Prof Dippak /IDT Latest Cases/Customs

 JUDICIAL SNIPPETS

CVD is levied on imported goods to counter-balance the levy of excise duty payable on domestic goods.
CVD is levied at same rate at which excise duty is leviable on domestic goods. It is settled principle that
benefit of excise exemption shall also be considered while determining the applicable rate for CVD. Even
the benefit of conditional exemption shall also be considered while determining the applicable rate for levy
of CVD.
In one case, excise duty was exempt in respect of dye carries, printing paste etc. when used in SAME
FACTORY for the manufacture of textile article. Department denied the benefit of such exemption to
imported goods contending that imported goods (dry carries/ printing paste etc) not being manufactured in
the same factory in which they will be used for manufacturing textile articles. Issue is in case where
fulfillment of condition in excise exemption is not possible as such, then whether that condition shall be
modified in context of imported goods so as allow the benefit of that exemption to imported goods.
, held that “literal meaning shall be avoided if it leads to absurdity when
the goods are imported obviously the same would not be manufactured in the same factory and therefore, it
would become impossible to apply the provision of Sec 3(1). “Same factory” only means that the imported
goods are required to be used in the factory belonging to the importer where the manufacturing activity
takes place, CVD not applicable.”

 DETAILED CASE LAW


Facts Essar Steel Ltd, a DTA Unit, supplied iron ore pallets to SEZ unit. Department
demanded export duty on such supplies contending that „supply to SEZ shall be treated
as Export”. Assessee contended that “supply to SEZ” is deemed to be export for the
purposes of grant of benefits to the supplier unit. Such deeming fiction shall not be read
into charging section, Sec 12. In other words, this deeming fiction shall not operate for
the purposes of levy of export duty.
Issue Whether export duty can be levied
a) Under provisions of Customs Act, 1962
b) Under provisions of SEZ Act, 2005?
Held that NO EXPORT DUTY
(a) “Export duty liability under provisions of CA, 1962
‘Export’ has been defined u/s 2 of Customs Act, 1962 to mean taking goods out of India to
a place outside India. Sec 2 defines ‘india’ to include ‘territorial waters of India.
Therefore, taxable event contemplated under Customs Act, 1962 [Sec 12: Charging
Section] for the purposes of levy of Export Duty is taking the goods out of territorial
waters of India to a place outside India, in which case only goods will attract export duty
under customs Act, 1962.
In the absence of
 any amendment in the definition of terms ‘Export’ and ‘India’ in Customs Act, 1962
or any amendment in charging section (Sec 12) or
 insertion of a charging provision contemplating movement of goods from DTA to SEZ
as a taxable event for levy of export duty as in the case of export,
the levy of export duty cannot be justified under provisions of Customs Act, 1962.

Tutorial Note: Earlier, there was Chapter-XA [Sec 76-A to 76-N] in Customs Act, 1962 which
contained provisions relating to SEZ. That Chapter used to specifically provide for levy of
export duty on supply to SEZ. But that chapter had been omitted now and therefore, the
aforesaid movement is no longer a taxable event under the Customs Act.

(b) Export duty liability under provisions of SEZ Act, 2005

The Statement of Objects and Reasons of the SEZ Act, 2005 indicates that the policy for
setting up of Special Economic Zones had been adopted by the Government with a view to
provide an internationally competitive environment for export. The objectives of the
Prof Dippak /IDT Latest Cases/Customs

Special Economic Zones include making available (to the unit) goods and services free of
taxes and duties for export production which is supported by integrated infrastructure.
In line with the aforesaid objective of providing goods and services free of taxes and
duties to SEZ Unit or to a developer of the SEZ for the purpose of establishing an
integrated infrastructure for export production, provisions have been made in the SEZ Act,
2005 granting exemption from taxes and duties, which would otherwise have been leviable
in the absence of any provision for exemption from such duties. Sec 7 of the SEZ Act
expressly provides for making the goods and services available to the Developer/Unit
situated in the SEZ, free of taxes and duties.
A levy of export duty is neither expressly nor impliedly contemplated under the
SEZ Act and cannot be read in by the purported intendment.

