EXPORT OF FREE SAMPLES – WHETHER REVERSAL OF GST INPUT TAX CREDIT IS MANDATORY ? AN ANALYSIS

IMPORTANCE OF DETAILED PACKING LIST – A CAUTION TO CUSTOMS BROKERS

CUSTOMS DUTY LIABILITY CHART UNDER MOOWR 2019 SCHEME ( as on 16.09.21)

The Customs Broker is not an inspector to weigh the genuineness of the transaction

IMPORTANCE OF DUE DILIGENCE DURING FILING OF SHIPPING BILL

Mill processed non-alloy ferrous waste metal goods wound in coil is not waste or scrap- To be classified under CTH 72099000

Refund of Extra Duty Deposit (EDD) denied for want of challans ?? No more worries..

Importance of Importer’s Mis Declaration acceptance letter to Customs – Think twice before you Ink !!!

DISTINCTION BETWEEN Hand Held Blender & Hand Held Mixer for BIS compliance – An eye opening clarification

Drawing and Design - information put on the media- Whether dutiable or not ?

How to classify Apple HomePod under Customs Tariff Heading (CTH) for imports ?

Competent authority to disallow FTA/PTA duty benefits & Binding effect of other port decisions on similar issues

WhatsApp messages have no evidential value: Supreme Court

MULTI THIRD COUNTRY INVOICING UNDER AIFTA – INTERESTING CESTAT CASE UPHELD DUTY BENEFIT FAVOURING IMPORTER

Amendment of Bill of Entry u/s 149 to substitute branch GSTIN

IMPORTANT INFORMATION TO TDS DEDUCTORS / COLLECTORS – ADDITIONAL COMPLINACE APPLICABLE wef 01.07.2021

Interpretation of DGFT Policy Notification by Customs officer & Order of Confiscation without SCN

Lease Imports or Temporary Imports – First Use Equipment then Pay customs duty

PAYING IGST ( THROUGH CUSTOMS ) UNDER PROTEST & AVAILING INPUT CREDIT

Do you know what is Back to Town concept under Indian Customs Law ?

Power to order Provisional Attachment of Property including Bank Account is draconian in nature, all conditions to be strictly fulfilled- SC

 Facts of the case: 

The Appellant challenged the orders issued on 28 October 2020 by the Joint Commissioner of State Taxes and Excise, provisionally attaching the appellant’s receivables from its customers. The provisional attachment was ordered while invoking Section 83 of the Himachal Pradesh Goods and Service Tax Act, 2017 and Rule 159 of Himachal Pradesh Goods and Service Tax Rules, 2017. While dismissing the writ petition on grounds of maintainability the High Court was of the view that the appellant had an ‘alternative and efficacious remedy’ of an appeal under Section 107 of the HPGST Act. The GST Department had moved the Apex Court against the ruling of a Division Bench of the High Court of Himachal Pradesh. The High Court dismissed the writ petition instituted under Article 226 of the Constitution challenging orders of provisional attachment on the ground that an alternate remedy is available. While dismissing the writ petition on grounds of maintainability, the High Court was of the view that the appellant had an ‘alternative and efficacious remedy’ of an appeal under State GST law. While dismissing the writ petition, the High Court held that it was undisputed that the third respondent and the Divisional Commissioner, who has been appointed as Commissioner (Appeals) under the GST Act, are constituted under the HPGST Act, and therefore, it is assumed that there is no illegal or irregular exercise of jurisdiction. The High Court further observed that even if there is some defect in the procedure followed during the hearing of the case, it does not follow that the authority acted without jurisdiction, and though the order may be irregular or defective, it cannot be a nullity so long it has been passed by the competent authority. 

Judgement: 

The Supreme Court has recently held that power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled. The Court said that before passing an order of provisional attachment, it is necessary to adhere to the twin conditions: first, allowing the assessee to submit objections to the order of attachment on the ground that the property was or is not liable for attachment and second, give him opportunity to be heard before the order.

Radha Krishan Industries (Appellant) vs. State of Himachal Pradesh (Respondent) Supreme Court decided on 20.04.2021

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# Customs Law Quick Bites-51

GENIUS INTERPRETATION OF ENGLISH ARTICLES “A” & “THE” - Additional Director General (ADG) of DRI is not the proper officer to issue Show Cause Notice (SCN) u/s 28(4) for recovery of customs dues & subsequent CBIC instruction - Major game changer in Customs Duty recovery process !!!

