2025 (6) TMI 1028 - HC - Customs

Violation of principles of natural justice - it is submitted that the Commissioner of Customs did not enquire into the case made out by the petitioner and had dismissed the appeal in a mechanical manner - dismissal of appeal on the ground of non-compliance with the pre-deposit requirement under Section 129E of the Customs Act 1962 - HELD THAT - Having regard to the specific embargo provided for in Section 129E of Customs Act the appellate authority being the Commissioner of appeals in my view is estopped from entertaining an appeal if the pre-deposit as provided therein is not furnished. Admittedly in this case the petitioner did not comply with the direction for payment of pre-deposit which prompted the appellate authority to dismiss the appeal. The petitioner has attempted to make out a case that since the entire proceedings are without jurisdiction non-compliance of the direction for payment of pre-deposit which resulted in dismissal of the appeal cannot stand in the way of the petitioner in preferring the writ petition - The petitioner had in fact while adhering to the statutory provisions applied before the appellate authority. Since the petitioner had invoked the statutory remedy the petitioner was obliged to adhere to the provisions of the statute for maintaining the statutory appeal. The petitioner having failed to comply with the statutory provisions it would not be fit and proper for this Court to exercise discretion in favour of the petitioner. As such there are no scope to entertain the writ petition. However the petitioner may avail further statutory remedy as may be advised. Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(i) Whether the Customs authorities had jurisdiction to question the act of replacing the MRP stickers on imported goods after clearance under Section 47 of the Customs Act, 1962;

(ii) Whether the imported goods, whose assessable value was declared at a lower RSP/MRP and subsequently sold at a higher MRP after replacement of stickers, are liable for confiscation under Section 111(m) of the Customs Act, 1962;

(iii) Whether the revised or changed RSP should be taken as the correct RSP for assessment of Additional Duties under Section 3 of the Customs Tariff Act, 1975 read with Section 4A of the Central Excise Act, 1944 and the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008;

(iv) Whether differential duty and interest are payable on the basis of the revised RSP under Section 125(2) read with Section 28(4) and Section 28AA of the Customs Act, 1962;

(v) Whether penalty under Section 112(a)(ii) and Section 114AA of the Customs Act, 1962 could be imposed on the petitioner;

(vi) Whether the Commissioner of Customs (Appeals) was correct in dismissing the appeal on the ground of non-compliance with the pre-deposit requirement under Section 129E of the Customs Act, 1962;

(vii) Whether the petitioner could bypass the statutory appeal process and directly invoke writ jurisdiction challenging the orders passed by the adjudicating and appellate authorities.

2. ISSUE-WISE DETAILED ANALYSIS

Jurisdiction of Customs Authorities to Question Post-Clearance Acts:

The petitioner contended that once goods are cleared under Section 47 of the Customs Act, the Customs authorities lose jurisdiction to question any subsequent act such as replacement of MRP stickers. The Court noted that the show-cause notice alleged that after clearance, the importer replaced the original MRP stickers with ones reflecting higher prices and sold the goods at this higher MRP, thus potentially evading additional duties.

The Court examined the statutory provisions and found that Section 111(m) of the Customs Act empowers confiscation if goods are undervalued or misdeclared. The replacement of MRP stickers to reflect a higher price after clearance could amount to misdeclaration of value at import. Therefore, the Customs authorities retained jurisdiction to initiate proceedings against such acts if they affect the assessable value and duty liability.

Confiscation under Section 111(m) of the Customs Act:

The adjudicating authority seized the goods and proposed confiscation under Section 111(m) based on the discrepancy between declared and revised RSP/MRP. The Court noted that the seizure memo and show-cause notice detailed the goods and the alleged undervaluation.

Applying the law to facts, the Court observed that if the importer declared a lower RSP at import and subsequently sold at a higher RSP after replacing stickers, this could constitute undervaluation and justify confiscation. The Court found no error in the authority's assessment on this issue.

