2024 (7) TMI 562 - AT - Customs

Service of SCN - Issuance of notice to finalise the assessment and demand duties etc. under section 28 of CA 1962 (revenue) or u/s 18 ibid - Undervaluation of imported goods - reprocessed LDPE / HDPE granules and HDPE agglomaterial from various overseas suppliers - alleged misdeclaration of values of the imported goods - involvement of fraud and collusion would justify the SCN issued under section 28 of CA 1962 along with invoking provision for confiscation and penalties or not - violation of principles of natural justice - HELD THAT - Its only after final assessment that the relevant date for issue of a notice to recover duty which has not been levied or has been short levied etc. involving fraud, if any, becomes operative. By issuing a legally defective notice, the opportunity to examine the probative value of the documents including statements on which reliance was placed by the department, in support of its allegations, was lost. The judgments cited by revenue regarding fraud are hence not found relevant in the peculiar facts of this case. The Hon ble Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT held that the nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import, under section 28 of CA 1962, is broadly a power to review the earlier decision of assessment. Hence the section comes into play only when assessment is final. In the case of AS Syndicate (Warehousing) P. Ltd. Vs Commissioner of Customs (Port) 2009 (12) TMI 609 - CALCUTTA HIGH COURT , the Hon'ble High Court had an occasion to analyse the issue as to whether the demand under Section 28 of the Customs Act, 1962 can be raised before the finalization of assessment. The Hon'ble High Court after referring to the analogous provisions under Rule 9-B(1) of Central Excise Rules, 1944, held that there being no final assessment, the demand-cum Show Cause Notice is without jurisdiction and quashed the same. The Hon'ble High Court of Bombay in the case of Commissioner of Customs (Import), Mumbai Vs Mahesh India 2006 (7) TMI 306 - BOMBAY HIGH COURT held that the Show Cause Notice issued under Section 28 when the goods have not been finally assessed is bad in law and not maintainable. Once the demand itself fails the appropriation of deposits towards duty, the penalties imposed on the appellants and the confiscation of the goods also fail. Appeal disposed off.

Issues Involved:
1. Whether a notice to finalize the assessment and demand duties can be issued under section 28 of CA 1962 or under section 18 ibid.
2. Whether the involvement of fraud and collusion justifies the SCN issued under section 28 of CA 1962 along with invoking provisions for confiscation and penalties.
3. Alleged violation of Principles of Natural Justice.
4. Validity of the provisional assessment process and its finalization.
5. The probative value of evidence and statements in the context of alleged fraud and suppression.

Issue-wise Detailed Analysis:

1. Notice to Finalize Assessment and Demand Duties:
The Tribunal examined whether the notice to finalize the assessment and demand duties could be issued under section 28 of CA 1962 or under section 18 ibid. The Tribunal found that the Bills of Entry (BE's) were provisionally assessed at the time of import. Section 28 of CA 1962 provides for recovery of duty which had not been levied or had been short levied, provided a notice demanding such duties was issued within the specified time limit. However, the "relevant date" for issuing such a notice is the date of adjustment of duty after the final assessment. Since the assessments were provisional, the proper course of action would have been to finalize them under section 18 before initiating proceedings under section 28. The Tribunal concluded that the process adopted by Revenue lacked a legal basis.

2. Involvement of Fraud and Collusion:
The Tribunal considered whether the involvement of fraud and collusion justified the SCN issued under section 28 of CA 1962 along with invoking provisions for confiscation and penalties. The Tribunal noted that the facts relating to suppression and fraud were corroborated by statements recorded under Section 108 of the Customs Act, 1962. However, it emphasized that the revenue must establish the value of imported goods satisfactorily and by methods known to law. The Tribunal found that the notice was prematurely issued and incorrect legal provisions were invoked, thereby vitiating the proceedings.

3. Alleged Violation of Principles of Natural Justice:
The Tribunal addressed the appellant's contention that the adjudication was ex parte and violated the Principles of Natural Justice. The Tribunal noted that although the law prescribes a minimum number of hearings, the circumstances under which the matter was decided ex parte needed examination. The Tribunal found that the appellant's request for more time to approach the Settlement Commission was not considered, which could have provided an alternate dispute resolution mechanism. The Tribunal concluded that the ex parte adjudication without considering the appellant's request was based on presumption and not in the spirit of procedural fairness.

4. Validity of the Provisional Assessment Process:
The Tribunal analyzed the validity of the provisional assessment process and its finalization. It found that the BE's were filed before Self-Assessment became the norm, and the department should have finalized the provisional assessment under section 18 before demanding duties under section 28. The Tribunal cited several judgments, including Canon India Pvt. Ltd. Vs Commissioner of Customs and AS Syndicate (Warehousing) P. Ltd. Vs Commissioner of Customs (Port), which held that a demand under Section 28 cannot be raised before the finalization of assessment. The Tribunal concluded that the notice was legally defective, and the assessments should have been finalized under the relevant section and valuation rules before alleging fraud and suppression.

5. Probative Value of Evidence and Statements:
The Tribunal considered the probative value of evidence and statements in the context of alleged fraud and suppression. It emphasized that the onus is on the Customs authorities to establish the value of imported goods satisfactorily. The Tribunal found that the notice was issued without proper verification procedures, especially in the case of imports under the Indo-Sri Lanka Free Trade agreement. The Tribunal concluded that the revenue's conclusion regarding fraud and under-valuation was unsound without proper verification and finalization of provisional assessments.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals. It held that the demand itself failed, and consequently, the appropriation of deposits towards duty, penalties imposed on the appellants, and confiscation of goods also failed. The appellants were deemed eligible for consequential relief as per law. The judgment emphasized the importance of adhering to proper legal procedures and ensuring procedural fairness in adjudication processes.

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