Case Law Details
In re Spraytec India Ltd. (CAAR Delhi)
It is not in dispute that no Show Cause Notice had been issued to the applicant by DRI, New Delhi regarding the past clearances at the time of the applicant filing application before the erstwhile AAR, even if it is acknowledged that DRI. New Delhi was investigating the issue of appropriate classification of aerosol valves allowed final clearance by the jurisdictional customs officers. Therefore, the question before me narrows down to whether the brief declaration regarding the investigation by DRI, New Delhi by the applicant (in para 6 of Annexure -1 of the application) and subsequent non-elaboration thereof tantamount to fraud or misrepresentation of facts by the applicant.
I note that section 28-K mentions two circumstances for declaring the advance ruling void, namely fraud or misrepresentation of facts, as distinct from three circumstances for invocation of extended period under section 28 (4) of collusion; or any wilful mis-statement; or suppression of facts. Merriam Webster dictionary defines fraud to mean deceit or trickery, more specifically intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. Clearly, the alleged act of omission of not elaborating on the details of DRI, New Delhi investigation by the applicant even if it were to be accepted would not be covered under the meaning of fraud. In the same vein, I do not find any mis-representation of fact by the applicant, noting further that this authority had also ascertained from DRI Jaipur whether any SCN had been issued and they had replied in the negative.
Let us for argument sake consider the course of events that would have been followed by this Authority had the applicant made a fuller disclosure regarding the on-going investigation by DRI, New Delhi (noting that the applicant states that they were not aware of the continuation of such investigation). Noting the indisputable facts that the previous clearances had been allowed finally, i.e. without recourse to provisional assessment by the jurisdictional customs officers and no pre-consultation notice or show cause notice had been issued by any of the competent authority. this Authority would not have invoked the proviso (a) to section 28-1 (2) of the Customs Act, 1962. In a recent ruling in the application of M/s HQ Lamps Manufacturing Co. Pvt Ltd., this Authority has opined that an application may be considered “pending” before any officer only if it is pending before an officer in formal manner before an officer who is competent to answer the said question in terms of specific powers vested with the officer under the Customs Act. An illustrative list of such situations would include cases wherein a Show Cause Notice has been issued; bill of entry has been provisionally assessed under section 18 of the Customs Act, 1962; the matter is pending before the Special Valuation Branch of the Customs Commissionerate for the purpose of valuation of the goods in question; or the proper officer has held the pre-notice consultation with the applicant in terms of the proviso of subsection (a) of Section 28(1) of the Customs Act, 1962. Therefore, in cases, such as the extant case, wherein an officer of customs is engaged in an investigation that may result in formulation of a question that would be posed before another competent officer would not qualify’ as “pending before an officer”.
Before concluding, I wish to emphasise that the ruling pronounced by this Authority in the case of the applicant, Ms/ Spraytech India Limited was based on the submissions made by the applicant and considering the views of the jurisdictional Commissioner of Customs, noting that the applicant had approached this Authority to obtain certainty on the issue of classification based on their experience of dispute relating to past clearances. Having carefully considered the representation of DRI. I do not (Ind that they have proffered any evidence of fraud or misrepresentation of filets by the applicant, which may have colored my ruling even remotely. The said Ruling No. CAAR/Del/Spraytec/ 20/2021 dated 05.10.2021 has therefore not been obtained by fraud or misrepresentation of facts by the applicant and does not merit to he to declared void.
In view of the above, having completed the examination of the representation filed by DRI. New Delhi under section 28-K of the Customs Act, 1962, I reject the said representation and order that the Ruling No. CAAR/Del/Spraytec/20/2021 dated 05.10.2021 continues to stand in its original version.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY FOR ADVANCE RULING, DELHI
M/s Spraytec India Ltd, 203-A-A. DDA Building No. 2 District Center, Janakpuri, New Delhi-58 (applicant. in short). a Limited firm having 1EC number 0593046668 and PAN No. AAECS 856R. had filed an application dated 16.03.2020 before the erstwhile Authority for Advance Rulings (Central Excise. Customs and Service Tax), New Delhi (AAR. in short) seeking advance ruling under section 28-1-1 of the Customs Act. 1962. The said application, consequent upon the appointment of Customs Authority for Advance Rulings (CAAR, in short) in New Delhi and Mumbai with effect from 04.01.2021, was transferred to CAAR, New Delhi in terms of section 28-F (3) ibid and regulation 31 of CAAR Regulations, 2021.
