JUNE 17, 2020

By Shailesh Sheth, Advocate & Founder, M/s. SPS LEGAL

IN Part-I, a bird's eye view of the major reforms undertaken by the CBIC ('Board') in the field of customs in the recent years was presented. It was explained how these initiatives have catapulted India from its dismal rank at 142 in 2014 to an impressive 63 in 2019 on the World Bank's 'Ease of doing business' Index. In Part-II, the salient aspects of 'Faceless Assessment' were discussed. In Part III, the structure being put in place by the Board for the purpose of 'Faceless Assessment' was analysed. In this concluding part, the salient procedural aspects of the 'Faceless Assessment' are discussed on the basis of the Instructions dated 05/06/2020 issued by the Board. It is finally concluded that this crucial Reform undertaken by the Board will certainly change not only the 'Face of the Customs' but also the 'Face of the Country' and propel India into the top 50 countries for 'Ease of doing business' on the World Bank's Index.]

A detailed procedure has been laid down by the CBIC in its Instructions dated 05.06.2020 which is required to be adopted by the Faceless Assessment Groups (FAG) for verification of bills of entry. It may be reiterated here that at present, the assignment to the Faceless Assessment Groups is restricted only to the 'Non-facilitated' bills of entry filed for the goods imported and primarily falling under Chapters 84 and 85 of the CTA, at Bengaluru and Chennai Customs. Bearing this in mind, let us now have a look at the various procedural aspects elaborately provided for by the Board by its Instructions. Interestingly, the Board has outlined the 'flow of bills of entry' covered under 'Faceless Assessment' in 'Process Flow' forms in Annexures 'A' and 'B' appended to the Instructions.

I. Procedure to be adopted in normal course for the verification of the assessment of bill of entry:

The stage-wise procedure that would normally be followed is explained below:

Stage 1 - Filing of Bill of Entry:

a. The importer shall present the Bill of entry on the Customs Automated System i.e. ICEGATE electronically under S.46 of the CA and upload all the requisite supporting documents on e-SANCHIT;

b. The selection of bill of entry for verification of self-assessment shall primarily be on the basis of risk evaluation through appropriate selection criteria;

c. The importers are advised to opt for continuity Bond option, to avoid fresh registration of Bonds every time, in cases where either they have prior knowledge of the requirement of execution of Bond or Bank Guarantee for the assessment of bill of entry or where filing of such Bond/Bank Guarantee is required in cases such as filing of Warehouse bill of entry or in case of opting for provisional assessment or where it is mandated under any duty exemption/remission scheme claimed by the importer;

d. The assignment of the bill of entry to an officer of the Faceless Group concerned for verification of assessment purposes would be by the Customs Automated System ('CAS').

Stage 2 - Assessment/Re-assessment by the Faceless Assessment Group:

Different scenarios have been visualized and dealt with by the Board so far as the verification of assessment of bill of entry by Faceless Assessment Group ('FAG') is concerned and the same are explained hereunder:

i. Confirmation of self-assessment:

- The FAG would undertake the necessary verification on the basis of the declaration made and documents available in e-SANCHIT;

- The FAG may seek additional information/documents for proceeding with the verification for which queries would be raised electronically, through ICEGATE Portal. The importer should provide the requisite information/documents thereof through e-SANCHIT;

- The Port of import would undertake the necessary examination and grant customs clearance. Any recalling and reassessment of bill of entry after this stage will be dealt with by port of import;

- After scrutiny of the information/documents provided by the importer, the FAG shall return the bill of entry to the importer for payment of duty after verification.

ii. Where re-assessment is to be done:

- If onscrutiny of the declaration made and additional information/documents, if any, furnished by the importer, the FAG does not agree with the self-assessment, it shall re-assess the bill of entry;

- In case, the importer does not agree with the re-assessment, the FAG shall issue a speaking order under S.17(5) of the CA following the procedure as prescribed.

iii. First check or Second check Examination and/or testing of goods:

- The FAG may, if it considers necessary, either on its own assessment or on the request of the importer, order first check examination or testing of the goods with specific directions or testing parameters to the shed officers at the port of import;

- The responsibility of sending the samples with the requisite test memo would lie with the port of import;

- On receipt of the examination/test report, the same would be fed in the system by the shed officers/Centralised Cell and the bill of entry would be referred back to the FAG;

- The FAG would thereafter follow the procedure as prescribed;

- The FAG may, whether in the course of accepting the self-assessment or re-assessing the bill of entry, order for second check examination of the goods;

- The directions of the FAG to the shed officers at the Port of import may include :

- verification of original documents;

- defacing the documents;

- taking custody of the documents;

- obtaining NOC from PGAs;

- verification of the Country of Origin Certificate; etc.

