Writ Petition No.6364 of 2014

4th August, 2014

Petitioner Counsel: Mr. BHARAT RAICHANDANI i/b Mr. MIHIR P. DESHMUKH
Respondent Counsel: Mr. P.S. JETLY

Cases Cited:
M/s.Skoda Auto India Pvt Ltd Vs. Union of India, 2011(4) ALL MR (JOURNAL) 63=2010 (255) ELT 63 (Bom) [Para 2,13]

JUDGMENT

B. P. COLABAWALLA J. :- Rule, by consent of the parties made returnable forthwith and heard finally.

The grievance made by the Petitioner in this Writ Petition under Article 226 of the Constitution of India is against the action of Respondent Nos.2 to 5 in loading 1% Extra Duty Deposit ("EDD") on the imports made by the Petitioner and/or their purchasers, and against the action of Respondent Nos.4 and 5 to withhold out of charge order unless 1% of EDD is paid under Bills of Entry No.593135601 dated 26th June 2014 and Bill of Entry No.5626428 dated 27th May 2014.

2. The learned counsel appearing on behalf of the Petitioner submitted that charging of 1% of EDD by Respondent Nos.4 and 5 despite the SVB order dated 23th June 2014 being brought to the notice of Respondent No.3 along with the conditions of the Circular No.11/2001- Cus dated 23rd February 2001 that 1% EDD cannot be recovered once the decision is given by the Special Valuation Branch ("SVB"), or where no SVB order is passed there on the expiration of four months from the date of filing of the reply to the questionnaire, is arbitrary and contrary to the said circular as well as the judgment of this Court in the case of M/s.Skoda Auto India Pvt Ltd v/s Union of India reported in 2010 (255) ELT 63 (Bom) : [2011(4) ALL MR (JOURNAL) 63]. He therefore submitted that this was a fit case for interference by this Court under Article 226 of the Constitution of India.

3. The brief facts relating to the present controversy are that, the Petitioner is an Indian Entity of the global operations of the DuPont group. By virtue thereof, the Petitioner imports several goods from various related parties within the meaning of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. In view of the relationship between the Petitioner and its affiliates, a reference was made to the Special Valuation Branch, Chennai for a detailed investigation on the valuation of their imports from their foreign associated enterprises. In the case of the Petitioner, SVB orders were passed from time to time. The latest being 23th June 2014. The details of same are set out hereunder:-

NO.	Order No. and date	When applicable
1	Order in Original No. 96/99/Group/Cr.SVB dated 11.02.1999	Till 10.02.2002
2	Order No.1442/2004 dated 10.02.2004	From 11.02.2002 to 09.02.2007
3	Order No. SVB/ Cus/ Review/1/Pu/2007 dated 10.04.2007	From 10.02.2007 to 09.04.2010
4	OrderNo.SVB/CUS/ Review/HS/19/2010 dated 25.11.2010 (Set aside by the Hon’ble High Delhi Court	From 10.04.2010 till 24.11.2013 (subject to modification by superior authorities)
5	Order No.SVB/CUS/Review/HS/24/2010 dated 21.02.2011	From 21.02.2011 till 20.02.2014
6	Order of this Hon’ble High Court in WP No. 2911 dated 28.03.2014	Directions to Respondent 5 to pass an appropriate order after considering submissions of the Petitioner within 3 months.
7	Order No.SVB/CUS/REVIEW/SS/07/19422 dated 23.06.2014 passed by Respondent 5 in compliance with this Hon’ble Court directions	Directions to Respondent 5 to pass an appropriate order after considering submissions of the Petitioner within 3 months.

4. The said SVB orders clearly contemplated that every order shall be in force for three years from the date of its passing unless the facts undergo any change. The orders also mention that any person aggrieved (which would include Revenue) with the SVB order may file an appeal under Section 128 of the Customs Act. Thus, till 9th April 2010, the SVB order dated 10th April 2007, set out above, was in force and for the subsequent period the case was taken up for review of the assessable value or renewal of the earlier order. Thereafter, a SVB order dated 25th November 2010 was passed and it was held that consideration paid under the Product License and Continuing Technical Support Agreement was to be added to the import price for customs duty purpose. That apart, the said order made this addition effective from 1st June 2001. Being aggrieved by this, the Petitioner challenged the same in the Delhi High Court and the Delhi High Court set aside the said order. Thereafter, a fresh SVB order was passed on 21st February 2011. The relevant portion of which, reads as under:-

"Para 21:

Declared invoice values (i) Chlorimuron Ethyl Technical & Metsulfuron Methyl Technical (ii) Indooxacarb Technical (iii) Methomyl Technical (iv) Cymoxanil Technical (v) Cholrimuron Ethyl Technical (vi) Metsulfuron Methyl Technical importer by the Importer from the foreign suppliers are rejected and loaded by 0.5%. Since the imports made by the Importer from foreign suppliers up to 9th April, 2010 were covered by the Order no. SVB/CUS/Review/PV/2007 dated 10.4.2007, I order that declared invoice values in respect of these items on or after 10.4.2010 shall be loaded by 0.5%. In addition to this loading of 0.5%, the Assessing group may also decide the issue of other additions, if any taking into consideration the provisions of valuation rules with Section 14 of the Customs Acts.

