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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA CUSTOMS APPEAL NO. 6 OF 2022 BETWEEN:
THE PRINICIPAL COMMISSIONER OF CUSTOMS AP AND ACC COMMISSIONERATE, MENZIES AVIATION BENGALURU 560300 …APPELLANT (BY SRI. JEEVAN J NEERALGI.,ADVOCATE)
AND:
M/S CISCO SYSTEMS PVT LTD., DIVYASHREE CHAMBERS, B WING, NO. 11, O SHAUGNESSEY ROAD, OFF LANGFORD ROAD, BENGALURU-560027 …RESPONDENT (BY SRI. RAVI RAGHAVAN.,A/G WITH M/S. ASHWINI NAG, ADVOCATE)
THIS CSTA / CUSTOMS APPEAL IS FILED UNDER SEC.130 OF THE CUSTOMS ACT, ARISING OUT OF ORDER DATED 10/01/2022 PASSED IN FINAL ORDER NOS.20005-20010/2022 PASSED BY THE HONBLE CESTAT, BENGALURU PRAYING TO ALLOW THE APPEAL OF THE APPELLANT AND DECIDE THE QUESTIONS OF LAW AS FRAMED ABOVE AND SET ASIDE THE ORDER DATED 07/01/2022 PASSED BY THE HONBLE CESTAT, BENGALURU IN FINAL ORDER NOS. 20005- 20010/2022 AND ETC.
THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA
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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA
ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)
Revenue is in appeal under Section 130 of the Customs Act, 19621 questioning the legality and correctness of order dated 07.01.2022 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru2 holding that no interest can be charged on finalization of provisional assessments initiated before 2006.
Heard Sri Jeevan J. Neeralagi, learned counsel for the appellants and Sri Ravi Raghavan, learned counsel for respondent. 3. Learned counsel for the revenue submits that the respondent is in the business of import and export of networking equipment parts, etc. Respondent-Assessee imported networking equipment and its parts during the period from 2001 to March 2005 for which period provisional assessment order was passed. In terms of the provisional
1 Hereinafter referred to as the ‘Act’ 2 Hereinafter referred to as the ‘CESTAT’
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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
assessment, the respondent-assessee paid the duty. Thereafter final assessments were made during the period from 22.03.2013 to 30.08.2016. In the final assessment, value of the goods were enhanced and respondent/assessee was required to pay differential higher duty. In terms of the final assessment, the respondent-assessee is said to have paid the differential duty. In the meanwhile, an amendment was brought to Section 18 of the Act and sub Section (3) was introduced on 13.07.2006. In terms of amended provision Section 18(3) of the Act, the importer or exporter shall be liable to pay interest, on any differential amount payable between provisional assessment and final assessment. As the interest on differential duty was demanded under Section 18(3) of the Act, the respondent-Assessee preferred an appeal before the Commissioner of Customs (Appeals), Bengaluru3. The Commissioner upheld the demand of interest on differential duty, against which, the respondent preferred an appeal before the CESTAT. Under the impugned order, the CESTAT held that no interest can be charged on finalization of provisional
3 Hereinafter referred to as the ‘Commissioner’
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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
assessments initiated prior to 2006. Aggrieved, by the same, the revenue is before this Court. 4. Sri Jeevan J. Neeralgi, learned counsel submitted that though the import as well as provisional assessment was earlier to the amendment i.e., 13.07.2006, final assessment has taken place subsequently and differential duty is paid by the respondent-assessee subsequent to amendment. Therefore, he submits that the assessee would be liable to pay interest on differential duty. Further, learned counsel would invite attention of this Court to Section 28AA of the Act and submits that the assessee would be liable to pay interest for the delayed payment of duty. Thus, learned counsel would pray to allow the appeal and to answer the substantial questions raised in favour of the appellant revenue. 5. Per contra, learned counsel Sri Ravi Raghavan appearing for the respondent-assessee would support the order passed by the CESTAT. Further, he submits that the amendment brought on 13.07.2006 inserting sub Section (3) to Section 18 of the Act is prospective in nature. Further, learned counsel would submit that Section 28AA of the Act would have no
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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
application to the demand made under Section 18 of the Act since, Section 18(3) of the Act is an independent provision which takes care of interest on the differential duty. Further, learned counsel would submit that the question as to whether the differential duty prior to amendment i.e., 13.07.2006 would attract interest or not is decided by the Division Bench of Gujarath High Court as well as Madras High Court which has been noticed by the Tribunal in the impugned order. Thus, learned counsel would pray for dismissal of the appeal. 6. Having heard the learned counsels and on perusal of the entire appeal papers, we are of the considered opinion that the present appeal is not a fit case for admission and since no substantial question of law would arise for consideration. 7. The contentions and the question of law raised by the appellant – revenue is answered in favour of the assessee by the Gujarath High Court in the case of Commissioner of Customs Vs. Goyal Traders4. The relevant paragraphs 16 and 17 read as follows:
