Shri Saurabh Bahety @APPELLANT @Hash Commissioner of Customs (Preventive), New Delhi @RESPONDENT

P.V. Subba Rao, J

Shri Saurabh Bahety, Proprietor of M/s. G.B. International, Appellant, filed this appeal to assail the Order-in-Appeal dated 19.06.2020, Impugned order passed by the Commissioner of Customs (Appeals) whereby he dismissed the appeal filed by the appellant and upheld the Order-in-Original passed by the Additional Commissioner.

We have heard learned counsel for the appellant and learned Authorized Representative for the Revenue and perused the records.

The appellant filed Bill of Entry No. 7301366 on 02.11.2016 to clear the following imported goods:

(a) Polyster PU Coated Fabrics

(b) Non-textured Fabrics

(c) Suction Pumps

Receiving intelligence, the officers of Commissioner of Customs (Preventive), New Delhi examined the goods under a Panchnama on 10.11.2016 and found them as declared but excess quantity of 1629 square meters of non-textured fabric was found. The appellant agreed that the quantity found was in excess of the declaration and paid duty on the excess quantity of fabric. The appellant is not contesting the duty paid on this excess quantity of goods found even before us.

It also appeared to the officers that the suction pumps were under-valued. The appellant was summoned who, in his statement given on 22.11.2016, admitted that the pumps were declared without any specification or brand name and they were of Chinese brand Dertin and were of 75 Gallons Per Day, GPD capacity. The appellant agreed to the re-determined value proposed by the officer and also agreed to pay the differential duty. The very next day, i.e.,on 23.11.2016, the appellant retracted the statement to the extent of valuation of suction pumps and asserted that National Import Database, NIDB data cannot be made the basis for valuation and goods should be valued on transaction value declared in the Bill of Entry. He also requested for the goods to be released provisionally. On 29.11.2016 provisional release was allowed with the condition that the appellant pays 100% of the duty demanded through demand draft or a submit a bank guarantee for the amount. The appellant approached the High Court of Delhi through a Writ Petition and by order dated 18.01.2017 the High Court modified the conditions for provisional release and goods were accordingly released.

The officers got the suction pumps examined by a Chartered Engineer who reported that they seem to be of 100 GPD capacity.

The officers conducted a Market survey, found the local market price of 100 GPD pumps and after allowing abatement from this price, re-determined their assessable value. Accordingly, duty was assessed under Rule 7 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, Valuation Rules, differential duty of Rs.4,57,868/- was worked out and it has been confirmed under section 28(4) of the Customs Act, 1962, Act by the Additional Commissioner in his Order in Original.

The goods were also confiscated under section 111(l) and (m) of the Act and were allowed to be redeemed under section 125 on payment of redemption fine of Rs.40,000/-. Penalty of Rs.4,57,868/- was imposed on the appellant under Section 114A.

Aggrieved, the appellant appealed to the Commissioner (Appeals) who, by the impugned order, upheld the Order-in-Original. Hence, this appeal.

We find that of the three goods which were imported there was no discrepancy with respect to Polyester PU Coated Fabrics. Excess quantity of non-textured fabric was found. The appellant does not dispute that excess quantity was found and duty was payable on the excess quantity. Learned counsel for the appellant submits that the excess duty has already been paid. Therefore, the only goods in dispute left are the suction pumps. Two issues arise for consideration with respect to these pumps:

(a) Were they of 75GPD capacity as asserted by the appellant or were they of 100 GPD capacity but mis-declared as of 75GPD as asserted by the department?

(b) If they were of 100 GPD capacity, was the method of re-determination and the value determined by the adjudicating authority correct?

We first examine the question of the capacity of pumps. Since the department is disputing the declaration made by the appellant, the department has to produce evidence. Section 102 of the Indian Evidence Act, 1872 reads as follows:

On whom burden of proof lies: The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.

In this case, the appellant filed the Bill of Entry making some declaration regarding the nature of the goods and their value. If Revenue asserts that the declarations are not correct, it has to produce evidence in support; otherwise it would fail.

