2025 (5) TMI 170 - AT - Customs

Enhancement of assessable value of the imported goods - rejection of declared value - speaking order not issued - violation of principles of natural justice - HELD THAT - The Assessing Officer committed a grave error in not issuing the speaking order because there is nothing on record to show that the appellant had accepted the re-assessment in writing. The reliance placed by the Commissioner (Appeals) on the order of this Tribunal in case of Commissioner of Customs vs. Hanuman Prasad Sons 2020 (12) TMI 1092 - CESTAT NEW DELHI is highly mis-placed. In that case the assessee had accepted the re-assessment in writing and therefore no speaking order was issued. It was therefore held in that case that the assessing Officer was correct in not issuing a speaking order. Even on merits the Commissioner (Appeals) recorded in the impugned order that the Assessing Officer had loaded the value . Neither section 14 of the Customs Act nor the Customs Valuation Rules provide for any loading of value by the Assessing Officer. The transaction value shall be the assessable value unless it is rejected following the procedure prescribed under Rule 12. If it is so rejected when the value should be re-determined sequentially following rules 4 to rule 9 of the Valuation Rules. None of these Rules or Section 14 empower the Assessing Officer to load the value. Conclusion - The re-assessment of the Bill of Entry by the Assessing Officer was without any authority of law and he also committed an illegality in not issuing a Speaking Order as mandated under section 17(5) of the Act. The impugned order of the Commissioner (Appeals) wrongly upheld such re-assessment. Therefore it cannot be sustained. The impugned order is set aside along with the re-assessment of the Bill of Entry by the assessing Officer - Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the Assessing Officer was legally justified in enhancing the assessable value of the imported goods from US$ 0.70/0.665 per kg to US$ 1 per kg without issuing a speaking order as mandated under section 17(5) of the Customs Act, 1962.

- Whether the appellant's payment of customs duty on the enhanced value without formal protest or written acceptance implies voluntary acceptance of the re-assessment.

- Whether the Assessing Officer's act of "loading the value" is permissible under the Customs Act, 1962 and the Customs Valuation Rules.

- Whether the Commissioner (Appeals) was correct in upholding the re-assessment despite the absence of a speaking order and the appellant's non-acceptance of the enhanced value in writing.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Re-assessment without Speaking Order under Section 17(5) of the Customs Act

Relevant legal framework and precedents: Section 17(5) of the Customs Act, 1962 mandates that where an assessment is contrary to the claim of the importer and the importer has not accepted the assessment in writing, the proper officer must pass a speaking order within fifteen days from the date of assessment. The Customs Valuation Rules prescribe the procedure for rejection of declared transaction value and re-determination of assessable value.

Court's interpretation and reasoning: The Court emphasized that the Assessing Officer failed to issue a speaking order within the prescribed 15-day period, which is a mandatory procedural requirement. Since the appellant did not accept the re-assessment in writing, the Assessing Officer was statutorily bound to issue a speaking order explaining the reasons for value enhancement.

Key evidence and findings: There was no record or evidence that the appellant accepted the enhanced value in writing. The Assessing Officer enhanced the value and the appellant paid the duty accordingly, but no speaking order was issued by the Assessing Officer as required.

Application of law to facts: The absence of a speaking order renders the re-assessment procedurally illegal and invalid. The statutory mandate under section 17(5) was not complied with, thus vitiating the re-assessment.

Treatment of competing arguments: The Commissioner (Appeals) relied on a precedent where the assessee had accepted re-assessment in writing, thus no speaking order was necessary. However, the Court distinguished the present facts where no such acceptance existed, making the precedent inapplicable.

Conclusion: The re-assessment without a speaking order was illegal and cannot be sustained.

Issue 2: Effect of Payment of Duty on Enhanced Value Without Formal Protest

Relevant legal framework and precedents: Payment of duty under protest is a recognized practice to enable clearance of goods while disputing the assessment. However, mere payment of duty without documentary evidence of protest does not amount to acceptance of the re-assessment.

