Endorsement on bill of entry amount to raising demand under customs law and not mere a provisional assessment

Brief of the case:

The Hon’ble Supreme Court in the case of M/s Swastika Enterprise held that the endorsement on the bill of entry to pay additional customs duty is a demand and not mere a provisional assessment. Thus, the duty payable due to such endorsement can be settled as settlement of demand under indirect taxes demand settlement scheme.

Facts of the case:

• The assessee imported old ships and filed a bill entry for clearance of the same form the port of import.In the bill of entry, it claimed exemption from the payment of ‘additional customs duty’ under an exemption notification. Custom authorities found assessee not eligible for the exemption and accordingly, returned the bill of entry by making an endorsement to pay additional customs duty.
• The assessee challenged the said endorsement by way of writ petition before the Calcutta HC.
• During the pendency of writ petition, assessee applied to settle it aforesaid dues of additional customs under the indirect tax settlement scheme by making declaration under section 88 of the Central Excise Act, 1944.
• The assessee’s application was rejected by the department on the ground that since no notice of demand has been issued, assessee is not eligible for the scheme.
• The Divisional Bench of Calcutta HC dismissed the writ petition of assessee on this issue on the ground that since no show cause notice has been issued, there cannot be any adjudication and without adjudication no notice of demand can be issued.
  

Contention of Assessee:

• An endorsement on bill of entry is a demand because the amount is required to be paid within the specified period failure of which attract the interest.
• Thus, such sum is demanded without issue of show cause notice but mere non – issue of show cause notice would not mean that the endorsement to pay additional customs duty is not a demand.                       

Contention of Revenue:

• The demand stands crystallized only when there is a show-cause notice (SCN) issued under Section 28 of the Customs Act and after that the adjudicating authority adjudicate such notice and finally passing an order deciding the customs duty or additional customs duty payable and on that basis notice of demand is issued.
• Thus, in the present case no such SCN was issued and no adjudication order was passed, without this procedure no notice of demand could be issued.
• At the best the endorsement on the bill of entry was provisional assessment.

Held by Hon’ble Supreme Court:

• The point of dispute is that whether the assessee is eligible for the scheme for settlement of indirect tax dues.
• The scheme, inter-alia, other conditions require the tax arrears can be settled only when notice of demand has been issued.
• Endorsement on the Bill of Entry requiring assessee to pay additional duty constitute notice of demand. It is why because Act does not contain any specific provision prescribing the manner in which customs duty would be assessed or demanded in respect of goods imported under a Bill of Entry.
• Further, the assessee is charged interest on failure to pay the additional duty endorsed on the bill of entry, the interest cannot be charged unless the duty is demanded and not paid.
• Even further, in the writ petition challenging the additional levy by way of endorsement revenue never disputed that the case was premature in the sense that no demand had been crystallized in the absence of show-cause notice or adjudication order and, therefore, such a writ petition was not competent.
• Therefore, there was an amount of duty payable, which had remained unpaid on the date of making declaration by the assessee under the scheme. It would be inappropriate to say that though there is a tax arrears, as the appellants were liable to pay the tax/duty demanded, and stillthe Scheme is inapplicable.
• On the basis of above findings, the assessee is eligible for settling tax dues under the Act.