The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, has ruled that an importer’s written acceptance of an enhanced customs value may dispense with the requirement of a speaking order but does not extinguish the importer’s independent statutory right to challenge the reassessment in appeal.
The Bench of P.K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the authorities had wrongly conflated two distinct legal issues—the limited procedural waiver of a speaking order under Section 17(5) of the Customs Act, 1962, and the substantive right of appeal available under Section 128 of the Act.
The appellant/assessee is engaged in importing “Polyester Knitted Fabrics of Mixed Colour, Weight and Length” from China. Between July 3, 2019, and October 3, 2019, it imported several consignments through ICD Dadri and declared the transaction value at USD 0.35 per metre or USD 1.77 per kilogram, based on the commercial invoices issued by the foreign supplier.
Upon examination, the imported goods were found to conform to the declarations contained in the Bills of Entry. There was no allegation of any discrepancy in their description, quantity or nature.
However, the Customs authorities did not issue “out of charge” orders at the declared value. According to the importer, it made several written requests seeking provisional or final clearance of the consignments upon payment of customs duty on the enhanced assessable value under protest. The importer claimed that it adopted this course to prevent further demurrage, detention and other losses arising from delayed clearance.
The importer alleged that the authorities did not act upon these requests and instead compelled it to submit letters consenting to the enhanced valuation. Customs thereafter rejected the declared transaction value and reassessed the goods at a higher value based upon those consent letters.
The importer subsequently requested the assessing officer to issue speaking orders explaining the reasons for the reassessment. No speaking orders were passed. It therefore challenged the assessments before the Commissioner (Appeals).
The Commissioner (Appeals) rejected the challenges after holding that the importer had accepted the enhanced assessable value in writing. The appellate authority concluded that once the reassessment was accepted, the proper officer was not required to issue a speaking order under Section 17(5) of the Customs Act and that the valuation accepted by the importer was legally binding.
Before CESTAT, the importer argued that its acceptance was not unconditional or voluntary. It pointed to its earlier communications seeking clearance on payment of duty under protest and maintained that the letters had been given only to secure the release of the consignments and avoid mounting detention charges.
It further contended that the consent letters merely stated that information regarding contemporaneous imports had been explained to it. The letters did not disclose the actual comparable import data or other relevant particulars, such as the quantity, quality, GSM, commercial level and period of the alleged comparable transactions.
The importer argued that the declared transaction value could not be rejected merely on the basis of a standard consent letter without complying with Section 14 of the Customs Act and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
The Customs Department defended the reassessment by submitting that the importer had expressly agreed to the enhancement after being informed of the grounds for rejecting the declared value and the details of contemporaneous imports of identical or similar goods. It was argued that the importer had also waived its right to a show-cause notice and speaking order.
The Department relied upon the Allahabad High Court’s ruling in S.S. Overseas v. Union of India, where relief seeking the issuance of speaking orders was declined after the importers had accepted the enhanced valuation. It also pointed out that the special leave petition against that decision had been dismissed by the Supreme Court.
CESTAT, however, found that the Commissioner (Appeals) had relied upon the importer’s consent letters without considering its earlier communications seeking clearance at the enhanced value under protest.
“These letters clearly proved that it was not the case of acceptance of enhancement of value simpliciter,” the Tribunal observed.
The Bench held that the proper officer was required to communicate in writing the grounds for doubting the truth or accuracy of the declared transaction value. It relied on the Supreme Court’s decision in Century Metal Recycling Private Limited v. Union of India, which held that the requirements prescribed under Rule 12 of the Customs Valuation Rules could not be ignored or waived.
CESTAT noted that the Bills of Entry involved in the case were filed between July and October 2019. Consequently, the proper officer was under an obligation to communicate the reasons for rejecting the transaction value in writing.
The Tribunal further observed that although the consent letters claimed that the importer had been shown details of contemporaneous imports of similar or identical goods, the actual data relied upon by Customs was not mentioned.
A bare recital that contemporaneous import data had been “gone through and understood,” without disclosing the relevant quantity, quality and contemporaneity of the comparable imports, could not be treated as an unconditional surrender of the importer’s right to dispute the valuation, the Bench held.
Relying substantially upon the Delhi High Court’s ruling in Hanuman Prasad and Niraj Silk Mills v. Commissioner of Customs (ICD), Patparganj, the Tribunal explained that Section 17(5) only permits an importer to waive the passing of a speaking order where the reassessment is accepted in writing.
Such acceptance cannot be interpreted as depriving the importer of its right to question the correctness of the reassessment through the statutory appellate mechanism.
“The waiver or concession is at best confined to the speaking order which the proper officer is obliged to frame,” the Tribunal said while applying the principles laid down by the Delhi High Court.
CESTAT also reiterated that there can be no estoppel against a statute, particularly in taxation matters. Consent or acquiescence by an assessee cannot defeat a substantive right expressly conferred by law, it stated.
The Bench distinguished the Allahabad High Court’s ruling in S.S. Overseas, holding that the judgment dealt with the narrower question of whether a writ of mandamus could be issued directing the authorities to pass a speaking order after the importer had accepted the reassessment.
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