Who is proper officer under section 28 of customs Act ?

It is necessary that the answer must flow from the power conferred by the statute i.e. under Section 28(4) of the Act. This Section empowers the recovery of duty not paid, part paid or erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts and confers the power of recovery on “the proper officer”. The obvious intention is to confer the power to recover such duties not on any proper officer but only on “the proper officer”.

There are only two articles ‘A’ and THE’. `A (or an)’ is known as the Indefinite Article because it does not specifically refer to a particular person or thing. On the other hand, ‘the’ is called the definite Article because it points out and refers to a particular person or thing. There is no doubt that, if Parliament intended that any proper officer could have exercised power under Section 28 (4), it could have used the word ‘any’ - Parliament has employed the article “the” not accidently but with the intention to designate the proper officer who had assessed the goods at the time of clearance.

If it was intended that officers of the Directorate of Revenue Intelligence who are officers of Central Government should be entrusted with functions of the Customs officers, it was imperative that the Central Government should have done so in exercise of its power under Section 6 of the Act. The reason why such a power is conferred on the Central Government is obvious and that is because the Central Government is the authority which appoints both the officers of the Directorate of Revenue Intelligence which is set up under the Notification dated 04.12.1957 issued by the Ministry of Finance and Customs officers who, till 11.5.2002, were appointed by the Central Government - The notification is obviously invalid having been issued by an authority which had no power to do so in purported exercise of powers under a section which does not confer any such power.

The entire proceedings in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters are invalid without any authority of law and liable to be set-aside.

M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS, SUPREME COURT, decided on 09.03.2021

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 # Customs Law Quick Bites-50

 Based on above landmark judgment which has clarified who is the proper officer u/s 28 of Customs Act 1962 for recovery of customs dues, CBIC has issued below instruction number 04/2021 Dt 17th March 2021 to issue fresh SCN’s by the  jurisdictional Commissionerates from where imports have taken place for all the cases presently being investigated by DRI.

 Instruction No. 04/2021-Customs

F.No.450/72/2021-Cus-IV

Government of India

Ministry of Finance

Department of Revenue

Central Board of Indirect Taxes and Customs

******

Room No.227B, North Block, New Delhi

Dated the 17th of March, 2021

To

Principal Additional Director General,

Directorate General of Intelligence (DRI),

New Delhi.

Sir,

Subject: Show Cause Notice (SCN) dated 19.03.2019 issued by DRI against Sh. Anil Aggarwal and 11 others – Directions to keep SCN pending –reg.

Reference is invited to the letters from your office drawing attention to the judgement dated 09.03.2021 of the Hon'ble Supreme Court in Civil Appeal No. 1827 of 2018 in the case of M/s Canon India Private Limited vs Commissioner of Customs. Vide the said judgement, the Hon`ble Apex Court has ruled that the Additional Director General (ADG) of Directorate of Revenue Intelligence (DRI) is not the proper officer to issue Show Cause Notice (SCN) under sub-section (4) of section 28 of the Customs Act, 1962. The Apex Court has concluded that the entire proceeding in the present case initiated by ADG (DRI) by issuing SCN, as invalid and without any authority of law. The Apex Court has accordingly set aside the subject SCN.

2. Further, attention is drawn to the specific reference for seeking Board’s direction with respect to SCN dated 19.03.2019 against Sh. Anil Aggarwal and 11 others where the adjudication of the SCN would get barred by the limitation of time on 18th March, 2021 under sub-section (9) of section 28 of the Customs Act, 1962, on account of the inability to proceed further due to the said judgement of the Hon’ble Supreme Court.

3. The matter has been examined. The implications of the said judgement are under active examination in the Board. Therefore, the Board has decided that for the present and until further directions, the said SCN may be kept pending.

4. Further, all the fresh SCNs under Section 28 of the Customs Act, 1962 in respect of cases presently being investigated by DRI are required to be issued by jurisdictional Commissionerates from where imports have taken place.

