TIOL-DDT 2468
03.11.2014
Monday

IF a caveman is given a sophisticated gun to shoot, instead of learning how to shoot and use the weapon he will throw the gun itself on the opponent, thus, using the sophisticated gun as a mere stone.

Recently we came across an eminently readable order by an Appellate Commissioner of Customs against an order of a learned Assistant Commissioner who has not obviously learnt anything about Customs Law. The Commissioner (Appeals) sweetly calls him the LAA - Learned Adjudication Authority. The Appellate Commissioner, for a change, was not impressed by the convoluted brilliance of the LAA.

Extracts from the loudly speaking order of the Commissioner (Appeals).

The facts in this case are that the LAA sitting as assessing officer has enhanced the value of the imported goods. The goods are apples which are perishable and stored in refrigerated containers. The LAA was going about the procedure of valuation as per his own law (not law of the land) and went about enhancing the assessable value of the goods probably as per the minimum average value theory expounded by him. The importer / citizen was following the customs law as enacted by the Parliament. He gave a simple letter of protest by post / Tapal (I do not know what are the other methods of handing over the letters). Meanwhile, container detention charges and the demurrage charges for keeping the apples cold and fresh inside the refrigerated container were mounting day by day. Along with this rising charges towards the demurrage and detention, the anxiety and blood-pressure of the importer was also rising. Finally not able to accept the law as propounded by the learned lower authority, the importer blinked first and paid the duty as per the enhanced value but while doing so he was clear in his mind that he is paying the duty on enhanced value only to get the goods cleared and he was reserving his intention to fight for upholding the law of the land for a later date. Towards this end, he wrote clearly in a letter dated 28.08.2013 that he is making the payment only to avoid continuing detention and demurrage charges and that the enhancement of value is unacceptable to him. On receipt of this letter, our learned lower authority should have issued a speaking order as per Section 17(5) of the Customs Act, 1962.

The strange situation is that the LAA is alleging that the importer has not followed the procedure as per the PN whereas as it obtains from facts, it is the LAA who has not followed the procedure of passing a speaking order. This entire litigation is on account of LAA not wanting to pass a speaking order because if he were to pass a speaking order he has to unveil his theories of valuation which he was compelled to bring out in the para-wise comments to the grounds of appeal.

The story does not stop here. Having not received a speaking order, the importer also doggedly pursued this case and filed a W.P. to High Court for issuance of speaking order. He gets an order to that effect from the Hon'ble High Court still the LAA does not want to pass a speaking order, then the importer sends a legal notice only then the LAA reluctantly passing the impugned order.

I really wonder as to why this LAA is so contemptuous of a simple letter. Why does he want a complicated letter from the importer? This simple letter should suffice for the purpose of Section 17 (5). Subsequently, the LAA should have passed a speaking order.

The LAA appears to be without any clue regarding the valuation procedures under the Customs Act, 1962. The contention of the appellant is fully valid and his comment that, "The Assistant Commissioner has made a statutory provision on his own to say that wherever the imports had taken place at a higher price then that price will prevail for all the imports made by any importer and he will go on changing the assessment as and when he found still higher price" makes at once a humourous and sad reading. Humourous because if one were to think of a situation where the above thinking of the learned Assistant Commissioner is implemented across the country then the kind of chaos that shall prevail over customs valuation and sad because if this type of ignorance is exhibited while assessing bills of entry in major custom house then the image of the Department will take an unnecessary beating.

Further, the LAA goes on compounding his folly by evolving new theories in customs valuation. His contention that Directorate of Valuation and individual Customs Commissionerate studies the trends of imports and analyse the import data and a minimum value is worked out for the purpose of verification of the assessing groups is again exposing the Department ' s internal working unnecessarily. The studies by Directorate of Valuation and various Custom Houses is to understand the trends in valuation. These studies and the conclusions are for empowering the assessing officer with good data but it cannot be a basis for ignoring the Customs Valuation Rules, 2007. These are strong weapons in the form of database which the assessing officer should know how to use in conjunction with the Customs Valuation Rules.

