AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 989
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.... 3. The Petitioner is a private limited company. The Petitioner manufactures, blends and sells indian made foreign liquor. Respondent No.1 is the Union of India. Respondent No.2 is the Central Board of Indirect Taxes and Customs. Respondent No.3 is the Principal Commissioner of Customs (Nhava Sheva). Respondent No.4 is Joint Commissioner of Customs. Respondent No.5 is the Deputy Commissioner of Customs, and Respondent No.6 is the Principal Commissioner of Customs, Noida, UP. 4. In case of import of goods by an Indian buyer from a foreign supplier, who is related, there is a possibility that the goods are imported at a lower value than the market price, thus causing a loss in customs duty levied on the value of the imported goods as per the provisions of the Customs Act. For that purpose, a specialized branch is set by the Customs known as Special Valuation Branch (SVB). Its function is to investigate the valuation of such imported goods from related parties. SVB investigates the impact of the such relationship on the invoice value of the imported goods. 5. The Petitioner has been importing concentrates of alcoholic beverages from M/s. Chivas Brothers Limited, United Kingdom....
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....4 February 2022 at Nhava Sheva port for clearance of the goods. A query was raised to the Petitioner on 1 April 2022, uploaded on the ICEGATE portal that as per recommendations of the SVB for the imports made after the year 2020 with effect from 1 January 2021, the value of the imported concentrates of alcoholic beverages of different malts is redetermined and is required to be loaded at the rate of Rs. 67.49% of the invoice value as per the SVB report. A similar query was uploaded on the ICEGATE Portal on 9 May 2022 at Inland Container Deport, Dadri, regarding bills of entry Nos. 8596233 and 8596820. The Petitioner was asked to give consent and to submit for either assessing the bills of entry with recommended loading or for assessing the bills of entry provisionally on submission of bond and bank guarantee for the differential duty. The Petitioner submitted bank guarantees on 27 May 2022 at Nhava Sheva Port and on 31 May 202 at Inland Container Deport, Dadri for the provisional assessment of import consignments The Petitioner submitted bank guarantees to the tune of Rs.2,08,18,000/- on 27 May 2022 and for Rs.1,30,16,000/- on 31 May 2022. Thereafter, for several bills of entry, th....
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....e provisional assessment should be done in respect of all future imports strictly in terms of Circular No.5/2016-Customs dated 9 February 2016. The Petitioner also prayed that the Respondents be directed to release the bank guarantees amounting to Rs.129,97,25,000/- furnished for the imports effected after 1 April 2022. On 27 September 2022, ad-interim order directing the Respondents not to take coercive steps against the Petitioner was granted. 11. We have heard Mr. Dil Jit Ahluwalia, learned Advocate for the Petitioner and Mr. Anil Singh, Additional Solicitor General for the Respondents. 12. The core issue before us is the direction to furnish the bank guarantees for differential duty on imports of the Petitioner's products by loading a specified percentage of the invoice value. There is no dispute that the power to direct furnishing security exists under Section 18 of the Customs Act. According to the Petitioner, this power is structured by Circulars No.5/2016 dated 9 February 2016 and Circular No. 38/2016 issued by the Central Board of Excise and Customs. According to the Petitioner, in the facts of the Petitioner's case, these Circulars, which are binding on the ....
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....er officer deems it necessary to make further enquiry; or (d) where necessary documents have not been produced or information has not been furnished and the proper officer deems it necessary to make further enquiry, the proper officer may direct that the duty leviable on such goods, be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed or re-assessed as the case may be, and the duty provisionally assessed." Section 18(1)(c) states that where the importer has produced all the documents and furnished complete information, however, if the Proper Officer deems it necessary to make further enquiry, the Proper Officer may direct that the duty leviable on such goods be assessed provisionally, if the importer furnishes such security as the Proper Officer may deem fit for payment of the deficiency, if any, between the duty as may be finally assessed or re-assessed as the case may be and the duty provisionally assessed. 14. The subject matter of this petition relates to the reference to the Special Valuation Bra....