5. Difficulties, if any, may please be brought to the notice of Board. Hindi version follows.

Yours faithfully,

(Ananth Rathakrishnan)

Deputy Secretary (Customs)

 

SMALL PVT LTD COMPANY - COMPLIANCE UNDER COMPANIES ACT 2013 - A READY RECKONER

 In the budget speech on 01 February 2021 Finance Minister has proposed to revise the threshold for determining a company as a “small company”.

The capital threshold will be Rs.2 Crores ( at present  50 lakhs )  and the turnover threshold will be Rs.20 Crores (at present 2 crores). If a company has more turnover and less capital or if a company has more capital and less turnover, still it will not enjoy the status of a small company.

Let's take the case of a private limited company which is within the thresholds and falls within the category of a small company and discuss up to what extent a small company is required to comply with provisions of the Companies Act, 2013 and connected rules,  as follows ;

Subject Matter	Provisions
Maximum Number of Directors limited to 15	Yes
DIN	Required
Disqualification of Directors	Applicable
Duties of Directors	Applicable
Retirement of Directors by Rotation	Not Required; unless Articles otherwise provide
Accepting Loans and Deposits from Directors	Permitted
Accepting Loans and Deposits from relatives of Directors	Permitted
Accepting Loans and Deposits from Shareholders	Permitted
Internal Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal ) Act,2013	Required
Compliance of provisions on Related Party Transactions	Applicable
Disclosure of Interests by Directors	Required
Participation by Interested Directors	Permitted
Prohibition to granting loans to directors and relatives	Not Applicable unless the company’s borrowings are equal to or more than twice of its paid up share capital
CSR Provisions, CSR Policy, Disclosures of CSR Policy and CSR Committee	Will apply only if net profits are Rs.5 Crores or more in the immediately preceding financial year; in any case, if the amount to be spent should be Rs.50 Lakhs, the average net profits during the three immediately preceding financial years must be of the size of 25 Crores. Therefore, the question of constituting CSR Committee may not arise. If CSR provisions apply due to phenomenal net profits, CSR Policy must be there and the same must also be disclosed in the Board’ Report
Annual Return	Required
Board’s Report	Required; however only abridged version as per rule 8A of the Companies (Accounts) Rules, 2014.
Audited Financial Statements (AFS)	Required
Cash Flow Statements	Not Required
Consolidated Financial Statements	Not Required
AOC -1, statement containing salient features of subsidiary etc.,	Not Required; unless the company has any joint venture or associate company.
Particulars of Contracts and Arrangements with Related Parties to be included in the Board’s Report in form AOC-2	Required
Appointment of Auditors	Required
Accounting Standards	As would apply to small and medium sized companies
Register of Members	Required
Register of Directors	Required
Register of Loans, Guarantees etc.,	Required
Register of Investments	Required
Register of Contracts and Arrangements with Related Parties	Required
Registration of Charges	Required
Holding not less than 4 Board Meetings	Required
Annual General Meeting	Required
Secretarial Standards	Applicable
Requirement to Maintain Minutes of Board and General Meeting	Required
Passing of Board Resolutions by Circulation of Resolutions to Directors	Permitted
Exercising of Powers only at Board Meetings	Required
Filing of Special and other Resolutions with Registrar of Companies in MGT-14 other than those falling under Section 179(3) of the Act	Required

 

 

BANK GUARATNEE UNDER CAROTAR – Much awaited order for importers who avail FTA benefits !!!

Post introduction of CAROTAR 2020, most of the importers who avail FTA benefits are frequently facing an issue of demand of 100% Bank Guarantee by Customs due to pending COO verification / enquiry pending etc.

Here is a good news to them that Hon’ble Tripura High Court ordered to accept Indemnity Bond and release the goods against provisional assessment.

It is apparent that when the verification is initiated, no record was available with the customs nor any communication was made to the importer that the verification was being under Rule 6(1)(a) or Rule 6(1)(b) or Rule 6 (4)(c) of the CAROTAR 2020 and hence, there was no reference to the security (BG).

The Importers are not afforded any opportunity to meet the purported deficiency for which the clearance has been refused. No observation on the legality or regularity of the process of verification on merit is called for at this stage, considering that the verification is still inconclusive.