Para 22:

Declared invoice value in case of imports of goods may be accepted subject to usual checks and scrutiny and addition, if any, under Rule 10 of Custom Valuation (Determination of value of Imported Goods) Rules, 2007

Para 23:

Bill of Entry filed by the Importer may be finalized accordingly

Para 24:

This decision has been taken on the basis of available facts, written submissions made and documents submitted by the Importer. Changes, if any, in the methods of invoicing, terms of the relationship, error or omission or any other material facts, which may affect the valuation of the goods under the Valuation Rules, should be brought to the notice of this branch immediately for review of this order. The imports thereafter will be assessed provisionally with EDD equivalent to 1% of the Assessable value.

Para 25:

This order is valid for a period of three years from the date of issue. To facilitate prompt and timely review, the Importer is requested to come forward with necessary data four months before the expiry of three year's period. If no renewal is done on expiry of three years period, the order shall stand expired and the Assessing Group may resort to provisional assessment with EDD equivalent to 1% of the Assessable value.?"

5. The Petitioner being aggrieved by the said order, with a specific challenge to paragraph 21 in relation to imposition of loading, filed an Appeal before the Commissioner (Appeals) who by his order dated 31st October 2011 allowed the Appeal filed by the Petitioner. Being aggrieved by the said order, the Deputy Commissioner, SVB preferred an Appeal before the CESTAT, Delhi. The said Appeal is pending without grant of any stay against the order of the Commissioner(Appeals) dated 31st October 2011.

6. Despite aforesaid, the department was insisting on 1% loading of EDD on bills of entry being filed by the Petitioner, and therefore, the Petitioner was left with no option but to approach this Court by filing Writ Petition No.2911 of 2014 challenging the provisional assessment and recovery of EDD along with various other grounds. This Court by its order dated 28th March 2014 recorded the statement on behalf of the Assistant Commissioner/Deputy Commissioner (Special Valuation Branch) New Delhi that the said authority would hear the Petitioner and after due consideration of their submissions would pass appropriate orders in accordance with law assigning the reasons for its conclusion. In terms of the aforesaid statement, the said Writ Petition was disposed of.

7. Thereafter, a personal hearing was granted by the Deputy Commissioner, SVB, New Delhi and an order was passed dated 23rd June 2014 issued on 24th June 2014. The Deputy Commissioner, SVB, New Delhi, inter-alia, came to the conclusion that:-

(a)He was desisting from making any comments on addition of 0.5% loading as the matter was subjudice before the Hon'ble Delhi (CESTAT);

(b)That royalty paid on 13.12.2013 in light of new

Agreement dated 01.04.2012 is liable to be added to the assessable value of the products covered under the Agreement dated 01.04.2012; and

(c) He was desisting from renewing the order dated 21.02.2011 as the same was subjudice before the CESTAT in an Appeal filed by the Revenue.

8. As per the aforesaid order, and despite having concluded in paragraph 26 thereof that products covered under the Agreement dated 1.04.2012 (under which royalty is being paid), are subject to the addition of such royalty to the price paid or payable, Deputy Commissioner, SVB, New Delhi deferred the implementation of the conclusions in the said order dated 23.06.2014 till the finality of the Appeal proceedings pending before the CESTAT, Delhi in which the Department had challenged the order dated 31.10.2011 passed by the Commissioner (Appeals).

9. It is the case of the Petitioner that the Customs Department continues to charge EDD of 1% of the assessment value on every import done by the purchaser of the Petitioner. The said charging of EDD of 1% was done on the assumption that the price of the goods imported is influenced by the relation of the Petitioner with its affiliated company.

10. In the light of these developments and with a view to clarify the issue of 1% EDD being charged on imports made, the Petitioner produced the SVB order dated 23rd June 2014 as passed by the Deputy Commissioner of Customs, SVB, New Delhi before Respondent Nos.4 and 5 and contended that in view of the said order, the Petitioner was not liable to pay the EDD of 1% on the assessment value of imported goods. Nevertheless, Respondent Nos. 4 and 5 reassessed the bills of entry no.542537549 dated 11th March 2014 and 5626428 dated 27th May 2014 provisionally subject to 1% EDD

11. Being aggrieved by these actions of Respondent Nos.4 and 5, and their failure to acknowledge the SVB order dated 23rd June 2014, this Writ Petition has been filed.