Revenue produced evidence to assert that the pumps were of 100GPD in the form of a certificate of Shri R.K. Aggarwal, Chartered Engineer. After examining the goods, Shri Aggarwal, submitted his certificate dated 29.12.2016 and his observations in which are as follows:

“After carefully examining and testing of the representative sample as mentioned above, I observed that this is a 'Mini Booster Pump' for use in RO and the same may also be called 'Suction Pump for RO Water’ or 'Diaphragm Pump', mainly for use in the RO system & may also be used in pesticide spraying etc., just to boost pressure and not suitable for lifting at high altitude levels. The other technical parameters of the pump: Operating Voltage: 24V DC, Amp: 0.9 A, Suction Height 2 Mtr. Normal Working Pressure: 70 psi and by looking at inlet-outlet sizes (Approx. Inlet size 7/16" and outlet size 3/8" size) and other construction and weight of the pump i.e. 2.070 Kg (as weighed), this seems to be suitable for 100 GPD capacity RO Membrane system.It is to be reiterated that this type of pump is not meant to be operated for 24 hrs. and its capacity actually denote the capacity RO Membrane system.

Further, I hereby CONFIRM that the above mentioned Good/(s) is New (unused) having full residual life and thus can't be classified as e-waste. This do not fall within the purview of Hazardous Waste (Management, handling and transboundary movement) Rules, 2008 to the best of my knowledge. & observation.

I hereby declare that the particulars and statements made in this certificate are true and correct.”

It is evident from the report that wherever the parameters were clear, the Chartered Engineer indicated them clearly such as operating voltage, ampereage, suction height, normal working pressure, inlet-outlet size and weight. As far as the capacity of the pumps is concerned, he states that the pumps “seem to be suitable for 100 GPD capacity”. He does not say with any degree of certainty that they were of 100 GPD capacity. He also does not indicate that he had determined the capacity of the pumps. He did not indicate any formula used to determine the GPD, tests conducted, etc. Evidently, it is only his tentative opinion that the pumps seem to be suitable for 100 GPD. There is no other evidence on record to show that the pumps were of 100 GPD. The labels of the pumps which were imported are enclosed with the report of the Chartered Engineer which indicates the work flow as 1.1 liters per minute and maximum pressure as 130 PSI and work pressure as 70 PSI and suction height as 2 meters. It does not indicate the capacity of the pump in GPD. In the absence of any evidence to the contrary, the declaration by the appellant that the pumps were of 75 GPD and were imported at the prices indicated in the invoices must be accepted.

We, therefore, find that insofar as the pumps are concerned, the capacity declared by the appellant has not been established to be false or incorrect by the Revenue either through the certificate of the Chartered Engineer or through any other evidence. Consequently, there is no ground to reject the transaction value of the pumps. The value of the pumps declared in the Bill of Entry should therefore, have been accepted.

Insofar as the excess quantity of the non-textured fabric is concerned, the appellant does not dispute that excess quantity was found and that duty has to be paid on the excess quantity. It has already paid the duty.

According to the learned counsel for the appellant, duty also could not have been confirmed under section 28(4) because the process of assessment was not even completed. This submission also deserves to be accepted. When goods are imported, the importer self-assesses duty under section 17(1) and the proper officer can re-assess the duty under section 17(4) and if he does so, unless the importer agrees to the re-assessed duty, he has to pass a Speaking Order within 15 days. Both self-assessment and the re-assessment by the officer fall under the definition of ‘assessment’ under section 2(2). These sections read as follows:

Section 2 Definitions:

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(2) ‘assessment’ means determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the Customs Tariff Act) or under any other law for the time being in force, with reference to—

(a) the tariff classification of such goods as determined in accordance with the provisions of the Customs Tariff Act;

(b) the value of such goods as determined in accordance with the provisions of this Act and the Customs Tariff Act;

(c) exemption or concession of duty, tax, cess or any other sum, consequent upon any notification issued therefor under this Act or under the Customs Tariff Act or under any other law for the time being in force;

(d) the quantity, weight, volume, measurement or other specifics where such duty, tax, cess or any other sum is leviable on the basis of the quantity, weight, volume, measurement or other specifics of such goods;

(e) the origin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods;

(f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods,

and includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil;

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Assessment of duty.—

(1) An importer entering any imported goods under section 46, or an exporter entering any export goods under section 50, shall, save as otherwise provided in section 85, self-assess the duty, if any, leviable on such goods.

