Written Acceptance Of Enhanced Customs Value Does Not Bar Statutory Appeal: CESTAT Allahabad

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad, has reiterated that an importer's written acceptance of an enhanced assessable value does not, by itself, prevent the importer from challenging the reassessment in appeal.

Relying on the Delhi High court's ruling in Niraj Silk Mills v. Commissioner of Customs (ICD), Patparganj, the tribunal held that accepting a reassessment and giving up a speaking order are not the same as giving up the statutory right to challenge the reassessment.

It also referred to its decisions in Artex Textile, Jai Mata Di Trading and MKY Enterprises on acceptance letters that did not disclose the underlying contemporaneous-import data.

“In each of these decisions, the Tribunal found that letters of acceptance which merely recite that contemporaneous import data was 'gone through and understood', without disclosing the actual comparable data (quantity, quality, contemporaneity), cannot be read as an unconditional and voluntary surrender of the right to contest valuation. The same reasoning applies squarely to the facts of the present case,” the tribunal observed.

A Bench comprising Judicial Member P.K. Choudhary and Technical Member K. Anpazhakan allowed Maruti Fabric Impex's appeals against orders rejecting its challenge to the enhanced valuation of imported polyester knitted fabrics.

Maruti Fabric Impex had imported 26 consignments of polyester knitted fabrics from China between June 7 and August 7, 2019. It declared a transaction value of USD 1.35 per kg based on the foreign supplier's commercial invoices. The goods were examined and found to conform to the declarations, with no allegation regarding their description, quantity, or nature.

Customs nevertheless enhanced the assessable value. The importer contended that it had repeatedly sought provisional or final clearance on payment of duty on the enhanced value under protest to avoid delays and losses from demurrage and detention.

It further contended that it was coerced into submitting letters consenting to the enhanced valuation. It later sought speaking orders, but none were passed, and it filed appeals against the assessments.

The Commissioner (Appeals) rejected the appeals because the importer had accepted the enhanced value in writing. The appellate authority held that, since the importer had also agreed that it did not want a show-cause notice or speaking order, no speaking order was required under Section 17(5) of the Customs Act.

The department defended the orders, relying on the acceptance letters. Those letters recorded that the importer had been informed of the grounds for rejecting the declared value and details of contemporaneous imports of similar or identical goods. They also recorded the importer's agreement with the enhanced value and its decision not to seek a show-cause notice or speaking order.

The tribunal found that the Commissioner (Appeals) had failed to consider the earlier letters seeking clearance on payment of duty on the enhanced value under protest.

Those letters, it observed, “clearly proved that it was not the case of acceptance of enhancement of value simplicitor.”

The tribunal also found that, although the acceptance letters referred to contemporaneous imports, they did not disclose the actual details of those imports. It noted that relevant parameters included quantity, quality and the time of placement of the import order.

The tribunal relied on the Supreme court's ruling in Century Metal Recycling, which held that the requirement under Rule 12(2) of the Customs Valuation Rules, 2007, to communicate the grounds for doubting the truth or accuracy of the declared value cannot be ignored or waived.

In simple terms, Rule 12(2) requires Customs to communicate why it doubts the value declared by an importer. If that value is rejected, the value of the goods must then be determined under the prescribed valuation rules.

Section 17(5) of the Customs Act ordinarily requires a speaking order explaining a reassessment. Where an importer confirms acceptance of the reassessment in writing, the proper officer is relieved of that requirement. But the tribunal held that this does not also remove the separate right of appeal under Section 128.

The tribunal put the distinction in its own words: “This conflates two distinct things- the limited procedural waiver of a speaking order and the independent, substantive right of appeal conferred by Section 128 of the Act.”

The department had also relied on the Allahabad High court's ruling in S.S. Overseas. The tribunal distinguished it, holding that the case concerned whether a writ could be sought for issuance of a speaking order after acceptance.

The tribunal further observed that “there can be no estoppel against a statute” and that an assessee's consent or acquiescence cannot defeat rights conferred by law.

Finding the case squarely covered by Niraj Silk Mills, the tribunal set aside the impugned Orders-in-Appeal and allowed Maruti Fabric Impex's appeals, with consequential relief, if any, in accordance with law.

For Appellant: Advocate Prerna Jain Kala,

For Respondent: N. Mohan Krishna, Authorised Representative and Shri Santosh Kumar, Authorised Representative.