1. Import of goods — Alleged under-invoicing — Recovery of differential duty under Section 28, Customs Act, 1962 — Dispute over extended period of limitation. (Para 2 )
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2023 Supreme(SC) 1308
SUPREME COURT OF INDIA
DINESH MAHESHWARI, SANJAY KUMAR, JJ.
M/s Shashi Dhawal Hydraulics Pvt. Ltd. Delhi – Petitioner
Versus
Commissioner of Customs (Import) Mumbai – Respondent
Civil Appeal Dy. No. 45602 of 2019
Decided On : 14-02-2023
Important Points
The Court held that the availability of the extended period of limitation under the Proviso to Section 28(1) of the Customs Act, 1962, is a jurisdictional issue. The Tribunal must specifically determine if collusion, wilful misstatement, or suppression of facts existed to justify the extended time limit.
Subject
Customs Law - Import and Valuation Issues
Act Referred
Customs Act, 1962: S.28, S.124, S.111(m), S.125, S.112(a), S.28AB, S.114A, S.129-B(2), S.14
Customs Valuation (Determination of Price of Imported Goods) Rules, 1988: R.5, R.10A, R.8, R.4(2)
Customs Valuation (Determination of Price of Imported Goods) Rules, 1988: R.5, R.10A, R.8, R.4(2)
Headnote
(A) Customs Act, 1962 - Sections 28, 111(m), 112(a), and 125 - Appeal against recovery of differential duty of Rs. 20,31,302/- on imported hydraulic pumps, alleged under-invoicing - Tribunal upheld recovery but set aside redemption fine and penalties citing lack of malafide intent - Appellant contended extended limitation period for SCN not applicable due to absence of mis-declaration - Court held that availability of extended period must be re-examined - Appeal allowed with restoration of original appeal to Tribunal for this assessment. (Paras 8, 11, 12, and 14)
Facts of the case:
Appellant sought authorized distributorship for hydraulic pumps but was denied, later the goods were imported through a sub-dealership. A Show Cause Notice alleged under-invoicing, leading to the recovery of differential duty and penalties.
Findings of Court:
The Court found the prior orders insufficiently addressed the jurisdictional question regarding the application of an extended limitation period under Section 28, thus restoring the matter for reassessment by the Tribunal.
Issues: The primary issue was whether the extended time for SCN under the Proviso to Section 28(1) applied given the Tribunal's findings on mis-declaration.
Ratio Decidendi: The Court emphasized that without the proper elements of Proviso to Section 28(1), the issuance of the Show Cause Notice could not be maintained, thus necessitating reevaluation by the Tribunal.
Result: Appeals allowed to extent that the matter is remitted for consideration by the Tribunal.
Facts of the case:
Appellant sought authorized distributorship for hydraulic pumps but was denied, later the goods were imported through a sub-dealership. A Show Cause Notice alleged under-invoicing, leading to the recovery of differential duty and penalties.
Findings of Court:
The Court found the prior orders insufficiently addressed the jurisdictional question regarding the application of an extended limitation period under Section 28, thus restoring the matter for reassessment by the Tribunal.
Issues: The primary issue was whether the extended time for SCN under the Proviso to Section 28(1) applied given the Tribunal's findings on mis-declaration.
Ratio Decidendi: The Court emphasized that without the proper elements of Proviso to Section 28(1), the issuance of the Show Cause Notice could not be maintained, thus necessitating reevaluation by the Tribunal.
Result: Appeals allowed to extent that the matter is remitted for consideration by the Tribunal.
Legal Category Hierarchy
Advocates:
Advocate Appeared:
For the Petitioners: Charanya Lakshmikumaran, Apeksha Mehta, Falguni Gupta, Neha Choudhary.
For the Respondents: Balbir Singh, Mukesh Kumar Maroria, Prashant Singh-I, Annirudh Sharma-II, Aakansha Kaul.
Advocate Appeared:
For the Petitioners: Charanya Lakshmikumaran, Apeksha Mehta, Falguni Gupta, Neha Choudhary.
For the Respondents: Balbir Singh, Mukesh Kumar Maroria, Prashant Singh-I, Annirudh Sharma-II, Aakansha Kaul.
