TMI Blog2019 (11) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... or Office Memoranda, pronouncing on the merits of issues which are pending before adjudicating authorities. Such an attempt would result in reducing the adjudicatory process to a mockery, and deserves to be deprecated. If the Revenue is of the opinion that an assessee has imported goods in violation of the law, or claimed the benefit of exemption to which it is not entitled, the grounds for such an opinion are required to be contained in the Show Cause Notice issued to the assessee. It is completely impermissible for the Revenue to issue a Show Cause Notice and, thereafter, seek to support, or even supplement, the recitals in the Show Cause Notice by way of Office Memoranda, or executive instructions, such as the Office Memorandum dated 16th February, 2018, under challenge in these writ petitions. Circular No 450/67/2019-Cus. IV, dated 31st May, 2019, stands modified by Circular No 450/67/2019-Cus. IV, dated 9th September, 2019, issued by the Central Board of Indirect Taxes and Customs. While no orders are, therefore, required to be passed in respect of Circular dated 31st May, 2019, Circular dated 9th September, 2019, is quashed and set aside, to the extent of the direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Limited, the petitioner in WP (C) 9225/2019. 2. The writ petition seeks quashing of (i) Office Memorandum, dated 16th February, 2018, issued by the Central Board of Excise and Customs (CBEC), (ii) Circular, dated 31st May, 2019, issued by the Central Board of Indirect Taxes and Customs (the CBEC, as rechristened after the advent of the GST regime, referred to, hereinafter, as the CBIC ), (iii) Office Memorandum, dated 6th September, 2017, issued by the Director General of Foreign Trade (DGFT), (iv) Show Cause Notice dated 15th July, 2019, issued to the petitioner by the Commissioner of Customs, ACC Import, New Delhi (hereinafter referred to as the Commissioner ), and (v) Show Cause Notice dated 19th July, 2019, issued to M/s Mink Tradecom Private Limited (hereinafter referred to as Mink ) by the Commissioner. 3. During the pendency of these proceedings, Circular dated 9 th July, 2019, was issued by the CBIC and Corrigenda dated 30th September, 2019, and 7th October, 2019, to the impugned Show Cause Notices dated 15th July, 2019, and 19th July, 2019, were issued by the Principal Commissioner of Customs (hereinafter referred to the Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts Kg. 15% 7114.19 -- of other precious metal, whether or not plated or clad with precious metal 7114.1910 --- Articles of gold Kg. 15% It would be seen that Sub-Heading 7114 1910, under which the petitioner sought to clarify the gold coins imported by it, covers articles of gold . 8. The petitioner also claimed complete exemption, from the requirement of payment of Customs duty, on the imported gold coins, under S. No. 526 of Notification 152/2009-Cus, dated 31st December, 2009, as amended by Notification 66/2016-Cus, dated 31st December, 2016. The relevant portion of Notification 152/2009-Cus, dated 31st December, 2009, as so amended, reads thus: In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods of the description as specified in column (3) of the Table appended hereto and falling under the Chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 111 (d) of the Customs Act, 1962 (hereinafter referred to as the Customs Act ), for having been imported in violation of Section 3 (3) of the Foreign Trade (Development and Regulation) Act, 1992, (hereinafter referred to as FTDR Act ), and para 2.08 of the Foreign Trade Policy, 2015-2020 (hereinafter referred to as the FTP ), (ii) the benefit of Notification 152/2009-Cus supra, as amended, be not denied to it, (iii) Customs duty, already deposited by the petitioner against the aforesaid imports of gold coins, be not adjusted against the duty which would be payable consequent on denial of the claim for exemption under Notification 152/2009-Cus supra, and differential duty be not confirmed and demanded, (iv) penalty be not imposed on the petitioner under Section 112 (a) of the Act, and (v) the assessment of one of the aforesaid eight Bs/E, which was provisional, be not finalized on the above lines. 11. As we do not intend to comment on the merits of the allegations in the impugned Show Cause Notices, we refrain from entering into the specifics of the various Notifications involved therein. 12. The FTP, it may be noted, is notified under Section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleges that Sub-Heading 7118 1000 covers coins other than gold coins, which are no longer legal tender, and Sub-Heading 7118 9000 covers all other coins, including legal tender and gold coins. It is, therefore, alleged that the gold coins imported by the petitioner were appropriately classifiable under Sub-Heading 7118 9000, rather than Sub-Heading 7114 1910, of the Tariff. 