4 2014 (302) E.L.T.529
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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
“16. Particularly, in fiscal legislation imposing liabilities generally governed by the normal rule is that it is not retrospective in nature. It is, however, equally undisputed that a procedural provision when made applicable to pending proceedings would not be viewed as given retrospective operation to the liability. In case of Govinddas and Ors. v. The Income Tax Officer and Anr. - AIR 1977 Supreme Court 552, the Apex Court was considering provision of Section 171 of Income-tax Act, 1961, in which the Legislature under sub-section (6) provided that even when no claim of total or partial partition is made at the time of making assessment under Section 143 or 144 of the Act, if it is found after the completion of assessment that the family has already effected as partition, total or partial, all the members shall be jointly and severally liable for the tax as payable by the joint family and the tax liable shall be apportioned among the members according to the portion of the joint family property allotted to each of them. The Apex Court was of the opinion that sub-section (6) of Section 171 thus, for the first time, imposed in the case of this kind joint and several liability on the members for the tax assessed on Hindu Undivided family and thus was personal liability as distinguished from the liability limited to the joint family property received on partition. The Apex Court thereupon held and observed that: "We cannot, therefore, consistently with the rule of interpretation which denies retrospective operation to a statute which has the effect of creating of imposing a new obligation or liability, construe sub-section (6) of Section 171 as embracing a case where assessment of a Hindu undivided family is made under the provisions of the old Act. Here in the present case, the assessments of the Hindu Undivided Family for the assessment years 1950-51 to 1956-57 were completed in accordance with the provisions of the old Act which included Section 25A and the Income Tax officer was, therefore, not entitled to avail of the provision enacted in sub-section (6) read with sub-section (7) of Section 171 of the new Act for the purpose of recovering the tax or any part thereof personally from any members of the joint family including the petitioners”
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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
In the present case, we find that prior to introduction of sub-section (3) of Section 18 of the Act in the present form, there was no liability to pay interest on difference between finally assessed duty and provisionally assessed duty upon payment of which the assessee may have cleared the goods. It was only with effect from 13-7- 2006 that such charging provision was introduced in the statute. Upon introduction therefor such provision created interest liability for the first time w.e.f. 13-7- 2006. In absence of any indication in the statute itself either specifically or by necessary implication giving retrospective effect to such a statutory provision, we are of the opinion that the same cannot be applied to cases of provisional assessment which took place prior to the said date. Any such application would in our view amount to retrospective operation of the law.” 8. Further, in the case of Reliance Industries Ltd., Vs. Union of India5 at para No.14, it is specifically held that Section 28 of the Customs Act only provides procedural aspects for recovery of duty and is not a substantive provision for levy of duty under the Act. The show cause notice also, accordingly, reveals that the interest on the differential amount is sought to be recovered under Section 18(3) of the Act. That the provisions of Section 28 are resorted to only for the purpose of making such recovery. Therefore, the charge is under sub- section (3) of Section 18 of the Act and not under Section 28 of the Act.
5 2015 (326) E.L.T.664 (Guj.)
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NC: 2024:KHC:36582-DB CSTA No. 6 of 2022
The relevant findings of the Division Bench of the Gujarath High Court in the above Reliance Industries Ltd.,4 at paragraph No.18 reads as follows: “18. As noted hereinabove, the show cause notice has been issued for recovery of interest on differential customs duty as per the provisions of sub-section (3) of Section 18 of the Act, and resort has been made to Section 28 only for the purpose of recovery of such amount. Under the circumstances, unless it is held that the petitioner is liable to pay interest on the differential duty under Section 18(3) of the Act, the question of making any recovery of such interest amount under Section 28 of the Customs Act would not arise. The impugned order, which proceeds on the basis that the recovery is only to be made under Section 28 of the Customs Act without reference to Section 18(3) of the Act, therefore, not being in consonance with the show cause notice issued to the petitioner as well as the relevant statutory provisions, cannot be sustained.”
Thus, we do not find any merit in the appeal and accordingly, appeal stands rejected.
Sd/- (S.G.PANDIT) JUDGE
Sd/- (C.M. POONACHA) JUDGE
BS List No.: 1 Sl No.: 33