- The port of import may, if deemed necessary, rope in any external agency for the purpose of verifying the authenticity of any document/s submitted by the importer through e-SANCHIT.

iv. Referring back of the bill of entry by the FAG to PAG:

- If the FAG is of the opinion that prior testing of the goods would take considerable time and the bill of entry should be assessed provisionally, it may refer the bill of entry back to the Port Assessment Group (PAG) at the port of import, following the prescribed procedure and specifying clearly the reasons thereof;

- In the above cases, the bill of entry would be assessed by the PAG at the port of import, after the receipt of the examination/test report;

- In case, the FAG, on the basis of the test and/or examination report fed by the shed officers/Centralised Cell as stated above, finds the goods to be subject to some restriction or prohibition or mis-declared, it shall refer the bill of entry to PAG at the port of import for action including action under S.124 of the CA;

- However, irrespective of the pending assessment at the FAG level, in case the importer requests for storage of the imported goods in a warehouse pending clearance under S.49 of the CA, such request shall be promptly processed by the officers at the port of import.

IIA. Procedure to be followed by the FAG in exceptional circumstances:

- The proper officer of the FAG may, with the approval of an officer not below the rank of the Joint Commissioner/Additional Commissioner, transfer the bill of entry through the CAS to PAG at the port of import for assessment in the following exceptional circumstances:

- Where the FAG has reason to believe that the imported goods may be liable to confiscation in terms of the provisions of S.111 of the CA. In such cases, the reasons for such a transfer shall be duly recorded in the CAS. However, this course of action should be adopted in genuinely exceptional circumstances.

- Where 'related party' transactions are involved warranting investigation by the Special Valuation Branch i.e. SVB [other than cases already covered by an earlier order of the SVB or taken up for investigation by the SVB]. In such cases, the port of import would refer the case to the jurisdictional SVB for further investigation;

- Where, even after several electronic query-based interactions with the importer, the FAG is unable to complete the verification for want of additional documents, test report, etc.;

- Aside from the above, the FAG may also transfer the bill of entry to the PAG in any other exceptional circumstances, but after due approval of the Commissioner supervising the proper officer.

IIB. Procedure to be followed by the Port of Import in exceptional circumstances:

It is provided that notwithstanding the above, the Principal Commissioner/Commissioner at the port of import may, at any stage pending assessment at FAG, direct the PAG to pull the bill of entry from FAG to the PAG in the following situations:

- Where a specific alert or intelligence is available pertaining to the said bill of entry or class of bill of entry; and

- Where the Principal Commissioner/Commissioner of Customs has ordered so for reasons to be recorded in writing.

III. Adjudication and Appellate Proceedings:

Needless to say, the assessment of the bill of entry is a quasi-judicial function and therefore, the principles of natural justice need to be followed by the proper officer before assessing the bill of entry in a manner prejudicial to the interests of the importer. Towards this end, the Board has prescribed elaborate guidelines/procedure to be followed for the re-assessment of a bill of entry; provisional assessment; amendments to a bill of entry and issue of demands by the FAG. The Board has also laid down the procedure to be followed for Appellate and Review proceedings. In the ensuing paragraphs, the Board's guidelines on these aspects are briefly summarized:

a. Issue of a speaking order :

The Board has enjoined upon the FAG to pass a speaking order within 15 (fifteen) days from the date of re-assessment of the bill of entry, as prescribed under S. 17(5) of the CA where such re-assessment is at variance with the self-assessment done by the importer. However, no such speaking order needs to be issued where the importer confirms his acceptance of the said re-assessment electronically in reply to the query raised by the assessing officer.

Essentially, the above prescription by the Board merely embodies what is stated in sub-section (5) of S.17 of the CA.

The Board has further provided that before proceeding with the re-assessment of the bill of entry, the FAG shall grant an opportunity of being heard to the importer and if the same is sought by him, then it may be conducted through video conferencing or other reliable means at the option of the importer.

