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Judgment
Ramachandran Nair, J.—Appellants are regular importers of Betel Nuts through Cochin Port. When appellants imported a consignment of
Betel nuts from abroad through Cochin Port, the proper officer, who was to assess duty and release the goods on appellants paying duty, raised a
dispute on valuation in as much as he doubted the invoice and other documents produced in support of appellants'' claim of value of the goods
imported. When dispute arose on the valuation for the purpose of assessment of duty finally, appellants requested for provisional assessment of
duty u/s 18 of the Customs Act, 1962 (hereinafter called as Act for short) and release of goods on part payment of duty and on execution of bond
for the balance duty amount. However, this was declined by the Assistant Commissioner of Customs, against which the Writ Petition was filed for
a direction from this Court to the said Officer to make provisional assessment u/s 18 of the Act and for release imported consignments. The
learned Single Judge held that provisional assessment is exclusively within the discretion of the Officer who has to assess the duty, and importers
cannot as a matter of right seek for provisional assessment of duty and release of goods. It is against this judgment, the appellants have filed this
Writ Appeal.
We have heard Shri. C.K.Karunakaran, learned counsel appearing for the appellants, and Shri.John Varghese, learned Senior Standing Counsel
appearing for the Customs and Excise Department.
During hearing, the appellants conceded that for the cargo imported by the appellants, final assessments have been made and the appellants
have, infact, filed appeal against such final assessment of duty before the Commissioner (Appeals). However, the appellants case is that even
though no direction for provisional assessment is sought in respect of the consignment already imported and released, the appellants want to
challenge the judgment of the learned Single Judge because the findings in the impugned judgment will bar them from getting goods imported later
released based on provisional determination of duty. We are also informed that a Division Bench of this Court in W.A.No.2050/2010 filed against
the very same impugned judgment, without going into the details of the contentions raised, directed release of the goods on provisional assessment
of duty and on payment of 50% of the same and on furnishing Bank Guarantee for the balance duty amount assessed provisionally. However, since
the question raised i.e. whether importers as a matter of right can claim provisional assessment of duty and release of goods on part payment of
duty and on furnishing bond for balance amount of duty u/s 18 of the Act, is not decided by the Division Bench in the above referred judgment, we
proceed to decide the issue at the request of both sides.
Learned Standing Counsel appearing for the respondents brought to our notice that large number of importers from North and East India got
massive quantity of imported cargo released based on provisional assessment and on part payment of the duty and they do not respond to notices
issued for final assessment, and the Department is facing the risk of losing massive Revenue in the event of parties not turning up for final
assessments or make payment of duty when finally assessed. In our view, the Department cannot blame the importers because the provisions of
the Act and Rules as explained by us below will clearly indicate that release of goods on furnishing bond without Bank Guarantee or adequate
security is not only an imprudent and indifferent act on the part of the Officer but is violation of the provisions of the Act and the Rules. The
Customs should have been doubly careful in handling importers from North and East while importing cargo through Cochin Port because those are
not importers known to the Customs Department and they have no local credibility or assets in Kerala for recovery, if there is default on the part of
such importers. Therefore, if goods are released without proper security for the differential duty amount, it is for the department to make final
assessments and chase them for recovery. In fact importers are pressing for release of goods on provisional assessment of duty because the
Department is indifferently permitting release of goods on part payment of duty and on execution of bond without adequate security and the bond
which is only an undertaking by the party, and when dishonoured the Department will be without any effective remedy to recover the amount.
Sections 17 & 18 of the Act provide for assessment of duty finally and provisionally respectively. The Scheme of the Act is such that as far as
possible goods in the export or import stream should be released only after final assessment and on payment of duty. What is mandatory u/s 17(1)
is that before assessment of duty the goods brought to the Port for export or import will have to be examined and tested by the Officer. This is
obviously for the purpose of identifying the goods with reference to the claim as declared by the party and to verify it''s quantity, quality etc. The
Assessing Officer is required to levy duty under Sub Section (3) of Section 17 of the Act after giving an opportunity to the importer/exporter to
produce documents and information relating to the goods and release goods on recovery of duty. However, sub section (4) of the said Section
provides that if the Officer is satisfied about the correctness and completeness of the documents and evidence produced by the party he can assess
duty. However, examination of goods is still provided even after assessment of duty, which means that before imported goods are released for
home consumption or the goods are exported out of India it should be examined by the Officer.
