2025 (11) TMI 1729 - AT - Customs

Differential duty demand on iron ore exports quashed; only proper officer can finalize provisional assessments under ss.17(4),18

CESTAT Mumbai held that differential duty demand on export of iron ore fines could not be sustained where 13 of 15 shipping bills remained under ... Recovery of differential duty on export of iron ore fines - finalization of provisional assessment of 13 shipping bills that had been assessed provisionally - invocation of extended period of limitation - HELD THAT:- It is on record that the 13 of the 15 shipping bills impugned in the proceedings had been pending finalization when the show cause notice was issued. In fact, these 13 shipping bills continue to remain provisionally assessed and the adjudicating authority took it upon itself to determine the manner in which finalization was to be done. A plain reading of section 18 of Customs Act, 1962 makes it abundantly clear that the assessment was to be finalized in terms of section 17(4) of Customs Act, 1962 and by the ‘proper officer’ thereon. Commissioner of Customs is not the ‘proper officer’ and where the adjudicating authority exercised the powers vested in a subordinate authority, the finalization itself should have been undertaken. The determination by the Commissioner of Customs placed the ‘proper officer’ in a quandary inasmuch as it left no scope for application of mind on the part of the ‘proper officer’ and the final outcome a foregone conclusion. That the assessments were finalized in 2009 is common ground, that the determination by adjudicating authority lacked ingredients permitting invoking of the extended period owing to empowerment of the ‘proper officer’ to call for all documents required for finalization with any deficiency thereof not amounting to suppression, wilfull misstatement or collusion rendered the invoking of the extended period to have been contrary to law. There is, therefore, no scope for entertaining the appeal of Commissioner of Customs, Central Excise and Service Tax, Goa against dropping of proceedings insofar as the two shipping bills are concerned. The impugned order is set aside - The appeal of Revenue is dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the Commissioner of Customs is the 'proper officer' competent to finalize provisional assessments under section 18 of the Customs Act, 1962 and to prescribe the manner of such finalization for shipping bills kept provisional. 1.2 Whether the Commissioner of Customs could, in adjudication proceedings, lawfully issue binding directions on valuation and quantity (including reliance on discharge-port quantity and CRCL test reports) for the finalization of provisional assessments by the 'proper officer'. 1.3 Whether, in respect of two shipping bills whose assessments were finalized in 2009, the extended period under section 28(4) of the Customs Act, 1962 could be invoked for recovery of differential export duty, and whether the dropping of such demand by the adjudicating authority was sustainable. 1.4 Consequent relief in respect of the 13 provisionally assessed shipping bills and the Revenue's appeal regarding the two finalized shipping bills. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Competence of Commissioner to finalize provisional assessments and to issue binding directions on their mode of finalization Legal framework 2.1 The judgment reproduces and relies upon section 18 of the Customs Act, 1962, particularly section 18(2), which stipulates that when the duty leviable on provisionally assessed goods is assessed finally 'in accordance with the provisions of this Act', the amount provisionally paid shall be adjusted against the duty finally assessed, leading to deficiency payment or refund as the case may be. 2.2 The Court notes that a 'plain reading' of section 18 makes it 'abundantly clear' that finalization of provisional assessment is to be carried out in terms of section 17(4) of the Customs Act, 1962 and by the 'proper officer' referred to in section 18(1). Interpretation and reasoning 2.3 The Court holds that only the 'proper officer' contemplated under section 18(1), acting in accordance with section 17(4), is empowered to finalize provisional assessments. The Commissioner of Customs is not such 'proper officer' for this purpose. 2.4 It is recorded that 13 of the 15 impugned shipping bills were still pending finalization when the show cause notice was issued and, in fact, continue to remain provisionally assessed. Nevertheless, the adjudicating authority (Commissioner) 'took it upon itself' to determine the manner in which finalization was to be done. 2.5 The Court observes that by issuing directions that the value should be the price declared at the time and place of exportation, and that for finalization 'the test report analysis carried out by the CRCL, Goa read with the actual quantity of goods delivered at the discharge port should be the criterion', the Commissioner effectively predetermined the basis on which the 'proper officer' must finalize assessment. 