Recent judgment of the Delhi High Court in Niraj Silk Mills & Others - 2024 (11) TMI 1361 has (re)triggered the debate over the significance of ‘consent’ given at the time of assessment of bill of entry or shipping bill, be it regarding rate of duty / valuation / classification. This article focuses on the critical aspect of whether an assessee can challenge an assessment even after giving consent / acceptance in writing. The authors feel that navigating this legal labyrinth is no walk in the park, given the complexities and conflicting judgments prevailing.
To set the background, the CESTAT, New Delhi and other Benches have been taking a consistent view that the importer / assessee could not question the enhancement of the value by the customs department in the appeal once it had waived its right to a speaking order under Section 17(5) of the Customs Act, 1962 and accepted the enhancement in writing.
Key legal points dealt with in the judgement by the Delhi HC:
A. Reassessment and Speaking Order:
* Section 17(5) of the Customs Act mandates that if reassessment is contrary to the self-assessment, a speaking order must be passed unless the importer accepts the reassessment in writing.
* The Hon’ble High Court emphasised that the proper officer must record reasons for doubting the declared value and communicate these reasons to the importer if requested as the same is a mandated requirement under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (‘CVR’).
B. Declared Values and Reappraisal:
* The reassessment must be based on cogent reasons and evidence.
* The proper officer’s decision to reject the declared value must be preceded by a reasonable doubt about the truthfulness or accuracy of the declared value.
* The High Court held that a conjoint reading of Section 17(4) alongside Rule 12 of CVR thus reinforces the fact that reasons in support of the formation of opinion that the self-assessment declarations are incorrect must exist and stand duly recorded. In short, the proper officer is mandatorily required to give his reasons for rejecting the transaction value in writing.
C. Abandonment and Waiver:
* Mere acceptance of the reassessment to expedite clearance does not amount to an abandonment of the right to challenge the reassessment.
* The importer’s communications indicated that they accepted the reassessment under protest to avoid financial losses due to detention and demurrage charges. Basis this finding, the High Court held that the decisions in the case of Advanced Scan Support and Vikas Spinners relied upon the CESTAT are not applicable to the present case.
Submissions put forth on behalf of the assessee:
The acceptance of the reassessment was made under duress to avoid delay in clearance & financial burden of detention and demurrage charges. They contended that such acceptance did not amount to a waiver of their right to challenge the reassessment. Broad legal points raised by the importer / assessee are:
A. Procedural Fairness: The proper officer must provide cogent reasons for rejecting the declared value and communicate these reasons to the importer. This procedural requirement cannot be waived. This argument was made basis the judgement of the Hon’ble Apex Court in Century Metal Recycling Union of India - 2019 (367) ELT (SC).
B. Right to Appeal: Their right to appeal against the reassessment was protected under the Customs Act, and mere acceptance of the reassessment that too under protest did not preclude them from challenging it later. This argument was made basis the judgement of the Hon’ble Apex Court in ITC Ltd. CCE – 2019 (368) ELT 216 which permitted challenge to self-assessment in an appeal under Section 128 of the Customs Act, 1962. Several other judgments were cited wherein assessee's right to challenge an assessment even after giving consent was upheld.
Take-away from the High Court’s judgement:
The Delhi High Court discussed in detail the inter-play between Rule 12 of the CVR and Section 17 of the Customs Act, 1962.
The Court held that a combined reading of Section 17 of the Customs Act, 1962 alongside Rule 12 of CVR would establish that the enquiry by the proper officer is essentially two-tiered. The first stage comprises of the proper officer forming the opinion that the declared value is liable to be reviewed, basis reasonable doubt being harboured with respect to its truthfulness or accuracy.
The Court further held that upon arriving at that preliminary conclusion, the proper officer is obliged to convey their opinion to the importer / assessee and elicit further information and documents to aid and assist it in the adjudicatory process. It is at this stage that the importer / assessee is entitled to call upon the proper officer to provide the grounds for doubting the declared value in writing so as to enable it to respond. The Court highlighted that the obligation to provide reasons and a reasonable opportunity of representation to the importer / assessee is clearly mandatory in light of the language employed under Rule 12(2) of CVR.
