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TMI Blog2001 (2) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also an agreement with Midrex International whereunder the petitioner was to pay a sum of DM 2 Million, DM 10.10 Million and DM 23 Million towards the Licence fees and technical services to be rendered by VAI. After the shipment, for each consignment Bill of Entry for clearance for home consumption under Section 46 of the Customs Act was filed. The contract was registered for import of the machinery under the Project Imports Regulations, 1986 (for short "Regulations") for classification and assessment under Heading 98.01 of the First Schedule to the Customs Tariff Act, 1975 (for short "Tariff Act"). Pursuant to the Registration of contract, the petitioner-company executed a Bond and furnished two Bank Guarantees dated 10-8-1998 and 6-5-1997 for Rs. 1,86,19,350/- and Rs. 30,86,200/- respectively. All assessments under the Project Imports were provisional and the petitioner extended and renewed the Bank Guarantee and bond. Validity was up to the period as mentioned in the Bank Guarantee (24-12-2000 20-1-2001 respectively). The Bill of Entry was accompanied with invoice issued by TIL and other relevant documents along with contract. Pro rata value of each consignment and calculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r made by the Collector of Customs was subject matter before the Customs, Excise and Gold (Control) Appellate Tribunal (for short "the Tribunal") at the instance of both the sides, namely, the Revenue and the petitioner-company. By an order dated 13-2-1991 [reported in 1991 (56) E.L.T. 221], the appeal preferred by petitioner-company was allowed as a consequence of which petitioner was declared entitled to refund of Rs. 6,02,24,300/-. The appeal of the Revenue was dismissed. The order is annexed at Annexure C to the petition. The Apex Court has finally on 19-11-1996 disposed of the matter between Collector of Customs (Prev.) Ahmedabad v. Essar Gujarat Limited and held as under in Para 30 of the judgment [reported in 1996 (88) E.L.T. 609 (S.C) at p. 622]; "Therefore, we are of the view that DM 2,000,000 being the process licence fee paid to Midrex Corporation, DM 10,100,000 being the cost of technical service provided by Midrex and a sum of DM 2,310,000 being payment on account of engineering and consultancy fee payable to V.A., should be added to the value of the import plant." 6. In Para 29, the Apex Court pointed out as under : "But this apart, other services rendered canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 14 and Clause (a) of sub-section (2) of Section 156 of the Act being ultra vires and that the essential legislative functions could not have been delegated to the Executive. It was submitted to the Court that the demands were illegal, invalid and unauthorised as the assessment has not been finalised. In support of the contention, reliance was placed on various decisions. The Delhi High Court hearing the matter held that there is no substance in the submission of the learned Counsel but the provisions of the Rules 3, 4, 9(c) (e) are not in conformity with the provisions of Section 14(1). The Court while rejecting the contention held that the said rules are not ultra vires the provisions of Articles 245, 246 265 and 19(1)(g) of the Constitution of India. 10.The notice of the demand was challenged by the petitioner-company on the aforesaid ground that the provisions of Section 1(1)(A) and Section 156(2)(a) as also the Rules are invalid and ultra vires to the Constitution of India. No specific plea of the nature sought to be urged now were pleaded in the above Writ petition and the Petition was basically filed challenging the constitutional validity of the aforesaid prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed provisionally under the Project Imports Regulations, 1986 on the basis of declared value and in view of the order of the Apex Court, the amount indicated in Paragraphs 26 27 of the order came to be added and provisional re-assessment was done on Bills of Entry. Re-assessment of Bills of Entry was, therefore, made provisional by loading the assessable value as held by the Hon'ble Supreme Court. Thus, it is an admitted position that there is no regular assessment. 13.Learned Counsel for the petitioners pointed out that without assessment in accordance with law, Customs authority issued demand notice demanding a sum of Rs. 10,63,39,665/-. During the pendency of the writ petition on 29th April, 1997, the Revenue enhanced the said amount to Rs. 16,60,35,971.44 by adding interest on the original demand. Learned Counsel submitted that the Delhi High Court did not issue any direction for finalising the assessment as the Court was of the view that; "The law has to take its own course and the statutory authority has to proceed in the matter in accordance with law." The Court had hoped that "A Statutory Authority vested with statutory obligation would proceed in the manner provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, without prejudice to any other action which may be taken under this Act, be re-assessed to duty. 15.With