12. Mr. Raichandani, the learned counsel appearing on behalf of the Petitioner contended that the action on the part of Respondent No.4 in loading the imports with 1% EDD is ex-facie erroneous, illegal and perverse. He submitted that the said 1% EDD could not be loaded on the imports, despite a valid SVB order passed by the Deputy Commissioner of Customs, SVB, New Delhi and the action on the part of the Respondents in this regard was high-handed and arbitrary. The learned counsel submitted that despite the said SVB order, the Respondents were assessing the bills of entry subject to the loading of 1% EDD in view of the fact that the Appeal from the order of the Commissioner (Appeals) dated 31st October 2011 was pending before the CESTAT, New Delhi. He submitted that despite the Petitioner having succeeded before the Commissioner (Appeals) and there being no stay granted by the CESTAT, New Delhi, the Respondents continued to load the imports of the Petitioner with 1% EDD. According to Mr. Raichandani, this action of the Respondents was totally arbitrary and contrary to the law. In the alternative, he submitted that the Ministry of Finance (Department of Revenue), Central Board, New Delhi had issued a circular 23rd February, 2001 that specifically directed that even if the decision is pending by the SVB cell, then, beyond a period of four months, EDD could not be recovered. In this regard, he placed reliance on clause (9) of the Circular dated 23rd February 2001, which reads as under:-

"9. The amount of extra duty deposit presently kept at 1% will be continued. Board has however decided that if the importer does not furnish complete reply to the questionnaire within 30 days, of receipt of the 'Questionnaire' by the importer, the extra duty deposit will be increased to 5% till the date of receipt of reply by the Department. It should therefore be impressed upon the concerned importers(in the public notice that is issued) to ensure timely replies being sent to the Questionnaire to avoid any higher deposit being insisted.

Furthermore, where provisional assessment is being, resorted to, the investigation and finalization of the assessment must be completed within four months from the date of reply. If no decision is taken within 4 months, the extra duty deposit should be discontinued and the concerned Deputy Commissioner/Assistant Commissioner will be held responsible for inexplicable delay in finalization."

13. On this issue, Mr. Raichandani also placed reliance on the judgment of this Court in the case of M/s.Skoda Auto India Pvt Ltd, [2011(4) ALL MR (JOURNAL) 63] (supra). For the aforesaid reasons, Mr. Raichandani submitted that assessment of bills of entry No.593135601 dated 26th June 2014 and 5626428 dated 27th May 2014 subject to loading of 1% EDD was illegal and contrary to law and requires interference by this Court.

14. On the other hand, Mr. Jetly, the learned counsel appearing on behalf of the Respondents submitted that Respondent Nos. 4 and 5 were justified in loading the imports made by the Petitioner with 1% EDD as the order passed by the Commissioner (Appeals) dated 31st October 2011 was not accepted by the department and the same was under challenge before CESTAT, Delhi. He, therefore, submitted that the Petitioner be directed to continue to pay 1% EDD and an application can be made to the CESTAT, Delhi for expediting the hearing of the Appeal filed by the Revenue.

15. With the help of the learned counsel, we have perused the Writ Petition and the Annexures thereto. In the peculiar facts of the present case, we find that the grievance made by Mr. Raichandani is justified. In the present case, admittedly, there is a SVB order passed by the Deputy Commissioner of Customs, New Delhi dated 23rd June 2014. In view of the said order, atleast prima facie, Respondent Nos.4 and 5 were not justified in loading 1% EDD on the imports made by the Petitioner. In any event and even if we were to hold that the SVB order dated 23rd June 2014 was not a fresh order and there was no renewal of the earlier SVB order dated 21st February 2011, even then, by virtue of the Circular dated 23rd February 2001, and particularly clause 9 thereof (reproduced above), in the facts of the present case, Respondent Nos.4 and 5 were not justified in loading 1% EDD on the imports made by the Petitioner. The said clause categorically states that where the provisional assessment is being resorted to, the investigation and finalization of the assessment must be completed within four months from the date of reply and if no decision is taken within the said period, the extra duty deposit will be discontinued.

16. In the present case, even if we assume that the order passed by the Deputy Commissioner, SVB, New Delhi dated 23rd June 2014 does not amount to a fresh SVB order and neither does it renew an earlier SVB order dated 21st February 2011, by virtue of the said circular, no EDD could have been loaded on the imports made by the Petitioner. However, in view of the fact that the Appeal before the CESTAT, Delhi is pending, we do not think it would be a fit case to entitle the Petitioner to clear their imports without in any way securing 1% EDD that is being loaded on their imports.

17. In view thereof, we pass the following order:-

(I) The Respondent shall not call upon the Petitioner to pay 1% Extra Duty Deposit on the imports.

(II) However, the Petitioner will have to furnish a Bond in favour of the Respondents at the time of clearance to secure the difference between the duty demanded and the Quantum of Extra Duty Deposit.

(III) The Respondents to clear the goods on compliance in terms of Clause (2) above by the Petitioner.

(IV) This order and direction is without prejudice to the rights and contentions of parties particularly in the pending Appeal before CESTAT.

(V) It would be open for the CESTAT to take up the pending Appeal expeditiously on request of either parties in that behalf.

18. The Writ Petition stands disposed of in the aforesaid terms.

Ordered accordingly.