M/s. Delta Power Solutions Pvt.Ltd v. The Commissioner of Customs

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 02.12.2009CoramThe Honourable Mrs.Justice CHITRA VENKATARAMANW.P.No.18362 of 2009M/s. Delta Power Solutions Pvt.Ltd rep. by its Power Agent V.SriramAsst. Manager, Commercial & LogisticsPuducherry - 605 107...Petitioner vs1. The Commissioner of Customs Office of the Commissioner of Customs Custom House, No. 60, Rajaji Salai Chennai 600 001. 2. The Assistant Commissioner of Customs (Group 5B & C) Office of the Commissioner of Customs Custom House, No.60, Rajaji Salai Chennai 600 001. 3. The Deputy Commissioner of Customs (SVB) Office of the Commissioner of Customs Custom House, No.60, Rajaji Salai Chennai 600 001. ...RespondentsPetition under Article 226 of the Constitution of Indiapraying to issue a writ of certiorarified mandamus to call for therecords on the file of the second respondent in Letter F.No. S49/298/ 2007 - Gr. 5B & C dated June 17, 2009 and to quash the saidorder and direct the second respondent to refund the EDD ofRs.1,95,275/- along with interest from June 2006, 2008 to thepetitioner. For Petitioner:Mr.Joseph PrabakarFor Respondents:Ms.Mallika SrinivasanORDER The petitioner has sought for an issuance of a writ ofcertiorarified mandamus to quash the order of the second respondent https://hcservices.ecourts.gov.in/hcservices/ dated 17.6.2009 and to direct the second respondent to refund the EDDof Rs.1,95,275/- along with interest from 6.6.2008. 2. The petitioner herein engaged in the manufacture of PowerRectifier System. The petitioner company imports goods from itsParent company. The import transactions of the petitioner companyfrom 'related persons' namely from parent company and group companieswere examined under Section 14 of the Customs Act, 1962 read withCustoms Valuation (Determination of Value of Export Goods) Rules,2007 by the Special Valuation Branch (SVB) of the Customs Departmentat New Delhi. Dealing with the import from related persons underCircular No.11/01 dated 23.2.2001, the Central Board of Excise andCustoms instructed that the SVB (Special Value Branch) shall holdenquiry wherever there is a prima facie justification for conductingthe enquiry in case of imports where the transaction is betweenrelated persons in accordance with Rule 2(2) of the Valuation Rules,1988. Further the EDD collected at 1% shall be increased to 5%wherever there is a delay in the reply by the importer till the dateof receipt of reply by the Department. The investigation andfinalisation of the provisional assessment made must be completedwithin four weeks from the date of reply. If no decision is takenwithin four months, the EDD should be discontinued and the concernedDeputy Commissioner/Assistant Commissioner shall be held responsiblefor the delay in finalisation of the provisional assessment of thepetitioner as per Circular No.268/07. The Assistant Commissioner ofCustoms, SVB held that pending verification of the agreements betweenthe supplier and the importer and the books of account, their importsfrom the suppliers, Delta Electronics, Thailand, are ordered to beassessed provisionally with EDD at 1% on the assessable value of thegoods in addition to the duty payable by them in accordance withCircular No.11/01. After examining the transactions, the AssistantCommissioner of Customs, Special Valuation Branch, passed an order on6.6.2008 accepting the value quoted by the petitoner as transactionvalue in terms of Rule 3(3)(b)(i) of the Valuation Rules that allpending assessments be finalised. The copy of the order was sent tothe second respondent. In respect of certain bills of entry dated13th December 2007, 12th February 2008, 27th February 2008 and 17thMarch 2008, the respondents collected 1% EDD. In terms of circulardated 23.2.2001 in Circular No. 11/2001, the petitioner entertainedthe impression that considering the collection of EDD, the assessmentwas by way of provisional assessment. When the petitioner took stepsto claim the refund of 1% EDD paid under the imports from relatedpersons pursuant to the order passed on 6.6.2008, the petitioner wasinformed by the respondents vide letter dated 17.6.2009 that theassessment was treated as final. In the circumstances, thepetitioner represented on 22nd May 2009 before the second respondentto treat these bills as provisionally assessed since they had paid 1%EDD for the four bills of entry dated 13.12.2007, 12.2.2008,27.2.2008 and 17.3.2008. The second respondent, however, rejected thesaid plea in his order dated 17.6.2009 on the ground that the said https://hcservices.ecourts.gov.in/hcservices/ bills of entry were more than six months old. Aggrieved by the saidview of the second respondent, the petitioner has come before thisCourt. The respondents have filed their counter affidavit.3. The grievance of the petitioner is that by reason ofcollection of 1% EDD from the four bills referred to above, althoughthe caption shown was final assessment, he was under the impressionthat the assessment was, in fact, provisional assessment only.Learned counsel for the petitioner pointed out that in terms ofcircular No.268/2007 – SVB (for Provisional Duty Assessment) issueddated 11th December 2007, pending verification of the agreementbetween the supplier and the importer and their books of accounts,their imports from the said suppliers were ordered to be assessedprovisionally with Extra Duty Deposit of 1% on the assessable valueof the goods in addition to the duty payable by them as per theBoard's circular dated 23.2.2001. Hence, going by the abovecirculars, the EDD at 1% collected is only by way of provisionalassessment, which is to be followed by a final assessment as per theorder dated 6.6.2008. As the department accepts the 'transactionvalue' of the importer, then EDD originally collected by thedepartment would have to be refunded to the importer upon issue ofSVB assessment order.4. Learned standing counsel appearing for the respondentspointed out that since the bills