regard to the Entry of Goods on Importation, Section 46 provides as under :- Section 46 :- Entry of goods on importation :- (1) The importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form : Provided that if the importer makes and subscribes to a declaration before the proper officer, to the effect that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information permit him, previous to the entry thereof, (a) to examine the goods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under section 57 without warehousing the same. (2) Save as otherwise permitted by the proper officer, a bill of entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier to consignor. (3) A bill o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of any interest payable under this section. 17.Learned Counsel submitted that sub-section (2) has been inserted by Customs (Amendment) Act (55 of 1991). Thus, before sub-section was inserted, there was no question of demanding the interest. In the instant case, the goods were cleared for home consumption prior to insertion of sub-section (2) and, therefore, there cannot be any question of demand of interest. It was also submitted that sub-clause (1) refers to 'assessment' and not to the 'provisional assessment'. According to the learned Counsel, the Bill of Entry should have been assessed finally. Liability would have commenced only after making final assessment and not otherwise. Learned Counsel drew our attention to Section 28AA of the Customs Act which reads as under : Section 28AA :- Interest on delayed payment of duty :- Where a person, chargeable with the duty determined under sub-section (2) of Section 28, fails to pay such duty within three months from the date of such determination, he shall pay in addition to the duty, interest at such rate not below ten per cent, and not exceeding thirty per cent per annum, and as is for the time being fixed by the Board, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint out that documents were received by the officer on 15-5-1992. It is clearly mentioned that reconciliation statement was not submitted in view of the order passed by the Tribunal in Appeal. However, as it was understood that as reconciliation statement was required to be filed without waiting for the decision, reconciliation statement was forwarded indicating Sr. No., Name of the Vessel, Bill of Entry No., Date, Numbers of Packages, Description of Goods, CIF value, Amount of Duty Paid, Duty Payable, etc. It was also submitted that the machinery has been installed since long. Not only that but the Revenue is also collecting the excise duty on goods which are being manufacturing by the petitioner-company and that is within their knowledge and with a view to harass the petitioners, it is stated that Installation Certificate is not produced or the proof of import of plant and machinery is not produced. Further, we were told that the Assistant Commissioner of Customs has addressed a letter to the Assistant Commissioner of Central Excise, Surat on 3-8-1998 for verification of Machinery imported under 98.01 by M/s. Essar Steel Limited, Hazira making a grievance that till date that off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that there are prolonged delays in the submission of reconciliation statement after the completion of the last importation. Plant site verifications to check proper utilisation of imported goods are not being frequently done and for other items mentioned therein, the Board has taken a serious view of the matter and has indicated its desire that all Collectors of Customs should make continuous efforts to liquidate the pendencies in this area of the work. The Circular says as under :- (1) On completion of the prescribed period after the last importation, Bond enforcement notices should invariably be issued to those importers who have failed to submit the reconciliation statements. (2) Senior officers including Collectors should monitor in detail the pendency position at regular, say monthly, intervals. (3) In those cases where the demand are confirmed, coercive steps should be taken and the provisions of Section 142 of the Customs Act, 1962 should be invoked if the amounts are not paid by the importer within a reasonable time. (4) Plant site verification should regularly be done to ensure proper utilisation of the imported goods for the projects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Apex Court in case of Samrat International (P) Limited v. Collector of Central Excise reported in 1992 (58) E.L.T. 561 (S.C.) and submitted that unless and until there is final assessment, there is no question of demanding interest at all. In the instant case, the amount of duty paid by the petitioner-company to the Revenue was obviously provisional and subject to the result of the final assessment that may be made by the Officer and without final assessment being made, there is no question of fastening of the liability of interest. 