2020 (3) TMI 1009 - AT - Customs

Maintainability of appeal - compliance of pre-deposit - section 129E of CA - Valuation - inclusion of royalty in the assessable value of imports - HELD THAT - There can be no order for recovery of duties of Customs on past imports that were finally assessed without recourse to Section 28 of Customs Act, 1962. Should that eventuality occur, the proper officer would, doubtlessly, issue an order quantifying the demand after following the procedure laid down in law. That could be a cause of grievance and any appeal therefrom, in compliance with Section 129E of Customs Act, 1962, could be entertained by the first, or subsequent, appellate authorities. The appellant is not aware of any action initiated on the prospective ruling on assessments of future imports, whether provisional or final. In Customs (Finalisation of Provisional Assessment) Regulations, 2018, we find that Regulations 4(8), 6(3) and 6(4) provide for consent or justification, as the case may be, on each bill of entry - to entertain and dispose of the appeal would tantamount to presenting the proper officer from applying its mind to finalization of an assessment and, indeed, to interfere in an assessment that is yet to fructify. The order of the Joint Commissioner of Customs is also not of such detriment to the appellant as to warrant circumventing of the requirement of mandatory pre-deposit for entertaining appeals under Section 128, or Section 129 of Customs Act, 1962. The proceedings initiated, and concluded, by the Joint Commissioner of Customs poses no detriment, as noted in the impugned order, till an import is effected or a notice for recovery of duties on past imports has been issued. Admittedly, these events have not taken place and the appellate authority has acted in haste to take up the appeal for disposal prematurely. An order emanating from the authority invested in Special Valuation Branch of Custom houses under administrative instructions of Central Board of Excise Customs are not orders which are capable of complying with the pre-requisites for filing of an appeal in Chapter XV of Customs Act, 1962. The first appellate authority erred in taking up the appeal preferred before it despite non-compliance of Section 129E of Customs Act, 1962 - To hear the appeal arising from an order issued without jurisdiction would be to compound the illegality of the proceedings. Matter remanded back to the first appellate authority to consider the appeal only to the extent of statutory jurisdiction conferred upon it.

Summary

Issues Involved:
1. Validity of the directions issued by the Joint Commissioner of Customs regarding the inclusion of royalty in the assessable value of imports.
2. Legitimacy of invoking the extended period under Section 28 of the Customs Act, 1962.
3. Compliance with the pre-deposit requirement under Section 129E of the Customs Act, 1962.
4. Jurisdiction of the Special Valuation Branch and its authority to review past assessments.
5. Procedural propriety in the issuance of demands and initiation of recovery proceedings.

Issue-wise Detailed Analysis:

1. Validity of the directions issued by the Joint Commissioner of Customs:
The appeal challenges the directions by the Joint Commissioner of Customs to include royalty in the assessable value of imports and to provisionally assess future imports. The monetary implications were not quantified at the time of appeal. The Tribunal noted that the system of loading factors based on royalty payments had been prevalent and continued in Custom houses.

2. Legitimacy of invoking the extended period under Section 28 of the Customs Act, 1962:
The Joint Commissioner of Customs invoked the extended period for recovery of differential duty from 2011 to 2014, citing suppression of the royalty agreement. The Tribunal observed that the first appellate authority failed to ascertain the scope for invoking the extended period, which is a critical procedural aspect.

3. Compliance with the pre-deposit requirement under Section 129E of the Customs Act, 1962:
The Tribunal highlighted that the first appellate authority proceeded with the appeal without the mandated pre-deposit, as there was no quantified demand. The Tribunal emphasized that appeals under Chapter XV of the Customs Act, 1962, require compliance with Section 129E, irrespective of whether the demand is quantified.

4. Jurisdiction of the Special Valuation Branch and its authority to review past assessments:
The Tribunal noted that the Special Valuation Branch's review and resulting order were tentative and preliminary. It referenced Circular No. 11/2001-Cus., which does not confer authority on the Joint Commissioner to venture into past assessments without senior-level accountability. The Tribunal cited the Supreme Court's decision in Century Metal Recycling Pvt. Ltd., emphasizing that valuation alerts should not interfere with the discretion of the assessment authority.

5. Procedural propriety in the issuance of demands and initiation of recovery proceedings:
The Tribunal stated that demands for unpaid duties must be implemented by appropriate orders and actions for recovery. It found that the proceedings by the Joint Commissioner posed no immediate detriment until an import is effected or a recovery notice is issued. The Tribunal referenced the Supreme Court's decision in M/s. Tecnimont Pvt. Ltd., which held that appellate authorities cannot override statutory pre-deposit requirements.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the first appellate authority to consider the appeal within the statutory jurisdiction. It emphasized the necessity of compliance with Section 129E for entertaining appeals and the proper procedural conduct for recovery of duties.