Table of Contents
2. Whether the extended period of limitation under Section 28 is applicable when the Tribunal finds no mis-declaration to justify confiscation under Section 111(m). (Para 7 )
3. The Tribunal failed to specifically examine whether the elements of collusion, wilful misstatement, or suppression of facts required for the extended period of limitation were present. (Para 10 , 11 )
4. The availability of the extended period of limitation under the Proviso to Section 28(1) is a jurisdictional question requiring specific examination of its constituent elements. (Para 11 )
5. Impugned orders modified — Appeal restored — Question of availability of extended period of limitation remitted to the Tribunal for consideration. (Para 13 , 14 )
6. What are the conditions for invoking the extended period of limitation under Section 28(1) of the Customs Act, 1962?
The extended period of five years is available if the duty was not levied or short-levied by reason of collusion or any wilful misstatement or suppression of facts by the importer, exporter, or their agent or employee. (Para 9 )
7. Is the availability of the extended period of limitation under the Proviso to Section 28(1) considered a jurisdictional issue?
Yes, the court held that this is a jurisdictional question because, without the existence of the elements specified in the Proviso, the show cause notice cannot be maintained. (Para 11 )
8. Can the extended period of limitation be maintained if the Tribunal finds no mis-declaration for the purpose of confiscation?
The court remitted this specific question to the Tribunal, noting that the availability of the extended period must be examined independently based on the facts of the case and the law applicable. (Para 12 , 13 )
ORDER :
1. Delay Condoned. Having regard to a short point involved, we have heard learned counsel for the parties finally at this stage itself.
2. These appeals are directed against the Judgment and Final Order No. A/87852/2018 dated 06.11.2018 in Appeal No. C/1132/2007 and Miscellaneous Order No. M/85887/2019 dated 17.07.2019, in Customs Miscellaneous Application No. 85189/2019, as passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai1 [Hereinafter referred to as ‘the Tribunal’] whereby the Tribunal partly allowed the appeal against the Order-in-Original passed by the Commissioner of Customs (Import), Mumbai dated 28.09.2007, upholding the recovery of differential duty from the appellant to the tune of Rs. 20,31,302/- on imported hydraulic pumps under Section 28 of the Customs Act, 19622 [Hereinafter referred to as ‘the Act of 1962’/’the Act’] and rejected the application for rectification.
3. Shorn of unnecessary details and briefly put, the relevant background aspects of the matter are that M/s David Brown Hydraulic Ltd., U.K.3 [Hereinafter referred to as ‘the manufacturer’] was in the business of manufacturing hydraulic pumps. The appellant had initially approached them to secure authorized distributorship but, the request was declined because M/s S&H Universal, London4 [Hereinafter referred to as ‘the supplier’] had already entered into contract for sole distributorship for India and South East Asia. Subsequently, the appellant entered into a sub-dealership arrangement through the supplier.
3.1. The matter in issue pertains to the period 2001-2003, when the appellant cleared shipment of hydraulic pumps manufactured by the said manufacturer and imported from the supplier.
3.2. A Show Cause Notice5 [‘SCN’ for short] dated 26.09.2006 was issued to the appellant under Section 124 of the Act of 1962 on the allegation that the appellant had under-invoiced the bills of hydraulic pumps imported from the supplier during the years 2001 to 2003. The dispute arose owing to the fact that same goods were imported by the sister concern of the appellant, namely, M/s Shashi Charu Hydraulics Pvt. Ltd. at a higher price, albeit directly from the manufacturer. Therefore, the appellant was called upon to show cause as to why the goods valued at Rs. 76,05,649/- should not be confiscated, differential duty of Rs. 20,31,302/- should not be recovered, and penalty should not be imposed.
3.3. The Commissioner of Customs (Import), Mumbai, in his order dated 28.09.2007, held that the appellant had under-invoiced the goods imported from the supplier and rendered itself liable to the consequences. The learned Commissioner, accordingly rejected the declared value of goods; re-determined the assessable value of goods; ordered recovery of differential duty along with interest; ordered confiscation of goods and imposed redemption fine in lieu of confiscation; and also imposed penalty on the appellant and its directors. The relevant parts from the Order-in-Original dated 28.09.2007 could be reproduced as under:
“24. In these circumstances, I am of the view that the importer made a vain attempt to justify the under-invoicing of the subject pumps on the basis of list price and distributor's price. In the instant case, the comparison was not in the import price and the list price, but in the two imports of the importer itself, one from the trader/distributor at a lesser price and another from the manufacturer which is at a higher price. Rule 5 of the Customs Valuation Rules clearly state that once the value rejected under 10A of the said rules, valuation can be proceed through Rule 5 to Rule 8. As there was a gross difference in value quoted by the importer and their sister concern (most of the Directors are same) for the said pumps of same manufacture invoice value submitted is in doubt and therefore can be rejected under 10A and after that it can be proceed through Rule 5 to Rule 8.
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26. Since the importer has pai
