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TMI Blog2019 (11) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in issuing the Office Memorandum dated 16th February, 2018. The powers of the CBEC, as conferred by Section 151A of the Customs Act, cannot extend to issuance of executive instructions, or Office Memoranda, pronouncing on the merits of issues which are pending before adjudicating authorities. Such an attempt would result in reducing the adjudicatory process to a mockery, and deserves to be deprecated. If the Revenue is of the opinion that an assessee has imported goods in violation of the law, or claimed the benefit of exemption to which it is not entitled, the grounds for such an opinion are required to be contained in the Show Cause Notice issued to the assessee. It is completely impermissible for the Revenue to issue a Show Cause Notice and, thereafter, seek to support, or even supplement, the recitals in the Show Cause Notice by way of Office Memoranda, or executive instructions, such as the Office Memorandum dated 16th February, 2018, under challenge in these writ petitions. Circular No 450/67/2019-Cus. IV, dated 31st May, 2019, stands modified by Circular No 450/67/2019-Cus. IV, dated 9th September, 2019, issued by the Central Board of Indirect Taxes and Customs. While no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited, the petitioner in WP (C) 9225/2019. 2. The writ petition seeks quashing of (i) Office Memorandum, dated 16th February, 2018, issued by the Central Board of Excise and Customs (CBEC), (ii) Circular, dated 31st May, 2019, issued by the Central Board of Indirect Taxes and Customs (the CBEC, as rechristened after the advent of the GST regime, referred to, hereinafter, as "the CBIC"), (iii) Office Memorandum, dated 6th September, 2017, issued by the Director General of Foreign Trade (DGFT), (iv) Show Cause Notice dated 15th July, 2019, issued to the petitioner by the Commissioner of Customs, ACC Import, New Delhi (hereinafter referred to as "the Commissioner"), and (v) Show Cause Notice dated 19th July, 2019, issued to M/s Mink Tradecom Private Limited (hereinafter referred to as "Mink") by the Commissioner. 3. During the pendency of these proceedings, Circular dated 9th July, 2019, was issued by the CBIC and Corrigenda dated 30th September, 2019, and 7th October, 2019, to the impugned Show Cause Notices dated 15th July, 2019, and 19th July, 2019, were issued by the Principal Commissioner of Customs (hereinafter referred to "the Principal Commissioner. 4. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 152/2009-Cus, dated 31st December, 2009, as amended by Notification 66/2016-Cus, dated 31st December, 2016. The relevant portion of Notification 152/2009-Cus, dated 31st December, 2009, as so amended, reads thus: "In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods of the description as specified in column (3) of the Table appended hereto and falling under the Chapter, Heading, Sub-heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as specified in the corresponding entry in column (2) of the said Table, when imported into India from the Republic of Korea, from so much of the duty of customs leviable thereon as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the aforesaid Table: Provided that the importer proves to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, that the goods in respect of which the benefit of this exemption is claimed are of the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid eight Bs/E, which was provisional, be not finalized on the above lines. 11. As we do not intend to comment on the merits of the allegations in the impugned Show Cause Notices, we refrain from entering into the specifics of the various Notifications involved therein. 12. The FTP, it may be noted, is notified under Section 5 of the FTDR Act, which reads thus: "5. Foreign Trade Policy. - The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, and that policy: Provided that the Central Government may direct that, in respect of the Special Economic Zones, the foreign trade policy shall apply to the goods, services and technology with such exceptions, modifications and adaptations, as may be specified by it by notification in the Official Gazette." 