17. The reason why the alleged classifiability, of the imported gold coins, under Sub-Heading 7118 9000 of the Tariff, in preference to Sub-Heading 7114 1910, makes a difference, is to be found in Chapter 71 of the Imported Trade Control (Harmonised System) [hereinafter referred to as ITC (HS) ], being the harmonized system of classification of imported goods for the purposes of the FTP, which is in sync, more or less, with the Tariff. The ITC (HS) is issued under Section 5 of the FTDR Act read with para 2.01 of the FTP. Section 5 of the FTDR Act, which already stands reproduced hereinabove, provides for notification of the FTP. Para 2.1 of the FTP, whereunder the ITC (HS) is notified, reads as under: 2.01 Exports and Imports- Free , unless regulated (a) Exports and Imports shall be free except when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importable, whereas import of other coins (which would include gold coins), which fall under Heading 7118 9000, though also free, is subject to regulations framed by the Reserve Bank of India (RBI). 20. The impugned Show Cause Notices, dated 12th July, 2019/15 th July, 2019, issued to the petitioner, and 28th June, 2019/19th July, 2019, issued to Mink, allege that, as per RBI guidelines, gold coins are freely importable, provided they are imported by the following agencies: (i) agencies nominated by the DGFT, (ii) Banks authorised by the RBI, and (iii) Star and Premier Trading Houses Apart from these agencies, other entities are not permitted, as per RBI guidelines, to import gold coins. The RBI, on being queried in this regard, especially with respect to the gold coins imported by the petitioner vide letters dated 8th August, 2017 and 24th August, 2017, issued by the customs authorities clarified, vide its letter, dated 13th September, 2017, that the gold coins imported by the petitioner (or by Mink) were not freely importable inasmuch as they were not agencies falling within any of the aforesaid three categories, who alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31st May, 2019, on which the afore-extracted para 8 of the impugned Show Cause Notices, dated 12th July, 2019/15th July, 2019, issued to the petitioner, and 28th June, 2019/19th July, 2019, issued to Mink, places reliance, reads thus: F. NO. 450/67/2019. CUS IV GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE (CENTRAL BOARD OF INDIRECT TAXES CUSTOMS) Room 227B, North Block New Delhi, dated 31st May, 2019 To All Principal Chief Commissioners/Chief Commissioners of Customs/Customs (Preventive) All Principal Chief Commissioners/Chief Commissioners of Customs Central Taxes All Principal Commissioners/Commissioners of Customs/Customs (Preventive) Subject:- Import of Gold Granules by entities other than nominated agency/bank/star house etc. reg. Sir/ Madam, Attention is invited to two CESTAT Judgments Sri Exports versus Commissioner of Customs. Hyderabad (Final Order No. A/31/194/2018, dated 22.11.2018 in Appeal No. C/30812/2018) and Sri Exports Versus C.C. Bangalore Cus [arising out of No. 344/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 (335) ELT 639 (Del). 28. On going through the impugned Circular, dated 31st May, 2019, we find ourselves in agreement with Mr. Gulati. The concluding paragraph of the impugned Circular, dated 31st May, 2019, issued by the CBIC is, even on a first reading, plainly objectionable. It discloses a woeful lack of appreciation, by the author of the said Circular, of the most rudimentary principles of law and precedent. Decisions of the Tribunal are, in the absence of any rulings to the contrary, by authorities higher in the judicial echelons, binding on all field formations, as well as adjudicating authorities. Any act or decision, by an officer, lower in judicial hierarchy to the Tribunal which would include all officers of the Department of Revenue and, in any case, every Customs or Central Excise Officer in the Government which is contrary to the law laid down by the Tribunal, is not only ex facie unsustainable, but is also contemptuous of the Tribunal. The following well-known passages, from the judgment of the Supreme Court in U.O.I. v. Kamlakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC), merit reproduction, in this context: 5. The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or anxiety of the Assistant Collector that, if he accepted the assessee s contention, the department would lose revenue and would also have no remedy to have the matter rectified is also incorrect. Section 35E confers adequate powers on the department in this regard. Under subsection (1), where the Central Board of Excise and Customs Direct Taxes comes across any order passed by the Collector of Central Excise with the legality or propriety of which it is not satisfied, it can direct the Collector to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order. Under sub-section (2) the Collector of Central Excise, when he comes across any order passed by an authority subordinate to him, if not satisfied with its legality or propriety, may direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector of Central Excise in his order and there is a further right of appeal to the department. The position now, therefore, is that, if any order passed by an Assistant Collector or Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Final Order No. A/31/194/2018, dated 22.11.2018 in Appeal No. C/30812/2018) and Sri Exports Versus C.C. Bangalore-Cus [arising out of No. 344/2018 dated 12.10.2018 passed by Commissioner of Customs, Bangalore-I), merely because the CBIC felt that the said orders were not legal and proper . This direction flies in the face of two of the most fundamental principles governing adjudication, viz., firstly, that it is not open to any executive, or administrative, authority to control, in any manner, the adjudicatory process, and, secondly, that no adjudicating authority can be directed to act in conscious violation of the law. These principles