In a ruling by Mumbai bench of the Customs, Excise And Service Tax Appellate Tribunal (CESTAT), has held that Assesssing Officer (AO) insisting importer opting for classification proposed by investigating agency is contrary to prescription of self-assessment Section 17 of Customs Act, 1962.
M/s Daikin Airconditioning India Pvt Ltd’s appeals concern the appropriateness of “split air conditioners incorporating refrigerating unit with dual function (cooling and heating),” for which the aforementioned exemption was not available as the correct classification. This is because of numerous assessments in bill of entry filed between October 21, 2023, and February 29, 2014, in which the claim for rate of duty corresponding to tariff item 8415 1010 of First Schedule to Customs Tariff Act, 1975 with attendant benefit of notification was revised to duty liability appropriate to tariff item 84.15 8210 of the First Schedule to Customs Tariff Act, 1975.
The Tribunal has been appealed against by Revenue and the matter is still pending before the Supreme Court along with application for stay. In this connection, he drew our attention to the decision of the Supreme Court in Commissioner of Customs, Mundra v. Cargil India Pvt Ltd [2019 (23)] holding that
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‘2. The issue of classification is raised in this appeal. The Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”) in the impugned order [2017 (353) E.L.T. A99 (Tribunal)] had noted that the said issue of classification is pending in the Court in other appeals. On that basis, the CESTAT has disposed of the appeal. Liberty is also given to approach the CESTAT after the verdict of this Court in the appeals pending here. In that view of the matter the CESTAT should not have disposed of the appeal and should have kept the appeal pending till the issue is decided by this Court.
In view thereof the order of the CESTAT disposing of the appeal is set aside and it is clarified that the appeal would remain pending before the CESTAT till the issue is decided by this Court whereafter the parties can approach the CESTAT.’
It seems that although the Supreme Court has not yet decided the Revenue’s appeal, the matter at hand stems from July 2013 investigations that resulted in a reclassification of their own imports between 2009–10 and 2013–14 as the conclusion of proceedings in a show-cause notice dated May 29, 2014. The current appeals relate to the consignments imported after and prior to the issuance of the show cause notice, which was decided by the Tribunal in re Daikin Air-Conditioning India P Ltd. It also seems that the assessing authorities have been adopting the classification as suggested by the investigating agency since the investigations began.
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In these circumstances, disposal of these appeals would not be prejudicial to Revenue by any stretch. The decision of the Supreme Court in re Cargil India Pvt Ltd was in response to the Tribunal having disposed off the appeal before it without ‘confirming, modifying or annulling or referring the case back to the authority which passed it’, as set out in section 129B(1) of Customs Act, 1962, as well as, by granting liberty to make fresh appeals consequent to final disposal by the Supreme Court that would be contrary to the deadlines prescribed in section 129A of Customs Act, 1962.
Counsel for the appellant submitted that they had preferred their challenges before the first appellate authority against assessment in bill of entry without the benefit of ‘speaking order’ prescribed in section 17(5) of Customs Act, 1962. They had also placed before the first appellate authority the circumstances in which they had been compelled to discharge the duty liability without the benefit of notification and that the impugned order had not taken note of the constrains.
The impugned order of Commissioner of Customs (Appeals), Mumbai – II has delved into the rival tariff items to affirm assessment in the bill of entry without having any material on record as to the manner in which the assessing authority had concluded on the appropriateness of the revision.
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A two-member bench Mr C J Mathew, Member (Technical) and Ajay Sharma, Member (Judicial) viewed that an assessing officer may choose to be guided by the proposals of the investigating agency is not surprising but that an assessing officer should insist upon the importer opting for classification as proposed by the investigating agency, which is inappropriate. It runs contrary to the prescription of self-assessment and orders of reassessment in Section 17 of the Customs Act, 1962.
It goes without saying that goods are fully under the jurisdiction of customs officials between the time the bill of entry is filed under section 36 of the Customs Act of 1962 and its ultimate disposal under section 48 of the same Act, and it is not impossible for them to go beyond reasonable limits in order to persuade someone to comply. A lack of agreement and enforced conformance is evident in the fact that the assessment was contested right away.
It was the first appellate authority’s responsibility to ensure that the “proper officer” complied with the law in these circumstances. If this was not done, the orders that are now being contested before us have the same stain of illegality. In view of the circumstances above, affirmation of the impugned order would be tantamount to participation in breach of law. That suffices to merit setting aside the impugned order and to restore the bills of entry before the original authority for compliance with the procedure set out in section 17 of Customs Act, 1962 and, in particular, section 17(5) therein.
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