JUNE 06, 2023

By Harshdeep Singh Khurana ¹ & Siddhant Indrajit ²

CESTAT at Delhi in the case of M/s. Holy Land Marketing Pvt. Ltd. v. CC, New Delhi ³ held that once goods have been cleared for home consumption, the only manner such assessment/ self-assessment could be altered is by filing an appeal before the first appellate authority. However, this decision, inter alia, fails to take into consideration the statutory provisions under the Customs Act. This article intends to test the decision of Holy Land (Supra) against the provisions of the Customs Act, while at the same time trying to harmoniously read other conflicting decisions together.

Scope of 'assessment' and when it ends

The term 'assessment' broadly refers to the process of determining the correct classification of goods under Customs Tariff, applicable duty rate with reference to exemption notification (if any), determination of value, etc., for charging duty against the goods. ⁴

It is against the above context and in 'self-assessment' regime ⁵, the Supreme Court interpreted the provisions of Section 17 of Customs Act in the landmark case of ITC Ltd. v. Commissioner of Central Excise, Kolkata-IV ⁶. The Court observed that a self-assessment, which is an assessment under Customs Act, may be verified by the proper officer and he may require the importer/ exporter to produce such document, or furnish such information, etc. as may be necessary. In case the proper officer, on examination or testing finds that the self-assessment is not done correctly, he may, without prejudice to any other action, proceed to re-assess the duty leviable on such goods. In this manner, Section 17(5) of Customs Act gets triggered, which obligates the proper officer to pass a speaking order on re-assessment in case the re-assessment is contrary to assessment undertaken by the assessee. ⁷

Such understanding of Section 17(5) of Customs Act has been followed in Holy Land (Supra) . However, the CESTAT took it one step forward and held that re-assessment order cannot be issued under Section 17(5) of Customs Act wherein the goods under consideration have been cleared for home consumption. This is because such goods are no longer considered "imported goods" ⁸ . In simple words, the CESTAT held that the process 'assessment' can be followed by re-assessment. However, the process of assessment or re-assessment ends when the order is used for clearing the subject goods for home consumption since the subject goods cease to be "imported goods", and the importer ceases to be the "importer".

In view of the above, the CESTAT held that once an assessment is completed, the following are the recourses available:

Now the question arises, whether the proper officer becomes functus officio for the purpose of 'assessment' once the goods are cleared for home consumption. If yes, whether the only option available with the assessee is to file an appeal before Commissioner (Appeals) under Section 128 of Customs Act.

Option for amendment not explored

Section 149 of Customs Act confers a power upon the proper officer to amend any documents presented in customs house, even after the imported goods have been cleared for home consumption. The phrase 'any documents' has been defined to, inter alia, include 'bill of entry' or 'shipping bill', and 'bill of export' ¹⁰. In other words, Section 149 of Customs Act confers the power to the proper officer to amend bills of entry even after importation of goods. The only condition required for availing such provisions is that the documentary evidence on the basis of which the amendment is sought must be in existence when the goods were cleared. ¹¹ Parallelly, Section 154 of Customs Act permits correction of clerical or arithmetical mistakes in any decision or order or errors arising therein due to incidental slip or omission. It is pertinent to note that neither Section 149 nor Section 154 of Customs Act provide any timeline within which such correction/ amendment has to be made.

In this light, the essential question that came up for consideration before the High Court of Mumbai in Dimension Data India Pvt. Ltd. v. CC ¹² was whether the request for correction of inadvertent mistake or error in self assessed Bill of Entry and consequential issuance of orders of re-assessment is legal and valid, or not. In this regard, firstly, the High Court on conjoint reading of Section 149 and Section 154 of Customs Act held that the discretionary powers have been granted to the proper officer to make corrections of any clerical or arithmetical mistakes or errors arising in any decision or order due to any accidental slip or omission at any time.

Secondly, coming to the interpretation of ITC Ltd. (Supra), and the recourse of filing of an appeal in case of assessment of goods post importation, the High Court in Dimension Data (Supra) made the following observations:

(i) Context of ITC Ltd. (Supra) : The High Court noted that the decision was in the context of eligibility to claim a refund. In such context, the Supreme Court provided that an application for refund can only be made upon the order of assessment being modified under Section 128 of Customs Act, or under any other provision as given under Customs Act.