22.Before making final assessment after the provisional assessment, notice must be issued to the person against whom the assessment is to be made. Natural justice requires that a person must be heard before making an assessment. An opportunity of being heard is in consonance with the principles and rules of natural justice. If notice is not given, the person is likely to be prejudiced when the order is made. Therefore, before the order is made, notice is a condition precedent. In the instant case, provisional assessment was made with regard to the service charge. There was a serious dispute in the instant case. There is a registration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout hearing the petitioner, the same is required to be quashed and set aside. 25.The learned Single Judge of Calcutta High Court, (Mrs. Ruma Pal, J, as She then was) in case of Nayek Industries Private Limited v. Union of India, reported in 1991 (56) E.L.T. 31 (Cal.), in Para 20, has observed as under: "There was no final approved classification list. The condition precedent to the exercise of power under Section 11A(1) of the Act is absent." For the reasons aforesaid, the learned Judge upheld the contention of the petitioner and held that the show cause notice was issued without jurisdiction. 26.Relying on this, the learned Counsel, Mr. Dushyant Dave, appearing for the petitioner submitted that it is a well accepted principle that unless and until the finality is reached, there is no question of making any demand. Therefore, he submitted that there is no question of recovery of any amount. 27.As discussed earlier, the petitioner-company placed before the respondents entire statement with details. All necessary documents were produced. Prices at which goods were purchased have also been indicated. Therefore, considering the language of Section 14, it is difficult to unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 4 SCC 276, the Apex Court pointed out as under : "When a statute levies a tax it does so by inserting a charging by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provision meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging of section which fixes the liability is strictly construed. The penalty provisions in a statute have also to be strictly construed. The considerations which may weigh with the authority as well as the court in construing penal provisions would be different from those which would weigh in construing a provision providing for payment of interest on unpaid amount of tax which ought to have been paid. The rule of strict construction is not extended to the machinery provisions which are construed like any other statue. The machinery provisions must be so construed as would effectuate the object and purpose of the statute and not de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the bank guarantee or within a six weeks whichever is late. If the appellants succeed in appeals, the amount of refund obtained pursuant to order shall be made good and restituted back to the appellants by the respondent together with interest thereon @ 18% per annum from the date of the refund". "The appeals shall be listed for final hearing in 2nd week of January, 1992. Liberty to file additional papers, if any, within six weeks from today". 35.Thus on the application for stay, while disposing of the application, the Apex Court made the order and at the same time, the appeals were ordered to be fixed for hearing in 2nd week of January, 1992. It is for the petitioners to obtain clarification from the Apex Court since, the Highest Court has made the order on the application while disposing of the application. In view of the strict conditions made in the order and use of word 'shall', we are not in a position to agree with the learned Counsel for the petitioners. If petitioners want to get clarification, it will be for them to approach the Apex Court. 36.So far as Rule 7 is concerned, it requires finalisation of the contract within three months from the date of clearan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 should be added to the value of the plant on this account". 39.It is an admitted position even before this Court that only provisional assessment is made and the respondent has sworn an affidavit stating that there is provisional assessment and therefore, the learned Counsel is not right in stating that in view of the order made by the Apex Court, straightway demand can be made but they have to make assessment finally as laid down in the Statute. We have indicated that the question of interest would arise only after duty is finally assessed and not before that. Section 18 makes it clear and we have discussed that earlier. Learned Counsel is also not right in stating that the matter is required to be rejected on the ground of delay and latches as till today there is no final assessment as indicated in Section 18 of the Customs Act. There is only provisional assessment. Therefore, it will be for the respondents to make the assessment in accordance with law. The respondents will have to hear the petitioners and will have to make a final assessment in accordance with law. 40.Learned Counsel for the Revenue further submitted that though there is no final assessment however reass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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