Court's interpretation and reasoning: The Court rejected the Commissioner (Appeals)'s presumption that payment of duty without protest implies acceptance of the enhanced value. It reasoned that the importer must pay duty to clear goods but this does not constitute voluntary acceptance of the re-assessment.

Key evidence and findings: The appellant did not produce any evidence of payment under protest. The Commissioner (Appeals) found no correspondence or challenge to the value enhancement at the Assessing Officer's level.

Application of law to facts: Absence of documentary proof of protest or acceptance in writing means the appellant's payment of duty cannot be construed as acceptance; it was a procedural necessity to clear goods.

Treatment of competing arguments: The department argued that non-production of protest documents implies acceptance. The Court found this presumption unjustified and contrary to procedural fairness.

Conclusion: Payment of duty without protest does not amount to acceptance of the enhanced value.

Issue 3: Legality of "Loading the Value" by the Assessing Officer

Relevant legal framework and precedents: Section 14 of the Customs Act and Customs Valuation Rules govern valuation of imported goods. The transaction value declared by the importer is the assessable value unless rejected following prescribed procedures (Rule 12 and subsequent Rules 4 to 9). There is no provision for the Assessing Officer to arbitrarily "load" or increase value.

Court's interpretation and reasoning: The Court held that the Assessing Officer's act of "loading the value" is unauthorized and illegal under the statutory framework. The valuation rules require a sequential and reasoned approach to reject declared value and determine assessable value, which was not followed.

Key evidence and findings: The impugned order itself recorded that the Assessing Officer "loaded the value". No evidence of compliance with valuation rules was produced.

Application of law to facts: The Assessing Officer's action violated statutory valuation procedures and lacked legal authority.

Treatment of competing arguments: The department did not justify the method of value enhancement as per statutory rules. The Court found no legal basis for such "loading".

Conclusion: The value enhancement by "loading" was illegal and without authority.

Issue 4: Validity of Commissioner (Appeals) Upholding the Re-assessment

Relevant legal framework and precedents: The Commissioner (Appeals) must examine whether the Assessing Officer complied with statutory requirements including issuance of speaking order and adherence to valuation rules.

Court's interpretation and reasoning: The Court found that the Commissioner (Appeals) erred in holding that payment of duty without protest amounts to acceptance, and in relying on a precedent where facts differed materially. The Commissioner (Appeals) failed to appreciate the mandatory nature of section 17(5) and the illegality of "loading" value.

Key evidence and findings: The impugned order's reasoning was based on an incorrect presumption of acceptance and misapplication of case law.

Application of law to facts: The Commissioner (Appeals)'s order upholding the re-assessment was unsustainable due to procedural and substantive errors.

Treatment of competing arguments: The Court rejected the department's arguments supporting the impugned order.

Conclusion: The impugned order of the Commissioner (Appeals) is set aside along with the re-assessment.

3. SIGNIFICANT HOLDINGS

"Where the importer has not accepted the re-assessment in writing, the Assessing Officer is statutorily bound under section 17(5) of the Customs Act to issue a speaking order within fifteen days explaining the reasons for the value enhancement. Failure to do so renders the re-assessment illegal."

"Payment of duty on the enhanced value without documentary evidence of protest cannot be construed as voluntary acceptance of the re-assessment. The importer may pay duty to clear goods without conceding to the enhanced valuation."

"The Customs Act and Valuation Rules do not empower the Assessing Officer to arbitrarily 'load' or increase the declared transaction value. The assessable value must be determined following the sequential procedure prescribed under the Customs Valuation Rules."

"The Commissioner (Appeals) erred in upholding the re-assessment on the basis of presumed acceptance and misapplied precedent where the facts materially differed."

"The re-assessment and the impugned appellate order are set aside. The appellant is entitled to consequential relief."