13. According to the Revenue, the gold coins imported by the petitioner under the aforesaid eight BS/E were appropriately classifiable, not under Sub-Heading 7114 1910, but under Sub-Heading 7118 9000 of the Tariff. Tariff Heading 7118 of the Tariff, with its Sub-Headings, may be reproduced thus: "Tariff Item Descript ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of 'prohibition', 'restriction' or 'exclusive trading through State Trading Enterprises (STEs)' as laid down in Indian Trade Classification (Harmonised System) [ITC (HS)] of Exports and Imports. The list of 'Prohibited', 'Restricted' and STE items can be viewed by clicking on 'Downloads' at http://dgft.gov.in. (b) Further, there are some items which are 'free' for import/export, but subject to conditions stipulated in other Acts or in law for the time being in force." Notification 36/2015-2020, dated 17th January, 2017, whereby the DGFT notified the ITC (HS), 2017, reads thus: "Notification No 36/2015-2020 New Delhi, Dated: 17 January, 2017 Subject: Notification of ITC (HS), 2017 - Scheduled-1 (Import Policy) S.O. (E): In exercise of powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (as amended from time to time) read with paragraph 2.01 of the Foreign Trade Policy, 2015-2020, the Central Government hereby notifies 'Indian Trade Classification (Harmonised System) of Import Items, 2017 [ITC (HS), 2017] as enclosed in the Annexure to this Notification. 2. ITC (HS), 2017 contains "Schedule 1 - Import Policy". Against each item of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported in violation of the FTP, were not entitled to the benefit of exemption under S. No. 526 of Notification. 152/2019-Cus supra. It is essentially on the basis of the aforesaid facts and allegations that the impugned Show Cause Notices call on the petitioner, and Mink, to show cause against confiscation of imported gold coins, demand of differential duty with interest, and imposition of penalty. 23. The petitioner claims to be particularly aggrieved by para 8 of the impugned Show Cause Notices, dated 12th July, 2019/15th July, 2019, issued to the petitioner, and 28th June, 2019/19th July, 2019, issued to Mink, which reads as under:- "8. Further, in a case involving import of similar article viz. gold granules, CBIC vide letter F. No. 450/67/2019Cus.IV dated 31.05.2019 has taken a stand that import of said items can only be made by a nominated agency bank/star house etc. In this regard, CBIC has held two recent orders passed by the CESTAT in the cases of Sri Export versus Commissioner of Customs, Hyderabad [Final Order No.A/31494/2018, dated 27.11.201 8 in Appeal No. C/30812/2018] and Sri Export Versus CC Bangalore Cus [arising out of No. 344/2018 dated 12.10.2018 passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yours Sincerely Sd/- (Zubair Riaz) Director (Customs)" (Emphasis supplied) 26. The petitioner submits that it was grossly improper, as well as ex facie illegal, on the part of the Director (Customs), to observe, in the afore-extracted Circular dated 31st May, 2019, that the judgments of the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as "the Tribunal"), in the Final Orders dated 12th August, 2018 and 27th November, 2018, both of which were passed in appeals filed by M/s Sri Exports, were not legal and proper. The petitioner submits that, while the right and entitlement, of the Customs authorities, to appeal against the said final orders passed by the Tribunal, could not be gainsaid, the CBIC had no authority, whatsoever, to castigate the said final orders - which were binding on all customs formations - as not being legal and proper. Neither, it is submitted, could the impugned Circular dated 31st May, 2019, direct that consignments, pending clearance at ports and airports, be dealt with in accordance with the said decision, as contained in the Circular, contrary to the decisions of the Tribunal. 27. It is submitted by Mr. Tarun Gulati, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the correct one, it will no doubt be finally upheld and the Revenue will get the duty, though after some delay which such procedure would entail. 8. We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been harsh on the officers. It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assessee-public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them." (Emphasis and underscoring supplied) 29. It was, therefore, completely impermissible for the CBIC to, in the impugned Circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instructions or directions shall be issued - (a) so as to require any such officer of customs to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner of Customs (Appeals) in the exercise of his appellate functions." (Emphasis supplied) 31. In directing field formations to deal with consignments pending clearance at ports and airports, in accordance with the views expressed by it, in preference to the law laid down by the Tribunal, it is clear that the CBIC has acted in direct and conscious violation of the proviso to Section 151A of the Customs Act. 32. We have no hesitation, therefore, in declaring the said diktat, as contained in the concluding paragraph of the impugned Circular dated 31st May, 2019, issued by the CBIC whereby consignments, pending clearance at ports and airports, were directed to be dealt with, "in terms of FTP 2015-2020 and the Board's decision above" to be illegal. Para 8 in the impugned Show Cause Notices (before amendment) 33. Para 8, in each of the impugned Show Cause Notices in this writ petition, i.e. the Show Cause Notice dated 12th July, 2019, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court. 