SCA/25328/2007 1/9 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 25328 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE M.S.SHAH AND HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= DELUXE SALES CORPORATION AND ANOTHER Versus UNION OF INDIA THRO' SECRETARY AND OTHERS ========================================= Appearance : MR PARESH M DAVE for the Petitioners MR RJ OZA for the Respondents ========================================= CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 02/04/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE M.S.SHAH) SCA/25328/2007 2/9 JUDGMENT RULE. Mr.R.J.Oza, learned Standing Counsel, waives service of Rule. In the facts and circumstances of the case, the petition is taken up for final disposal. 2. The petitioner, Messrs Deluxe Sales Corporation filed 3 Bills of Entry Nos.F-00939 to F-00941 all dated 31.05.2000 through their Clearing and Customs House Agent at Gandhidham for importation and clearance of goods declared as 595 MP of PVC Resin valued at UD$ 550 PMT. According to the department, the goods were subjected to 1st check examination and representative samples were drawn and sent for a test. As per the examination report and test report dated 16.06.2000, the goods were found as Synthetic Polymer Poly Vinyl Chloride in the form of white Coarse Powder. According to the department, during the relevant time, similar goods were traded in the international market in the range of US$ 760 to 780 PMT C&F as indicated in the internationally reputed financial journals. The Assessing Officer accordingly held in the provisional assessment order dated 20.12.2000 that the CIF value of the goods worked out to be US$ 798.55 PMT for the purpose of assessment. 3. The petitioner and many other parties filed group of writ petitions before this Court challenging the Standing Orders issued by the Chief Commissioner, Mumbai containing instructions on the question of valuation of goods on the basis of price given in SCA/25328/2007 3/9 JUDGMENT journals. During pendency of those petitions, this Court directed the department to assess the goods only provisionally. Ultimately, the petitions were finally decided by judgment dated 04.04.2001 reported in 2001 (44) RLT 579 (Guj.). The Court expressed the following view: “18. The real difficulty which has arisen in the case of three impugned Standing Orders is that their language is not in the nature of a guideline or instruction but a command or a mandate. The language of the three Standing Orders is likely to create an impression in the mind of the Customs Authorities that irrespective of the peculiarities of a case and the transaction value involved, they have no option, but to assess value by applying the international price declared in the Foreign Finance Journals. The next question is whether it would be necessary to strike down all of them. In our considered opinion, the three Standing Orders are not bad in their entirety. They contain valuable guidelines for determining the price of imported articles for subjecting them to Custom Duty. In cases, where the `transaction value' is not determinative, the international price as disclosed in Foreign Finance Journals becomes relevant. The provisions of the Act and the Rules are exhaustive enough to regulate the exercise of power and discretion by the Customs Authorities. Merely, because there are elaborate provisions in the Act and the Rules,standards and guidelines which structure the exercise of power and discretion in a way which nevertheless allows the circumstances of particular cases to be taken in to account, cannot be held to be impermissible under Section 151A of the Act. The Standing Orders impugned before us are liable to be sustained by reading them down as not rigid SCA/25328/2007 4/9 JUDGMENT directions or mandates, but only as instructions containing flexible guidelines. Flexible standards are required to be laid down for the purpose of achieving uniformity in levying Customs Duty on articles and items of similar nature imported in similar conditions. Such standards or guidelines gradually develop in the course of exercise of powers. They are sometimes necessary to structure the exercise of statutory and discretionary power. They are very useful and beneficial provided they are not followed rigidly so as to exclude the essence of power and discretion and do not take away the readiness and willingness of the concerned Officer to deal with each case on its merits. A just and efficient method of tax recovery requires a concerted pursuit in non-discriminatory manner. That requires a mix of freedom for and control of "functionaries" by those in charge. 19. A caution has, however, to be recorded that in exercise of powers under Section 151A the Board or its delegate should not be allowed to pursue consistency at the expense of the merits of individual cases. 20. As a result of the discussion aforesaid, the challenge to the constitutional validity of Section 151A of the Customs Act made by the petitioners fails. The Petitions are partly allowed so far as the challenge against the three impugned Standing Orders is concerned. The three impugned Standing Orders are not liable to be struck down, but they are to be read down by the concerned Customs Authorities purely as instructions or guidelines and not mandates or commands for being obeyed in each individual case of assessment before them. The Standing Orders are to be taken only as assistance in exercise of their quasi- judicial power of determining value for the purpose of levy SCA/25328/2007 5/9 JUDGMENT of Customs Duty. 21. During the pendency of these Petitions, by interim orders, we had directed the petitioners to be provisionally assessed on the imported goods. The interim orders are now vacated and the Customs Authorities may now regularly assess the petitioners on the goods imported by them for Customs Duty. Rule in each case is made absolute to the aforesaid extent.” (emphasis supplied) 4. According to the