2025 (5) TMI 83 - AT - Customs

Requirement of speaking order under section 17(5) of the Customs Act 1962 - enhancement of value of imported goods at the rate of 13% on account of SVB loading - absence of such provision either in the Customs Act or in the valuation rules - HELD THAT - The reliance placed by the Commissioner (Appeals) on Hanuman Prasad 2020 (12) TMI 1092 - CESTAT NEW DELHI is completely mis-placed. In that case the importer had accepted in writing the re-assessment done by the proper officer and therefore it was held that the proper officer was not required to issue a speaking order as per section 17(5) of the Act. After accepting the re-assessment in writing the importer had filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) set aside the re-assessment on the ground that no speaking order was passed. It is in that factual matrix that the order of this Tribunal in Hanuman Prasad held that once the importer gives in writing that he accepts the re-assessment there was no need for the proper officer to issue a speaking order. Therefore it was held that the Commissioner (Appeals) had erred in setting aside the re-assessment on the ground that no speaking order was passed. Coming to the merits of the re-assessment itself as per Section 14 of the Customs Act the assessable value shall be the transaction value for import at the time and place of importation i.e the CIF value of the imported goods. Transaction value is the price paid or payable by the importer for the goods. However Section 14 itself provides for some exceptions and empowers the Government to frame rules to deal with such situations - If the transaction value is rejected then the value should be determined sequentially through Rules 4 to 9. In this case no reasons for rejection of transaction value were recorded at all by the Commissioner (Appeals) or by the proper officer. Further the re-determination of the value was also not done through any of the Valuation Rules indicated let alone following the Valuation Rules sequentially. According to the impugned order the value was loaded at the rate of 13 per cent on account of SVB loading . There is no provision either in the Customs Act or in the valuation rules called SVB loading . Conclusion - The re-assessment of the Bill of Entry by the Assessing Officer was without any authority of law and also contrary to the provision of section 17 (5). The Commissioner (Appeals) committed an illegality in upholding such re-assessment. The impugned order as well as the re-assessment to the Bill of Entry by the Assessing Officer are set aside - Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal include:

(a) Whether the Assessing Officer was obligated under section 17(5) of the Customs Act, 1962 to issue a speaking order upon re-assessment of the Bill of Entry in the absence of written acceptance of the re-assessment by the importer;

(b) Whether the re-assessment of the assessable value by enhancement of 13% "on account of SVB loading" was legally valid and supported by statutory provisions or valuation rules;

(c) Whether the transaction value declared by the appellant for the imported goods was rightly rejected or accepted, considering the provisions of section 14 of the Customs Act and the Customs (Determination of Value of Imported Goods) Rules, 2007;

(d) Whether the Commissioner (Appeals) erred in upholding the re-assessment on the ground that the appellant had paid duty on the enhanced value without protest;

(e) The applicability and interpretation of the Tribunal's precedent in Commissioner of Customs vs. Hanuman Prasad & Sons in the context of acceptance of re-assessment and the requirement of a speaking order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Obligation to issue a speaking order under section 17(5) of the Customs Act

Legal framework and precedents: Section 17(5) mandates that if the re-assessment is contrary to the importer's self-assessment and the importer has not given written acceptance of the re-assessment, the proper officer must pass a speaking order within 15 days of re-assessment.

Court's interpretation and reasoning: The Tribunal emphasized that the Assessing Officer failed to issue the mandatory speaking order despite the appellant not providing written acceptance of the re-assessment. The Tribunal distinguished this case from the precedent in Hanuman Prasad, where the importer had accepted the re-assessment in writing, thereby obviating the need for a speaking order. Here, no such written acceptance was given, making the Assessing Officer's failure to issue a speaking order a violation of statutory duty.

Application of law to facts: Since the appellant did not accept the re-assessment in writing, the Assessing Officer was legally bound to issue a speaking order explaining the reasons for enhancement, which was not done.

Conclusion: The Assessing Officer's omission to issue a speaking order rendered the re-assessment procedurally defective and unlawful.