Assessment of Additional Duties Based on Revised RSP:

The Customs authorities sought to assess additional duties on the basis of the revised RSP, invoking Section 3 of the Customs Tariff Act, 1975 read with Section 4A of the Central Excise Act, 1944 and the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. The petitioner challenged this, arguing that the original declared RSP should govern duty assessment.

The Court analyzed the relevant legal framework, which allows determination of assessable value based on the actual retail sale price to ultimate consumers. The replacement of stickers to reflect a higher RSP indicated that the declared value was not the true retail price. The Court concurred with the authorities that the revised RSP should be taken as the correct basis for additional duty assessment.

Demand and Recovery of Differential Duty and Interest:

Under Section 125(2) read with Section 28(4) and Section 28AA of the Customs Act, the authorities demanded differential duty of Rs. 15,648/- along with applicable interest. The petitioner contended that this demand was unjustified.

The Court found that where undervaluation is established, differential duty along with interest is recoverable as per the statutory provisions. The evidence of replacement of MRP stickers and sale at higher prices supported the demand. Hence, the Court upheld the demand for differential duty and interest.

Imposition of Penalty under Sections 112(a)(ii) and 114AA:

The adjudicating authority imposed a penalty of Rs. 10,00,00,000/- under Section 114AA, which the petitioner challenged as without jurisdiction. The Court noted that Section 114AA provides for penalty where a person is found guilty of evasion or misdeclaration affecting duty.

The Court observed that the penalty imposition was based on the findings of undervaluation and misdeclaration. Although the petitioner argued lack of jurisdiction, the Court found that the authorities had jurisdiction to impose penalty under the statute once the facts supported the charge. The Court did not find the penalty order to be without jurisdiction.

Dismissing Appeal for Non-Compliance with Pre-Deposit under Section 129E:

The Commissioner of Customs (Appeals) dismissed the petitioner's appeal for failure to comply with the pre-deposit requirement under Section 129E of the Customs Act, which mandates deposit of a percentage of the disputed duty or penalty before entertaining an appeal.

The Court examined Section 129E, which clearly states that appeals shall not be entertained unless the stipulated pre-deposit is made, subject to a maximum limit. The petitioner admitted non-compliance with this provision.

The Court held that the appellate authority was correct and bound by the statutory embargo to dismiss the appeal. The petitioner could not circumvent this mandatory provision.

Invocation of Writ Jurisdiction without Exhaustion of Statutory Remedies:

The petitioner sought to invoke writ jurisdiction challenging the orders of the adjudicating and appellate authorities, contending that the proceedings were without jurisdiction and thus the pre-deposit requirement should not bar the appeal.

The Court emphasized the principle of exhaustion of statutory remedies before approaching writ jurisdiction. Since the petitioner had preferred the statutory appeal but failed to comply with the pre-deposit condition, the Court found no justification to entertain the writ petition. The Court noted that the petitioner's failure to comply with statutory provisions precluded discretionary relief.

3. SIGNIFICANT HOLDINGS

"Having regard to the specific embargo provided for in Section 129E of the said Act, the appellate authority being the Commissioner of appeals, in my view, is estopped from entertaining an appeal, if the pre-deposit as provided therein is not furnished."

"The writ petitioner did not straight away invoke the writ jurisdiction prior to preferring the said appeal... The petitioner having failed to comply with the statutory provisions, in my view it would not be fit and proper for this Court to exercise discretion in favour of the petitioner."

"The Customs authorities do not lose jurisdiction to question any act or action of the importer once, the imported goods are cleared in accordance with Section 47 of the Customs Act, 1962, where such act affects the assessable value and duty liability."

"Where undervaluation is established by evidence such as replacement of MRP stickers to reflect a higher retail sale price, differential duty and interest are recoverable under Sections 125(2), 28(4), and 28AA of the Customs Act."

The Court concluded that the Customs authorities were justified in initiating proceedings for confiscation and additional duty on the basis of revised RSP, and in imposing penalty under the Customs Act. The appellate authority was correct in dismissing the appeal for non-compliance with pre-deposit requirements. The writ petition was dismissed as premature and inappropriate due to non-exhaustion of statutory remedies.