1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.8315 OF 2009 SKODA Auto India Pvt.Ltd. Plot No.A-1/1, Shendra, Five Stat Industrial Area, MIDC Aurangabad – 431 201. ... Petitioners versus 1. Union of India 2. The Commissioner of Customs (Imports), Jawaharlal Nehru Customs House,Nhava Sheva, Dist.Raigad 3. The Commissioner of Customs Air Cargo Complex, Sahar Air Port, Mumbai 4. The Commissioner of Customs (Imports), New Customs House, Ballard Estate, Mumbai 5. The Assistant Commissioner, GATT Valuation Cell New Customs House Annexe, Ballard Estate ... Respondents ... 2 Mr. J.J. Bhat, Sr. Counsel, Mr.Prakash Shah and Mr.Jas Sanghvi for petitioners. Mr. P.S.Jetly with Mr.R.B. Pardeshi for the respondent s CORAM : FERDINO.I. REBELLO & D.G. KARNIK, JJ. DATED : 16th October 2009 ORAL JUDGMENT: - (Per Ferdino I. Rebello, J) 1. Rule. By consent, heard forthwith. 2. The question that arises for consideration in this petition is paragraph no.9 of the circular no.11/01-CUS dated 23rd February 2001 issued by Central Board of Excise and Customs, New Delhi. The relevant paragraph reads as under:- “9. The amount be continued. Board has however decided that if the importer does not furnish complete reply to the questionnaire within 30 days, of receipt of the ‘Questionnaire’ by the importer, increased to 5% till the date of 3 receipt of reply by the Department. It should therefore be impressed upon the concerned importers (in the public notice that is issued) to ensure timely replies being sent to the Questionnaire to avoid any higher deposit being insisted. Furthermore, where provisional assessment is being resorted to the investigation and finalisation of the assessment must be completed within four months from the date of reply. If no decision is taken within 4 months, the extra duty deposit should be discontinued and the concerned Deputy Commissioner/ Assistant Commissioner will be held responsible for inexplicable delay in finalisation.” 3. A few facts may now be set out. The petitioners are engaged in the manufacture and sale of Passenger Cars. The petitioner import car kits, parts and components of car and motor vehicles (hereinafter referred to as “Auto goods”) from Skoda Auto., a company incorporated under the laws of Czech Republic. (hereinafter referred to as “Skoda Auto”). The petitioner imported and/or are importing the said Auto goods to JNPT, Customs House, Nhava Sheva and Sahar Airport at Mumbai. 4 4. The petitioner entered into a Technology Transfer and Trademark License Agreement dated 1st October 2001 (hereinafter referred to as “TTA”), with Skoda Auto for providing technical documents, technical assistance in order to manufacture, assemble, distribute and sell passenger cars including the right to use trade mark “SKODA” in India. As per the said TTA, the petitioners were liable to pay Skoda Auto a lump sum consideration of 45 Million US$ by way of royalty in six different instalments. There is no dispute that the petitioners are a subsidiary of Skoda Auto. The said amount of consideration was paid in six different instalments. The last instalment was paid on 31st December 2006. The petitioners do not dispute that Skoda Auto is a related person within the meaning of Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rule 1988. They therefore filed necessary application with GATT Valuation Cell of Bombay Customs House on 18th April 2002. By an order dated 10th June 2003, the Dy. Commissioner of Customs GATT Cell was pleased to hold as under:- (a) Invoice price as declared by the supplier is the actual transaction value of the goods being imported by the petitioner Skoda Auto. (b) The relation between the petitioner Skoda Auto did not influence the price of importing goods 5 and hence, the invoice price as declared by the supplier is the actual transaction value. (c) transaction appears to be at arms length only. The said order dated 10th July 2003 was subject to periodical review after a period of three years from the date of the issue 5. Considering the order dated 10th June 2003 as period of three years had expired. The petitioner by an application dated 5th July 2006 and 26th July 2006 prayed for renewal of the order dated 10th June 2003. 6. Pending the application for renewal of order dated 10th June 2003, the DGCIE Pune carried on investigations on the basis of their understanding that petitioners are liable to pay customs duty on the lump sum consideration paid/payable by them to Skoda Auto under the TTA. For various reasons, including co-operating with the respondents the petitioners deposited with the respondents Rs.27.50 crores under protest in the year 2006. 7. By the letter of 17th September 2007, the petitioners requested respondent no.2 to waive the demand of revenue deposit of 1 % for all the subsequent and future imports from Skoda Auto and SVB renewal order be issued immediately. By a 6 letter of 28th November 2007, the petitioner requested the Special Valuation Officer to renew the order dated 10th June 2003. 8. A show cause notice dated 31st January 2008 has been served on the petitioner and the petitioner were called upon to show cause as to why the differential customs duty amounting to Rs.97,15,54,000/- should not be paid by the petitioner in terms of proviso to sub-section (1) of section 28 of the Customs Act along with applicable interest u/s.28AB and u/s.114A of the Customs Act. 9. By a letter of 1st February 2008, the Dy. Commissioner of Customs, GATT Valuation Cell informed the Addl. Commissioner of Nhava Shiva that he had been directed to state that the SVB order No.123/03 dated 10th June 2003 has not been renewed and the Commissioner of Customs Bombay has allowed the assessment provisionally without renewal of deposit till the order is renewed or the case is finalised. By communication of 5th February 2008, the Addl. Commissioner, Special Valuation Cell, JNCH informed the petitioner that the Commissioner of Customs (Import) has allowed the assessment provisionally without renewal deposit till the order of 10th June 2003 is renewed or the case is finalised. 10. Thereafter correspondence was exchanged between the parties. A reply was filed to the show cause notice. On 13th August 2009, Dy. Commissioner of Customs (Imports) GATT 7 Valuation Cell informed the Chartered Accountant of the petitioner that since the petitioners have preferred an appeal before CESTAT against order in original dated 4th March 2009 and the matter is subjudice and their request for periodical review of the order in original dated 10th June 2003 cannot be considered at this stage. 