If a cave-man is given a sophisticated gun to shoot, instead of learning how to shoot and use the weapon he will throw the gun itself on the opponent, thus, using the sophisticated gun as a mere stone. It is interesting to note how a sophisticated tool like NIDB database and studies being conducted by Directorate of Valuation and other Customs formations can be rendered useless.

The concept of 'basic minimum average price' cannot replace the legal requirements in customs valuation. It is a tool in the form of database/alert to aid the assessing officer. The LAA states that basic minimum average price shall govern over even higher prices. These concepts are beyond my comprehension and, therefore, I do not want to tax my brain about it. The LAA comes out with further details about the working of his Group and he states that when the price of imported goods falls short of this minimum average price then the Groups (his Group) asks for justification of declared value.

There is no concept of 'minimum average price'. The interesting question which arises here is suppose if the declared value is higher than the minimum average price, will the Group reduce the assessable value from the declared value to the minimum average price. Reading the comments of the LAA, I seriously doubt whether this officer has ever heard of the concept of transaction value as enshrined in Section 14 of the Customs Act, 1962.

The LAA does not stop there. He goes on to state that when the importer accepts their (whose?) minimum values in writing, bills of entry are assessed adopting the minimum value. " If no written consent has been given by the importer, action can be taken following the procedure laid down in the Customs Act, 1962 and CVR, 2007 as applicable. " This clearly shows the mind of the LAA that in his scheme of things, ' common minimum average price ' is the most sacrosanct value for the customs purpose. The Customs Act, 1962 and CVR, 2007 are subsidiary to the minimum average price. But unfortunately as a Government authority, we are bound by the Customs Act and the rules made thereof and not by some minimum average price concept propounded by the learned lower authority.

The LAA does not stop there. He is fairly bent upon extending the ridiculous to farce. He states that, "It is up to the importer to contest Department's minimum average price and justify the declared transaction value by submitting contracts/LC/PO/ bank remittances, etc., at the time of assessment and to register their protest as per the procedure prescribed in the PN, Circular, etc. which will save the time and energy and unnecessary litigation".

The LAA has failed to explain as to at what point of assessment all this should take place when assessment is done in an EDI environment. Is the EDI geared up for this minimum average price concept? Has the Department published the minimum value for various commodities/sub-heading wise? I fail to understand the significance of contracts/LC/PO/ bank remittances, etc. to justify the transaction value when as per the LAA a minimum value is already staring at the importer. The LAA has successfully put the entire concept of valuation in Customs stand on its head.

It is for the proper officer to reject the declared value if he so feels as per Rule 12 of the Customs Valuation Rules, 2007 and then it is for him to take upon himself the burden of arriving at a new assessable value as per CVR Rules 4 to 9. But strangely, as per this LAA, the procedure is somewhat like this - whenever an importer files bills of entry and declares a transaction value, he will immediately be shown a minimum value by the assessing officer. The importer has to immediately give a written acceptance/ consent for this 'minimum average value' being adopted as the assessable value. If the importer does not accept and if he prefers to contest the Department's minimum value and justify his own declared transaction value then he has to submit contracts/LC/PO/ bank remittances, etc. This should be done at the time of assessment. The exact time is not clearly stated by the LAA. After showing all these documents, the importer should register their protest as per procedure prescribed in unrelated Public Notice No.07/2002 and circulars, etc. This according to him will save the time, energy and unnecessary litigation. The LAA is silent on one thing that after receiving the protest, on what value the Group will assess the bill of entry, will they assess it as per the declared value (transaction value) or will they assess under the minimum average value?.

Finally, the LAA delivers his knock-out punch by stating that, "in the subject case, importer at one hand accepted the value at the time of clearance and gave a simple letter by post / tapal without following the prescribed procedure is a clear violation and abuse of the legal process and is an unnecessary litigation."