of entries are finally assessed, thequestion of claim for refund would have to be made within the timeframe prescribed under the Act. The respondent pointed out that asfar as the collection of 1% EDD is concerned, the claim for refundhad been made beyond the six months, hence, it has to be rejected.Consequently, as the petitioner has not made any claim for refundwithin the stipulated period, the question of refund of the amountdoes not arise. Learned standing counsel appearing for therespondents further submitted that the petitioner had been finallyassessed and had paid extra duty deposit of 1%. The question ofrefund has to be considered only in accordance with the provisions ofthe Act by the proper authority. The respondents submit that sincethe petitioner failed to file the application for refund of claimwithin the time frame, the question of claiming refund of duty isunsustainable in law. In this, learned standing counsel for therespondents placed heavy reliance on Section 27 of the Customs Actwhich deals with claim for refund of duty. 5. Heard learned counsel for the petitioner and the learnedcounsel for the respondents. 6. A perusal of the circular dated 10.12.2007 issued by therespondents discloses that in respect of imports made from relatedperson, pending verification of the agreements between the supplierand the importers and their books of accounts, the imports from thesuppliers were ordered to be assessed provisionally with Extra Duty https://hcservices.ecourts.gov.in/hcservices/ Deposit of 1% on the assessable value of goods in addition to theduty payable by them as per the Board's circular No.11/2001 dated23.2.2001. On the enquiry completed as given under circular dated23.2.2001, final assessment is to be made within a period of fourmonths from the date of reply obtained from the importer. Thus, interms of this circular dated 10th December 2007, when the petitionerfiled bills of entry of 13th December 2007, 12th February 2008, 27thFebruary 2008 and 17th March 2008, the goods were all cleared with EDDof 1% apart from the normal duty payable. It is no doubt true thatthe second respondent has passed an order of assessment on 6.6.2008,wherein it is observed that the imports were related to foreignsuppliers as per Rule 2(2) of the Valuation Rules and the pricesdeclared by the importer for assessment of the imported goods to dutyare not influenced by the relationship. Paragraph 12 of the orderdirected that all pending assessments be finalised accordingly. Theorder passed is stated to be the subject to occasional review/a finalreview after a period of three years which means, as regards theimports done during this period, so long as invoice entries remainedthe same, the value declared by the importer for assessment of theimported goods is accepted as it is. The said order of the secondrespondent dated 6.6.2008 is binding on the petitioner as well as onthe respondents. So far as this aspect is concerned, there is nodispute between the petitioner and the respondents. The grievance ofthe petitioner arises only on account of the fact that in thebackground of the order made long after the import, the respondentsshould have either made a final assessment without the demand for 1%EDD or alternatively with 1% EDD, it could only be a provisionalassessment. Hence, with the collection of 1% EDD, the contention ofthe respondents that it is the final assessment clearly goes againstthe order dated 6.6.2008. In the circumstances, the collection of 1%EDD is totally unjustified. Hence, the petitioner has to be grantedthe refund of the said amount in terms of the order dated 6.6.2008Circular 268/07 dated 10.12.2007 within the time frame as referred toin the provisions of the Act or otherwise pass the assessment andgrant the refund to the petitioner. 7. I agree with the submissions of the petitioner. As perExplanation II of Section 27 of the Customs Act, where any duty ispaid provisionally under Section 18, the claim has to be made withinthe period of one year or six months, as the case may be from thedate of adjustment of duty after the final assessment thereof ismade. A reading of the documents placed before this Court, however,gives no idea as to whether the petitioner had been given theadjustment of the tax payment of 1% under EDD on final assessmentkeeping in mind the order passed on 6.6.2008. Paragraph 12 statesthat all pending assessments be finalised accordingly. The contentionof the respondents herein is that the petitioner is not entitled tothe refund of the amount paid at 1% EDD as the petitioner had notfiled its claim for refund within the period of six months, cannot beaccepted for the simple reason that the 1% EDD collected clearly https://hcservices.ecourts.gov.in/hcservices/ makes the assessment a provisional one in terms of the order passedon 6.6.2008. Treating the assessment as final and retaining 1% EDDwithout adjustment practically is against the very tenor of the orderdated 6.6.2008 and the circular dated 10.12.2007 and hence,unsustainable. Consequently, I have no hesitation in setting asidethe order impugned herein thereby directing the respondents tofinalise the assessment in terms of the order passed on 6.6.2008within a period of six weeks from the date of receipt of a copy ofthis order, so that the petitioner may work out his remedies inaccordance with law.8. With the above observation, the writ petition is disposedof. No costs. Sd/Asst.Registrar/true copy/Sub Asst.Registrarbg/ksvTo1. The Commissioner of Customs Office of the Commissioner of Customs Custom House, No. 60, Rajaji Salai, Chennai 600 001. 2. The Assistant Commissioner of Customs (Group 5B & C) Office of the Commissioner of Customs Custom House, No.60, Rajaji Salai, Chennai 600 001. 3. The Deputy Commissioner of Customs (SVB) Office of the Commissioner of Customs Custom House, No.60, Rajaji Salai, Chennai 600 001.1 cc To Mr.Joseph Prabakar, Advocate, SR.662171 cc To Mrs.Mallika Srinivasan, Advocate, SR.65918W.P.No.18362 of 2009BK(CO)sra 11.01.2010