2024 (4) TMI 246 - AT - Customs

First appellate authority exceeded remand jurisdiction by directing 5% royalty addition without section 28 show cause notice

CESTAT Mumbai held that the first appellate authority exceeded its remand jurisdiction by directing the proper officer to add 5% royalty to assessable ... Valuation of goods transacted between related persons - Royalty addition - Addition to assessable value to the extent of 5% of ‘net sale price’ of ‘precipitated calcium carbonate’ - remand jurisdiction of appellate authority to issue directions to ‘proper officer’ - No notice issued u/s 28 of Customs Act, 1962 - cross-border trade transaction - HELD THAT:- From the absence of show cause notice, as well as submission on behalf of appellant, it is again clear that such imports that are subject to Special Valuation Branch (SVB) oversight are, invariably, kept provisional for finalization to be undertaken upon completion of ascertainment by Special Valuation Branch (SVB). Therefore, at this stage, the quantification ordered by the first appellate authority pertains to finalization under section 18 of Customs Act, 1962 devolving on ‘proper officer’ that Deputy Commissioner, Special Valuation Branch (SVB) is not. As appeal has not been directed before first appellate authority against order of such ‘proper officer’, it transgresses the remand jurisdiction of such appellate authority to issue directions to ‘proper officer’ who has yet to complete the process of finalization. Direction to the ostensible ‘original authority’ is an exercise in futility and direction to the ‘proper officer’, and the statutorily empowered potential ‘original authority’, is beyond appellate jurisdiction of Commissioner of Customs (Appeals) before whom the order impugned did not challenge a ‘yet to occur’ assessment. In these circumstances, it behoves us to focus on the competence of the reviewing authority to have gone before the first appellate authority against the opinion of the Deputy Commissioner, Special Valuation Branch (SVB) that there was no need to add the ‘royalty’ to assessable value. Section 128 of Customs Act, 1962 stands on two limbs – decision being that of officer below the rank of Commissioner of Customs and from the decision causing a grievance. The author of the order impugned before the first appellate authority is certainly subordinate to Commissioner of Customs. However, as pointed out above, that opinion was not even persuasively binding on the ‘proper officer’ who, as assessing authority and obliged to issue speaking order, is required to arrive at assessment uninfluenced, even if not uninformed, by external sources. Therefore, there was no cause for grievance to initiate appellate remedies. Such opportunity would have presented itself after finalization. Implicit in acknowledgement of appellate remedy against ‘advisory’ of Special Valuation Branch (SVB) is another round of appeal through the first appellate authority on the same goods and facts which does not sit well with the principle of comety of courts. The appeal before the first appellate authority was, thus, premature. This aspect of disposal of the appeal within the scheme of Customs Act, 1962 and the role of Deputy Commissioner, Special Valuation Branch (SVB) within it was not evaluated by the Commissioner of Customs (Appeals). Thus, we set aside the impugned order and restore the appeal to first appellate authority to dispose off the pleas of the appellant- Deputy Commissioner in accordance with the scheme of Customs Act, 1962. Appeal is, thus, allowed by way of remand. Issues involved: The judgment involves the addition of royalty to the assessable value of imported goods u/s rule 10(1)(c) of Customs Valuation Rules, 2007 based on a license agreement, jurisdiction of Special Valuation Branch (SVB) in customs valuation, and the appellate authority's competence in directing remand.Addition of Royalty to Assessable Value: The appellant challenged the first appellate authority's decision to add royalty to the assessable value of imported goods based on a license agreement. The order lacked details of imports and did not follow the necessary procedures u/s 28 of Customs Act, 1962 for proposed additions. The appellate proceedings raised questions about the authority for such enhancement and its relevance to the agreement between related parties.Jurisdiction of Special Valuation Branch (SVB): The judgment delved into the role of SVB in customs valuation, highlighting that SVB is not the proper officer u/s 17 or 28 of Customs Act, 1962. The SVB's advisory competence does not extend to determining duty liability or recovery post-clearance for home consumption. The order's origin from SVB raised concerns about its legal grounding and authority to enhance the value for assessment.Competence of Appellate Authority: The appellate authority's decision to direct remand for adding royalty to the assessable value was deemed premature. The judgment emphasized that the opinion of the Deputy Commissioner, SVB, was not binding on the proper assessing authority. The appeal before the first appellate authority was considered premature as it did not align with the scheme of Customs Act, 1962. The judgment set aside the impugned order and remanded the appeal for proper disposal.(Order pronounced in the open court on 04/04/2024)