2015 (10) TMI 605 - HC - Customs

Dispute of personal hearing before Final Assessment - Petition filed on principles of natural injustice - Petitioner contends that a demand should precede a final assessment or any show cause notice is issued Further contends that principles of natural justice have been violated and opportunity of being heard to the Petitioner must be given - Petitioner appeals the quashing and setting aside the impugned communications Respondents contend that there is no merit in the Writ Petition Further holds that bill of entry was filed and provisional assessment was made Bond was executed demanding the differential duty and SCN was issued thereafter the assessment was finalised based on the documents available. Held That - It is evident that neither there is any record of personal hearing nor there is a further record of a finalisation of the assessment and its communication to the Petitioner - Writ Petition succeeds and demand notice is quashed and set aside clarifying that in the event an order is passed in pursuance of SCN and after hearing the Petitioner, the Revenue can proceed to recover the tax or amounts due Decided in favour of the Petitioner.

Issues:
1. Interpretation of customs duty exemption notification.
2. Validity of final assessment of bill of entry.
3. Compliance with principles of natural justice in customs proceedings.
4. Admissibility of appeal against customs assessment orders.

Issue 1: Interpretation of customs duty exemption notification

The petitioner, an export house status holder, imported bright yellow crude sulphur and claimed exemption from customs duty based on a notification. The petitioner submitted all relevant documents for assessment, relying on a previous departmental view and the opinion of the Deputy Chemist. However, a show cause notice was issued alleging non-production of original documents. The respondent argued that provisional assessment was done under section 18(1) of the Customs Act due to the petitioner's inability to furnish documents. The final assessment was completed under section 18(2) based on available documents. The court noted the appealable nature of the final assessment order and dismissed the petitioner's claim, emphasizing the availability of an appeal process.

Issue 2: Validity of final assessment of bill of entry

The petitioner contended that the final assessment and subsequent demand for differential duty were invalid as they were not preceded by an adjudication process or compliance with natural justice principles. The respondent acknowledged the absence of a record of a hearing or communication of the final assessment to the petitioner. The court held that without adjudication and confirmation of the demand, coercive recovery measures were impermissible. It emphasized the importance of following procedural stages in tax matters and the right of the assessee to object and be heard before confirmation of a demand.

Issue 3: Compliance with principles of natural justice in customs proceedings

The petitioner argued that the principles of natural justice were violated due to the lack of a hearing before finalizing the assessment and issuing the demand notice. The court agreed, stating that the absence of a record of a hearing or finalization of assessment undermined the validity of the demand notice. It emphasized the need for proper adjudication and a hearing before recovery actions could be taken, ensuring the petitioner's right to be heard and contest the assessment.

Issue 4: Admissibility of appeal against customs assessment orders

The respondent contended that the final assessment order was appealable, and the petitioner could challenge it through the appellate process. The court noted the appealability of such orders and dismissed the petitioner's claim, highlighting the importance of utilizing the available appeal mechanisms instead of seeking judicial intervention without exhausting statutory remedies.

In conclusion, the court quashed the demand notice but clarified that the revenue could proceed with recovery after passing an adjudication order following a proper hearing. The judgment emphasized the necessity of adhering to procedural fairness, including providing opportunities for the petitioner to contest assessments before enforcing recovery actions.

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