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2016 (9) TMI 1089 - BOMBAY HIGH COURT

2016 (9) TMI 1089 - BOMBAY HIGH COURT - TMI - Valuation - demand of customs duty on license fee paid to the overseas licensor - payment of service tax on license fee - reverse charge mechanism - import of set top boxes - multi-channel down-linking - distribution and transmission of technology - HITS operator - consignments of set top boxes stored in customs bonded warehouse - clearance of set top boxes for home consumption avoiding appropriate payments of customs duty and giving wrong declaratio .....

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They are relying on the payment of Service Tax and in that regard, the DRI could not have proceeded on the footing and in the facts and circumstances of the present case that there is a definite evasion. It is their duty to bring such cases of alleged evasion to the notice of the customs, which they have after the outcome of the investigation, whenever they are concluded. It is thereafter for the Commissioner of the Customs and all authorities under the Customs Act to take appropriate steps and .....

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nd B. P. Colabawalla, JJ. Mr Darius Shroff, Sr. Counsel a/w Mr Gaurav Joshi, Sr. Counsel, Mr Akshay Kolse Patil, Mr. Naishadh Bhatia, Ms. Bulbul Singh -Raj Purohit, Mr Brendon P. i/b M/s Crawford Bayley & Co. for the Petitioners Mr Pradeep S. Jetly for the Respondent JUDGMENT ( Per S. C. Dharmadhikari J. ) By this petition under Article 226 of the Constitution of India, the petitioners seek a declaration that no Customs Duty is payable on the licence fee paid to the overseas licensor in conn .....

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ue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ/order/ or direction calling for the records relating to the seizure of the Petitioners goods on 4th August 2016 and 9th August 2016 under panchanamas at Exhibit K to Exhibit M respectively hereto and after considering the legality and validity thereof be pleased to quash and set aside the impugned orders of seizure. (c-2) this Hon'ble Court be pleased to issue a writ of certiorari or a writ in the nat .....

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other appropriate writ/ order or direction calling the Respondents herein their servants, agents and subordinates to: (i) refrain from insisting on any bank guarantee for provisional clearance of the seized goods; and (ii) to permit the petitioners to clear the seized goods only on furnishing a bond of the redetermined value or on such terms and conditions as this Hon'ble Court may deem fit and proper. 2 It is the case of the petitioners that it is engaged in the business of providing the mu .....

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op boxes. The petitioners provide the details of all such steps and then contend that the Union of India through the Directorate of Revenue Intelligence has caused an investigation to be made into certain importations. The petitioners have stated that the said set-top boxes are required to meet certain standards, which have been now evolved and made applicable by the Union of India in terms of its policies. The petitioners had an agreement and for importing the set-top boxes from various vendors .....

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development in India to comply with the guidelines issued by the Ministry of Telecommunications. The petitioners also place reliance on certain clauses of this agreement. The petitioners in paragraph 18 of the Writ Petition point out as to how they are paying applicable Customs Duty on the physical import of the set-top boxes under the relevant chapter headings of the First Schedule to the Customs Tariff Act, 1975, respectively. The petitioners have also been duly discharged from Service Tax lia .....

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o.3. The petitioners rely on past practice and state that their consignments of set-top boxes were stored in a custom bonded warehouse. They filed certain bills of entry and the details of all these are to be found in paragraph 22 of the Writ Petition. The petitioners, thereafter, through its representatives personally inquired as to why further steps were not allowed to be taken and it was then revealed that the petitioners' representative was summoned for a statement to be recorded. The pe .....

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from respondent No.2. Thereafter, the petitioners' representative visited the office of respondent Nos.2 and 3. It was revealed during this personal visit that there are certain queries and which require to be answered. Similarly, the summons was also issued to the representative of that petitioner. The petitioners herein then point out as to how another representative of the petitioner was summoned for giving a statement in terms of Section 108 of the Customs Act, 1962. The petitioners were .....

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use at Kalamboli, Navi Mumbai, where the petitioners' goods were stored. They were about to illegally seize 3.48 lacs set-top boxes valued at ₹ 37 crores, and claimed that they are required to draw samples. The respondents proceeded on the footing that these goods were cleared for home consumption after avoiding appropriate payments of the Customs Duty and by giving wrong declarations. In the guise of drawing samples, the named goods stored in the warehouse were seized under two pancha .....

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ers for home consumption. The petitioners made an application for provisional release of these goods. They pointed out that the present dispute was a pure valuation dispute, the entire seizure was unreasonable as the disputed additional Customs Duty amounted to only ₹ 53,38,212/- in respect of the seized goods, whereas the Customs Department has seized the goods worth ₹ 52,79,52,015/-. The set-top boxes were imported with a view to implement the Government policy regarding digitaliza .....