While final assessment and collection of duty on goods under export or import in terms of Section 17 of the Act is normal procedure, Section
18 provides for provisional assessment of duty and release of goods either under export or import for consumption on part payment of duty and on
furnishing security for the balance estimated amount of duty, which is subject to final adjudication. In order to consider the nature and scope of
Section 18 of the Act, which is the issue raised before us, we extract hereunder Section 18(1) of the Act.
Provisional assessment of duty.- (1) Notwithstanding anything contained in this Act but without prejudice to the provisions contained section 4-
(a) where the proper officer is satisfied that an importer or exporter is unable to produce any document or furnish any information necessary for the
assessment of duty on the imported goods or the export goods, as the case may be; or
(b) where the proper officer deems it necessary to subject any imported goods or export goods to any chemical or other test for the purpose of
assessment of duty thereon; or
(c) has produced all the where the importer or the exporterfurnished necessary documents and full information for the assessment of duty but the
proper officer deems it necessary to make further enquiry for assessing the duty, the proper officer may direct that the duty leviable on such goods
may, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally if
the importer or the exporter as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any,
between the duty finally assessed and the duty provisionally assessed.
Obviously what is clear from the above provision is that it is by way of an exception to Section 17 of the Act, which means that if final
assessment is possible goods whether it is imported or for export should be released after final assessment and collection of duty. However, it may
so happen that final adjudication of duty may get delayed for various reasons, and Section 18 of the Act takes care of such situation wherein the
Officer is given discretion to make provisional assessment of duty and release the goods pending final adjudication. Three situations are specifically
provided in clauses (a), (b) & (c) of Section 18(1) of the Act for the Assessing Officer to resort to provisional assessment of duty. The first one
covered by clause (a) is a case where the proper officer is satisfied that the importer/exporter is unable to produce any document or furnish any
information necessary for assessment of duty on the goods imported or brought for export. What is relevant is not the failure or refusal on the part
of the party to produce documents required for making assessment of duty. On the other hand, the Officer should be satisfied that the
importer/exporter is unable to produce documents or furnish information required for assessment. It is only on being satisfied about the bonafides
of the party''s inability, the Officer will proceed to make a provisional assessment on those grounds stated in clause (a) of Section 18(1) the Act. In
other words, if the Assessing Officer is satisfied that documents or information required for assessment would be available with the party and the
party is withholding or delaying production and apply for time to get the goods provisionally assessed and released it is for the Officer to decline
the same and proceed to make final assessment u/s 17 based on records available or documents obtained by the Officer.
Clause (b) of Section 18 provides a situation where the proper officer feels that identity or quality of the goods should be checked through
chemical or other tests and without proper identification the goods cannot be finally assessed as required u/s 17 of the Act, and in that event he
may wait for test results, and in between proceed to make provisional assessment, which again is a discretion of the Officer in as much as if he is
satisfied that the declared identity and quality of goods requires no chemical or other tests he can proceed to make a final assessment u/s 17 of the
Act without going to testing of goods.
Clause (c) of the Act covers a situation where the importer/exporter has produced all the necessary documents and furnished full information for
assessment of duty but the Officer wants to check the correctness of any such documents or wants to conduct enquiry for obtaining further details
or information, it is up to the Officer to defer final adjudication and proceed to make a provisional assessment of duty in terms of the said sub
clause of Section 18(1) of the Act.
What is clear from the above provisions is that provisional assessment as a matter of right cannot be claimed by any importer or exporter.
However, nothing bars an importer or exporter for requesting for time for production of document or information required for final assessment and
if the proper officer on being satisfied about the bonafides and genuineness of the claim grants time, then certainly such importer/exporter can
request for provisional assessment of duty u/s 18(1) of the Act because otherwise the importer / exporter will end up in paying heavy demurrages
for storage of the goods in the Port besides the risk of the cargo getting perished or suffering erosion of the quality. Besides the situation covered
by sub clause (a) we do not think the importer/exporter can even request for provisional assessment of duty which, in our view, covered by all
other clauses is completely within the discretion of the proper officer adjudicating the matter. In other words, the importer/exporter has no role in
matters covered by clauses (b) & (c) wherein the Officer only has the discretion to make provisional assessment and release of goods after sending
the goods for chemical and other tests and wait for test result for final adjudication or if the officer feels he needs to conduct further enquiry and
collect information in his own way for final adjudication, no matter the party has produced all required information and documents which according
to the party are required for assessment of duty.