The court has noted that the importer has not challenged the process of the verification  but the importer has made serious allegation that without affording any opportunity to him in respect of meeting any deficiency, the importer had been asked to opt or request for provisional assessment for purpose of clearing the goods on furnishing the security [100% bank guarantee] for the difference between the duty provisionally assessed under Section 18 of the Act and the preferential duty claimed.

Hon’ble Tripura High Court  held that “ the assessing officer and the other authorities are directed to provisionally assess the duty and to release the goods on obtaining an indemnity bond, to be submitted by the petitioner binding himself to deposit the duty or the difference between the duty that would be assessed by the competent authority on verification and the preferential duty within a period of 7(seven) days. In the event of failure to deposit the assessed duty on completion of verification within the said stipulated time, the payable duty shall carry interest at the rate of 15% per annum till the said duty is deposited”

“ The provisional assessment in respect of the goods covered under the Bill of Entry dated shall be completed within a period of two days from the date of receipt of a copy of this order. After furnishing of the indemnity bond, those goods be released within next 24 (twenty four) hours”

SHRI PIJUSH BANIK VERSUS UNION OF INDIA, THE ASSISTANT COMMISSIONER, DIVISION-1, CGST & SERVICE TAX, THE SUPERINTENDENT OF CUSTOMS, TRIPURA HIGH COURT decided on 08.02.2021

Very Important : In above case the importer has met all criteria of the CAROTAR, 2020 and possessed all information regarding the country of Origin of Goods as per Rule 4 and have furnished all requisite information to customs.

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 # Customs Law Quick Bites-49

 

Detention of vehicles and seizure of goods in transit under GST - Kerala High Court's clarification

 M/s Podaran Foods India (P) Ltd. (Appellant) vs. State of Kerala (Respondent)  Kerala High Court decided on 12.01.2021

Facts of the case: 

The Appellant filed the writ petitions challenging detention orders passed under the CGST Act when the scheme of the Act clearly indicated that the writ court was not to be ordinarily approached in detention cases where effective alternative remedies by way of provisional clearance, and appeal thereafter, were provided against alleged arbitrary/illegal detention orders. The goods and the vehicles were detained by the respondents on the ground that there was only one common invoice (for 22 packages) that was generated in respect of the two consignments, and when compared with the number of packages that were contained in each of the vehicles, there was a shortage of packages in both the vehicles. It was also found that the petitioner had not complied with the procedure prescribed under Rule 55 (5) of the CGST Rules while transporting goods in semi knocked down (SKD) or completely knocked down (CKD) condition or in batches or lots. 

Judgement: 

Kerala High Court explained the provision when the seizure of the goods or the vehicle can be exercised in a case where there seems a doubt of evasion in taxes. The consignee can choose to make the stipulated payments as per the notice, after which the notice would be concretized in the form of another order and the proceedings closed. But if the consignee wishes to challenge the detention/seizure, he can furnish security in the form of a bank guarantee covering the prescribed sum and get his goods/vehicle released provisionally, and then make his representation. Further, when it comes to making an appeal in the High Court, it was clearly specified that only after the consignee is given an opportunity to be heard and his objections considered can the concerned authority issue an order. If aggrieved, the consignee can approach the relevant authority under the legislation in appeal, but cannot approach the High Court at this stage. Hence, it was decided that detention and seizure of goods and vehicles is a reasonable restriction on the exercise of free trade and movement, but shouldn’t be exercised strictly only in order to prevent possible tax evasion. The Court opined that the need for strict construction of detention laws was “what is at stake is a constitutional right, fundamental or otherwise, of a citizen”

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 #GST Law Quick Bites-48

CUSTOMS BROKER’S CONTRACT OF IMPORT CLEARANCE INCLUDING PAYMENT CUSTOMS DUTY ON BEHALF OF IMPORTERS – IS CB ALSO LIABLE FOR PELATY U/S 114A DUE TO MIS DECLARATION / DUTY EVASION ?

 An importer had outsourced the entire import clearance operations to the customs broker. The Customs Broker has mis declared value of goods. During the assessment of the bill of entry, it was found by the department that the value declared by the CB was much lower than the value of contemporaneous imports and found CB had deliberately mis declared the quantity of the goods in order to evade payment of customs duty.