While the aforesaid guidelines prescribed by the Board are welcome, it may be emphasised here that the assessing officer must convey his proposal to re-assess the bill of entry and the grounds or basis thereof to the importer before granting a hearing to him and passing a speaking order. Unless the importer is put to notice of the proposed stand of the authority and the basis thereof with regard to the re-assessment of the bill of entry, mere grant of a hearing will be an empty formality. An importer obviously cannot be expected 'to shoot in the dark' nor can he be expected to assume what is the case of the Department! Therefore, after verification of the declaration made or the requisite additional information furnished by the importer, if the Assessing Officer feels the need to re-assess the bill of entry in a manner which is at variance with the claims made by the importer, the Assessing Officer must communicate the details of the re-assessment as proposed by him and the grounds/basis thereof to the importer beforehand to enable the latter to put his defence in an effective and meaningful manner on record.

b. Provisional Assessment:

S.18 of the CA provides for 'provisional assessment' in the following circumstances viz.:

- Where the importer (or exporter) is unable to make self-assessment under S.17(1) and makes a request in writing to the proper officer for assessment;

- Where the proper officer deems it necessary to subject any imported goods (or export goods) to any chemical or other test;

- Where the importer (or exporter) has produced all the necessary documents and furnished full information but the proper officer deems it necessary to conduct further enquiry;

- Where the necessary documents or information have not been produced and the officer deems it necessary to conduct further enquiry;

The Board, by its above Instructions, has stated that the FAG may, after obtaining the requisite prior approval for provisional assessment as per the provisions of the CA and the Departmental guidelines, assess the bill of entry provisionally.

The bond and bank guarantee in such cases are to be registered by the importer with the Turant Suvidha Kendra at the port of import.

Here, it is necessary to have a brief look at the options available to the importer whenever a claim made by him in the self-assessed bill of entry is being contested by the Assessing Officer. A dispute may generally arise with regard to a claim relating to classification and/or valuation and/or entitlement to an exemption notification, which would normally have a bearing on the quantum of the duty payable. In such cases, the importer has 3 (three) options available to him, viz.

i. to opt for provisional assessment as provided in S.18 of the CA;

ii. to opt to pay duty 'under protest';

iii. to insist on the issuance of a show cause notice or a 'Note Sheet Order' which would enable him to put his submissions on the record and take the matter to a higher level after adjudication,in appeal, if required.

It is well-known that the option of 'provisional assessment' is generally not favoured by Assessing Officers primarily for the reasons viz. one, revenue considerations and two, the onus on the proper officer to finalise the assessment within the specified time limit. This is despite the fact that S.18, inter alia, allows the importer (or exporter) to seek provisional assessment' as explained above. Once the importer has decided to opt for 'provisional assessment' after evaluating the risk factors attached to this option, the Assessing Officer cannot legally deny him the exercise of such option.

Assessing Officers generally insist on payment of duty 'under protest', which not only results in immediate revenue collection, but also absolves them of the responsibility of resolving the issue or finalizing the assessment expeditiously. There is yet another factor that plays a major, albeit may be a subjective role here. When the duty is paid 'under protest', the importer, consequent upon a final assessment in his favour, would be entitled to the refund of duty paid in excess by him. However, it is a common knowledge that getting a refund is not a simple task.

The Board may, therefore, issue suitable instructions in this regard stressing that seeking a 'provisional assessment' is the right of the importer (or exporter) and he cannot be forced to pay duty 'under protest'. The Board may also lay down a time limit - ideally not exceeding 6 (six) months - for the finalization of assessment by the Assessing Officer in case where the duty is paid 'under protest' by the importer.

c. Demands under S.28 of the CA:

The Board has clarified that the issue of demands under S.28 of the CA, adjudication thereof, and handling of audit objections shall be done by the officers of the port of import. Thus, even if the assessment is done by the FAG, the initiation of the proceedings under S.28 would continue to be handled by the officers of the port of import. However, wherever clarifications or inputs from the PAG are required in such cases, Nodal Commissioners are tasked with ensuring co-ordination between the FAG and the port of import.

d. Appellate Proceedings:

An appeal against any order on re-assessment passed by the FAG shall lie before the Commissioner (Appeals) as per Not.no. 51/2020-Customs (NT) ibid.