are, indeed, so elementary, that we are astonished at the directions contained in the impugned circular dated 31st May, 2019. The authority issuing the said circular ought to have been aware of the fact that dealing with consignments pending clearance at ports and airports involves a process of adjudication, and that it was not open to any such authority, dealing with such consignments, to act in violation of binding decisions of the Tribunal. The concluding paragraph of the impugned Circular dated 31st May, 2019, issued by the CBIC, in our v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t May, 2019, issued by the CBIC. The Circular, dated 31st May, 2019, having been found by us to be in contravention of the law, the invocation of the said Circular, in para 8 of the Show Cause Notices dated 12th July, 2019 and 28th June, 2019, too, therefore, cannot be legally sustained. Neither could any authority, adjudicating the said Show Cause Notices, be bound by para 8 thereof. Circular No. 450/67/2019-Cus. IV and Corrigenda to impugned Show Cause Notices, issued during the course of these proceedings 34. Aware of the above legal position, the respondent, in an apparent bid to salvage the situation, issued Circular dated 9th September, 2019, as well as corresponding Corrigenda dated 30th September, 2019 and 7th October, 2019, replacing para 8 in the impugned Show Cause Notices dated 12th July, 2019 (issued to the petitioner) and 28th June, 2019 (issued to Mink). 35. The Circular, dated 9th September, 2019, issued by the CBIC, reads thus: F No. 45G/67/2019-Cus.IV. Government of India Ministry of Finance Department of Revenue (Central Board of Indirect Taxes Customs) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned Show Cause Notices dated 12th July, 2019/15th July, 2019 and 28th June, 2019/19th July, 2019, as amended by the said Corrigenda dated 30th September, 2019 and 7th October, 2019, reads thus: Further, in a case involving import of similar article viz. gold granules, CBIC vide letter F. No. 450/67/2019-Cus. IV dated 31.05.2019 has taken a stand that import of said items can only be made by a nominated agency bank/star house etc. in this regard CBIC has held 2 recent orders passed by the CESTAT in the cases of Sri Export versus Commissioner of Customs, Hyderabad [Final Order No. A/3149/2018, dated 27.11.2018 in Appeal No C/30812/2018] and Sri Export versus CC Bangalore Cus [arising out of No 344/2018 dated 12.10.2018 passed by Commissioner of Customs, Bangalore-1], as not being legal and proper. In the said orders, import of Gold Granules has been allowed to be imported by an importer which was not a nominated agency bank/star house etc. It has been decided by CBIC that the said orders should be appealed against. Directions have also been issued by CBIC that field formations may take suitable action in accordance with the instructions of RBI/relevant master c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nonce, to be assumed that the order of the Tribunal had been suspended , that, by itself, would not justify the directions contained in para 4 of the Circular dated 9th September, 2019. The effect of such suspension , if any, and the issue of whether such suspension would eviscerate the precedential value of the order of the Tribunal, could be assessed only on perusing the order suspending the order of the Tribunal. Such vagueness, in a Circular issued by the CBIC, which has pan-India ramifications, is completely intolerable. We are also unable to appreciate the further recital, in para 2 of the Circular, dated 9th September, 2019, that an appeal had been filed, against the order of the Tribunal, Bangalore, in the High Court of Karnataka. Filing of an appeal against an order of a judicial authority, it is fundamental, does not even dilute, far less erode, the precedential value of the judgment appealed against. 38. Having said that, the CBIC may, quite legitimately, in exercise of the powers conferred on it by Section 151A of the Customs Act, issue circulars, or instructions, informing field formations of orders, passed by superior judicial authorities, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad bench of the Tribunal, and 12th October, 2018, passed by the Bangalore Bench of the Tribunal, are required to be followed, or not, the concerned adjudicating/assessing authority may deem it appropriate to examine whether the said orders stand stayed/set aside, by any superior judicial fora and, if so, the effect of the order of such forum, staying/setting aside the decision(s) of the Tribunal.. (The amended) para 8 of the impugned Show Cause Notices 40. Subject to this clarification, para 8 of Show Cause Notice dated 12th July, 2019/15th July, 2019, issued to the petitioner, and para 8 of the Show Cause Notice dated 28th June, 2019/19th July, 2019, issued to Mink, would also be required to be set aside. Re. merits of the Show Cause Notices 41. Proceeding further, we may note that extensive submissions have been advanced, both in the writ petition, as well by Mr. Tarun Gulati, learned Senior Counsel, during the course of submissions on behalf of the petitioner, regarding the merits of the allegations in the Show Cause Notice, and the case that has been sought to be built up, therein, against the petitioner. 