2. Thereafter, the said application for advance ruling was taken up by the Customs Authority for Advance Rulings, New Delhi and upon completion of the procedure laid down by section 28-1 of the Customs Act, 1962 and CAAR Regulations, 2021, Ruling No. CAAR/Del/Spraytec/20/2021 dated 05.10.2021 in respect of the said application No. VIII/CAAR/Delhi/Spraytec/22/2021 has been pronounced and placed in public domain.
3. The Directorate of Revenue Intelligence, Headquarters New Delhi (DRI, New Delhi in short). vide their letter F. No. DRI/HQ-Cl/B-Ce11/50D/Eng-22/2018-0/1513 dated 31.05.2022. inter-alia informed CAAR. New Delhi that investigation pertaining to classification of actuator, aerosol valve, pumps etc. imported by M/s. Spraytec India Ltd. is underway in the office of DRI since January 2019; that M/s. Spraytec India Ltd. had availed the said Rulings by mis-representation of facts, i.e. by hiding the fact of pending investigation before DRI; thus the applicant has mis-represented facts which violated the provisions of section 28-I(2)(a) of the Customs Act, 1962; and any such advance rulings is to be declared void ab inilio under section 28K of the Customs Act. 1962. It was submitted that consequent upon the amendment in section 2 of the Customs Act, 1962 vide the Finance Act„ 2022, the officers of Customs have been defined with retrospective effect and DRI officer has been assigned function of proper officer under the Customs Act, 1962.
4. Recognizing the precedence value of the issue raised in the representation and the need to determine at the outset the competence of officers of customs. other than the jurisdictional customs officers based on the declaration of the applicant regarding the concerned Principal Commissioner or Commissioner of Customs, the authorized representative, namely the Additional Director, DRI. New Delhi was requested to appear for Personal Hearing on 27.06.2022 to determine question(s) relating. inter-alia, to locus-standi to file an application under section 28K and appropriate stage at which proviso to section 28-1 (2) of the Customs Act. 1962 can he invoked. The Customs Authority for Advance Rulings, Mumbai was also requested to co-chair the personal hearing as decision in the proposal of DRI would have significant precedence value.
5. The said Personal Hearing eventually took place on 05.07.2022. As regards the locus-stanch, the Additional Director (DRI) referred to section 28 K of the Customs Act, 1962 and mentioned that DRI is covered under its provisions and DRI Officer authorized can make a representation for declaring the said Ruling in the case of the applicant, to be void ab initio. The two Authorities agreed that the expression. “otherwise” in section 28K of the Customs Act, 1962 is quite wide and would also include a CBIC formation, such as DRI, not covered by the expression, “the Principal Commissioner or Commissioner of Customs”. Further. on perusal of the Affidavit submitted DRI under section 28K of the Customs Act, 1962, the two Authority were of the view that a procedure required to he initiated under section 28K of the Customs Act. 1962. beginning with supplying copy of the DRI Affidavit to the applicant. The next date for personal hearing inviting the applicant and DRI was fixed on 12.07.2022. On 12.07.2022. the representative of the applicant requested for more time as they wanted to come back with detailed reply and DRI also desired to make additional submissions. which was granted by the Authority.
6. The DRI in its submissions has inter-alia stated that the contention of the applicant that the question of classification was not pending before any officer of Customs on the day of filing of application by them before the erstwhile AAR, New Delhi [now Customs Authority for Advance Ruling (CAAR), New Delhi], is wrong and devoid of merit as the applicants were well aware about the ongoing investigations being conducted by the officers of DRI who are also the officers of Customs; the applicant had suppressed the facts of pending investigation before the officers of DRI in their application filed before the CAAR, New Delhi. In the Affidavit, DRI, gave a brief of the investigation conducted by DRI in the matter (e.g. recording of statements. search, sample collection, etc.) has been summarised. DRI has also alleged that the importer had not approached this Authority with clean hands; the importer had mis-represented the facts before the CAAR and had obtained the ruling fraudulently. Therefore, the advance ruling pronounced should be declared ab initio void.