Thus, to illustrate, an appeal against an order passed as per S.17(5) or S.18 of the CA, by the proper officer of the FAG at Chennai in respect of the bill of entry filed by the importer at Bengaluru, being the port of import, would lie with the Commissioner (Appeals) having jurisdiction over the port of import i.e. Bengaluru.

e. Review Proceedings:

It is provided that the review of any speaking order on re-assessment passed by a proper officer of the FAG, under S.129D(2) of the CA, shall lie with the reviewing authority having administrative control over the proper officer of the FAG.

This guideline is somewhat strange and confusing! A review application against an order passed by the proper officer of the FAG would lie before the Commissioner (Appeals) who would be having jurisdiction over the port of import, in terms of S.129D(4) of the CA. Moreover, for all practical and legal purposes, the jurisdictional Commissioner of the port of import continues to remain an interested party even if the bill of entry is assessed/re-assessed by the proper officer of the FAG based in a different Customs zone. It is, therefore, surprising as to why review powers are vested in the 'reviewing authority' i.e. the Commissioner having administrative control over the proper officer of the FAG and not in the Commissioner having the administrative control over the port of import. This aspect may need re-consideration by the Board.

f. Amendment of Bill of Entry:

The following instructions are issued by the Board in this regard -

- A facility whereby requests for amendments can be made online via ICEGATE Portal has been enabled by the Directorate General of Systems ('DGS');

- Once the amendments are filed online, the System would queue them before the proper officer of the FAG if the bill of entry is pending for verification with him or else, the requests would be queued to the proper officer of the PAG;

- The amendment fees in terms of Levy of Fees (Customs Documents) Regulations, 1970 can be paid online. The applicable fee will be included in the duty challan for payment;

- Requests for amendments under S.149 of the CA (i.e. Amendment of Documents) and requests after bill of entry has been returned for payment by the FAG shall be processed by the port of import.

g. Exchange of communication:

Lastly, the Board has provided that for the purposes of the FAG, all communications between the FAG and the importer shall be exchanged exclusively by ICEGATE.

Moreover, the internal communication between the FAGs and the officers of the port of import or Turant Suvidha Kendra shall also be exchanged exclusively via electronic mode.

'Faceless Assessment' - The changing face of the Customs:

It may be observed that the successful working of ' Faceless Assessment' would need cohesion and close co-ordination between the Port of Import and the FAG. Here, Nodal Commissioners can be expected to play a vital role. The 'Faceless Assessment' is like a giant wheel and every cog in this wheel is expected to ensure that the wheel moves smoothly and without any friction!

The rollout of 'Faceless Assessment' ( also commonly referred to as ' anonymised assessment' or 'virtual assessment ') heralds the dawn of a new era in the Customs Assessment Process. The objectives behind this crucial reform as outlined by the Board in its Concept Paper are -

- To bring anonymity in assessment and cut down the physical interface between the Assessing Officer and the importer/broker to the extent technologically feasible;

- To ensure uniformity in assessments across the country;

- To promote sector specific approach and functional specialization;

- To improve workload balance amongst various field formations for efficient utilisation of the resources.

These avowed objectives of 'Faceless Assessment' would reflect the seriousness with which the Board has embarked upon this reform!

It is also obvious that once, the pan-India roll out is implemented by December 31, 2020 as proposed, 'Faceless Assessment' may not only change the 'face of the Customs' but also the 'face of the Country'! There is no doubt that it will also propel India into the top 50 countries for ' Ease of doing business ' on the World Bank's Index! There are and bound to be some creases and other creases may even appear over a period of time but it is expected that these would be ironed out by the Board.

While the anonymity, uniformity and transparency, amongst other objectives remain the ultimate aims of this reform, 'speed' of the Assessment will also be vital as delayed assessment will not only hurt the importers very badly but also put paid to the whole initiative. 'SPEED ' may be ensured by:

- Scrutiny of documents

- Promptness of action

- Effective Co-ordination

- Equitable Consideration

- Decision

There is much for the importers to look forward in this revolutionary reform initiated by the Board and it is in the interest of all the stakeholders that they strive to ensure its success!

"The laws of a State change with the changing times."

[Aeschylus - Ancient Greek Dramatist]

Editor: The four-part series stands concluded.