(ii) Emphasis on "other relevant provisions": The interpretation of phrase, "other relevant provisions", includes approaching proper officer for reassessment of order in terms of Section 149 of Customs Act.

Therefore, the High Court held that the decision of ITC Ltd. (Supra) itself clarified that if any person is aggrieved by an order of self-assessment, he must get the order modified under Section 128 or under Section 149 of Customs Act before claiming of refund. ¹³

Legal tussle curated by decision of Holy Land (Supra)

As discussed in the former part of this article, the decision of Holy Land (Supra) provides that the window of assessment is closed after the goods have cleared for home consumption, and the proper officer becomes functus officio for the purpose of 'assessment'. Hence, the CESTAT held that the only recourse available with the assessee is to file an appeal before the Commissioner (Appeals) under Section 128 of Customs Act. However, the decision of Holy Land (Supra) apparently fails to take the following factors into consideration:

- Reliance on ITC Ltd. taken out of context: It is trite law that a decision must be understood as a whole. In the decision of ITC Ltd. (Supra), the Supreme Court nowhere said that an amendment or modification of an assessment order can only be done in an appeal under Section 128 of Customs Act. ¹⁴ Hence, the interpretation reached by Holy Land (Supra) to this extent is incorrect.

- Statutory provisions: Section 149 of the Customs Act is an additional remedy along with option of filing an appeal under Section 128 of Customs Act. The assessee cannot be insisted on filing an appeal when there is an alternative statutory remedy available at its dispersal.

It is also equally important to note that the above-mentioned conclusions have also been highlighted by the Division Bench of CESTAT Delhi in Lava International Ltd. (Supra) . Hence, there is an inherent contradiction amongst the decisions passed by CESTAT Delhi.

CONCLUSION

In view of the above, the authors are of the considered view that the CESTAT in Holy Land (Supra) failed to take into consideration the provisions of Section 149 and Section 154 of Customs Act. Hence, to this extent, the decision erred in concluding that an appeal under Section 128 of Customs Act is the sole remedy with the assessee. However, on harmonious construction of the decisions of ITC Ltd. (Supra), Dimension Data (Supra) and Holy Land (Supra), the authors are of the considered view that once goods have been cleared for home consumption, the following are the two-recourse available with the assessee, namely:

- Appeal before Commissioner (Appeals) within sixty days (extendable by thirty days) from the date of receipt of out of charge order [Section 128 of Customs Act]

- Amendment under Section 149 of Customs Act

However, the above two remedies come with their own set of pros and cons. Hence, the assessee must examine the relevant factors before approaching the relevant authorities.

[The views expressed are strictly personal.]

¹ Chartered Accountant

² Advocate

³ Final Order No. 50094/2023 dated 31.01.2023 in Customs Appeal No. 51055/2020 [ 2023-TIOL-120-CESTAT-DEL ]

⁴ Customs Act, Section 2(2) [inserted vide Finance Act, 2018]

⁵ Section 2(2) and Section 17(1) of Customs Act

⁶ 2019-TIOL-418-SC-CUS-LB

⁷ ITC Ltd. v. Commissioner of Central Excise, Kolkata-IV, 2019-TIOL-418-SC-CUS-LB, Para 33 .

⁸ Customs Act, Section 2(25) defines "imported goods" as "any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption".

⁹ See also, CC, CEx & ST, Hyderabad, v. Standard Consultants Ltd ., 2022 (381) E.L.T. 582 (S.C.)

¹⁰ Customs Act, Section 149, Proviso.

¹¹ Gabriel India Ltd. v. CC, - 2013-TIOL-979-CESTAT-MUM

¹² 2021-TIOL-224-HC-MUM-CUS

¹³ See also, Sony India Pvt. Ltd. v. UOI & Anr., 2021-TIOL-1707-HC-Telangana-Cus; Principal Commr. of Customs, ACC (Import), NCH Delhi v. Lava International Ltd, Final Order No. 50112-50117/2023 dated 10.02.2023 (CESTAT Del - 2023-TIOL-156-CESTAT-DEL); Autotech Industries (India) Pvt. Ltd. v. CC, Chennai IV, - 2021-TIOL-717-CESTAT-MAD; Kirloskar Ferrous Industries Ltd. v. CC, Mangalore, - 2021-TIOL-247-CESTAT-BANG.

¹⁴Sony India (Supra), Para 34.