 (Imp & Expected)

Facts M/s Hero Cycles Ltd imported certain goods and paid customs duties. Though goods
were exempt from CVD leviable u/s 3(1), assessee failed to claim benefit of exemption.
Accordingly, the said CVD was assessed on bill of entry which was returned to the
importer. Importer paid the assessed CVD.
-- Later, on realizing its mistake, assseee filed a refund claim claiming refund of CVD
paid contesting it had paid CVD by mistake.
-- Department rejected the refund claim stating that assessee should have filed appeal
against assessment order. For this it has place reliance on SC decision in case of
FLOCK(I) PVT LTD-2000-SC / PRIYA BLUE INDUSTRIES- 2004- SC.
Earlier, on import of same goods under same set of circumstances, exemption from
benefit of CVD which was given to him. Even subsequent consignments were also cleared
under exemption.

[Assessee had approached HC to direct Customs Officer to entertain refund claim]

Issue Whether assessee request as to entertainment of refund claim is admissible?
Held that -- In the instant case, M/s Hero Cycles Ltd admittedly, based on the said notification were
being granted benefit of the notification previous to the imports in issue and also
subsequent to the imports in question. In other words, both the parties were aware of the
said notifications.
-- If the assessee on account of an inadvertent (*unintentional) error chose not to apply for the
benefit, would that result in denial of the benefit. In our opinion that by itself would not
be answer as a duty is cast on the authority to assess the goods and impose duty
according to law which includes a statutory notification, if duty cannot be demanded if
otherwise not payable. Once there be a power to assess there is a corresponding duty to
assess according to law. The fact that the assessee has paid the duty under mistake of law
and or in the instant case by oversight, cannot result in being assessed to duty which was
otherwise not payable. In our opinion, this will be a case of manifest injustice and on the
face of it erroneous.
-- In so far as the claim for refund is concerned, that would only arise after the order is
amended. The relief of refund claimed is not maintainable before the order of
assessment is amended or modified as held by the Supreme Court in PRIYA BLUE
INDUSTRIES- 2004.
Hon‟ble SC in case of FLOCK (I) PVT LTD-2000-SC held that “Where an adjudicating authority has
passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the
statutory right of filing an appeal it is not open to the party to question the correctness of the order of the
adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had
committed an error in passing his order”. [it was an excise case]
When this matter arises in case of PRIYA BLUE INDUSTRIES -2004-SC, SC held that “Flock (India) Pvt. Ltd. decision
relating to refund under Central Excise also applicable to refunds under Customs”. Going further, in customs duty is
assessed always by Customs Officer on Bill of Entry and assessed bill of entry is treated as „assessment order‟ and thus, if
duty assessee is found to be in excess/wrong, then proper course of action is to file an appeal.

However, at this juncture following provision shall also be taken into account
Sec 149: Amendment of documents.
The Proper Officer may, in his discretion, authorize ANY DOCUMENT,
-- after it has been presented in the custom house
-- to be amended.
Prof Dippak /IDT Latest Cases/Customs

Provided that
- no amendment of a BILL OF ENTRY or a SHIPPING BILL/BILL OF EXPORT shall be so
authorised to be amended after
- the imported goods have been cleared for home consumption or deposited in a warehouse, or
- the export goods have been exported,
Except on the basis of documentary evidence which was in existence at the time the goods were cleared,
deposited or exported, as the case may be.
As is evident from Sec 149, that PO may permit a bill of entry to be amended in 2 situations:
1) B/E presented to PO but goods not cleared from port [main part]
2) B/E presented to PO and goods cleared from Port [Proviso] - but in this case, Importer shall present
documentary evidence to support the amendment sought for

Thus, u/s 149, assessee can claim amendment to bill of entry (even subsequent to clearance of goods – but subject
to condition of submitting documentary evidences) and thus, can claim re-assessment of duty without challenging the
order (originally assessed B/E) in appeal. in fact, in case of BANSAL ALLOYS AND METALS PVT LTD- 2009-
P&H HC held that in case of short-landed goods, the excess duty paid, if any, can be claimed as refund without
challenging the assessment order in appeal. therein it was held that, PO must have assessed the duty correctly as per
the examination report available before him at time of clearance, which he failed to do. Now, assessee is entitled to
claim amendment in the bill of entry though goods have been cleared. Consequent to this amendment, PO shall re-
assess the duty and the assessee importer shall be within its right to claim refund without taking recourse of appeal.

In the instant case also, assessee can get the bill of entry amended in terms of Sec 149 [the documentary evidence
as to the facts that goods were entitled to exemption was in existence at time of clearance of goods – as on earlier
imports alos, PO has granted exemption benefit]. Subsequently, assessee shall claim refund claim.