I do not see anything speaking in this speaking order. The LAA has not adhered to any procedures or rules of valuation while enhancing the value of the goods. Except for stating that he has seen 3 Bills of Entry, (contents of which, he has not disclosed to the appellant to rebut as envisaged in the rules), he has not given any reason whatsoever in his entire Order-in-Original. This order is contrary to law and procedures laid down and cannot be accepted. In view of this, I set aside the Order-in-Original and allow the appeal with all consequential relief.

Will the Learned Assistant Commissioner learn something now?

IAS Officers joining IRS? - We demand Equality

THE IRS Association in a letter to its members, states;

•  The number of higher promotional posts and therefore the opportunities for promotion in the IRS, compared to other Services, particularly the IAS, IFS, IPS and IFS (Forest) are very limited. Successive Pay Commissions have been placing IAS and IFS at a higher pedestal and giving them extra advantages in terms of pay, promotions etc.

•  The discrepancy in number of posts is particularly marked for higher posts. It is seen that for IAS which has only a slightly bigger cadre strength compared to the IRS, the number of Apex level posts is about 10 times and for IPS and IFS(Forest) with a smaller cadre compared to the IRS there are about double the number of Apex level posts. Similarly IFS(Foreign) with a much smaller cadre has a very large number of Apex level posts resulting in very fast promotions in these Services compared to the IRS.

•  There is nothing to show that the IRS is inferior to any other Service, as there is a common system of examination and any candidate can opt for any Service depending upon his or her choice and the availability of posts in that Service.

•  There are a very large number of IRS officers who could have or had joined All India Services such as IPS and IFS (Forest) but preferred to join the IRS. Similarly there are some examples of candidates who could have joined IAS or IFS but preferred to join the IRS. We need to bring forward such examples so as to demonstrate to the 7th Pay Commission that there is no ground for treating or considering that the IRS is inferior to these services.

•  In view of the fact that the IRS is now the Principal Revenue Collector for the Nation (a task which was performed by the ICS in the pre Independence period and by the IAS thereafter) and in view of other factors such as the efficiency of the IRS, as we collect the Revenue at the lowest cost of collection in the world, we have prayed to the 7th CPC for the IRS being treated as the premier Service of the country and to be given the edge which was earlier given to the IAS.

•  As may please be appreciated, merely stating that a large number of officers decline to join the IAS / IFS/ IPS / IFS(Forest), is just not enough, as it lacks the requisite thrust. You are therefore requested to cite such concrete cases of officers within your knowledge preferring to join the IRS notwithstanding their qualifying for the IAS / IFS (Foreign)/ IPS/ IFS (Forest) etc. (in the same year or an earlier or later year) with their details.

This is from the Income Tax version of IRS.

IRS over IAS?

SOMETIME back a senior IRS Officer (customs) wrote to me,

Barring one or two Officers, nobody has preferred I.R.S. over I.A.S. And you must remember that around 1000 plus officers have joined I.R.S. in the last 20 years. One or Two officers can have personal reasons or choice.

By the Way, one or two officers have also preferred I.P.S. over I.A.S., purely due to personal reasons or personal choice.

I.P.S. is a different type of Service, with very different job profile. Since 1960s, there have been large number of officers who have not opted for I.P.S. and have opted for I.R.S. and I.A.A.S.

And the fact is that the kind of career profile, variety of assignments, perks, absolute supremacy that I.A.S. enjoys in Districts, State Capitals, New Delhi - no other Service can ever come near it.

He added,

My mail was only conveying the agony of all I.R.S. Officers - or should I say double jeopardy-

* of NOT getting a Civil Services Rank to get into I.A.S. and thereby not being able to join the 'Brahmins' of Civil Services in this lifetime (Civil Services in India too have a caste system as you know - one can only be born into a Service, and after that no amount of sincerity and integrity can change the destiny): and

** then being told that you chose to be born in a non-brahmin caste as you wanted to take bribes!

This was in the context that UPSC selected candidates are preferring IRS to IAS - to make money.