petitioners, when the department was seeking to invoke their bank guarantees given as securities, the learned advocate for the petitioners addressed notice dated 29.12.2001 calling upon the department to refrain from invoking Bank Guarantees as there was no final assessment made by the department. Thereafter, the petitioners received notice dated 29.01.2002 referring to the provisional assessment and calling upon the petitioners to remain present for personal hearing on 07.02.2002. That notice sent by the Deputy Commissioner (Gr-II), Customs House, Kandla is to be found at Annexure-E to the petition. The petitioners, however, submitted reply dated 31.01.2002 stating that due to unavoidable circumstances, it would not be possible to remain present on 07.02.2002 and therefore, the date of hearing may be fixed in the first week of March 2002. It is the case of the petitioners that thereafter, the petitioners did not receive any further notice for final assessment, but ultimately, received detention notice dated 01.08.2007 issued by the Assistant SCA/25328/2007 6/9 JUDGMENT Commissioner (Gr.II), Custom House, Kandla stating that the demand of customs duty amounting to Rs.42,84,575 was confirmed by the Deputy Commissioner of Customs vide Order in Original dated 20.12.2000 and that since the petitioners had failed to pay the said amount, officers of the the Customs and officers of the Central Excise all over India were requested to recover the aforesaid amount from any goods belonging to the petitioners. The present petition is filed for challenging the said detention notice on the ground that when no final assessment was made after the aforesaid judgment of this Court, it was not open to the respondents to issue any such detention notice. 5. On the other hand, the case of the revenue is that after the aforesaid judgment, the final assessment was made on 18.07.2001 by making necessary endorsement on the Bills of Entry. As regards contention that such final assessment was made without giving the petitioners any opportunity of hearing or without serving any copy of the final assessment order, the stand of the department is that since the final assessment value of the goods in question did not exceed the provisional assessed value, it was not necessary to give the petitioner an opportunity of personal hearing. 6. Although affidavit in reply is filed and letters dated 15.01.2002 and 24.04.2002 are produced, the respondents have not shown as to when the final assessment on the Bills of Entry was communicated to the petitioner. There is controversy about the SCA/25328/2007 7/9 JUDGMENT service of orders on the petitioners and we would have ordinarily left it to the petitioners to avail of the alternative remedy of filing an appeal before the Commissioner (Appeals). However, apart from the fact that the period of limitation has expired long back and the Commissioner (Appeals) has no power to condone the delay beyond the stipulated period (which was in those days 3 + 3 months), even in the detention notice dated 01.08.2007 the case of the department is that the final assessment was made by order dated 20.12.2000. There is no reference to the final assessment stated to have been made on the Bills of Entry on 18.07.2001. There is also serious controversy between the parties about the petitioners' right to get an opportunity of hearing before the final assessment is to be made. It is, however, not necessary to go into that controversy because in the peculiar facts and circumstances of the present case, one fact stands out and that is the finding given by this Court in the judgment dated 04.04.2001. As per the said judgment, even while rejecting the petitioner's challenge to the constitutional validity of the impugned standing orders, this Court did read them down and held that they are also to be read down by the concerned Customs Authorities purely as instructions or guidelines and not mandates or commands for being obeyed in each individual case of assessment before them. The Standing Orders are to be taken only as assistance in exercise of their quasi-judicial power of determining value for the purpose of levy of Customs Duty. Since the Assessing Officer relied upon the SCA/25328/2007 8/9 JUDGMENT reputed international financial journal for the purpose of levy of customs duty, the judgment of this Court in case of Ramchandra Art Silk Yarn Vs. Union of India (supra), in which group of petitions the petitioners' case was also covered, the petitioners were required to be given an opportunity to show that the guidelines contained in the Standing Orders were not required to be applied to the petitioners' case. For this particular reason, the petitioner was required to be given an opportunity of hearing in the facts and circumstances of the case. 7. In view of the above discussion, we set aside the final assessment made by the Assessing Officer on 18.07.2001 on the three Bills of Entry with liberty to the Assessment Officer to given an opportunity to the petitioners to show cause why the provisional assessment made on 20.12.2000 should not be finalized. We further direct that the Bank Guarantees furnished by the petitioners at the time of provisional release shall be validated by the petitioners. In case their validity period has expired in the meantime, the validity period of the Bank Guarantees shall be extended till the Assessing Officer finalizes the assessment and for a period of 3 months thereafter. The Assessing Officer shall give an opportunity of hearing to the petitioners and finalize the assessment within a period of 3 months from the date of receipt of this judgment. As a consequential relief, the Detention Notice dated SCA/25328/2007 9/9 JUDGMENT 01.08.2007 at Annexure-I to the petition is quashed and set aside, subject to the condition that the Bank Guarantees given earlier at the time of provisional release are re-validated as directed above. 8. Rule is made absolute. (M.S.SHAH, J.) (RAVI R.TRIPATHI, J.) *Shitole