3. Subsequent to above Instructions. RBI vide letter dt. 18 June 2019 has stated that as per Master Direction dated July 1, 2016, it has been mentioned that Nominated banks and nominated agencies, as notified, by DQFT are permitted to import gold on consignment basis. Further, DGFT vide F. No, 01/89/180/36/AM-11/PC-2 (A)/Pt.II/P-321 dated 21.6.19 has clarified that 'individual parties not falling under the category of nominated agencies are not eligible for importing gold', (copy enclosed) 4. In view of the above, last para of instruction dated 31.5.19 is modified to the effect that field formations may take suitable action in accordance with the above instructions of RBI/relevant master circulars/ extant FTP provisions and the clarification from DGFT dated 21.6.19 cited above besides provisions of the Customs Act with regard to pending or future imports of gold consignments. Yours Sincerely Sd/- 9.9.2019 (Zuber Riaz) Director (Customs)" (Emphasis and underscoring in original) 36. Para 8, in the impugned Show Cause Notices dated 12th July, 2019/15th July, 2019 and 28th June, 2019/19th July, 2019, as amended by the said Corrigenda dated 30th September, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 4 of the Circular dated 9th September, 2019, is merely superficial. The CBIC has, effectively, reiterated its direction, to all authorities assessing pending imports, to ignore the judgments of the Tribunal. We reiterate that this is completely impermissible. Administrative and executive authorities, in the Indirect Tax hierarchy, are completely proscribed from directing field formations to act in violation of judicial orders. We are aware that para 2 of the Circular dated 9th September, 2019, states that "as per the information received from the Principal Commissioner of Customs, Hyderabad", the "order passed by CESTAT Hyderabad has been suspended". The Circular does not condescend, however, to even refer to the date of the "information received from the Principal Commissioner of Customs", let alone the details thereof. The order, if any, of the superior judicial authority, "suspending" the order passed by the Hyderabad bench of the Tribunal, is also not disclosed. Even if it were, for the nonce, to be assumed that the order of the Tribunal had been "suspended", that, by itself, would not justify the directions contained in para 4 of the Circular dated 9th September, 2019. The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uffice it to state that there is no absolute proposition, in law, that an order, of a lower judicial authority, completely loses, on its being stayed by a higher judicial authority, its entire precedential value. We prefer to rest our observations at that. 39. In any event, in view of the above discussion, we are convinced that the Circular, dated 9th September, 2019 may, at best, serve as a source of information about the fact that appeals, against the orders passed by the Tribunal in the Appeals preferred by Sri Exports, before the Hyderabad and Bangalore benches of the Tribunal, are pending before higher judicial fora, and nothing more. The directions contained in para 4 of the said Circular are, in any case, ultra vires the powers conferred on the CBIC by Section 151A of the Customs Act, and would require to be set aside. At the same time, we clarify that, while examining, in any individual case, whether Final Order, dated 27th November, 2018, passed by the Hyderabad bench of the Tribunal, and 12th October, 2018, passed by the Bangalore Bench of the Tribunal, are required to be followed, or not, the concerned adjudicating/assessing authority may deem it appropriate to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priety of the interference, by the High Court, with a Show Cause Notice issued by the Enforcement Directorate under the provisions of the Foreign Exchange Management Act, 1999, the Supreme Court held thus (in para 5 of the report): "This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show-cause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless the High Court is satisfied that the show-cause notice was totally non est in the eye of the law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine, and the writ petitioner should invariably be directed to respond to the show-cause notice and take all stands highlighted in the writ petition. Whether the show-cause notice was founded on any legal premises, is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.r.t. the date of shipment, as per Para 2.17 read with para 9.11 of the HBP (2015-20). Accordingly, shipments prior to 25.08.2017 may