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....upplied) The underlined portion above refers to investigation. Clauses-3.2 and 3.3 are of importance. They read as under: "3.2. The Board has reviewed the practice relating to levy of 'Extra Duty Deposits' (EDD) in cases where SVB investigations are undertaken. It has been taken into consideration that 'Extra Duty Deposit' @ 1% of declared assessable value is being obtained from the importer for a period of 4 months during which time he is required to submit required documents and information to the SVB. In the event of his failing to do so, the EDD can be increased to 5% till such time the importer complies. Upon the importer, complying with the requisition for documents and information, Circular 11/2001 - Cus dated 23.2.2001 provides that EDD shall be discontinued, while imports will continue to be assessed provisionally till the completion of investigations. In other words, the imports were continued to be assessed provisionally on the basis of a PD Bond but without any EDD. It has also been noted that many importers have represented on delays in dispensing of EDD, even though they have provided the required information and a period of 4 months has passed without the....
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....orts continued to be assessed provisionally based on a bond without any EDD. For the sake of reduction of transaction cost and for bringing uniformity across the customs house , by this Circular No.5/2016 the Board decided that while referring to SVB requires assessment to be provisionally no security in terms of EDD shall be obtained from the importers; however, the importers fail to provide documents within sixty days of requisition, security deposit of 5% of the declared assessable value shall be imposed by the Commissioner for a period of not exceeding three months. Simultaneously, the importers were granted a further time of sixty days to comply with the documents. If the importers fail to submit documents within the prescribed period, the SVB would consider for obtaining information. The security deposit was to be within three months. Clause-3.2 of Circular No.5/2016 refers to Circular No.11/2001, which had provided and makes a specific reference to imports to continue to assess provisionally till the completion of the investigation. Clause 3.3 of Circular No.5/2016 states that it has been decided that SVB will not issue an appealable order, instead, the SVB shall convey its ....
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....within 60 days. 6.2 The documents received from the importer with respect to the checklist shall be duly acknowledged by the SVB. An intimation shall be forwarded to RMD and the referring appraising group regarding submission of the documents within time so that provisional assessments, without security deposit or bank guarantee, continue till the finalization of the investigation. 6.3 The documents received from the importer with respect to the checklist shall be duly acknowledged by the SVB. An intimation shall be forwarded to RMD and the referring appraising group regarding submission of the documents within time so that provisional assessments, without security deposit or bank guarantee, continue till the finalization of the investigation. (emphasis supplied) Further procedure in the SVB is laid down in Clause-8, which reads thus: "8. Upon receipt of all related records from the referring customs formation, the SVB shall forthwith assign a case number and update the Central Registry Database (CRD) maintained by DGoV, The SVB shall also inform the RMD of the details of the importer, his IEC code, and details of seller for inserting suitable instr....
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....ould be no need to issue a speaking order for finalizing the provisional assessments in such cases. 9.1 However, when investigate findings are that the declared value has been influenced by the circumstances surrounding the sale, the proper officer shall issue a show cause notice to the importer within 15 days of the receipt of the IR, under intimation to the concerned SVB. 9.2 In cases where imports have been cleared through multiple customs locations, the jurisdictional commissioner of the SVB shall, after issue of notices by the proper officers in the said locations, make a proposal addressed to the Commissioner (Customs), CBEC recommending appointment of a common adjudicating authority by the Board for the purpose of passing order for finalization of the provisional assessments." This, in short, is the scheme of Circular No.5/2016.Thus by issuing Circular No.5/2016, the Board reviewed the practice of levying Extra Duty Deposit (EDD) and security in cases where the SVB has undertaken investigations. It is necessary to note at this stage that the underlined and emphasized portion from the clauses reproduced above refers to Investigation. This aspect will be e....
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....pon the Proper Officer under Section 18(1) of the Customs Act to demand such security as may be necessary to secure the interest of revenue. Even assuming the power is structured by Circular 5/2016, in the cases where reference is made to SVB, the conditions therein regarding personal bond and limited security is only till the investigation finding/ report by SVB is submitted. Circular No.5/2016 will have to be read in totality, and it is issued only to govern the procedure of investigation to be carried out by SVB and not the entire assessment. There is a clear distinction between the Investigation and Assessment. The subject matter of Circular No.5/2016 is the procedure of investigation by SVB. Therefore, in respect of conditions regarding furnishing security, Circular No.5/2016 will have to be restricted till the submission of the report by SVB. This aspect has been made very clear in Clause 6.3 of Circular No.5/2016; wherein there is a reference to the continuation of provisional assessment without a security deposit or bank guarantee only till the finalization of the investigation. Even Clauses 8.2 and 8.3 of the said Circular make the position very clear. After the investigat....
