The power to demand security for differential duty on imports flows from Section 18(1) of the Customs Act and Circular No. 38/2016 after the Special Valuation Branch (SVB) submits its findings.

JUDGMENT :

NITIN JAMDAR, J.

1. Rule. Rule made returnable forthwith. Respondents waive service. Taken up for disposal.

2. The Petitioner has challenged the direction issued by Respondent No. 3 to the Petitioner on the ICEGATE Portal demanding bank guarantee for differential duty on of bills of entry for imports of the Petitioner of concentrates of alcoholic beverages from 1 April 2022 onwards.

3. The Petitioner is a private limited company. The Petitioner manufactures, blends and sells Indian made foreign liquor. Respondent No. 1 is the Union of India. Respondent No. 2 is the Central Board of Indirect Taxes and Customs. Respondent No. 3 is the Principal Commissioner of Customs (Nhava Sheva). Respondent No. 4 is Joint Commissioner of Customs. Respondent No. 5 is the Deputy Commissioner of Customs, and Respondent No. 6 is the Principal Commissioner of Customs, Noida, U.P.

4. In case of import of goods by an Indian buyer from a foreign supplier, who is related, there is a possibility that the goods are imported at a lower value than the market price, thus causing a loss in customs duty levied on the value of the imported goods as per the provisions of the Customs Act. For that purpose, a specialized branch is set by the Customs known as Special Valuation Branch (SVB). Its function is to investigate the valuation of such imported goods from related parties. SVB investigates the impact of the such relationship on the invoice value of the imported goods.

5. The Petitioner has been importing concentrates of alcoholic beverages from M/s. Chivas Brothers Limited, United Kingdom since 1994. There has been litigation regarding these import activities in the past, which is not directly relevant for the present discussion to describe it in detail. On 28 February 2012, the Petitioner filed an annexure along with documents for the proposed import of concentrates of alcoholic beverages in view of the Supply Agreement dated 11 January 2012. On 17 October 2014, the Directorate of Revenue Intelligence (DRI), New Delhi, initiated an investigation that the Petitioner has been importing concentrates from Chivas Brothers, a related party and DRI suspected undervaluation of goods. During the investigation by DRI, the Petitioner deposited Rs. 40 crores as an ad-hoc deposit on 16 February 2015. A further deposit of Rs. 20 crores was made with the DRI, New Delhi, on 6 May 2015. The DRI submitted a detailed report dated 6 July 2021 regarding the short payment of customs duty and the undervaluation of concentrated alcoholic beverages provisionally imported by the Petitioner. The DRI's investigation report stated that the differential duty amounting to Rs. 20,08,68,69,079/- appears to be payable by the Petitioner and, therefore, it was requested to initiate proceeding for the finalization of the assessment of goods imported by the Petitioner.

6. The case of the Petitioner was also referred by the Assistant Commissioner of Customs to Special Valuation Branch (SVB) to take the relationship and valuation of goods imported by the Petitioner from the foreign supplier-M/s. Chivas Brothers into account. SVB submitted investigation report on 30 December 2021. The SVB concluded that the Petitioner-importer and M/s. Chivas Brothers Limited, UK are related parties in terms of Rule 2(2)(iv) and 2(2)(vi) of the Customs Valuation Rules, 2007. It was observed that the Petitioner and M/s. Chivas Brothers are fully owned subsidiaries of Pernard Ricard, S.A. It was observed that the declared prices are liable for rejection under Rule 12 of the Rules of 2007 and are to be re-determined and required to be loaded from 2011 to 2020 quarterly, half-yearly and yearly. Further, for the imports made after the year 2020 with effect from 1 January 2021 and onwards, the value of imported goods is to be re-determined and is required to be loaded at the rate of 67.49% of the invoice value.