S S Overseas Vs Union of India And Another (Allahabad High Court)
Summary: The Allahabad High Court dismissed a batch of writ petitions concerning the requirement to issue a speaking order when Bills of Entry are reassessed and subsequently finalised under the Customs Act, 1962. The leading matter was Writ Tax No.881 of 2022, heard together with connected petitions involving a similar controversy. The petitioners sought a writ of mandamus directing the customs authorities to issue speaking orders concerning the finalised Bills of Entry after complying with the principles of natural justice. The Court held that, under Section 17(5) of the Customs Act, a speaking order is not required where the importer has expressly accepted the reassessment in writing. Since the petitioner’s own letters confirmed acceptance of the revised customs valuation, the Court found no merit in the petitions and dismissed them.
Read SC Judgment in this case: Supreme Court Declines Interference in Customs Reassessment Speaking Order Dispute
The Court heard Shri Ayush Khanna for the petitioner, Shri Arvind Kumar Goswami for the Union of India and the respective standing counsel representing the Customs and Excise Department. Counter affidavits filed on behalf of respondent No.2 in Writ Tax Nos.881, 882, 884, 892 and 895 of 2022 were taken on record. With the consent of the parties, the Court considered the matters together and treated Writ Tax No.881 of 2022 as the lead petition. The central relief sought was a direction requiring the customs authorities to issue speaking orders in respect of the finalised Bills of Entry.
According to the customs department’s counter affidavit, the petitioner had imported goods declared as mixlot or stocklot polyester knitted fabric and had initially self-assessed the Bills of Entry under Section 17(1) of the Customs Act, 1962. During verification under Section 17(2), the proper officer observed that the declared value was lower than the contemporaneous import value of similar goods. The importer was therefore asked to furnish particulars of the fabric, including its composition, dimensions, thickness, width, GSM, colouring or printing, intended end-use, coating material and other characteristics relevant to valuation and tariff classification.
In response, the importer submitted letters accepting reassessed values ranging from USD 1.85 to USD 1.96 per kilogram. The department specifically asserted that the importer had also requested that neither a show cause notice nor a speaking order be issued. Copies of the acceptance letters were annexed to the counter affidavit as Annexure CA-1. The department further alleged that the petitioner had failed to disclose these letters when filing the writ petition and characterised that omission as concealment of material facts intended to secure a favourable order.
Because the importer had not furnished a specific response concerning the fabric composition, the proper officer considered testing necessary to establish whether the goods were prime-quality fabric or stocklot/mixlot material. The Bills of Entry were consequently provisionally assessed pending receipt of the test reports. The importer executed a bond based on the reassessed value already accepted and furnished a bank guarantee covering the differential duty arising from the proposed prime-goods valuation of USD 2.85 per kilogram. After the test reports were received, no difference in duty liability from the provisional assessment was found. The Bills of Entry were therefore finally assessed at the reassessed values accepted by the importer, and the bond and bank guarantee were returned for cancellation.
The department relied on Notification No.73/2018-Customs (N.T.) dated 14 August 2018, which introduced the Customs (Finalization of Provisional Assessment) Regulations, 2018. It reproduced Regulation 6 governing the finalisation of provisional assessments under Section 18 of the Customs Act. Regulation 6(3) requires the proper officer to pass a speaking order following the principles of natural justice where the final assessment is contrary to the provisional assessment. Regulation 6(4), by contrast, addresses situations where the final assessment confirms the provisional assessment and requires the officer to ascertain the importer’s or exporter’s acceptance on record and communicate the finalisation date in writing. The regulations also address adjustment of duty shortfalls, cancellation of bonds and return of security, and electronic finalisation through the Customs Automated System.
Examining Section 17 of the Customs Act, the High Court explained that subsection (1) provides for self-assessment of customs duty, subsection (2) authorises verification by the proper officer and subsection (4) permits reassessment where the self-assessment is incorrect. The decisive provision was Section 17(5), which requires a speaking order on reassessment except where the importer or exporter confirms acceptance of the reassessment in writing. The Court treated the written acceptance as a statutory exception to the requirement for a speaking order.