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e petitioners that by these orders, though provisional release of the seized set-top boxes is permitted, the condition imposed for such release is arbitrary, unreasonable and unfair. Now, the condition imposed is of furnishing 25 % Bank Guarantee of the re-determined value of ₹ 54.55 crores. That means the bank guarantee would be of ₹ 13.63 Crores though the differential duty claimed is only in the sum of ₹ 54 Lacs. It is, therefore, urged by Mr Shroff, learned Senior Counsel a .....

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aper book, there are three communications of April 2016, wherein the petitioners clarified that though imported set-top boxes are intended for retail sale, they availed of 4 % Special Additional Duty ( SAD ) exemption, but as against the Bills of Entry in respect of which this exemption was availed of, the petitioners do not wish to take it. They wish to pay 4 % SAD and as detailed in said letters. Essentially, the contention of Mr Shroff is that the Deputy Director and particularly the Director .....

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h materials. Mr Shroff has taken through the affidavits filed in reply. 8 He would submit that in the first affidavit in reply, which has been filed on 16 August, 2016, it has been stated by the respondents, and particularly, DRI that the investigations are going on. The investigation though going on, according to these respondents, the petitioners have evaded Customs Duty. They have disclosed completely their stand on merits. It is, in these circumstances that the Writ Petitions, according to M .....

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ions be allowed and the nominal condition which has been imposed in several such instances by Delhi High Court and Punjab & Haryana High Court, be imposed. Mr. Shroff has also relied upon an order passed by the Honourable Supreme Court of India in the case of Navshakti Industries Pvt. Ltd. Vs. The Commissioner 2011(267) ELT Case Law Times, 483 which upholds the view taken by Delhi High Court in a LPA. That SLP is disposed of on 4 May, 2011 being Civil Appeal No.3940 of 2011. 10 Mr Jetly appe .....

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l Duty. In the trade there is no retail sale of set-top boxes. The petitioners were aware of this, yet they indulged in this act resulting in evasion of taxes. It is urged by Mr Jetly that the provisional release of seized goods has already been granted. The conditions imposed are for safeguarding the interest of revenue. The values declared at the time of assessment of the bills of entry for warehousing does not take into consideration the licence fee etc. Hence, the payment of Service Tax whic .....

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retion has to be exercised on case to case basis and no general rule can be laid down insofar as imposing of conditions is concerned. 11 With the assistance of Mr Shroff and Mr Jetly, we have perused the Writ Petitions and all annexures thereto. Now what is before us is the order of provisional release of the goods. That order was passed pursuant to the request made by the petitioners themselves. The petitioners are really aggrieved by the conditions imposed. It is submitted that the release is .....

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mately would be paid as and when the goods are cleared for home consumption. Thus the petitioners would pay the full Customs Duty, differential duty on licence fee prorata and Additional Customs Duty also pro-rata, as and when the goods are cleared. 13 The petitioners would also be ready and willing to furnish the Bank Guarantee of 30 % on the differential duty of licence fee. The petitioners are aggrieved and dis-satisfied with the condition of furnishing the Bank Guarantee of 25 % of the re-de .....

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have, after amendment of the petitions, also filed additional / further affidavits. The petitioners complain that in the garb of drawing samples, the entire consignment at Kalamboli and Uran have been seized. The consignment is of set-top boxes which are valued ₹ 4 Lacs and above. They are required for fulfilling the obligation and in terms of policies of the Central Government. The petitioners have also submitted that in the past, the said consignments were cleared and at that stage the i .....

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e events. They assure yet that due process of law will be followed. It is, under these circumstances, that we are not inclined to accept the arguments of Mr Jetly that the court must sustain the conditions as imposed. We are clear in our mind that it would be ultimately for the customs authority to take into consideration the issues on merits. 16 On 6 August, 2016, the investigation into the import of Conditional Access System ( CAS ) embedded card-less set-top boxes by the petitioners were inve .....

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etermination of Value of Imported Goods) Rules, 2007. The petitioners are also, according to DRI, wrongfully claiming exemption from payment of Special Additional Duty. The notification in that regard could not have been relied upon and availed of the exemption. Thus, the preliminary investigation revealed, according to the DRI that, though the petitioners urged that these set-top boxes are imported in Ready to Sale package condition to mismatch the original price printed on the boxes, they are .....

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ion that it is only on the investigation being concluded and appropriate steps taken, that the authorities can issue a show cause notice and demanding amounts now styled as a Customs Duty on the licence fee. That payment, according to the petitioners, cannot be taken into account. The petitioners are relying on the principle that what is really embedded and as claimed, are not goods but it is intellectual property services. They are relying on the payment of Service Tax and in that regard, we do .....

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