Issue (b): Legality and authority for enhancement of value by 13% "SVB loading"

Legal framework: Section 14 of the Customs Act provides that the assessable value shall be the transaction value, i.e., the price paid or payable for imported goods. The Customs (Determination of Value of Imported Goods) Rules, 2007, particularly Rules 9 and 12, provide the procedure for rejection of declared transaction value and re-determination of value using sequential methods.

Court's reasoning: The Tribunal found no statutory provision or valuation rule authorizing "SVB loading" or any 13% enhancement. The Assessing Officer failed to record reasons for rejecting the declared transaction value and did not follow the sequential valuation methods prescribed under the Rules. The Commissioner (Appeals) upheld the re-assessment without scrutinizing the legal basis for "SVB loading."

Application of law to facts: The absence of any statutory or rule-based authority for the 13% loading and the non-compliance with procedural safeguards rendered the re-assessment invalid.

Conclusion: The enhancement of value by 13% on account of "SVB loading" lacked legal authority and was contrary to the Customs Act and valuation rules.

Issue (c): Validity of rejection of declared transaction value

Legal framework: Section 14 and the Customs Valuation Rules require the transaction value to be accepted unless there is reasonable doubt about its truth or accuracy. Rule 12 mandates that the proper officer must communicate grounds for doubting the declared value and provide an opportunity to be heard before rejecting it.

Court's reasoning: The Tribunal noted that neither the Assessing Officer nor the Commissioner (Appeals) recorded any reasons for doubting the declared transaction value. No communication of such grounds or opportunity to the appellant was provided. The re-assessment was conducted without adherence to the procedural safeguards under Rule 12.

Application of law to facts: Since the procedural requirements for rejection of declared value were not followed and no reasons were recorded, the declared transaction value should have been accepted.

Conclusion: The rejection of the declared transaction value was procedurally and substantively unsustainable.

Issue (d): Effect of payment of duty on enhanced value without protest

Court's reasoning: The Commissioner (Appeals) held that payment of duty on the enhanced value without protest amounted to acceptance of the re-assessment. The Tribunal rejected this reasoning, clarifying that mere payment of duty under protest or to clear goods does not constitute written acceptance as required under section 17(5). The absence of written acceptance means the Assessing Officer's obligation to issue a speaking order remained intact.

Conclusion: Payment of duty without written acceptance does not validate an otherwise unlawful re-assessment.

Issue (e): Applicability of precedent in Hanuman Prasad & Sons

Legal framework and precedent: The Tribunal's decision in Hanuman Prasad held that if the importer accepts re-assessment in writing, the proper officer is not required to issue a speaking order under section 17(5).

Court's reasoning: The Tribunal distinguished the present case on facts, noting the absence of written acceptance by the appellant. Hence, Hanuman Prasad was held inapplicable, and the Assessing Officer's failure to issue a speaking order was a violation of mandatory statutory procedure.

Conclusion: Hanuman Prasad does not apply where there is no written acceptance of re-assessment.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The re-assessment of the Bill of Entry by the Assessing Officer was without any authority of law and also contrary to the provision of section 17 (5). The Commissioner (Appeals) committed an illegality in upholding such re-assessment."

Core principles established include:

- The mandatory requirement under section 17(5) that a speaking order must be issued within 15 days if re-assessment is not accepted in writing by the importer;

- The transaction value declared by the importer is to be accepted unless there is recorded reason and procedural compliance for its rejection under the Customs Valuation Rules;

- Any enhancement of assessable value must be supported by statutory provisions or valuation rules and cannot be arbitrarily imposed;

- Payment of duty on enhanced value without written acceptance does not amount to acceptance of re-assessment;

- The precedent in Hanuman Prasad applies only when there is written acceptance of re-assessment, and is not applicable otherwise.

Final determinations:

- The re-assessment by enhancement of 13% "on account of SVB loading" was set aside as unauthorized and illegal;

- The order of the Commissioner (Appeals) upholding the re-assessment was quashed;

- The appellant's declared transaction value was restored as the correct assessable value for customs duty purposes.