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Bombay HC sets aside seizure order which was passed without recording reasons to believe contravention

The Petitioner had contemplated to sell certain copper wire rods, etc. on high sea sale basis to the Original importer. Accordingly, two Bills of entry in respect of two consignments had been filed in the name of the Original importer.

The said Importer subsequently declined to get purchase the imported goods on high seas, however agreed to co-operate in getting No Objection Certificate (NOC) and for substitution of the name of the Petitioner in the two BOE. A request was made for the amendment of the BOE, which was duly carried out. Subsequently, the DRI authorities seized the consignment of the Petitioner on the ground that certain provisions of Notification No.25/1999 – Customs 28.02.1999 had been contravened. Aggrieved, the Petitioner filed a Writ before the Bombay HC.

Referring to Section 110 of the Customs Act, the HC observed that if the proper officer has reason to believe that any goods are liable to confiscation under the Customs Act, he may seize such goods. Accordingly, the proper officer must have reason to believe that the goods in question are liable to confiscation under the Customs Act. Once the proper officer forms such a belief then he may seize such goods.

It was further observed that the expression 'reason to believe' is an expression of considerable import and in the context of the Customs Act, confers jurisdiction upon the proper officer to seize goods. The HC further observed that the belief has to be of the proper officer who had made the seizure. It cannot be that seizure is made by one officer and the reasons to believe are recorded by another officer. It was further observed that the proper officer who made the seizure must have reasons to believe that the seized goods are liable to confiscation. Seizure of goods is not an end in itself.

It was further noted by the HC that the Petitioner had not sought any concession or exemption or benefit under Notification No. 25/99 – Customs dated 28.02.1999. Accordingly, there could not have been any reason to believe that the said imported goods had contravened any of the provisions of section 111 dealing with confiscation and hence liable to seizure under section 110.

It was further remarked that the cancellation of amendment was not carried out by the authority which had allowed the amendment i.e., Customs authorities, Nhava Sheva, after due application of mind. It was carried out as per the direction of DRI, Zonal Unit, Ahmedabad. Such cancellation certainly resulted in adverse civil consequences upon the Petitioner who was the beneficiary of the amendment. It was further observed that without putting the Petitioner to notice and without giving an opportunity of hearing, the amendments could not have been unilaterally cancelled. Such cancellation of amendment would, therefore, be a nullity having no legal sanctity.

Basis the above observations, the HC set-aside the order for seizure of goods and directed for the release of the goods subject to the payment of the requisite duty and completion of necessary formalities.

Nikkom Copper and Conductors Private Limited vs. Union of India and Ors. [W.P. No. 3834 of 2020]

Gujarat HC issues notice in Writ challenging provision denying ITC on account of sellers not depositing tax

The Petitioner has challenged the constitutional validity of Section 16(2)(c) of the CGST Act before the Gujarat HC. The said provision inter alia denies ITC to a buyer of goods or services, if the tax charged has not been actually paid to the Government by the supplier of goods or services. The Petitioner challenged the said provision, inter alia on the following grounds:

Denial of ITC to a buyer of goods or services for default of the supplier of goods or services tantamount to shifting the incidence of tax from the supplier to the buyer which is arbitrary and irrational. The said provision is therefore violative of the Article 14, Article 19(1)(g) and Article 300A of the Constitution of India;
The said provision requires reversal of ITC which has already accrued to a buyer of goods or services, on account of a fraud committed against the Revenue by the supplier of goods or services. Therefore, it punishes both the perpetrator of the fraud and the victim and treat them on an equal footing which is totally in contradiction with the mandate contained under Article 14 of the constitution, which provides that the equals are to be treated equally, but also lays down that the unequals should not be treated equally;
The principle mischief which was sought to be remedied by introduction of GST Law by subsuming all existing indirect tax legislation was removal of cascading effect of tax. Denial of ITC will lead to cascading effect of tax because GST will again have to be paid on the tax paid stock;
As a principle of law, it is necessary to look into the mischief against which the statute is directed, other statutes in parimateria and the state of the law at the time;
In the absence of any finding about Petitioners' mala fide intention, connivance or wrongful association with the suppliers, no liability can be imposed on it on the principle of vicarious liability on account of fraudulent conduct of the suppliers, who have obtained registration on the basis of fictitious documents.

Taking cognizance of the submissions made by the Petitioner, the Gujarat HC has issued a notice in this regard, returnable on 19 January 2021.

Surat Mercantile Association vs. Union of India [R/SPECIAL CIVIL APPLICATION NO. 15329 of 2020]

GLS Comments:

It would be pertinent to note that a similar Writ Petition has been filed before the Delhi HC in the case of Bharti Telemedia Limited vs. Union of India and Ors. [W.P.(C) 6293/2019], wherein a notice has been issued. As for the erstwhile law, the Madras HC in the case of Sri Ranganathar Valves (Private) Limited [W.P.No.38488 of 2015], had held that the buyer cannot be denied ITC on account of sellers not depositing tax.

Kolkata CESTAT directs SVB Cell to consider the Assessee’s submission for SVB finalization

The Appellant had imported certain raw materials and equipment, from their US based parent company. The case was forwarded to Special Valuation Branch (‘SVB’) for detailed investigation. Upon investigation, the SVB rejected the Appellant’s declared transaction value and loaded the declared value. The said order was further confirmed by the Commissioner (Appeals). Aggrieved, the Appellant preferred an Appeal before the CESTAT.

It was contended by the Appellant that the Respondent’s orders fly in the very face of Rule 4(3)(a) of the Customs Valuation (Determination of Price of Imported Goods) Rules, and settled principles of law on redetermination of value. In terms of Rule 4(3)(a) of the CVR, 1988, the Department needs to accept the transaction value even in cases where the parties are related. Before rejecting the transaction value, a duty is cast on the Department to examine the circumstances surrounding the sale and the transaction value may be rejected only if such examination indicates that the relationship between the parties influenced the price.

The CESTAT observed that no clarification whatsoever was sought by the Department from the Appellant as to the relevance of the Chemical weekly report before proceeding to rely on the report. It was further observed that no opportunity of hearing in this regard was afforded to the Appellant. The Department relied upon the international chemical report without actually assessing whether the items mentioned therein and the items imported were comparable in quality as well as quantity and that no test report had been obtained.

It was further observed by the CESTAT that the original authority had given a finding that that the onus to prove that their relationship has not affected the pricing lies on the importer in terms of the rules cited above. However, the same is not the correct proportion of law. It was observed that as per Rule 3(a) of the Customs Valuation Rules, where the buyer and the seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate the relationship did not influence the price. It was observed that neither the original authority nor the Appellate authority had given reasons to hold that the relation had indeed affected the prices.

The CESTAT further observed that no reasons were produced by both the authorities for rejecting the submissions of the appellant and that no discussion and findings were given by both the authorities. In the end there was rush to complete the proceedings.

Basis the above observations, the CESTAT allowed the appeal by way of remanding the matter back to the original authority for proper examination of all facts and submissions of the Appellant and to pass a speaking and reasoned order as per law.

GLS Comments:

It has been seen that various SVB matters have been pending at the adjudication stage despite the Revenue’s clear instruction to dispose the same on expeditious basis. It would be pertinent to note that such delays in finalization of SVB matters adversely affect the importers to a great extent.

Pending the SVB Order, the importers are required to pay the application RD / EDD for clearance of their consignments imported from related parties. Although such duties paid on imports during investigation can be refunded, it casts additional burden upon importers. In this regard, the Revenue shall ensure that all SVB matters are disposed judiciously and expeditiously.

408 Records found, page 3 of 41

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