On the evidence placed before it, particularly the petitioner’s letters annexed to the counter affidavit, the High Court concluded that the importer had unequivocally accepted the reassessment in writing. Consequently, there was no occasion for the proper officer to issue a speaking order. The Court rejected the petitions for want of merit and dismissed all the connected writ petitions. The ruling distinguishes between contested reassessments requiring reasoned adjudication and reassessments expressly accepted by the importer, for which Section 17(5) dispenses with a speaking order.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1.Heard Shri Ayush Khanna, learned counsel for the petitioner, Shri Arvind Kumar Goswami, learned Central Government Standing Counsel for respondent no.1/Union of India and Shri Gaurav Mahajan, learned Senior Standing Counsel, Shri Parv Agarwal, Shri Krishna Agarwal, Shri Dhananjay Awasthi and Shri Amit Mahajan, learned counsels for the Customs and Excise Department/respondent no.2.
2.Counter affidavits filed today on behalf of the respondent no.2 in Writ Tax Nos.881 of 2022, 882 of 2022, 884 of 2022, 892 of 2022, 895 of 2022 are taken on record.
3. Since the similar controversy is involved in all the above noted writ petitions, therefore, with the consent of learned counsels for the parties, all the writ petitions are being finally heard together and Writ-Tax No.881 of 2022 is treated as the leading writ petition and facts thereof are being noted.
4.Writ Tax No.881 of 2022 has been filed praying for the following relief:
“a) a writ, order or direction in the nature of mandamus directing the Respondent No. 2 to issue speaking order in respect of finalized Bills of Entry after complying with the requirements of principles of natural justice.”
5.In paragraph 2 of the counter affidavit filed in Writ Tax No.881 of 2022, the respondent no.2 has stated as under:-
“2. That the deponent at the very outset craves leave of the Hon’ble Court to bring on record certain important facts, background and material which are already part of record and also flow from the statute book and which will have a material bearing on the outcome of the Writ Petition. The said facts are as follows:-
(a) The petitioner had filed the mentioned Bills of Entry for the import of goods declared as Mixlot/stocklot of polyester knitted fabric. The said Bills of Entry were self assessed to duty by importer/petitioner under Section 17(1) of Customs Act, 1962.
(b) During verification of self assessment under Section 17(2) of Customs Act, 1962, the proper officer raised query on the basis of description stating that the declared value of the described goods is lower than the contemporaneous import value of the similar items. Also, importer were requested to provide the following:-
COMPLETE DESCRIPTION OF THE CONSIGNMENT E.G. COMPOSITION OF THE FABRIC; DIMENSIONS I.E., THICKNESS, WIDTH IN CM; GSM; WHETHER DYED /MADE OF YARNS OF DIFFERENT COLOURS/PRINTED; POSSIBLE END-USE OF FABRIC, COATING MATERIAL IF ANY; ANY OTHER CHARACTER OF THE GOODS HAVING BEARING ON THE VALUATION AND CLASSIFICATION OF GOODS.
(c) In reply to query raised, importer submitted letters of various dates before Respondent No. 2 accepting re- determined value in these Bills of Entry as USD 1.85/- per Kg to USD 1.96 per kg Further, importer had also categorically requested not to issue show cause notice and speaking order. Photocopies of the letters submitted/filed by the importer/petitioner accepting re-determined value of goods covered under the bill of entry are collectively enclosed herewith and marked as Annexure No. CA-1.
The reason for not filing the letters annexed as Annexure No. CA-1 by the petitioner alongwith the Writ Petition reflects the intention of the petitioner to conceal material facts from the Hon’ble Court to obtain a favorable order. This act of the petitioner is an act of deliberate deception with the design of securing and taking an unfair advantage.
