2025 (10) TMI 73 - HC - Customs

Appeal dismissed as department failed to contest importer's self-assessed Bills of Entry, assessments accepted; small-value dispute.

Union of India, represented by the Commissioner of Customs (Preventive), Meghalaya, Deputy Commissioner of Customs Agartala. Versus M/s Sri Rumon Dey.

Appeal dismissed. HC held that the department failed to challenge the importer's self-assessed Bills of Entry as required by precedent, so the assessments ... Evasion of additional duties of customs - undervaluation - cement from the same manufacturer in Bangladesh imported through Agartala, Land Customs Station (LCS) was having a higher MRP - Importer(respondent) claimed that impugned Bills of Entry duly which were self-assessed, were not challenged by the department - HELD THAT:- The judgment of the Supreme Court in ITC [2019 (9) TMI 802 - SUPREME COURT (LB)] specifically lays down that the self-assessment of the Bills of Entry by the importer has to be challenged by the department and it should be got modified under Section 128 or under other relevant provisions of the Act., if not the same has to be accepted by the department. The learned Tribunal had correctly applied the said principle to the facts of the case as it is not the case of the appellant that it had challenged at any point of time the self-assessment of the Bills of Entry by the respondent - Moreover, the reasoning given in paragraph no. 09 of the impugned order is worthy of acceptance and is certainly plausible and based on the knowledge of the members of the Tribunal as to how imports coming through different ports are normally treated by the department itself. The reasoning given by the Tribunal cannot be said to be perverse. So there are no merit in this Appeal. Also since value of this Appeal is very small i.e. of Rs. 73,000/-, it ought not to have been filed by the appellant. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal correctly applied the principle that departmental demand for differential duty cannot be raised without first challenging the importer's self-assessment of Bills of Entry under the applicable assessment and modification provisions. 2. Whether the Tribunal's conclusion that difference in MRP on identical goods imported through different ports is a valid explanation defeating an allegation of undervaluation is perverse or legally unsustainable. 3. Whether the impugned Tribunal order is rendered illegal or contrary to law by reason of the Explanation to the proviso to sub-section (2) of Section 3 of the Customs Tariff Act, 1975 (as contended). ISSUE-WISE DETAILED ANALYSIS - Issue 1: Requirement to challenge self-assessment before demanding differential duty Legal framework: The statutory scheme requires that an assessment (including self-assessment) stands unless modified by following the appropriate statutory proceedings (e.g., proceedings under Section 128 or other relevant provisions). A departmental demand for differential duty ordinarily presupposes that the original assessment has been lawfully questioned and modified in accordance with the Act; the department cannot, by issuance of a show cause/demand notice alone, bypass the statutory mechanism for challenging or modifying an assessment. Precedent treatment: The Tribunal relied on the Supreme Court's ruling establishing that the department cannot demand differential duty without first challenging the self-assessment and obtaining modification under the statutory remedies. The Court below followed that precedent rather than distinguishing or overruling it. Interpretation and reasoning: The Tribunal found, on facts, that the department did not at any stage challenge or seek modification of the original self-assessed Bills of Entry; consequently, issuance of demand notices seeking differential duty was procedurally impermissible. The appellate Court accepted that the precedent's ratio squarely applies where no attempt was made to modify the self-assessment by invoking the statutory provisions for reassessment or rectification. Ratio vs. Obiter: The holding that differential duty cannot be demanded without challenging self-assessment is treated as ratio - a binding rule of procedure under the statutory assessment scheme. Application of that rule to the present facts is ratio for the dispute decided. Conclusion: The Tribunal correctly applied the legal principle that departmental demands for differential duty are unsustainable where the department has not challenged or modified the original self-assessment through the statutory remedies; the demand was therefore invalid on this ground. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Validity of Tribunal's factual conclusion on MRP differences and undervaluation Legal framework: Allegation of undervaluation requires the department to establish that declared value was suppressed relative to the true transactional value; comparisons with contemporaneous imports may be relevant but must account for lawful reasons for price differences (e.g., place/port of importation, landing costs, local factors affecting MRP). Fact-finding by the Tribunal on valuation and commercial reasons for pricing differences is entitled to deference unless perverse. Precedent treatment: No precedent was overruled or distinguished on the factual proposition; the Tribunal's reliance on commercial realities (different ports leading to legitimately different MRPs) is consistent with established principles permitting legitimate non-fraudulent explanations for price variance. Interpretation and reasoning: The Tribunal observed that identical goods imported from the same manufacturer but through different land ports were subject to different MRPs, and that factors such as place of importation, landing costs and local market considerations legitimately affect MRP. There was no evidence that goods bearing different MRPs were being sold at the same downstream price or that the importer had suppressed value. The appellate Court found the Tribunal's reasoning plausible and grounded in knowledge of how imports via different ports are treated, and therefore not perverse. Ratio vs. Obiter: The factual conclusion that price differences between consignments imported through distinct ports can be legitimate and not evidence of undervaluation constitutes the operative ratio for the valuation issue in this appeal; observations about commercial factors are determinative rather than obiter. Conclusion: The Tribunal's factual finding rejecting undervaluation on the ground of legitimate price variation between ports is sustainable, not perverse, and supports dismissal of the demand on valuation grounds. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Applicability of the Explanation to the proviso to sub-section (2) of Section 3 of the Customs Tariff Act, 1975 Legal framework: The Explanation to the proviso to sub-section (2) of Section 3 (as invoked) concerns interpretative nuances of valuation under the Customs Tariff Act. Any contention that the Explanation mandates a different outcome must show that statutory language compels a departure from the Tribunal's procedural or valuation conclusions. Precedent treatment: The appeal's argument that the Tribunal's decision is illegal in view of the Explanation was considered but not accepted; the Court observed that the controlling precedent on self-assessment modification and the Tribunal's factual findings on MRP differences were dispositive, and that no legal error flowed from ignoring or misapplying the Explanation. Interpretation and reasoning: The Court found no demonstration that the Explanation to the proviso altered the requirement that self-assessment be challenged by the department before seeking differential duty, nor that it mandated an inference of undervaluation despite the absence of evidence of suppression. The Tribunal's dual grounds-procedural infirmity of the demand and plausible factual exculpation on MRP differences-rendered the Explanation inapplicable to alter the outcome. Ratio vs. Obiter: The Court's treatment of the Explanation is ratio in so far as it concludes that the Explanation does not negate the need for departmental challenge of self-assessment nor override credible factual findings on price differentials; any peripheral comments were obiter. Conclusion: The Explanation to the proviso to sub-section (2) of Section 3 does not render the Tribunal's order illegal; the alleged statutory provision does not supply a basis to sustain the demand where the self-assessment was not challenged and where legitimate commercial reasons for price differences exist. CROSS-REFERENCES AND OVERALL CONCLUSION 1. Issues 1 and 2 are inter-related: procedural infirmity (failure to challenge self-assessment) independently invalidates the demand, and the factual conclusion on MRP differences independently defeats the substantive allegation of undervaluation. Either ground is sufficient to sustain the Tribunal's order. 2. The Tribunal followed controlling precedent on the necessity to challenge self-assessment and reached a plausible factual conclusion on valuation; neither ground was shown to be perverse or contrary to law. Consequently, the Tribunal's dismissal of the demand is legally sustainable.