The Deputy Commissioner narrating the entire sequence of events ordered for confiscation of the imported consignments under Section 111(l) of the Customs Act 1962 and allowed the redemption on payment of redemption fine of ₹ 2,00,000/- under Section 125 of the Customs Act. He confirmed the demand of duty of ₹ 4,82,054/- upon reassessment and appropriated the amount of duty already paid towards this amount. He also imposed a penalty of ₹ 49,000/- on the importer under Section 112(b)(ii) of the Customs Act 1962.

Further he imposed a penalty of ₹ 1,00,000/- upon the Customs Broker under Section 114AA of the Customs Act 1962 for presenting false and incorrect material in the declarations made in the bills of entry.

The importer has not contested the order of the Deputy Commissioner and neither has the CB. The CB has paid the penalty imposed under Section 114AA.

Aggrieved by the order of the adjudicating authority, the Revenue has filed an appeal before the first appellate authority arguing that the penalties should have been imposed by the Deputy Commissioner upon the customs broker under Section 114A of the Customs Act 1962 which has not been done. Agreeing with the appeal filed by the Revenue, the first appellate authority has imposed a penalty of ₹ 4,82,054/- under Section 114A upon the Customs Broker. Aggrieved by the order, the present appeal has been filed by the Customs Broker before CESTAT.

Now let us the CESTAT order as follows ;

“SECTION 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under [the Customs Tariff Act, 1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or exported from, India.

(2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government.”

As can be seen, the charge of customs duty is on the goods imported or exported. The importer or exporter is therefore liable to pay the customs duty. It does not matter if  the importer or exporter entrusts this responsibility to somebody else, may be his own employee or an agent. The liability is on the importer or exporter only. The definition of importer also includes “any person who holds himself out to be importer”. In this case the Customs Broker has not claimed to be importer. In fact, the bills of entry mention the name of the main importer as the importer for the consignments. Therefore, the liability of customs duty rests only upon the importer. Accordingly Section 114A also applied to the importer in this case. It cannot apply to customs broker whose offence was mis-declaring facts in the bills of entry. Section 114AA is meant for such offences and a penalty under this has already been imposed by the Deputy Commissioner which has been paid by the Customs Broker.

Hence the impugned order imposing penalty of ₹ 4,82,054/- under Section 114A upon the Customs Broker is set aside.

RADO IMPEX LOGISTICS PVT LTD. VERSUS THE COMMISSIONER OF CUSTOMS, CESTAT HYDERABAD decided on 03.12.2019

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 #Customs Law Quick Bites-47

RoDTEP – Why Advance Authorisation holders are also should be included in this scheme ? An insight view

 RoDTEP ( Remission of Duties and Taxes on Exported Products ) has come into effect from 01/01/2021 but the Central Government is yet to notify Item wise RoDTEP rates. All the eligible exporters are advised to claim for RoDTEP while filing the shipping bill. When the rates are notified it will automatically get credited to the exporters ledger in the form of credits which can later be converted to credit scrips. Refer recent ICEGATE demo video how to  activate this account. These scrips can be used by the exporters for their own imports or it can be transferred to other needy IEC holder.

The important issue is, RoDTEP is not allowed to shippers who are claiming benefits under certain other schemes like Advance Authorization, EOU, Jobbing etc. We need to understand one important issue that the Advance Authorization does not lead to the complete zero-rating of the exports. The cost of electricity, freight, fuel etc are not factored in AA benefits which are unavoidable in the manufacturing process

It is very clear that the availment of Advance Authorization will not lead to complete zero-rating hence the Government must issue an appropriate clarification in this regard. To give real meaning to Prime Minister’s Atma Nirbhar Bharat initiative, AA holders also should be honoured for their share of committed exports.

EXPORT PROMOTION COUNCIL FOR EOUs & SEZs has taken up this issue to Central Government vide their representation letter dated 02.01.2021. It is high time to FIEO & other export councils also to take it forward to Hon’ble Finance Minister, for the benefit of their members who are exporting under AA scheme.

I suggest that the exporters availing the benefit of Advance Authorization must also express their intent in the invoice & shipping bills for claiming the benefits under RoDTEP. Such claims may be considered favourably in near future.   

The above views of the author is purely personal .Readers are requested to take the decision on their own.