We therefore conclude that an importer exporter is entitled to demand provisional assessment u/s 18(1)(a) if such person convinces the proper
officer the requirement of further documents or information which are not readily available with the party and are required for assessment, which
such importer / exporter will be able to obtain and produce before the Officer within a reasonable time and if the Officer feels that the documents
or information offered to be produced by the party is vital for the purpose of assessment and the party genuinely needs time, necessarily the final
adjudication will be delayed and provisional adjudication is the recourse open to the Officer which he should not decline. However, even in this
situation covered by clause (a) discretion is essentially given to the Officer whether to accept the party''s claim or reject it for proper reason and
proceed for making final assessment u/s 17 of the Act.
Since we have considered the scope of provisional assessment u/s 18 of the Act, we have to necessarily deal with the conditions with regard to
collection of duty and security and release of goods pursuant to orders issued u/s 18 of the Act. In this regard conditions of provisional assessment
and release of goods are contained in Regulation 2 & 4 of the Regulations framed u/s 157 read with Section 18(1) of the Act, which are extracted
hereunder for easy reference.
Regulation 2. Conditions for allowing provisional assessment - Where the proper officer on account of any of the grounds specified in sub-section
(1) of Section 18 of the Customs Act, 1962 (52 of 1962), is not able to make a final assessment of the duty on the imported goods or the export
goods, as the case may be, he shall make an estimate of the duty that is most likely to be levied hereinafter referred to as the provisional duty. If the
importer or the exporter, as the case may be, executes a bond in an amount equal to the difference between the duty that may be finally assessed
and the provisional duty and deposits with the proper officer such sum not exceeding twenty per cent of the provisional duty, as the proper officer
may direct, the proper officer may assess the duty on the goods provisionally at an amount equal to the provisional duty.
Regulation 4. Surety or security of the bond - The proper officer may require that the bond to be executed under these regulations may be with
such surely or security, or both, as he deems fit.
What is clear from Section 18(1) read with the above Regulations is that the Officer could make provisional assessment and release goods u/s
18 of the Act pending final adjudication only after ensuring that the actual duty that could be levied later will be recoverable from the party. For this
purpose, the provisions of the Act and the Regulations above referred provide for determination of duty based on available documents, evidence
and claim made by the party and also estimation of duty which according to the Officer is likely to be levied finally. So much of the duty determined
based on the documents and claim of the party is the admitted duty which the party has to straightly remit. The duty provisionally determined is
nothing but the duty which the Officer estimates over the duty admitted by the party as payable based on his estimation on the value, classification
or the rate applicable, which is essentially a matter to be determined by the Officer. Regulation 2 makes it clear that besides remittance of the
admitted duty in terms of the claim of the importer / exporter the officer can demand payment of duty up to 20% of the duty provisionally
determined by him which is over and above the admitted duty payable in accordance with the claim of the party and assessed by the Officer. After
remitting the duty in terms of the claim made by the party (admitted duty) and up to 20% of the provisional duty demanded by the Officer, the
Officer is bound to collect security for the balance of the provisional duty which under Regulation 4 is through execution of bond supported by
surety or security or both as the Officer deems fit. But we feel from the past follies of the Department stated by the learned Standing Counsel that
the proper Officers provisionally assessing duty are under misunderstanding on the scope of Regulation (4) which requires surety or security in
support of the bond executed which is noting but an undertaking to pay duty on demand. However, a surety bond should be valid only when it is
supported by proper security, which may be by way of mortgage of immovable property or Bank Guarantee in favour of the Department or
otherwise, and bond executed without proper security would serve only as a document to claim the amount. The Officer should realise that the
best and safest course open to the Department is to demand Bank Guarantee from the local branch of a Nationalised Bank for balance provisional
duty determined, so that recovery is ensured without any necessity for the Department to chase the parties and looking for their assets. In fact,
credentials of the importer / exporter and such other matters should weigh with the Department in relaxing the condition for security, which in the
normal course should be Bank Guarantee.
Therefore the Writ Appeal is disposed of by modifying and elaborating the judgment of the learned Single Judge as above.