In the case of M/s. Sony India Pvt. Ltd. v. Union of India & Ors. [Writ Petition No. 4793 of 2021], the Telangana High Court held that amendment to bills of entry cannot be denied by the Customs Authorities.
The Petitioner is engaged in the business of manufacturing and marketing of different types of electronic goods and consumer electronics including mobile phones.
That between 04.08.2014 to 29.01.2015, the Petitioner imported mobile phones in India for trading purposes which is classified under the Customs Tariff Item No. 8517 12 90 of Schedule I to the Customs Tariff Act, 1975.
On import of the said mobile phones under the Bills of Entry (BOEs), the Petitioner paid Countervailing Duty (CVD) at the rate of 6% as per Sl. No. 263A(i) of Notification No.12/2012-CE dated 17.03.2012 (Exemption Notification). However, such mobile phones were chargeable to concessional rate of 1% subject to the condition that no credit should have been availed on the inputs or capital goods used in the manufacture of mobile phones.
However, despite being entitled to the benefit of exemption the Petitioner was forced to pay CVD at the merit rate vide Order dated 07.02.2020 (Impugned Order) issued by the Respondent rejecting the Petitioner’s Application vide letter dated 22.11.2019 for amendment in the BOEs under Section 149 of the Customs Act, 1962 (Customs Act), thus, depriving the Petitioner of its right due to deficiency in the system.
Being aggrieved, the Petitioner approached the Hon’ble High Court.
ISSUE BEFORE THE HIGH COURT
Whether the reassessment of Bills of Entry can ONLY be done under Section 128 of the Customs Act, 1962?
CONTENTIONS OF THE PARTIES
The Petitioner contended that the Impugned Order has been passed in complete contradiction with the decision of the ITC Ltd. v. Commissioner of Central Excise [2 (2019) 17 SCC 46] (ITC Ltd. Case) wherein the Supreme Court observed that, a BoE is required to be amended or modified, under the relevant provisions of the Customs Act, before filing of a refund application under Section 27 of the Customs Act. That the same can be done either by way of filing an appeal under Section 128 of the Customs Act or can be amended under Section 149 and/or Section 154 of the Customs Act.
The Petitioner also contended that in the present set of facts, the Respondent turned blind eye to this decision and denied the Petitioner’s right of exemption.
The Petitioner further submitted that had the Respondent followed the ratio of the above-mentioned Supreme Court judgment, the Petitioner would be allowed to claim the refund of the excess duty paid under Section 27 of the Customs Act.
The Petitioner stated that the Impugned Order is completely illegal as the same was bound to follow the precedent of the Supreme Court. The Petitioner also contended that the Respondent while rejecting the Petitioner’s application referred to in Order-in-Appeal No. HYD-CUS-000-APP-022-19-20 dated 28.06.2019 passed by the Commissioner of Customs and Central Excise (Appeal-I), Hyderabad was passed prior to the decision of ITC Ltd. Thus, the same is not applicable.
The Petitioner further contended that the Petitioner could not avail the reduced rate since the Respondent had taken a stand that such exemption is available only when the Assessee has not taken credit in respect of the inputs and capitals goods under the CENVAT Credit Rules, 2004 for the manufacture of mobile phones.
The Petitioner submitted that since, the inputs and capital goods in the instant case were procured and utilized outside India, the Respondent was of the view that the Petitioner shall not be entitled for such exemptions and that, the Electronic Data Interchange (EDI) system during that time did not permit availment of the lower rate of tax as per the Exemption Notice.
The Petitioner relied on the Supreme Court judgment in M/s. SRF Limited v. Commissioner of Customs [2015 (318) ELT 603] (SRF Ltd. Case) wherein, the lower rate of Excise Duty has been provided with a condition of non-availment of CENVAT Credit, CVD shall also be applicable at lower rate as an importer-trader cannot avail CENVAT Credit in any case, and that the condition attached to the lower rate is deemed to be fulfilled, thus, they were also eligible to avail the benefit of the reduced rate of 1% pursuant to the same interpretation.
The Petitioner submitted that the Impugned Order has erroneously rejected the application of the Petitioner for amendment on the basis of the ratio laid down by the Supreme Court in SRF Ltd. Case which was pronounced after the relevant period of the clearance of the goods pertaining to the 136 BoEs, the benefit of the same cannot be availed.
The Petitioner asserted that the Supreme Court in the SRF Ltd. Case did not introduce a new benefit under the provisions of the Customs Act but merely provided clarification with respect to providing the same benefits to the importer that are provided to a manufacturer.
On the other hand, the Respondents contended that the Petitioner’s request for amending the BoEs is against the provisions of the Customs Act and was not sustainable as reassessment was the only remedy available to the Petitioner and that it was required to seek re-assessment as provided under the provisions of Section 128 of the Customs Act within such stipulated time and as per the conditions provided therein.
The Respondent submitted that the provisions under Section 149 do not provide for unconditional amendment of documents. Under this provision, an Authorised Officer is vested with the power to allow the amendment by exercising his discretion. However, the Petitioner in order to bypass the provisions of Section 128 of the Customs Act could not present valid grounds to re-assess and therefore, the application of the Petitioner was rejected.
The Respondent further contended that same action cannot be sought under two different sections of the Customs Act. There already being a specific provision for re-assessment as provided under Section 128 of the Customs Act, if re-assessment is sought under Section 149 of the Customs Act without any limitation of time, the existence of the provisions of Section 128 and Appeal mechanism therein would become redundant. That once such mechanism becomes redundant then there is no requirement for the existence of the provisions of Section 128 or any other such provisions.
DECISION AND FINDINGS
The Telangana High Court (the High Court) after hearing the parties, made the following observations as under:
- Pursuant to what was held by the Hon’ble Supreme Court in SRF Ltd. case, lower rate of CVD shall also be applicable to importer-trader who cannot avail CENVAT Credit in any case.
- Although the amendment of BOEs under Section 149 of the Customs Act is a discretionary power vested with the Authority, but the Authority is not bound by any time limit for the same. Since, the Assessing Authority incorrectly determined the duty payable, the Petitioner cannot be denied to seek amendment of BOE.
- It was the duty of the Respondent to determine the tax to be levied in accordance to the law; instead the Respondent failed in discharging his duty, and forced the Petitioner to pay excess tax due to the fault of the Respondent, causing serious injustice to the Petitioner.
The High Court dismissed the Impugned Order passed by the Respondent and directed the Respondents to amend the BOEs for the Imported Mobile Phones so that the Petitioner can claim refund of excess CVD paid under Section 27 of the Customs Act.
The High Court in the present case has pointed out the behaviour of Customs Authority who forced the Petitioner to pay excess duty due to the deficiency of system. The High Court emphasized that it is the responsibility of the Authorities to correctly determine the duty leviable in accordance with law before clearing the goods for home consumption.
However, denying the tax exemption by denying amendments in BOEs merely on basis of the procedural aspects not in consonance shows serious prejudice towards the importers which is certainly not the objective of the Customs Act.
Therefore, this judgment would set a strict precedent for the Custom Authorities and for the other Government Authorities and clarify that the objective of every law is not just to restrict the stakeholders but to thrive for ease of doing business within the regulated parameters.
– Team AMLEGALS, assisted by Mr. Saransh Awasthi (Intern)
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