7. However, the applicant in their written submissions through their advocate had inter-alia submitted that the Applicant / importer in their application in paragraph 6 has already disclosed the fact that they had filed 2 Bills of Entry at ICD, Garhi – Harsaru and the same had been detained by the Customs authority on instance of DRI, Headquarters; the Applicant company moved the Hon’ble Delhi High Court and order dated 06.02.2019 was passed and later the said consignment had been released on 08.02.2019 without taking any bond or bank guarantee under CTH 84248990; from ruling dated 05.10.2021, it may be noted that the comments had been obtained not only from the concerned Commissioner of Customs, i.e. Commissioner of Customs (Preventive), Jodhpur but even comments were sought as also the clarification was obtained from DRI, Jaipur and clarifications had been furnished not only by the concerned Commissioner of Customs, i.e. Commissioner of Customs (Preventive), Jodhpur but also DRI, Jaipur had furnished the comments, hence it is obvious that not only the concerned Commissionerate but also the DRI, Jaipur were not only aware but had in fact participated in the proceedings before the Authority pursuant to which Ruling had been issued on 05.10.2021; therefore, it is not the case of any suppression of facts or hiding the fact or misrepresenting; the applicants had no power to come to know the status of investigation being conducted by DRI; DRI had mixed up the facts pertaining to two different companies i.e. M/s Spraytec India Ltd. and M/s. Stella Industries Pvt. Ltd.
8. The second personal hearing in the matter took place on 27.07.2022 wherein the applicant’s representatives attended the hearing. However, no one from DRI was present. The applicant’s representative reiterated the submissions earlier made by them and also stated that final assessment of goods which have been initially held up on the instance of DRI at ICD Garhi -Harsaru and even thereafter. similar goods had been assessed under the heading 8424 leading the applicant to assume that there is no investigation being carried out.
9. In light of the foregoing and having gone through the affidavits, counter affidavit, additional submissions of DRI and the applicant, I proceed to decide on the representation filed by DRI. New Delhi.
9.1 Section 28K (1) of the Customs Act provides that where the Authority finds, on a representation made to it by the Commissioner of Customs or otherwise, that an advance ruling pronounced by it under sub-section (6) of section 28-1 has been obtained by the applicant by fraud or misrepresentation of facts, it may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act shall apply to the applicant as if such advance ruling had never been made. In consultation with CAAR; Mumbai, it is held that the scope of the aforesaid section as to who could represent to this Authority regarding alleged fraud or misrepresentation of fact by the applicant to obtain the advance ruling is wide enough to include officers of customs who may come to suspect such alleged fraud or misrepresentation of fact by the applicant.
9.2 In the instant case, it is the allegation of DRI, New Delhi that the applicant has engaged in such fraud or misrepresentation of fact by not disclosing the fact about on-going investigation by DRI, New Delhi in their application. It is argued that had the same been disclosed, the application would have been hit by proviso (a) to section 28-I (2) of the Customs Act,1962 which prescribes that that the Authority shall not allow the application where the question raised in the application is already pending in the applicant’s case before any officer of customs.
9.3 On careful perusal of the case file, I find that the applicant in para 6 of Statement of relevant facts having a bearing on the question(s) on which advance ruling is required had clearly mentioned that goods covered under two bills of entry dated 14.01.2019 at ICD Garhi-Harsaru had been detained by the Customs authority on the instance of DRI Headquarters, and the said goods were eventually released without taking any bond or bank guarantee and the goods were cleared under CTH 84248990. Therefore, the contention of the DRI, New Delhi regarding non-disclosure of the fact regarding investigation is not correct. Thereafter, during the procedure prescribed under the Customs Act and CAAR Regulations, 2021, this Authority had ascertained from DRI, Jaipur whether any show cause notice had been issued to the applicant since there was a reference to difference of opinion between the concerned Commissioner of Customs Preventive, Jodhpur and DRI, Jaipur, which had vide letter dated 01.04.2021 had informed this Authority that “as per the records available, this office has not issued any SCN to M/s Spraytech India Limited.”