(d) No specific reply was received with regard to composition of fabric Further, in order to ascertain the true nature of the goods Le. Prime or Stocklot/Mix Lot, the proper officer found it necessary to get goods tested. Thus, the Bills of Entry were assessed provisionally for the want of test report on execution of Bond of re-assessed Value (value accepted by the importer at the time of provisional assessment) and furnishing Bank Guarantee of differential duty arising due to proposed value for prime goods i.e. USD 2.85 per Kg and the re-assessed value (value accepted by the importer at the time of provisional assessment).
(e) Thereafter, on receipt of test report when nothing contrary to provisional assessment i.e. no difference in duty liability was found, the Bills of Entry were assessed finally at the reassessed value i.e the value accepted by the importer at the time of provisional assessment and the Bond and Bank Guarantee executed during the provisional assessment were returned to the importer and Bank for cancellation.
(f) The Government of India, Ministry of Finance, Department of Revenue, (Central Board of Indirect Taxes and Customs) vide Notification No. 73/2018-Customs (N.T.) dated 14.08.2018 framed Regulations titled as the “Customs (Finalization of Provisional Assessment) Regulations, 2018” and Section 3 of the said Regulations provide that these Regulations shall apply to the provisional assessments ordered on and after the enforcement of these regulations.
(g) Section 6 of the “Customs (Finalization of Provisional Assessment) Regulations, 2018” provides for the manner of finalization of provisional assessment and is as follows:
6. Manner of finalization of provisional assessment –
(1) The provisional assessment shall be finalised as per the provisions of Section 18 of the Act.
Provided that if the amount so paid at the time of provisional assessment or after adjustment under clause (a) to Sub-Section (2) of Section 18 of the Act, falls short of the duty finally assessed or re-assessed, as the case may be, and the importer or the exporter has not paid the deficiency, the shortfall shall be adjusted from the security, if any, obtained at the time of provisional assessment, under intimation to the importer or the exporter,: Provided further that, if the amount so adjusted or paid falls short of the duty finally assessed or re-assessed, as the case may be, the importer or exporter of the goods shall pay the shortfall in terms of the provisions of Section 18.
(2) The Bond executed at the time of provisional assessment with security, if any, shall be cancelled after finalisation of provisional assessment and the security shall also be returned, if there are no pending dues.
(3) Where the final assessment is contrary to the provisional assessment, the proper officer shall pass a speaking order following principles of natural justice.
(4) Where the final assessment confirms the provisional assessment, the proper officer shall finalise the same after ascertaining the acceptance of such finalisation from the importer or the exporter on record and inform the importer or exporter in writing of the date of such finalisation.
(5) Where a Bill of Entry or Shipping Bill is presented electronically on the Customs Automated System and is ordered to be provisionally assessed, the proper officer shall finalise the provisional assessment on the system also consequent to the procedure prescribed in these regulations.
A photocopy of the Notification No. 73/2018-Customs (N.T.) dated 14.08.2018 framed Regulations titled as the “Customs (Finalization of Provisional Assessment) Regulations, 2018” is enclosed herewith and marked as Annexure No. CA-2.”
6. Section 17 of the Customs Act, 1962 (hereinafter referred to as the ‘Act, 1962’) provides for assessment of duty. Under sub-section (1) of Section 17, an importer entering any imported goods under section 46 of the Act, 1962 or an exporter entering any export goods under section 50, shall, save as otherwise provided in Section 85, self-assess the duty, if any, leviable on such goods. Sub-section (2) of Section 17 provides for verification of entries and self-assessment of goods referred to in sub- section (1) by the proper officer. Sub-section (4) of Section 17 provides for re-assessment of duty by the proper officer where the self-assessment is not done correctly. Sub-section (5) provides that the proper officer shall pass a speaking order on the re-assessment in matters other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re-assessment in writing.
7. From the facts as stated in aforequoted paragraph 2 and its sub- paragraphs of the counter affidavit, and the own documents of the petitioner filed as Annexure-1 to the counter affidavit, leave no manner of doubt that the petitioner himself has confirmed in writing his acceptance of re-assessment. Therefore, there exists no occasion to pass a speaking order on the re-assessment.
8. For the reasons aforestated, we do not find any merit in these petitions. Consequently, all the writ petitions are dismissed.
