2023 (7) TMI 1190 - AT - Customs

Tribunal remands case for new decision, emphasizes reasons for rejection in customs valuation matters.

M/s. Jai Hind Traders Versus The Commissioner of Customs

The Tribunal found the impugned order legally unsustainable and remanded the case to the original authority to pass a speaking order after hearing the ... Valuation - Principles of natural justice - non-speaking order - Can appellant ask for a speaking order with cogent reasons for enhancement of the value in spite of the fact that the enhanced value is accepted only for avoiding the demurrage and other charges? - HELD THAT:- In view of Section 14 (valuation of goods) read with Rule 12 (2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the Proper officer has to provide cogent reasons for rejecting the declared value and the appellant has to be given an opportunity to be heard before enhancement of the declared value. Moreover, in the present case, the appellant had vide letters dated 19.3.2015 and 26.03.2016 had agreed for the enhanced value only to avoid detention and demurrages on the clearance of the goods and also vide letter dated 31.3.2015, appellant had requested for issuance of speaking order. The impugned order is legally not sustainable and is set aside. The issue stands remanded to the original authority for passing a speaking order on merits after hearing the appellant - appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether an importer who accepts an enhanced assessed value and pays duty to avoid detention/demurrage can thereafter require the proper officer to pass a speaking order under Section 17(5) of the Customs Act, 1962. 2. Whether the proper officer is obliged, under Section 14 read with Rule 12(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, to record and communicate cogent reasons (grounds for doubting the declared transaction value) and afford a reasonable opportunity of hearing before rejecting declared transaction value and enhancing valuation. 3. Whether a summary dismissal of an appeal by a higher authority on the ground that the importer had accepted the enhanced value and paid duty (without issuance of a speaking order) is legally sustainable. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Right to seek a speaking order despite prior payment of duty to accepted enhanced value Legal framework: Section 17 (as amended) requires self-assessment by importer; sub-section (4) permits re-assessment by proper officer; sub-section (5) mandates passing a speaking order on re-assessment where the re-assessment is contrary to self-assessment, except where the importer confirms acceptance of re-assessment in writing. Precedent treatment: The Tribunal relied on apex court jurisprudence holding that an order of self-assessment is appealable and that Section 17(5) contemplates issuance of a reasoned/speaking order when self-assessment is found unsatisfactory. The Tribunal also noted decisions recognizing that acceptance of enhanced valuation under compulsion (to avoid demurrage/detention) does not necessarily bar later challenge. Interpretation and reasoning: The Court examined whether mere payment of duty after agreeing to an enhanced value (to avoid immediate commercial harm) operates as an irrevocable written confirmation extinguishing the right to a speaking order and appeal. The Tribunal held that acceptance under compulsion (to avoid detention/demurrage) does not automatically constitute an unconditional confirmation under Section 17(5) that precludes issuance of a speaking order. The statutory scheme contemplates protection of substantive rights (challenge to valuation) even where duty was paid to secure release, and the right to a reasoned adjudication cannot be bypassed by informal or compelled acquiescence. Ratio vs. Obiter: Ratio - An importer's payment of duty consequent to an enhanced value accepted for avoiding detention/demurrage does not ipso facto bar the proper officer from issuing a speaking order nor deny the importer the right to seek such an order and to appeal; the statutory requirement for a speaking order in appropriate cases remains operative. Obiter - Observations on the broader policy implications of compelled acceptance and commercial pressures. Conclusions: The Tribunal concluded that the appellant could legitimately request a speaking order despite having paid duty after accepting the enhanced value to avoid detention/demurrage; summary refusal to issue a speaking order on the sole ground of payment/acceptance was not permissible. Issue 2 - Mandatory obligation to record and communicate grounds for doubting declared transaction value and to afford opportunity of hearing under Section 14 and Rule 12(2) Legal framework: Section 14 governs valuation; Rule 12(2) of the Valuation Rules requires the proper officer, at the importer's request, to intimate in writing the grounds for doubting the truth or accuracy of the declared value and provide a reasonable opportunity of being heard before making a final decision under Rule 12(1). Rules 3 and 4-9 prescribe the sequence for valuation if transaction value is rejected. Precedent treatment: The Tribunal relied on apex court pronouncements that have interpreted Rule 12(2) as imposing a mandatory duty on the proper officer to form and record reasons for reasonable doubt and to communicate them when requested, and that failure to comply renders the assessment flawed. The Tribunal followed precedents holding that formation of opinion and communication of reasons is the proper officer's mandatory obligation and that mandated procedures under the Valuation Rules cannot be bypassed. Interpretation and reasoning: The Tribunal held that Rule 12(2) imposes a mandatory procedural safeguard: when the proper officer has reasonable doubt about declared value, the officer must record the grounds and, upon request, communicate them and afford hearing before rejecting transaction value and proceeding to valuation under Rules 4-9. The Tribunal emphasized that this requirement cannot be circumvented by pressuring the importer to accept an enhanced valuation or by omitting to pass a reasoned/assessment order that discloses the grounds. Ratio vs. Obiter: Ratio - The proper officer must provide cogent reasons for rejecting the declared transaction value and must afford an opportunity of hearing in accordance with Rule 12(2); non-compliance renders the assessment/order legally infirm. Obiter - Comments on applying doctrine of prospective effect in some precedents (not applied here) and considerations for past cases. Conclusions: The Tribunal concluded that the original assessment/valuation process was procedurally defective because the appellant was not given cogent reasons nor an opportunity to be heard as required by Rule 12(2); thus the impugned order could not stand. Issue 3 - Legality of summary dismissal of appeal where no speaking order was issued below Legal framework: Appeals lie against 'any order' under the Customs Act; Section 128 read with Section 17 treats assessment (including self-assessment and re-assessment) as appealable. Section 17(5) requires a speaking order on re-assessment unless importer confirms acceptance in writing. Precedent treatment: The Tribunal relied on authoritative decisions establishing that absence of a speaking order in the original proceedings, by itself, does not automatically preclude appellate scrutiny; an appeal is maintainable against assessment orders where aggrieved and where procedural requirements (such as communication of reasons) were not complied with. Interpretation and reasoning: The Tribunal observed that the Commissioner's summary dismissal - premised on the contention that no speaking order could be issued because the original authority had not issued one and because the importer had accepted the enhanced value - failed to appreciate that appellate jurisdiction extends to all assessment orders and that the statutory right to a speaking order and to be heard cannot be negated by summary treatment. The Tribunal found that the Commissioner (A)'s dismissal was not a reasoned disposal in law. Ratio vs. Obiter: Ratio - Summary dismissal of an appeal on the ground that no speaking order exists below, when the appellant has sought reasons and contends acceptance was under compulsion, is not legally proper; the appellate authority must consider the substantive and procedural compliance with statutory obligations. Obiter - Remarks on the scope of appellate review and interplay with self-assessment. Conclusions: The Tribunal held that the summary dismissal was legally unsustainable and remanded the matter to the original authority to pass a speaking order on merits after affording the appellant an opportunity of hearing; appeals were allowed by way of remand. Cross-references and outcome Cross-reference: Issues 1-3 are interlinked - acceptance/payment to avoid demurrage (Issue 1) does not negate the mandatory procedural obligations under Rule 12(2) (Issue 2), and failure to comply with those obligations renders summary appellate dismissal improper (Issue 3). Outcome: The impugned order is set aside and the matter remanded to the original authority for passing a speaking order on merits after hearing the importer; appeals allowed by way of remand.