9.4 It is not in dispute that no Show Cause Notice had been issued to the applicant by DRI, New Delhi regarding the past clearances at the time of the applicant filing application before the erstwhile AAR, even if it is acknowledged that DRI. New Delhi was investigating the issue of appropriate classification of aerosol valves allowed final clearance by the jurisdictional customs officers. Therefore, the question before me narrows down to whether the brief declaration regarding the investigation by DRI, New Delhi by the applicant (in para 6 of Annexure -1 of the application) and subsequent non-elaboration thereof tantamount to fraud or misrepresentation of facts by the applicant.
9.5 I note that section 28-K mentions two circumstances for declaring the advance ruling void, namely fraud or misrepresentation of facts, as distinct from three circumstances for invocation of extended period under section 28 (4) of collusion; or any wilful mis-statement; or suppression of facts. Merriam Webster dictionary defines fraud to mean deceit or trickery, more specifically intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. Clearly, the alleged act of omission of not elaborating on the details of DRI, New Delhi investigation by the applicant even if it were to be accepted would not be covered under the meaning of fraud. In the same vein, I do not find any mis-representation of fact by the applicant, noting further that this authority had also ascertained from DRI Jaipur whether any SCN had been issued and they had replied in the negative.
9.6 Let us for argument sake consider the course of events that would have been followed by this Authority had the applicant made a fuller disclosure regarding the on-going investigation by DRI, New Delhi (noting that the applicant states that they were not aware of the continuation of such investigation). Noting the indisputable facts that the previous clearances had been allowed finally, i.e. without recourse to provisional assessment by the jurisdictional customs officers and no pre-consultation notice or show cause notice had been issued by any of the competent authority. this Authority would not have invoked the proviso (a) to section 28-1 (2) of the Customs Act, 1962. In a recent ruling in the application of M/s HQ Lamps Manufacturing Co. Pvt Ltd., this Authority has opined that an application may be considered “pending” before any officer only if it is pending before an officer in formal manner before an officer who is competent to answer the said question in terms of specific powers vested with the officer under the Customs Act. An illustrative list of such situations would include cases wherein a Show Cause Notice has been issued; bill of entry has been provisionally assessed under section 18 of the Customs Act, 1962; the matter is pending before the Special Valuation Branch of the Customs Commissionerate for the purpose of valuation of the goods in question; or the proper officer has held the pre-notice consultation with the applicant in terms of the proviso of subsection (a) of Section 28(1) of the Customs Act, 1962. Therefore, in cases, such as the extant case, wherein an officer of customs is engaged in an investigation that may result in formulation of a question that would be posed before another competent officer would not qualify’ as “pending before an officer”.
9.7 Before concluding, I wish to emphasise that the ruling pronounced by this Authority in the case of the applicant, Ms/ Spraytech India Limited was based on the submissions made by the applicant and considering the views of the jurisdictional Commissioner of Customs, noting that the applicant had approached this Authority to obtain certainty on the issue of classification based on their experience of dispute relating to past clearances. Having carefully considered the representation of DRI. I do not (Ind that they have proffered any evidence of fraud or misrepresentation of filets by the applicant, which may have colored my ruling even remotely. The said Ruling No. CAAR/Del/Spraytec/ 20/2021 dated 05.10.2021 has therefore not been obtained by fraud or misrepresentation of facts by the applicant and does not merit to he to declared void.
10. In view of the above, having completed the examination of the representation filed by DRI. New Delhi under section 28-K of the Customs Act, 1962, I reject the said representation and order that the Ruling No. CAAR/Del/Spraytec/20/2021 dated 05.10.2021 continues to stand in its original version.
