Introduction: The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Mumbai recently delivered a crucial decision in the case of GlaxoSmithKline Asia Pvt Ltd against the Commissioner of Customs. This case revolves around the issue of whether the findings of the Special Valuation Branch (SVB) are binding on the Commissioner of Customs. The CESTAT’s decision regarding remand and the impact on the appellant are discussed in detail in this article.
Detailed Subheading-Wise Analysis:
1. Background of the Case: The article provides an overview of the case, explaining that M/s GlaxoSmithKline Asia Pvt Ltd challenged an order of the Commissioner of Customs (Appeals), Mumbai-I. The challenge was related to a remand order issued by the Commissioner.
2. Jurisdiction and Remand: The article mentions that the primary contention in the case is related to the jurisdiction of the first appellate authority to issue a remand order. It explains that the appellant believed that the order of the original authority should not have been set aside.
3. Twists and Turns in the Dispute: The article outlines the key developments in the dispute, including the import agreement between the appellant and M/s GlaxoSmithKline Biologicals SA, Belgium. It highlights the referral to the Special Valuation Branch (SVB) due to the relationship between the entities and the subsequent appeals.
4. Issues Raised by the Appellant: The article discusses the objections raised by the appellant before the first appellate authority. These objections pertain to the correctness of the data related to transportation charges, manufacturing overheads, promotional expenses, selling and distribution costs, and profit, as well as the need to examine the balance sheet.
5. First Appellate Authority’s Decision: The article explains that the first appellate authority did not address the appellant’s objections and simply held that the transaction value was acceptable. This decision prompted a further appeal by the customs authorities.
6. Legal Precedents and Judicial Discipline: The article cites legal precedents, including decisions by the Hon’ble High Court of Bombay and the Hon’ble High Court of Karnataka, regarding the importance of adhering to remand orders issued by higher appellate authorities. It emphasizes the need for judicial discipline in following such orders.
7. Evaluation of the Remand Order: The article analyzes the remand order issued by the first appellate authority. It clarifies that the remand was necessary to ascertain the veracity of data from the balance sheet provided by the appellant. The article discusses the rationale behind this decision and its compliance with legal principles.
8. Prejudice to the Appellant: The article addresses the issue of prejudice to the appellant due to the remand. It explains that the communication that initiated the dispute did not comply with statutory provisions, and therefore, the findings of the SVB were not binding. The article argues that no prejudice to the appellant arises from the remand order.
9. Conclusion: In conclusion, the article discusses the dismissal of the appeal by the CESTAT Mumbai. It emphasizes that the remand order was issued within the jurisdiction of the first appellate authority and that no grounds for interference were found. The article highlights the importance of complying with statutory provisions and adhering to remand orders in customs disputes.
The CESTAT Mumbai’s decision in the case of GlaxoSmithKline Asia Pvt Ltd serves as a reminder of the legal principles surrounding remand orders and their impact on customs proceedings.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal of M/s GlaxoSmithKline Asia Pvt Ltd, against order1 of Commissioner of Customs (Appeals), Mumbai-I, challenges the remand directed thus
‘4.8 The appellant has not produced any evidence which may suggest that the findings/ conclusion arrived at by the OA was not correct. The only specific objection the appellants took in appeal before the Hon’ble CESTAT is as under:
“7. While examining the deductive value supplied by the importer respondent, the DC had not examined balance sheet to ascertain whether the transportation charges, manufacturing overheads, promotional expenses, selling & distribution cost and profit are correct.
8. Comparison of two vaccines “Priorix” and “Hiberix” in the impugned order showed unexplained variance w. r. t. packing cost, transportation, promotional expenses and S & D expenses. It was therefore, necessary to examine the balance sheet.
9. There was an unexplained difference of Rs. 105 in the MRP of the two vaccines when their ex-factory cost was almost same (about Rs.124), “
5. The said ground of appeal is in the nature of objection which can be relooked at by the OA. As stated herein above, the OA has recorded at para 2 & 3 of the OIO that the importers had submitted accounts including audited accounts of last three years, I think it fit and proper to remand back to the OA to examine the aforesaid objection taken by the appellant and pass a fresh order. The OA may hear the importers and give them opportunity to make any additional submissions.’
to the Deputy Commissioner (GATT Valuation Cell), New Custom House, Mumbai with submission of Learned Counsel for appellant that it is not within the jurisdiction of the first appellate authority to do so and that the order of the original authority should not have been set aside.
2. In the light of this submission, the twists and turns in this dispute thus far may have to be borne in mind. The appellant had entered into agreement dated 1st October 2006 with M/s GlaxoSmithKline Biologicals SA, Belgium for import of ‘vaccines’ specified in the schedule therein which was commenced in 2007. Owing to admitted relationship of the two entities, the matter was referred to Special Valuation Branch (SVB) and, in communication dated 17th November, 2008 the declared value was held as acceptable. Appeal filed at the behest of the jurisdictional Commissioner of Customs, before the first appellate authority was dismissed by order dated 11th August, 2009. In further appeal of Revenue, order of the Tribunal dated 11th July 2018 held that the matter was required to be heard afresh by the first appellate authority for having traversed beyond the issue in appeal. The first appellate authority took note of the decision of the Tribunal and held as supra for a fresh decision by the original authority.