The Court also held that if the doubt persists even after consideration of the response as submitted by the importer / assessee or where it fails to respond to the notice issued, the proper officer will proceed to record its decision that the value of the goods cannot be determined in accordance with Rule 3(1). This constitutes the second tier of the adjudicatory process. Therefore, it is clear that the proper officer is bound to provide reasons for re-determination of value.
The Hon’ble Court further highlighted that the provisions contained in Rule 12(1) are in essence an amalgam of the procedure prescribed and stipulated in sub-sections (3) and (4) of Section 17. The Hon’ble Court relied upon the judgement in Shah Mulchand & Co. v. Jawahar Mills - (1952) 2 SCC 674 wherein the Supreme Court explained that abandonment of a right is much more than mere waiver, acquiescence, or laches. Mere acceptance of reassessment does not amount to an abandonment of the right to challenge it. The Court noted that the importer / assessee had registered its protest on more than one occasion and had also sought expeditious clearance of goods subject to an exercise of provisional reassessment being undertaken. These facts and circumstances clearly detract from the argument of a conscious abandonment of the right to question the reassessment or to accept the re-evaluation exercise undertaken without reservation of a right to challenge.
The Hon’ble Court also took note of the judgement in South India Television v. Commissioner of Customs - (2007) 6 SCC 373 wherein the Hon’ble Supreme Court held that the burden of proving incorrect valuation lies on the Department. The Department must provide cogent reasons and evidence for rejecting the declared value. The High Court finally set aside the decision of the CESTAT.
In a nutshell, the Delhi High Court's judgement reaffirms the legal principles governing reassessment by Customs department and recourse available to assessee against the same. It emphasises that an assessee can challenge an assessment even after giving consent to the reassessment, provided the consent was given under protest or due to coercive circumstances.
In the authors’ understanding, the above judgement echoes the settled legal position that an admission made in ignorance of legal rights or under duress does not have a binding effect on the maker of the admission. Therefore, such admission would not eliminate the right to file an appeal. Refer: Shri Krishnan v. The Kurukshetra University – (1976) 1 SCC 311 (SC); Shiv Shankar v. ACTO – 1997 (105) STC 40 (Raj. HC); Secretary, Kaniyara Seva Samaj v. State of Mysore - 1969 (23) STC 155 (Mysore HC); Chhat Mull Aggarwal v. CIT - 1979 (116) STR 694 (P&H HC). Also, the right of appeal is a valuable right, and the same cannot be forfeited unless explicitly taken away by an enactment or by necessary implication as held by the Bombay High Court in Nagpur Zilla Krushi Audyogik Sahakari Sangh v. Second ITO – (1994) 207 ITR 213, para 6.
Another argument which can be put forth by the importer / assessee in such cases is that act of filing appeal will itself tantamount to payment of duty under protest as held by the Hon’ble Delhi High Court in Principal Commissioner of Customs (Import & General) v. Cisco Systems (India) – (2023) 3 Centax 209 (Del.) which stands affirmed by Hon’ble Supreme Court in 2024 (387) ELT 517:
13. It is difficult for this Court to accept that the payment of custom duty imposed pursuant to an order while appealing the same can be construed as payment of duty without protest. The very act of filing an appeal against an order imposing customs duty is a protest against the duty as assessed. The entire purpose of such an appeal is to seek reduction of the levy. It is, thus, obvious that the assessee does not accept the said levy and, payment of the same would necessarily have to be construed as payment under protest.
14. In view of the authoritative decision of the Supreme Court in Mafatlal Industries Ltd. v. Union of India (supra), the question whether payment of duty while appealing its imposition, is required to be construed as payment under protest, is no longer res integra. Although the said decision was rendered in the context of Section 11B of the Central Excise Act, 1944, the second proviso to Section 11B of the Central Excise Act, 1944 is pari materia to second proviso of Section 27(1) of the Customs Act.
… [Emphasis Supplied]
The authors’ feel that this judgment of the Delhi High Court is a significant step towards ensuring fairness and transparency in customs valuation and reassessment processes, especially in cases where the customs officials obtain the consent under force / duress to avoid burden of issuing speaking order under Section 17(5) of the Customs Act, 1962. This judgement will certainly ensure that the importer / assessee is not left remedy less in cases where they are forced to accept the reassessment by the customs officials.
[The authors are Partner, Principal Associate and Senior Associate, respectively, in Customs practice at Lakshmikumaran & Sridharan Attorneys]