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....iring investigation are noticed, the concerned Commissionerate is supposed to transfer all relevant records to the jurisdictional SVB. Since SVBs are located at few places, the most proximate to the corporate office of the importer can be chosen. In Clause-3.2, the Board reviewed the practice of levying EDD in the cases where 'investigations' are undertaken. Thereafter in the context of the investigation, it is stated that EDD would be discontinued upon the importer complying with documents and information. The imports were supposed to be continued to be assessed provisionally on the basis of the bond but without EDD, and it was noted that there were delays in dispensing with EDD even when information necessary for investigation was supplied. To reduce the delay in the investigation before SVB and to bring uniformity and reduce transaction costs, the Board decided, no security in the form of EDD would be obtained from the importers. It is not necessary that Circular No.5/2016 should have prefixed each sentence with "pending investigation". The clauses of the Circular will have to be read meaningfully. Clause-3.3 states that earlier, the findings of SVB were appealable; now,....
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....ceived and show-cause notice is issued. 26. The Petitioner has also relied on Circular No.38/2016 and advanced arguments based on the same. Circular No.38/2016 lays down guidelines regarding provisional assessment under Section 18(1) of the Act. These are general guidelines. Circular No.38/2016 refers to the Customs (Provisional Duty Assessment) Regulations, 2011 and Notification No.81/2011-Customs(NT) dated 25 November 2011. It refers firstly to the deposit of 20% of the differential duty between provisional duty and duty to be finally assessed or re-assessed, secondly execution of a bond and, thirdly, the surety or security of the bond. As regards the deposit of 20% of duty provisionally assessed, the Circular mentions that the Board decided it to be dispensed with in favour of the importers to reduce transaction costs. Clause 2.7 refers to Section 18 of the Act of 1962 and that uniform guidelines are to be followed by all Customs Stations in respect of security. It would be necessary to reproduce Clauses 2.8, 2.9 and 3 of Circular No.38/2016. They read thus: "2.8 Wherever, duty is to be assessed provisionally, the importer shall: (a) for the purposes of unde....
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....o cause inquiries where differential duty has been estimated that security can be 100% of the differential duty. 27. On the implication of Circular No.38/2016, Mr. Ahluwalia, learned counsel for the Petitioner, submitted as follows: Under the Customs (Provisional Duty Assessment) Regulation 2022, in addition to the personal bond, security/bank guarantee up to 20% of differential duty could be leviable by the Proper Officer under Section 18(1) of the Act; however, this is reviewed and dispensed with as noted in Circular No.38/2016. Thus, the Respondents' action in demanding security in terms of a bank guarantee of up to 100% of differential duty even when the stipulation of 20% stands removed, is entirely illegal. The removal of 20% of the security of differential duty was to reduce the delay in the clearance of transactions for ease of doing business. Paragraph 2.8 of the Circular dated 38/2016 is clear and widely worded that whenever duty is to be assessed provisionally, a bond is to be executed, and the importer shall furnish security for payment of differential duty. The Respondents' case that even under Clause-3 of Circular No.38/2016, security can be obtained is mis....
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.... be assessed provisionally, the importer shall furnish such security for payment of duty deficiency. As per Clause- 3 of the said Circular, such security can be in the form of a bank guarantee. Clause 3 lays down, in a tabular form, the guidelines for obtaining security for provisional assessment. In sub-clause-4 of Clause-3, it is stated that the cases referred to SVB will be governed by Circular No.5/2016. 31. Proceeding on the basis that Circular No.38/2016 structures the power under Section 18 of the Act, even that will not assist the Petitioner. Sub-clause- 6(b) of Clause-3 of Circular No.38/2016 refers to the procedure after differential duty has been estimated. Therefore, after SVB has estimated the same till the finalization of the assessment, sub-clause 6(b)(1) of Clause-3 of Circular No.38/2016 would apply. Circular No.38/2016 in sub-clause (6)(b) of Clause-3 refers to the cases where it is necessary to order provisional assessment for causing inquiry. 32. Thus, the position after submission of the investigation report by SVB is not covered by Circular No.5/2016, and the contingency is covered under Section 18(1) of the Act and also by sub-clause-6(b)(1) of Clause-3....