3. Learned Counsel submits that the observation that
‘4.7 From the above, it is clear that OA has surmised the correctness of the price in view of the supply agreements between the supplier and the importer, the market conditions prevailing in respect of these vaccines, margin of profit and the expenses connected to manufacturing and marketing. The transaction value in the present case have been accepted on the basis of sale of Goods to unrelated buyers in India. I find that at para 2 and para 3 of the impugned order in original the Original Authority has recorded the documents submitted by the importer which includes audited balance sheets for last three years apart from other relevant documents and accounts. It would mean that OA has scrutinized facts before arriving at the conclusion unless anything contrary is recorded in the order. In the absence of any contrary finding it is clear that OA has scrutinized all these facts before coming to conclusion.’
had disposed off the issue raised in departmental appeal before first appellate authority in affirming the correctness of the order impugned and, yet, decided to remand the matter on factual aspects raised by Revenue before the Tribunal. He relied on the decision of the Hon’ble High Court of Bombay in Commissioner of Central & Customs, Nasik v. DJ Malpani [2010 (258) ELT 185 (Bom)] holding that
‘4. Every Tribunal and/or quasi judicial authority which in the hierarchy is subordinate to the Tribunal is bound to comply with the direction. If any party is aggrieved by an order the remedy is to prefer an Appeal. A lower authority cannot go against the order of remand issued by the higher Appellate Authority. In fact it is bound by the terms of the remand order and cannot go beyond the terms of the order of remand. Judicial discipline requires that this system which has been followed in our judicial system must be maintained by all judicial and quasi judicial authorities. However, considering the unconditional apology tendered today the directions as contained in order dated 29th September, 2006 to the extent quoted by us earlier are expunged. With the above direction petition disposed of.’ and of the Hon’ble High Court of Karnataka in Dell International Services India (P) Ltd v. Assistant Commissioner of Income Tax, Bangalore [2016 (382) ITR 37 (Karnataka)] holding that
‘9. We observe that no proper reasoning has been given by the Tribunal for exercising the power of remand. The directions issued by this Court while remanding the matter to the Tribunal is not considered by the Tribunal in the true spirit. It was the obligation cast on the Tribunal to examine the case of the Assessee in the light of the Judgment of the Apex Court in Rotork. Controls case (supra) and to come to a decision. But, remanding the matter to the Assessing Officer is in disregard to the Judgment of this Court and as such we are of the opinion that the order passed by the Tribunal is unsustainable.’
4. We have heard Learned Authorized Representative. It is seen that, except as objection to the latest order of first appellate authority, the appellant was not even a litigant or even a noticee. All appeals were entirely at the instance of customs authorities whose plea was not accepted by first appellate authority on the earlier occasion.
5. The dispute, also seen to be limited to the period of three years from January 2007, was in appeal before the first appellate authority on the ground that the original authority had not scrutinized the balance sheet for ascertaining the correctness of the ‘transportation charges’, ‘manufacturing overheads’, ‘promotional expenses’, ‘selling and distribution cost’ and ‘margin of profit’ intimated in the computation furnished by them to Special Valuation Branch (SVB).
6. In the first round of litigation, the first appellate authority had, instead of rendering a finding on the verification or remanding the matter for verification, had held that the transaction value was acceptable without considering the plea of the jurisdictional Commissioner of Customs on the need to ascertain the veracity of the data from the balance sheet. This had been sought for as the ‘retail selling price’ of the two vaccines involved, viz. ‘Priorix’ and ‘Hiberix’, was substantially higher than the ‘ex-factory price’ which could possibly be attributed to loading identified costs on the consumer while distancing the import transaction from those intrinsic elements. The finding of the Special Valuation Branch was based on ‘deductive value’, furnished by the appellant herein, approximating the import price and the non-ascertainment of correctness of the elements in the furnished computation was the flaw sought to be rectified in appeal. Hence the direction of the Tribunal to consider the plea as laid out in the appeal.
7. It is evident that facts would have to be ascertained and the only available options for the first appellate authority were to call for the balance sheet and ascertain veracity of the elements or to have such exercise undertaken. That the latter was preferred is not without jurisdictional competence and setting aside of order is pre-requisite for such re-consideration. We do not find this remand to be contrary to the decisions in re DJ Malpani or in re Dell International Services India (P) Ltd and the only issue for consideration before us is only prejudice the appellant herein arising from remand.
8. The communication that started the dispute was not rendered within the framework of a show cause notice and any action to the detriment of an importer must comply with section 17 or section 18 of Customs Act, 1962; likewise, any recovery will take recourse to section 28 of Customs Act, 1962 with show cause notice as prerequisite. The findings of the Special Valuation Branch (SVB) are not binding on ‘proper officer’ exercising such statutory powers and no action, unless initiated under the cited provisions, can be detrimental to the appellant herein. We see no prejudice thereby as appellant has not brought on record that any particular import to be assessed, provisionally or finally, will be impacted by mere ascertainment of the details furnished by the importer and, that too, only by reference to their own record.
9. We, therefore, find no ground for interference in the order of first appellate authority. Appeal is dismissed.
(Order pronounced in the open court on 14/09/2023)
1 [order-in-appeal no. MUM/CUS/JSN/IMP-99/2019-20 dated 22nd January 2020]