2009 (3) TMI 831 - Commissioner - Customs

Provisional assessment - Knowledge of exporter - Sampling - Procedure - Evidence - Test report - Export - Misdeclaration - Proof - Demand - Limitation

Summary

Issues Involved:
1. Provisional vs. Final Assessment of Shipping Bills
2. Validity of Sampling Procedure
3. Reliability of CLRI Test Report
4. Applicability of Section 17(4) of the Customs Act
5. Buyer's Certification and Acceptance
6. Limitation Period for Issuing Show Cause Notice

Detailed Analysis:

1. Provisional vs. Final Assessment of Shipping Bills:

The appellants contended that the assessment of shipping bills attained finality at the time of export and could not be reopened unless a proper appeal was filed. The adjudicating authority argued that the export was allowed on a provisional basis, but the evidence of provisional assessment was not on record. The provisions of Section 17(4) of the Customs Act, 1962, were cited, which allow reassessment if declarations are found false. However, the adjudicating authority failed to prove that the facts of provisional assessment were known to the appellants, making the applicability of Section 17(4) questionable.

2. Validity of Sampling Procedure:

The appellants argued that the procedure for sampling under Section 144 of the Customs Act was not followed, as no sample piece was given to their representative. The adjudicating authority claimed that due procedure was followed, but there was no evidence to support this. The absence of the owner's signature on the sample memo or sealed packet containing the sample raised doubts about the authenticity of the samples. Thus, the benefit of doubt regarding the authenticity of samples went to the appellants.

3. Reliability of CLRI Test Report:

The appellants challenged the CLRI test report on several grounds, including the delay in testing, the report being an examination rather than a proper test report, and the lack of detailed grounds for the findings. The adjudicating authority's reliance on this report was deemed questionable due to the inordinate delay and the non-specific nature of the report. The initial report from CLRI was in favor of the appellants, and the subsequent report did not provide clear evidence to contradict this.

4. Applicability of Section 17(4) of the Customs Act:

The adjudicating authority cited Section 17(4) to justify reassessment. However, the applicability of this provision was contingent upon proving that the appellants' declarations were false. Since this issue was not settled, the applicability of Section 17(4) remained in doubt. The adjudicating authority's observation regarding distinguishing the law laid down in the Flocks India case (supra) was not acceptable, as there was no evidence of provisional assessment.

5. Buyer's Certification and Acceptance:

The appellants submitted a letter from their buyer certifying that the consignment was "Buff finished Nubuck Leather" of four colors, including beige. The adjudicating authority dismissed this letter as a deciding factor, but the appellate authority differed, stating that the buyer's certification could not be ignored. The buyer would not have accepted the material if it did not meet the specified norms, making this evidence significant.

6. Limitation Period for Issuing Show Cause Notice:

The appellants argued that the show-cause notice was barred by limitation under Section 28 of the Customs Act, 1962, as it was issued after more than six months from the date of export. The adjudicating authority did not invoke the provisions of the extended period. The appellate authority found this submission correct, as the show-cause notice was served after 11 months, making the demand time-barred.

Conclusion:

The appellate authority found that the adjudicating authority's reliance on the CLRI report was flawed due to procedural lapses and the non-specific nature of the report. The buyer's certification was deemed significant, and the show-cause notice was found to be time-barred. Consequently, the appeal was allowed, and the impugned Order-in-Original was set aside.