11. Notwithstanding the pendency of the renewal of the SVP order dated 10th June 2003 and the assessment being continued provisionally by communication of 23rd September 2009, the Assistant Commissioner of Customs GATT Valuation Cell, Mumbai had informed the petitioner that the waiver of 1% Revenue Deposit granted to the petitioner vide order dated 1st February 2008 has been withdrawn with immediate effect. It is on account of this that the present petition. 12. At the hearing of this petition on behalf of the petitioner it is submitted that there is no justification or change in the circumstances of the case warranting the abrupt withdrawal or the waiver of 1% revenue deposit and insisting on payment of 1% deposit. Considering the circular dated 23rd February 2001, the withdrawal therefore it is submitted is arbitrary. Apart from that, no opportunity was given to the petitioner before the impugned communication of 23rd September 2009. For all the aforesaid reasons, it is submitted that communication dated 23rd September 2009 is a nullity at law. 8 13. Reply has been filed on behalf of the respondent by Mr.Rajiv Garg, Assistant Commissioner of Customs GATT Valuation Cell. The principal contention is that during the investigation it was found that the petitioners were involved in valuing its imports and that the material earlier produced did not disclose all relevant facts. Considering section 18 of the Customs Act 1962 where any Officer on account of any of the grounds specified in sub-section (1) of section 18 is not able to make final assessment of the duty on the imported goods, he shall make an estimate of the duty that is most likely to be levied which is the provisional duty. The respondent therefore submits that they have acted within jurisdiction in demanding 1% of Revenue Deposit as security. It is further set out that the case is sui-generis, as the impugned order was obtained by suppressing facts and the discovery of new facts and documents is now under judicial and scrutiny before CESTAT. The hands of Assistant Commissioner SVP are hence tied and the department is not in a position to decide the case in four months as per the Boards director and that direction would not be applicable to the present case. 14. The question therefore, on the admitted facts is that as the respondents have been unable to complete finalisation of assessment within four months are the petitioners entitled for discontinuance of extra duty deposit. The Central Board of Revenue in exercise of its powers 9 conferred by section 157 of the Customs Act read with section 18 of the said Act have framed regulations known as the Customs (Provisional Duty Assessment) Regulations, 1963, which hereinafter shall refer to “Regulations”. In terms of regulation 2 in the event the proper Officer of Customs on account of any of the grounds specified in section 18 (1) is not able to make final assessment of the duty on the import of goods or export of goods as the case may be, shall make an estimate of the duty that is most likely to be levied which is referred to as provisional duty. If the importer or exporter as the case may be, executes a bond in an amount equal to the difference between the duty that may be finally assessed and the provisional duty and deposits with the proper officer such sum not exceeding twenty per cent of the provisional duty as the proper office may direct, the proper officer may assess the duty on the goods provisionally. This discretion in the proper officer, however, in view of the notification dated 23rd February 2001 is limited to deposit of 1% of what is known as extra duty deposit. This circular is in respect of the case taken up by the Special Valuation Branch of the Customs House By virtue of paragraph no.9 there is a further requirement in the case of provisional assessment. If the same is not finalised on account of investigation within four months, then extra duty deposit should be discontinued. Admittedly, in the instant case, the provisional assessment has not been finalised. The contention of the respondent is that 10 investigations are still going on. The further contention is that investigations could not be completed for reasons beyond their control and therefore, it was open to the proper officer but demand the extra duty deposit as demanded. 15. We may take note of the fact that the respondent themselves on account off not been able to finalise the assessment by communication of 1st February 2008 and 5th February 2008 allowed the assessment provisionally without revenue deposit till the order dated 10th June 2003 is reviewed or the case is finalised. In other words, the respondents themselves being aware that they could not complete the final assessment within the four months contemplated by paragraph no.4, allowed provisional assessment without deposit of the additional revenue deposit. The only contention urged on behalf of the petitioner is that considering Regulation 2 which we have earlier referred to, it is for the proper officer of customs to demand security which such proper officer has demanded. In our opinion, it will not be possible to accept the aforesaid contention of the respondents. Firstly, the discretion earlier confirmed by regulation 2 is now subject to the Board regulation. The board regulation restricts the amount of revenue deposit at 1 per cent. This was within the jurisdiction of the Board. As per the law declared by the Supreme Court, the Board circulars are binding on the officer including the proper officer of customs. The discretion of such officer is now limited by the said board circular. It is not open to claim more than one per 11 cent. This demand of one per cent is further subject to paragraph no.9 of the circular which sets out that if the final assessment is not completed within four months then the respondents are to discontinue the extra duty deposit. The Board circular therefore in so far as the proper officer is concerned, is clear. It sets out when the proper officer will demand the duty and when such proper officer is to withdraw the demand for extra duty deposit. The reasons for failure by the proper officer in finalising the assessment is immaterial, as that is no ground to discontinue the extra duty deposit. Once there is a circular issued by the Board in exercise of the powers, that circular has to be followed. It is not within the jurisdiction of the proper officer to deviate from the said circular. The decision therefore communicated to the petitioners by communication dated 23rd September 2009 is clearly without jurisdiction. 16. In the light of that, petition has to be allowed. Petition therefore is made absolute in terms of prayer clauses (a) and (b). There shall be no order as to costs. (D.G. KARNIK,J.) (F.I. REBELLO,J.)