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Customs Can Recover Without Challenging Importer's : CESTAT Ahmedabad
In a significant ruling that clarifies the interplay between under the and the department's recovery powers, the , has held that the can issue a demanding under Section 28 without first challenging an importer's . The decision, delivered on , partly allowed an appeal by while reducing the imposed from Rs 4 lakh to Rs 1 lakh.
The bench, comprising Judicial Member Dr. Ajaya Krishna Vishvesha and Technical Member Satendra Vikram Singh, emphasized that there is no legal bar preventing the department from recovering customs duties that were not levied or paid at the time of clearance, even if the is not formally appealed.
Background of the Dispute
The case involved two consignments of cold-rolled flat stainless steel products imported from China by under dated and . The goods were cleared after under . Subsequently, the department discovered that the imports attracted at a rate of 57.39% under , which had not been paid by the importer.
The department issued a for Rs 20.95 lakh towards and Rs 3.77 lakh towards , along with and a of Rs 4 lakh. The importer contested the , arguing that the department could not reopen the without challenging it through .
The Conundrum
relied heavily on the 's decision in and the decision in to support its argument that the must be modified before any recovery can be made. The importer contended that the process, once completed, attains unless the department initiates an appeal.
However, the tribunal distinguished the ITC Ltd. case, noting that it concerned a refund claim where modification of the underlying was a prerequisite. In the present case, the issue was recovery of duty that had never been levied or paid—a fundamentally different scenario. The bench observed:
"There is no bar in issuance of show cause notice by the department under for demanding differential customs duty without challenging of goods."
The tribunal further relied on the 's decision in , which unequivocally held that a for recovery can be issued even after the goods have been cleared. This principle, the bench noted, applies squarely to cases where duty has escaped assessment due to an at the time of clearance.
IGST on
Another critical issue was the levy of IGST on the . argued that IGST should not be charged on because it is a special duty distinct from customs duties. The tribunal rejected this contention, holding that imposed under , is a duty of customs.
The bench referred to , which provides that the value for calculating IGST on imported goods includes all duties of customs. It also relied on the decision in , which held that duties levied under the Customs Tariff Act fall within the expression "duties of Customs." Consequently, the tribunal ruled that IGST is leviable on , and since the importer had not paid it at the time of , the was valid.
The bench observed:
" levied under is a duty of customs. Therefore, as per Section 3(7) read with and further read with , IGST is leviable on which was not paid in this case by the appellant at the time of ."
Reduction and
On the question of , the tribunal referred to the 's decision in , which held that imposition of under the relevant provision is discretionary and not mandatory. The bench noted that the imports took place in January and May 2019, when the maximum under the was Rs 1 lakh. The maximum was subsequently increased to Rs 4 lakh with effect from .
Given that the imports occurred before the amendment, the tribunal held that the higher could not be imposed retrospectively. It therefore reduced the from Rs 4 lakh to Rs 1 lakh, while upholding the principal for and IGST along with .
Legal Implications and Impact
This ruling is of considerable importance to importers and customs practitioners. It settles the question whether the department must first challenge a before issuing a for . By affirming that Section 28 operates independently of the mechanism, the tribunal has reinforced the department's power to correct without being bogged down by procedural appeals.
The decision also clarifies the taxability of for IGST purposes, ensuring a consistent approach in valuation. Importers must now be vigilant about including in the value for IGST calculation, failing which they may face significant demands.
The reduction, while providing some relief to the importer, underscores the principle that penalties must be applied based on the law in force at the time of the contravention. This serves as a reminder that are not permissible unless expressly provided.
Conclusion
The CESTAT Ahmedabad's judgment strikes a balance between the need for effective and the rights of importers. By distinguishing the ITC Ltd. precedent and relying on Jain Shudh Vanaspati , the tribunal has provided clear guidance on the scope of Section 28. Importers and customs professionals will need to reassess their compliance strategies in light of this decision, particularly regarding the inclusion of in IGST valuation.
The appeal was partly allowed, with the principal sustained and the reduced. The order reinforces that is not a shield against recovery of duties that were legitimately due but unpaid.
