ORDER OF DY. COMMISSIONER (CUSTOMS) CONTRARY TO THE ADVANCE RULING

[Mr. M. GOVINDARAJAN]

In ISHA EXIM VERSUS UNION OF INDIA, COMMISSIONER OF CUSTOMS (NS-I) , MUMBAI, DEPUTY COMMISSIONER OF CUSTOMS (NS-I) MAHARASHTRA - 2023 (12) TMI 920 - BOMBAY HIGH COURT, the petitioner was an importer. The petitioner imported unflavored betel nuts and API betel nuts from two suppliers, one from Thailand and the other from Myanmar.  The said goods were received at Chennai and JNPT ports.  The petitioner filed an application before the Authority for Advance Ruling, Mumbai for getting ruling on classification of ‘unflavored supari, ‘flavored supari’ and ‘chikni supari’.  The Authority for Advance Ruling considered the application and ruled that the above products which do not contain specified ingredients, viz. lime, kith and tobacco but containing other flavoring material are classifiable under Customs Tariff Heading  2106 90 30.

On 25.11.2017 the petitioner imported betel nuts from Indonesia and classified the same as unflavored supari under the heading 2016 90 30.  The said goods were not allowed to be cleared on the ground that the petitioner had misclassified the goods imported.  The petitioner filed a writ petition before Madras High Court.  The petitioner, before the High Court, contended that the Authority for Advance Ruling had ruled that ‘unflavored supari’ is to be classified under CTH 2106 90 30.  The petitioner further contended that the seizure memo is contrary to the ruling.  The Commissioner accepted the classification done by the Authority for Advance Ruling.  Therefore the petitioner contended that the detention of the cargo was unjustified.  Since no appeal has been filed by the Revenue against the ruling given by the Authority for Advance Ruling, the said ruling attained finality.  The Ruling given by the Authority is binding on the applicant and the Revenue.  Therefore the order contrary to the Advance Ruling is not valid.   The Madras High Court in its judgment reported in M/S. ISHA EXIM VERSUS THE ADDITIONAL DIRECTOR GENERAL, DIRECTORATE OF REVENUE INTELLIGENCE, THE SENIOR INTELLIGENCE OFFICER, THE COMMISSIONER OF CUSTOMS, THE DEPUTY COMMISSIONER OF CUSTOMS - 2018 (1) TMI 1027 - MADRAS HIGH COURT observed that the seizure memo is contrary to the ruling passed by the Authority for Advance Ruling.

On 30.03.2022 the petitioner imported unflavored supari from Myanmar classifying the same under the Heading 2106 90 30. The Deputy Commissioner rejected this classification and ordered the same to be classified under the Head 0802.  The Deputy Commissioner relied on the judgment of CESTAT in M/S. S.T. ENTERPRISES AND M/S. AYUSH BUSINESS OVERSEAS VERSUS COMMISSIONER OF CUSTOMS (CHENNAI VII) - 2021 (3) TMI 27 - CESTAT CHENNAI  which took the view that the betel nuts imported fall under Chapter 8 and not under Chapter 21.  The Ayush Businss filed an appeal before the Supreme Court which dismissed the same.  Therefore it would amount change of law for not following the ruling given by the Authority for Advance Ruling.

The petitioner filed the present writ petition before Mumbai High Court against the order of Dy. Commissioner (Customs).  The petitioner submitted the following before the High Court-

• The classification in respect of unflavored supari has been given by the Authority for Advance Ruling, Customs as 2106 90 30.
• Since the said ruling was not challenged by the Revenue it attained finality.
• The said ruling is binding on the respondent department.
• The appeal dismissed by the Supreme Court cannot be considered as the change of law.
• The Authorities are mis-reading Chapter 3 which would not applicable to the product imported by the petitioner. 
• The correct classification is under Chapter 2.
• The order passed by the Deputy Commissioner (Customs) is without jurisdiction and therefore liable to be set aside.

The Revenue submitted the following before the High Court-

• The impugned order is an appealable order.
• The petitioner without availing the alternative remedy approached the High Court and on this ground itself the petition is liable to be dismissed.
• Since the appeal against the order  of CESTAT in ‘S.T. Enterprises’ (supra) and ‘Ayush Business Overseas’ (supra) before Supreme Court was dismissed the Department is not bound to act as per the ruling given by the Authority for Advance Ruling.
• Therefore the order passed by the Dy. Commissioner (Customs) is valid and justified.

The Revenue prayed that the writ petition is to  be dismissed on the above grounds.

The High Court heard the submissions made by the parties to the petition and analyzed the facts of the case.  The High Court held that  the order passed was without jurisdiction the petitioner can file writ petition without availing alternate remedy.  The High Court then analyzed Section 28J of the Customs Act. 

Section 28J of the Customs Act provides that the advance ruling pronounced by the Authority under section 28-I shall be binding only -

• on the applicant who had sought it;
• in respect of any matter referred to in sub-section (2) of section 28H;
• on the Principal Commissioner of Customs or] Commissioner of Customs, and the customs authorities subordinate to him, in respect of the applicant.

The advance ruling shall remain valid till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is earlier.

The High Court did not agreed with the contentions of the Revenue that because of change in law on account of dismissal of appeal by the Supreme Court against the order passed by CESTAT in case of other assessees, advance ruling is not binding.  Further the High Court held that the decision of CESTAT is not binding on the High Court.  The dismissal by the Supreme Court without going into merits of the case acts only as res judicata between the parties before the Court and same cannot be said that CESTAT bench decision amounts to a declaration of law. Therefore dismissal of appeal by the assessees before the Chennai Bench of CESTAT, by the Supreme Court does not attract provisions of Section 28 J(2) of the Act for not following decision of the advance ruling rendered in the petitioner’s own case.           

The High Court further observed that the facts of S.T. Enterprises’ case (supra) as stated in paras 2 and 3 of the said decision are also different and therefore even on facts same is distinguishable from the facts of the petitioner.  In the case of S.T. Enterprises the revenue’s case was that Areca nuts is a prohibited item for import as the CIF value of the goods was lesser than Rs.251/- per Kg. Furthermore, in the case of S.T. Enterprises, there was a finding that as per report, ‘process’ stated by the importer have not been undertaken to make the betel nut “product of betel nut” to merit classification under CTH 2106 which is not the case in the impugned proceedings before the High Court. 

The High Court further observed that the department has not challenged the ruling given by the Authority for Advance Ruling in the appeal as prescribed in the Act.  Instead the Department made an application for review of the ruling by the Authority for Advance Ruling which was dismissed.  This rejection has not also been challenged by the Department before the higher forum.  The Revenue accepted the said ruling and later on they are having no right to contend that the ruling is not binding on the department.  The Madras High Court in the case of the petitioner held that the seizure memo of the department is contrary to the ruling passed by the Authority for Advance Ruling.  The said judgment has also not been challenged by the Department.    Therefore the High Court quashed and set aside the impugned order.