be considered for clearance by Customs. However, of late there has been an unprecedented surge in import of gold coins from South Korea under INDIA - Korea CEPA. Customs being the verifying agency for Rules of Origin (RoO) criteria of the imported goods, may like to examine these consignments of gold with due diligence to ensure that such imports have complied with the (RoO) under the Indo-Korea CEPA. 3. To further amplify the point, since Korea is not a gold producing Country, the point to be checked is whether the exported gold articles from Korea are complying with the 'origin criteria' of Product Specific Rules of Origin under India-Korea CEPA. It may so happen that gold coins are being imported into Korea only for export purpose without any conversion facility. This is the right time for India to undertake a physical verification exercise (of manufacturing facility/premises) in coordination with our counterpart in Korea. 4. Further, as it has been observed that consignments of gold coins are being imported under HS: 7114 from South ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therewith. 52. At the same time, it is also settled that the manner in which an import item is described in the Bs/E, is not necessarily conclusive regarding its classifiability. It is always open to an importer to contend that an item is not exactly conforming to the description contained in the Bs/E. It is only in cases in which an assessee avails certain benefits, whether by way of exemption or otherwise, based on the manner in which it describes or classifies its goods, that, at times, courts have taken a view that the assessee cannot, having availed such benefit, seek to resile from the description, or classification, advanced by it. This, however, is not such a case. Irrespective, therefore, of the manner in which the goods in question have been described in the Bs/E filed by it, there can be no estoppel on the petitioner establishing, before the adjudicating authority, by cogent and convincing evidence, that the goods imported by it are, nevertheless, entitled to the benefit of exemption. In case such a contention is advanced, the authority, adjudicating the Show Cause Notices dated 12th July, 2019/15th July, 2019, issued to the petitioner, and 28th June, 2019/19th July, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted. 4. In view of the above, it appears that the issue of classification and eligibility of the entities who imported "gold coins" during the period 1st July to 25th Aug 2017 under India-Korea FTA requires action in terms of Foreign Trade Policy. 5. This issue with the approval of the Board. Sd/- (Mandeep Sangha) Senior Technical Officer Chief Commissioner of Customs New Customs House Near IGI Airport New Delhi." 55. We are unable to sustain, to any extent whatsoever, the aforesaid Office Memorandum, dated 16th February, 2018, issued by the CBEC. To us, it appears obvious that this Office Memorandum is a transparent attempt, on the part of the CBEC, to shackle the impartial exercise, by the competent adjudicating authorities, of adjudication of the Show Cause Notices issued to the petitioner and to Mink - and, quite possibly, to other similarly situated importers. When the issue of classification, and entitlement to exemption, of the gold coins, imported by the petitioner, and other similarly situated importers, is at large before competent adjudicating authorities, who are in seisin thereof, the CBEC was completely unjustified in issuing the Office Memoran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, required to be passed in respect of Circular dated 31st May, 2019, Circular dated 9th September, 2019, is quashed and set aside, to the extent of the directions contained therein, especially in para 4 thereof. The effect of the said Circular shall be read as limited to conveying of information, regarding the fact that Final Order No.A/31494/2018, dated 27th November, 2018, of the Hyderabad bench of the Tribunal, in Appeal No. C/30812/2018, and the Final Order, passed by the Bangalore Bench of the Tribunal against Order-in-Original No.344/2018, dated 12th October, 2018, passed by the Commissioner of Customs Bangalore-I, had been appealed against, and no more. The authorities, adjudicating the Show Cause Notices impugned in these writ petitions would be required, independently, and uninfluenced by the Circular dated 9th September, 2019, to examine, for themselves, whether such appeals have, in fact, been filed and, if so, the effect of the orders passed therein. (ii) Para 8 of the impugned Show Cause Notices, dated (a) 12th July, 2019/15th July, 2019, issued to the petitioner in WP(C) 9225/2019, (b) 28th June, 2019/19th July, 2019, issued to M/s Mink Tradecom Pvt. Ltd, an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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