Facts An IMPORTER imported a machine duty-free under and exemption notification on the
condition that importer would use if for its own use for a period of 5 years. The machine
got destroyed in an accident and the importer claimed insurance compensation net loss
suffered by it and sold the scrapped machinery to the ASSESSEE.
Seizure by Department: According to the department, since the condition of exemption
notification (as to actual use) was not complied with by the importer, as the machine was
sold to the assessee within a period of 5 years, therefore, the machinery was liable for
confiscation under Section 111(0) of the Customs Act, 1962. The Department seized the
machine from the premises of the assessee on 14-11-2008.
Assessee’s objections: The ASSESSEE contended that while machinery was seized from
it, no notice had been issued to it u/s 110 read with section 124 even after expiry of one year
(original six month plus extended six month, if any) from the date of seizure, hence, such
seizure was illegal and the machinery was liable to be returned to it.
Department’s contention: The Department contended that though no notice was issued to
the assessee, however, a statutory notice was issued to the IMPORTER within 6 month,
time-limit, hence, the seizure was valid in law.
Issue Whether issuing of a notice to the owner-original importer of the goods is enough or
whether notice is also required to be issued to the person from whose custody the goods are
seized?
Held that Notice to be given to owner as well as the person from whom goods seized – Present seizure
beyond six months, illegal:
Held that –
(i) Where civil rights of a person are likely to be affected, rules of natural justice require
that the person affected be given a reasonable opportunity of being heard before the
order is passed unless the statute under which the order is passed specifically excludes
such opportunity.
(ii) Where an importer of goods transfers the goods in violation of a condition of import, the
transferee may not be knowing the same.

Facts Assessee had imported CTV (Colour Television) components over a period of time.
Under the EX-IM policy (old name of FTP-Foreign Trade Policy) import of CTV
components was allowable but not that of CTV. Revenue treated import of “components
of CTV” as import of “CTV” itself. For that it applied Rule 2(a) of GIR which states that
unassembled/ assembled product shall be classifiable as “Assembled Product (CTV, in
the instant case)”. However, assessgee challenged applicability of Rule 2(a) to his
situation. It argued that it had imported them over a period of 22 months on different
Prof Dippak /IDT Latest Cases/Customs

dates in 94 consignments. Assessee argued that Rule 2(a) shall be applicable only if all
components presented at same time for customs clearance. Consignments of different dates
shall not be clubbed for purposes of applying Rule 2(a). thus, goods brought shall not be
taken as complete CTV.
Issue Whether goods in questions are components and cannot be treated as complete CTV and
hence, duty demand, confiscation and penalty are unsustainable?
Held that YES – Import is of COMPONENT (not that of CTV)
“Rule 2(a) of GIR: Any reference in a Heading to an article shall be taken to include a
reference to that article presented unassembled or disassembled.
Rule 2(a) would be applicable only and only if all the components which are intented
to make a final product are presented at the same time for customs clearance. Such is not the
case in the present situation where the goods have been brought in 94 different consignments”


Facts Appellant is manufacturer and exporter of readymade garments. 3 SCN were issued to
him by different Adjudicating Officer for defaults as listed below:
i) 1 SCN – Duty involved Rs 2,09,784/- [Issued by DC, Chennai Sea Port]
ii) 2nd SCN – Duty involved Rs 2,83,780/- [Issued by DC, Tuticorin Sea Port]
iii) 3rd SCN – Duty involved Rs 1,42,021/- [Issued by DC, Chennai, Air Port]
He filed a single common application for settlement accepting the entire duty liability of
Rs 6,35,585 covered by 3 SCN.
Issue Whether each and every proceeding initiated by a different SCN shall be treated as a
separate “CASE” or for whether these can be combined and treated as a single CASE?
 If each proceeding initiated by a different SCN is treated as a separate case, then
assessee case cannot be settled at all as in none of the case admitted duty liability
exceeds Rs 3,00,000/- which is the basic condition for admissibility of settlement
application.
 On the other hand, if these can be combined and treated as a single case, then
settlement application is admissible as combined duty liability exceeds Rs 3 lakhs.
Held that Each proceeding shall be treated as a separate proceeding – Settlement application not
admissible
-- ‘Expression “CASE” as defined in Sec 127-A (b) of Customs Act, 1962 does not refer to
multiple proceedings before different authorities. 3 SCNs to be considered as 3 different
cases and cannot be clubbed as one.”