42. We, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice and take all stands highlighted in the writ petition. Whether the show-cause notice was founded on any legal premises, is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the court. Further, when the court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose are not denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is not accorded to the writ petitioner even at the threshold by the interim protection granted. (Emphasis supplied) Similarly, in U.O.I. v. Kunisetty Satyanarayana (2006) 12 SCC 28, the Supreme Court observed that writ jurisdiction is discretionary jurisdiction and hence, such discretion under Article 226 should not ordinarily be exercised by quashing a show-cause notice or charge-sheet . 45. It is not necessary to multiply references to authorities, for the principle, which may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complying with the 'origin criteria' of Product Specific Rules of Origin under India-Korea CEPA. It may so happen that gold coins are being imported into Korea only for export purpose without any conversion facility. This is the right time for India to undertake a physical verification exercise (of manufacturing facility/premises) in coordination with our counterpart in Korea. 4. Further, as it has been observed that consignments of gold coins are being imported under HS: 7114 from South Korea, whereas the gold coins are classified under HS: 71189000 subject to RBI guidelines. This aspect may also be examined while dealing with these consignments. In case, you find any mis-declaration, you may take appropriate action against the importer under the Customs Act. This issues with the approval of DGFT. Sd/- (S.K. Mohapatra) Dy. DGFT Tel: 23061562 Ext: 277 E-mail: mohapatra.sk@nic.in The Commissioner (Customs), Air Cargo Complex (Import) New Customs House, New Delhi-110037. 48. The grievance of the petitioner, needless to say, is directed against p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot, having availed such benefit, seek to resile from the description, or classification, advanced by it. This, however, is not such a case. Irrespective, therefore, of the manner in which the goods in question have been described in the Bs/E filed by it, there can be no estoppel on the petitioner establishing, before the adjudicating authority, by cogent and convincing evidence, that the goods imported by it are, nevertheless, entitled to the benefit of exemption. In case such a contention is advanced, the authority, adjudicating the Show Cause Notices dated 12th July, 2019/15th July, 2019, issued to the petitioner, and 28th June, 2019/19th July, 2019, issued to Mink, would have to consider and appreciate the contention on merits, and cannot refuse to do so merely on the basis of the impugned Office Memorandum dated 6th September, 2017, issued by the DGFT, or the impugned Office Memorandum dated 16th February, 2018, issued by the CBEC. 53. In sum and substance, therefore, it is required to be clarified that the impugned Office Memorandum, dated 6th September, 2017, issued by the DGFT, and 16th February, 2018, issued by the CBEC, cannot fetter, or bind, the adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o imported gold coins during the period 1st July to 25th Aug 2017 under India-Korea FTA requires action in terms of Foreign Trade Policy. 5. This issue with the approval of the Board. Sd/- (Mandeep Sangha) Senior Technical Officer Chief Commissioner of Customs New Customs House Near IGI Airport New Delhi. 55. We are unable to sustain, to any extent whatsoever, the aforesaid Office Memorandum, dated 16th February, 2018, issued by the CBEC. To us, it appears obvious that this Office Memorandum is a transparent attempt, on the part of the CBEC, to shackle the impartial exercise, by the competent adjudicating authorities, of adjudication of the Show Cause Notices issued to the petitioner and to Mink and, quite possibly, to other similarly situated importers. When the issue of classification, and entitlement to exemption, of the gold coins, imported by the petitioner, and other similarly situated importers, is at large before competent adjudicating authorities, who are in seisin thereof, the CBEC was completely unjustified in issuing the Office Memorandum dated 16th February, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. While no orders are, therefore, required to be passed in respect of Circular dated 31st May, 2019, Circular dated 9th September, 2019, is quashed and set aside, to the extent of the directions contained therein, especially in para 4 thereof. The effect of the said Circular shall be read as limited to conveying of information, regarding the fact that Final Order No.A/31494/2018, dated 27th November, 2018, of the Hyderabad bench of the Tribunal, in Appeal No. C/30812/2018, and the Final Order, passed by the Bangalore Bench of the Tribunal against Order-in-Original No.344/2018, dated 12th October, 2018, passed by the Commissioner of Customs Bangalore-I, had been appealed against, and no more. The authorities, adjudicating the Show Cause Notices impugned in these writ petitions would be required, independently, and uninfluenced by the Circular dated 9th September, 2019, to examine, for themselves, whether such appeals have, in fact, been filed and, if so, the effect of the orders passed therein. (ii) Para 8 of the impugned Show Cause Notices, dated (a) 12th July, 2019/15th July, 2019, issued to the petitioner in WP(C) 9225/2019, (b) 28th June, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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