2014 (2) TMI 552 - HC - Customs

Principles of natural justice - finalization of a provisionally assessed bills of entry - variation made on the bills of entry at the time of its finalization - import of Muriate of Potash (MOP) - speaking order - The objection of the revenue to invocation of Section 17(5) of the Act is that in this case the assessment was made provisional under Section 18(1) of the Act and were also being finalized under Section 18(2) of the Act. Therefore, it is submitted that Section 17(5) of the Act requiring an issuance of a speaking order will not apply. Held that - Any quasi judicial decision which could be subject matter of appeal would require reasons to be given. However, in this case in any view of the matter Section 18(2) of the Act at the relevant time read as when the duty leviable on such goods is assessed finally in accordance with the Act then certain consequences on finalization of assessment are set out. However, the final assessment of the goods which have been provisionally assessed has to be in terms of Section 17 of the Act. This is so as Section 18(2) of the Act itself does not provide for finalization of assessment but merely states the action to be taken by the Assessing Officer consequent to the finalization of provisionally assessed bill of entry under Section 17 of the Act. Thus the objection of the revenue is unsustainable. - matter remanded back from fresh decision.

Issues Involved:
1. Whether an endorsement made on the bills of entry on finalization of a provisionally assessed bills of entry on a basis different from that claimed by the importer requires following the principles of natural justice and including a speaking order justifying the variation made on the bills of entry?
2. Whether a speaking order justifying the variation made on the bills of entry at the time of its finalization to the prejudice of the importer is a sine qua non to enable a filing of an appeal under the Customs Act, 1962?

Issue-wise Detailed Analysis:

Issue I: Principles of Natural Justice and Speaking Order Requirement
The petitioners challenged demand notices for an aggregate amount of Rs.17.51 crores, which arose from the finalization of five Bills of Entry without providing an opportunity for a personal hearing or furnishing reasons for modifying the bills of entry. The court noted that even if the statute does not explicitly require notice, personal hearing, or a speaking order before finalizing provisionally assessed bills of entry, the principles of natural justice must be read into the statute. This ensures that no arbitrary orders are passed and that the importer has an opportunity to explain why the proposed variations are uncalled for. The court emphasized that the process of natural justice is in compliance with the elementary principles of the Rule of Law, ensuring fair play and preventing arbitrary and unfair behavior by authorities. The court held that the assessment of the said bills of entry was in breach of natural justice and thus bad in law.

Issue II: Necessity of a Speaking Order for Filing an Appeal
The petitioners argued that a mere endorsement on the bills of entry, finalizing the assessment to their prejudice, is not an appealable order. A speaking order is required to enable an efficacious appeal under Section 128 of the Customs Act. The court agreed, stating that an appeal must be from an order with reasons, as mandated by Section 17(5) of the Act. In the absence of reasons, the importer would be at a loss to challenge the assessment effectively. The court cited the Kerala High Court's decision in HDFC Bank Ltd. Vs. Union of India, which held that the period for filing an appeal commences only upon the issuance of a speaking order. The court also referenced the Supreme Court's observation in Asstt. Commissioner Commercial Tax Department vs. Shukla Brothers, emphasizing that reasons are the soul of orders and necessary for proper administration of justice.

Conclusion:
The court set aside the final assessments made on the said bills of entry and the consequent demand notices. It directed the Assistant Commissioner of Customs to finalize the assessment of the said bills of entry afresh, following the principles of natural justice by indicating the reasons for non-acceptance of the petitioners' claims and providing a personal hearing before passing a reasoned order. The court answered both issues affirmatively, stating that the principles of natural justice, including a speaking order, are required when provisionally assessed bills of entry are finalized differently from the importer's claim, and a speaking order is necessary for filing an appeal under the Customs Act.

Final Judgment:
The petition was allowed, and the final assessments, demand notices, and further notices were set aside. The court directed a fresh finalization of the assessment of the bills of entry with adherence to the principles of natural justice and issuance of a reasoned order. No order as to costs was made.

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