2.6 This conduct is held to be beyond the competence of the Commissioner because: (a) The Commissioner, not being the 'proper officer' for section 18 read with section 17(4), could not himself finalize or prescribe binding parameters for finalization of provisional assessment. (b) Such directions would leave 'no scope for application of mind' by the 'proper officer', rendering the final outcome a 'foregone conclusion'. (c) It would also create procedural difficulties for the exporter, who, upon eventual finalization by the proper officer, could only challenge the assessment under section 128, even though the decisive terms had already been settled at the Commissioner's level. (d) The statutory scheme does not envisage investigation authorities issuing notices and culminating in a determination where the Commissioner, rather than the proper assessing officer, effectively controls the final assessment basis. 2.7 The Court therefore concludes that the Commissioner's directions on valuation and quantity (including adoption of discharge-port quantity and specific reliance on CRCL Goa test reports) for finalization by the proper officer are 'without authority of law'. Conclusions 2.8 The Commissioner of Customs is not the 'proper officer' authorized under sections 18 and 17(4) to finalize provisional assessments. 2.9 The directions issued by the Commissioner prescribing the precise criteria and method for such finalization, including mandatory use of discharge-port quantity and CRCL test reports, are ultra vires and are set aside to that extent. 2.10 The 'proper officer' remains at liberty to finalize the provisional assessments independently, in accordance with section 18 of the Customs Act, 1962, considering evidence including that gathered during investigation, but without being bound by the Commissioner's earlier directions. Issue 3: Validity of invoking extended period under section 28(4) for two shipping bills already finalized in 2009 Legal framework 2.11 The proceedings sought to recover differential duty under section 28(4) of the Customs Act, 1962, which permits invocation of an extended limitation period where non-levy or short-levy is by reason of suppression of facts, wilful misstatement, collusion, or like ingredients. 2.12 Section 18(2)(a) of the Customs Act, 1962 provides that, upon final assessment, the amount provisionally paid is to be adjusted against the duty finally assessed and any short payment recovered, or excess refunded, as applicable. Interpretation and reasoning 2.13 It is common ground that the assessments in respect of the two shipping bills were finalized in November 2009. The Court treats those assessments as having been completed by the competent 'proper officer'. 2.14 The Court holds that, in such a situation, the extended period under section 28(4) cannot be invoked because: (a) The 'proper officer' had the statutory empowerment to 'call for all documents required for finalization'. (b) Any deficiency in documents or information at the time of such finalization, where the proper officer could and should have sought them, would not amount to 'suppression, wilful misstatement or collusion' attributable to the exporter. (c) Consequently, the necessary ingredients for the application of section 28(4) are 'lacking' in the determination by the adjudicating authority. 2.15 In light of the above, the Court finds that invoking the extended period under section 28(4) for these already-finalized assessments was 'contrary to law'. Conclusions 2.16 For the two shipping bills whose assessments were finalized in 2009, the extended limitation under section 28(4) is not available in the absence of suppression, wilful misstatement, collusion or like conduct. 2.17 The dropping of proceedings for recovery of differential duty in relation to these two shipping bills is held to be correct, and there is 'no scope for entertaining' the Revenue's appeal challenging such dropping. Issue 4: Consequential relief regarding 13 provisionally assessed shipping bills and the Revenue's appeal Interpretation and reasoning 2.18 For the 13 shipping bills that remained provisionally assessed, the Court emphasizes that any cause of grievance to the exporter can arise only after finalization by the proper officer, and any challenge to such finalization can then be pursued under section 128 of the Customs Act, 1962. 2.19 Since the Commissioner's directions on the manner of finalization are held to be without authority of law, the impugned order is set aside 'to the extent of 13 shipping bills'. The proper officer is left free to finalize those assessments 'as and when deemed fit' in accordance with section 18. 2.20 As regards the Revenue's appeal, once the extended period under section 28(4) is held wrongly invoked and the dropping of proceedings for the two finalized shipping bills upheld, no further relief could be granted to Revenue. Conclusions 2.21 The impugned order is set aside only insofar as it contains directions governing the mode and criteria for finalization of the 13 provisionally assessed shipping bills; those assessments are to be finalized afresh by the proper officer under section 18 of the Customs Act, 1962. 2.22 The appeal filed by the Revenue against the dropping of proceedings relating to the two finalized shipping bills is dismissed.