.09.2020 ( Monday) BoE under FTA/PTA for availing duty benefits there is a major BoE procedure change which needs to be taken care before filing BoE. Without this compliance, BoE should not be filed to safeguard CB / Importer interest.

Customs Broker compliance:

 I have prepared a excel file ( copy and paste below given link in your browser to get file in your system ) which are new BoE fields. You need to ask importers, who are availing FTA/PTA benefits to fill this form from their side and get it printed on their letter head. Then it has to be signed by responsible / authorised person with seal and should be mailed to us. Maintain a copy in respective docket. Customs Broker should take required info only from importer declaration at the time of preparing check list. Please DO not fill anything on your own or as per previous BoE etc. It may leads to commercial disputes between CB and importers.  

Importer Compliance:

Importers should maintain consignment wise Form I for 5 years. Please inform importers in this regard well in advance as they need to produce these document immediate form upon Customs demand.

EXCEL LINK:

https://drive.google.com/file/d/1NhLVaIPZPxng4Al8frlYSIR9AhHjlEsN/view?usp=sharing

With regards

Rajesh A

How to make short levied/short paid Customs duty & interest payment without higher penalty ?

In a particular import consignment, the customs department observed that the goods imported by the appellant were not Malaysian origin but were imported from China, which attract levy of Anti Dumping Duty. ( Kindly refer The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 wef 21.09.2020 and origin criteria prescribed in the respective Rules of Origin should be proved by importers  )

Based on pre consultation from Customs, the importer has paid Anti Dumping Duty (ADD) with interest before issuance of SCN.

Since the department has accepted such facts, that as per the provisions of sub-section(5) of Section 28 the appellant was required to be issued with the show cause notice only for deposit of the penalty amount of 15% of the short levy duty. However, instead of issuing the show cause notice for recovery of the 15% amount of penalty, the department had proceeded against the importer for confirmation of the 100% penalty in respect of the short paid amount of duty. Is this 100% penalty tenable ?

No. In this case, importer has paid difference in duty with interest without getting Show cause notice.

Section 28(5) reproduced below;

Recovery of [duties not levied or not paid or short-levied or short-paid] or erroneously refunded

“ Where any [duty has not been levied or not paid or has been short-levied or short-paid] or the interest has not been charged or has been part-paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or the employee of the importer or the exporter, to whom a notice has been served under sub-section (4) by the proper officer, such person may pay the duty in full or in part, as may be accepted by him, and the interest payable thereon under section 28AA and the penalty equal to[fifteen per cent.] of the duty specified in the notice or the duty so accepted by that  person, within thirty days of the receipt of the notice and inform the proper officer of such payment in writing”

Show cause notice had confirmed that the importer had deposited the entire amount of Anti Dumping Duty along with interest before issuance of the show cause notice. Since the department has accepted such facts, that as per the provisions of sub-section(5) of Section 28 the appellant was required to be issued with the show cause notice only for deposit of the penalty amount of 15% of the short levy duty.

Since, there is no ambiguity in interpretation of the provisions of sub-section (5) of Section 28, with regard to the quantum of penalty to be deposited, the benefit of lower penalty of 15% should be available to the appellant.

The appellant should liable to pay penalty of 15% of the adjudged amount of duty confirmed/paid by it before initiation of the show cause.

Remarks: When Importer is not 100% confident on his lesser duty claim with strong precedent cases, based on Customs pre consultation  letter,  it  is advisable to pay the difference in duty with interest PLUS 15% towards penalty to avoid further legal consequences and higher penalty.

ATIONS SPECIALITY CHEMICAL VERSUS COMMISSIONER OF CUSTOMS, NHAVA SHEVA - V,  CESTAT MUMBAI decided on 05.03.2020

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#Customs Law Quick Bites-25

Red sanders Illegal export - Levy of personal penalty for abetment on transporter and Customs Broker – Latest Judgement

 “X’ is a transport agent who arranged a truck for the export and “Y” acted as Customs Broker for clearance of the goods and “Z” arranged Customs broker and Ocean freight. ( herein  after called as the parties )

The goods were stuffed at factory in  the presence of Director of the exporter company and Superintendent of Central Excise ( year 2014 case )  and thereafter  it was sent to Port for exportation. Post sailing of vessel, DRI came to know that Red sanders illegally shipped hence container was called back to India.

Customs Dept. imposed personal penalty under Section 114(i) of the Customs Act on the X,Y & Z ( i.e transporter and Customs Broker and other party ) also. Is it tenable ?

No. The parties have rendered their routine service of arranging for container and Customs clearance service to earn for their livelihood within the bounds of law. During the investigation, DRI recorded the statement of Director of exporter company and also the parties . In the statement shipper has clearly stated that he was responsible for smuggling of red sander wood logs and the others were not knowing about their smuggling plan.

Further Customs authorities in their orders have admitted that there is no direct proof of the complicity of the parties and there is suspicion against each of them and on the basis of that suspicion penalty imposed on them.

In the case of Collector of Customs, Madras and others Vs. D. Bhoormull wherein the Apex Court has observed that “ the law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue”

SECTION 114. Penalty for attempt to export goods improperly, etc. - Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable, -

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act, whichever is the greater;

It is pertinent to note that the Tribunal in various decisions consistently held that for imposing the personal penalty under Section 114(i) of the Customs Act, 1962, there should be acceptable legal evidence on record about the acts of commission or omission by the parties. Further, in order to hold that the parties has abetted in the commission of the offence, there has to be a knowledge on the part of the parties  regarding the illegal activities of the exporter whereas in the present case no corroborative evidence has come on record which pinpoint that the parties had the knowledge of the illegal activities of the exporter company.

The impugned order is not sustainable in law & penalty also set aside.

SACHIN KUMAR ( Transport agent )  VERSUS Commissioner of Customs MANGALORE, CESTAT BANGALORE, decided on 14.09.2020

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#Customs Law Quick Bites-24