2017 (6) TMI 1016 - HC - Customs

Non-speaking order - case of petitioner is that petitioner, essentially, uses the Ethernet Switches, which are, in effect, non-carrier Ethernet Switches or Enterprise Switches, within a defined area, such as, a campus or a building. The carrier Ethernet Switch, on the other hand, are used over a dispersed geographical areas. These are switches, which are used by service providers, such as BSNL, Airtel and Vodafone. The petitioner, therefore, clearly falls within the ambit of the exemption notification dated 01.03.2005 - whether or not, respondent Nos.1 and 2 are required to pass speaking orders, with respect to BEs, filed by the petitioner, at the time of seeking clearance of the subject goods? Held that - the petitioner has cleared goods via seven (7) BEs. In six (6) BEs, the goods are described as network switches , while in the seventh (7th) BE, i.e., BE No.2968893 dated 19.10.2015, the goods are described as Enterprise Ethernet Switch . - In respect of all BEs, save and except BE No.2968893 dated 19.10.2015, the petitioner had paid duty under protest, which has been registered with the concerned authority. As a matter of fact, each of the letters of protest, which is on record, bears a stamp, to that effect. Only if, the petitioner s assessment was doubted, verification, examination or testing of goods would have taken place and thereafter, perhaps, led to reassessment of duty. The respondents, thus, took the stand that, it is only when re-assessment of duty is carried out under sub-section (4) of Section 17 of the Act, and, it is contrary to self-assessment carried out by an importer or an exporter (as the case may be), with respect to valuation of goods, classification, exemption or concession of duty availed consequent to any notification that an obligation is cast on the respondents to pass a speaking order, under sub-section (5) of Section 17 of the Act within the defined period. Whether there was a duty cast on the proper officer to verify, examine or test the subject goods, in view of the protest registered by the petitioner? - Held that - under sub-section (2) of Section 17 of the amended provision, it is incumbent on the part of the proper officer to verify the claim of the petitioner, in the light of the protest registered by him. In so far as BE No.2968893, dated 19.10.2015, was concerned, even though the BCD rate was mentioned as nil , the petitioner was not allowed to either clear the goods or, register a protest, in contrast to other BEs. The petitioner, in fact, paid duty at the very same rate and cleared the goods after executing a test bond - the proper officer took the view that duty was payable in respect of the goods cleared. This view was applied across all seven (7) BEs. The petitioner is right that the proper officer is duty bound to pass a speaking order in terms of sub-section (5) of Section 17 of the Act - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Requirement for respondents to pass speaking orders for Bills of Entry (BEs).
2. Classification and exemption status of imported Ethernet Switches.
3. Obligations of customs authorities under Section 17 of the Customs Act, 1962.
4. Petitioner's right to appeal and seek redressal.

Detailed Analysis:

1. Requirement for Respondents to Pass Speaking Orders for Bills of Entry:
The petitioner sought directions for respondent No.2 to make available test results and pass speaking orders for the specified BEs. The court focused on whether respondents were required to pass speaking orders for the BEs filed by the petitioner at the time of seeking clearance of the subject goods. The court noted that the petitioner had paid duty under protest for six BEs, which were registered with the concerned authority. Despite repeated requests by the petitioner through letters spanning from 15.10.2015 to 11.03.2016, no speaking orders were passed by the respondents. The court concluded that the proper officer is duty-bound to pass a speaking order in terms of sub-section (5) of Section 17 of the Act, particularly when a protest is registered.

2. Classification and Exemption Status of Imported Ethernet Switches:
The petitioner, engaged in the import and distribution of Telecommunication and IT Accessories, imported Ethernet Switches and claimed exemption from customs duty under notification No.24/2005 dated 01.03.2005. However, the notification was amended on 11.07.2014 to exclude "Carrier Ethernet Switches" from the exemption regime. The Customs Authorities then required payment of Basic Customs Duty (BCD) for the Ethernet Switches. The petitioner argued that the imported goods were non-carrier Ethernet Switches used within defined areas like enterprise campuses/buildings and should remain exempt from BCD. The court noted that the classification of Ethernet Switches into Carrier and Enterprise Ethernet Switches could vary based on their usage, as indicated by the Department of Telecommunication (DoT).

3. Obligations of Customs Authorities under Section 17 of the Customs Act, 1962:
The court analyzed the provisions of Section 17, both pre and post-amendment, to determine the obligations of the customs authorities. Under the amended Section 17, the proper officer is empowered to verify self-assessment, test goods if necessary, and reassess duty if the self-assessment is found incorrect. The court emphasized that when a protest is registered, it is incumbent upon the proper officer to verify the claim and pass a speaking order. The court rejected the respondents' argument that no speaking order was required since the petitioner had followed the self-assessment route, noting that a protest had been registered at the time of payment of duty.

4. Petitioner's Right to Appeal and Seek Redressal:
The court addressed the respondents' argument that the petitioner should have filed an appeal within the period of limitation prescribed under Section 128 of the Act. The court found this argument unconvincing, noting that without a speaking order, any appeal would be inefficacious. The court cited precedents where courts allowed claims for refund or appeals even when no formal appeal was filed, emphasizing that the scheme of the Act does not exclude the passing of a speaking order when a protest is lodged at the time of payment of duty.

Conclusion:
The court directed the proper officer to pass speaking orders for the specified BEs within 15 days from the date of receipt of a copy of the order and to provide any available test reports to the petitioner. The writ petition was disposed of with these directions, and no order as to costs was made.