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(4) Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re-assess the duty leviable on such goods.

(5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re-assessment in writing, the proper officer shall pass a speaking order on the re-assessment, within fifteen days re-assessment of the bill of entry or the shipping bill, as the case may be.

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If the duty that has been assessed is paid, the proper officer issues an order permitting their clearance under section 47 which reads as follows:

Clearance of goods for home consumption.—

(1) Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption:

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Once the proper officer makes an order permitting clearance of goods for home consumption under section 47, the goods cease to be imported goods [section 2(25)] and dutiable goods[section 2(14)], and the importer ceases to be importer [section 2(26)].These sections read as follows:

Section 2 Definitions:

(14) ‘dutiable goods’ means any goods which are chargeable to duty and on which duty has not been paid;

(25) ‘imported goods’ means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;

(26) ‘importer’, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner, beneficial owner or any person holding himself out to be the importer;

Thereafter, there can be no assessment of duty. However, the assessment already made can be modified either on appeal by either party to the Commissioner (Appeals) or through the process under section 28.

The issue of SCN and determination of duty not levied, not paid or short levied or short paid, is in the nature of reopening of the assessment which was already completed by the proper officer. This process under Section 28 is subject to three limitations- Who, When and Why. The proper officer can issue an SCN, within the normal period or, as the case may be, extended period of five years and to recover duty not levied, not paid, short levied and short paid. The relevant date to reckon the limitation to issue an SCN under section 28 is the date on which the out of charge is given by the proper officer. The relevant portions of section 28 read as follows:

Recovery of duties not levied or not paid or short-levied or short-paid] or erroneously refunded.—

(1) Where any duty has not been levied or not paid or short-levied or short-paid or erroneously refunded, or any interest payable has not been paid, part-paid or erroneously refunded, for any reason other than the reasons of collusion or any wilful mis-statement or suppression of facts, —

(a) the proper officer shall, within two years from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

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Explanation 1.—For the purposes of this section, ‘relevant date’ means,

(a) in a case where duty is not levied or not paid or short-levied or short-paid, or interest is not charged, the date on which the proper officer makes an order for the clearance of goods;

(b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof or re-assessment, as the case may be;

(c) in a case where duty or interest has been erroneously refunded, the date of refund;

(d) in any other case, the date of payment of duty or interest.

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Thus, it is clear that section 28 can be invoked only after the goods have been cleared for home consumption because until then, the assessment is still open and if any discrepancies are found or any adjustments have to be made, they can be done by the proper officer through re-assessment under section 17.

In this case, the appellant filed the Bill of Entry and self-assessed duty and before it could be re-assessed by the proper officer, the officers of the Commissioner of Customs (Preventive) intervened and the Additional Commissioner has done this re-assessment instead of allowing the proper officer to do it. Thus, the demand which he confirmed is only a re-assessment under section 17 and is not a demand under section 28. Consequently, section 28AA and section 114A which are linked to section 28 do not apply to this case. This is simply a case of assessment of the goods where excess quantity of one of the goods was found on examination on which the appellant agreed and paid the excess duty. The proper officer could have done it in due course but the Additional Commissioner of Customs (Preventive) took over and did it.

Insofar as the confiscation of the goods under Section 111 (l) and (m) and redemption fine are concerned, we find that Section 111 makes certain goods liable for confiscation but does not mandate such confiscation. It is for the adjudicating authority to exercise his discretion and see if goods need to be confiscated in the facts of the case or not. In this case since the only violation is of import of excess quantity of one of the goods, we find no sufficient ground to confiscate the goods. Therefore, the confiscation of the goods and the redemption fine also deserve to be set aside.

In view of the above, we partly allow the appeal and modify the impugned order upholding the confirmation of demand of duty on the excess quantity of PU Fabric but set aside the rest of the order.

[Order pronounced in the open court on 23.08.2024]