Tariff Value of Gold and Silver Decreased

THE Government has decreased the Tariff value of Gold from 401 USD to 391 USD per 10 gms. The tariff value of Silver is also reduced from 575 USD to 551 USD per kilogram. Tariff value of Brass scrap has also been decreased. However, the Tariff value of Poppy is increased, while Areca Nuts remain unchanged. Tariff values of oils are reduced. The Tariff values as on 15.10.2014 and with effect from 31.10.2014   are as under:  

Notification No. 100/2014-Cus.(N.T.), Dated: October 31, 2014

Jurisprudentiol-Wednesday's cases

Service Tax

Contract for collection of proceeds from foreign buyer is between appellant and Bombay branch of Standard Chartered Bank - Thus, both service provider and service recipient are situated in India and, therefore, there is no import of service involved - Stay granted: CESTAT

THE appellant has a manufacturing unit of textile products and exported goods to the foreign buyer. The bills for collection of the export proceeds were handed over to Standard Chartered Bank at Fort, Mumbai. Standard Chartered Bank undertook collection of the export proceeds through their office in UK who retained a part of the amount towards collection charges.

The department is asking the appellant to pay service tax on the amount retained by the UK branch of the Standard Chartered Bank on reverse charge basis under Section 66A of the Finance Act, 1994.

Income Tax

Sec 54EC - Whether even if investment falls under two financial years, benefit claimed by assessee cannot be denied, although it crosses limit of Rs 50 lakhs - YES: HC

THE assessee sold a property at Palavakkam for a sale consideration of Rs.3,46,50,000/- vide agreement of sale entered into with the Ceebros Property Developments. The assesssee invested Rs.1,00,00,000/- out of the sale proceeds in certain bonds in two financial years, namely, Rs.50,00,000/- in Rural Electrification Corporation Bonds and Rs.50,00,000/- in National Highways HAI Bond. The AO held that the assessee can take the benefit of investment in specified bonds to a maximum of Rs.50,00,000/- only under Section 54EC(1) of the Act and accordingly, held that the other sum Rs.50,00,000/- invested over and above the ceiling prescribed does not qualify for exemption in terms of the Act.

The issues before the Bench are - Whether under the existing Section 54EC(1) and the first proviso, investment made within the time limit of six months from the date of transfer should be computed financial year wise and not transaction wise; Whether even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied, although it crosses the limit of Rs 50 lakhs and Whether by virtue of Finance Act, 2014 w.e.f April 1, 2015 all investments u/s 54EC shall be limited to a total of Rs 50 lakhs including the financial year in which the original asset or assets are transferred and for all subsequent financial years. And the verdict goes in favour of the assessee.

Customs

Import of passenger car radial tyres requiring BIS Certification - Revenue appeal against allowing clearance of goods on payment of redemption fine instead of re-export - Matter remanded to Commissioner (Appeals) for proper appreciation of provisions of Section 125 of the Customs Act, 1962: HC

THE assessee had imported 'New passenger car radial tyres of mixed sizes'. The original authority found that a certificate of the Bureau of Indian Standards was available only in respect of a consignment of Nexon brand tyres but that was valid only until 30 December 2012. No BIS certificate was available in respect of the tyres of other brands also no invoice of the manufacturer or evidence for the purchase of tyres from Nexon or from any other manufacturing company had been submitted. The Additional Commissioner ordered confiscation of the goods under Section 111 (d) of the Customs Act, 1962. However, an option was furnished under Section 125(1) of the Customs Act for the payment of a redemption fine of Rs. 8 lacs in lieu of confiscation and for the re-export of the goods. A penalty of Rs.5lacs was also imposed.

Tomorrow is a holiday - Muharram

See our Columns Wednesday for the judgements

Until Wednesday with more DDT

Have a nice day.

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