28 May 2015 2:34 AM GMT
A Supreme Court bench comprising of Justice A.K. Sikri and Justice R.F. Nariman, in M/s Tata Chemicals Ltd v Commissioner of Customs (Preventive) Jamnagar (Civil Appeal No. 7628-7629 of 2004) has held that the expression “deems it necessary” under Section 18 of the Customs Act, 1962 (Customs Act) is not subjective/arbitrary, and the exercise of power by the concerned customs officer...
A Supreme Court bench comprising of Justice A.K. Sikri and Justice R.F. Nariman, in M/s Tata Chemicals Ltd v Commissioner of Customs (Preventive) Jamnagar (Civil Appeal No. 7628-7629 of 2004) has held that the expression “deems it necessary” under Section 18 of the Customs Act, 1962 (Customs Act) is not subjective/arbitrary, and the exercise of power by the concerned customs officer should be based on reasonable grounds.
Section 18 of the Act empowers an officer under the Act to subject any imported goods or export goods to any chemical or other test for the purposes of assessment of duty where he deems it necessary. Pending the production of such documents or information or completion of test or enquiry, the duty leviable on these goods may be assessed provisionally if the importer or the exporter, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any.
While holding that expressions such as “deems it necessary”, “reason to believe” etc. does not mean subjective satisfaction of the concerned customs officer, the Court observed that such power should be exercised in accordance with the restraints imposed by law. Therefore, the decision to subject imported goods to chemical tests should not be a subjective one.
The appellants, M/s. Tata Chemicals Ltd. were engaged in the manufacture of soda ash and Coke. It had imported a consignment of Low Ash Metallurgical Coal and claimed a concessional rate of customs duty. Metallurgical/coking coal that has ash content below 12% was eligible to a concessional rate of customs duty of 5%. TCL had specifically instructed that the coal should have less than 10.3% ash content and also stipulated for sampling and analysis by an independent inspection agency of international repute.
At the time of shipment, the inspection agency did detailed sampling as provided under the relevant British Standards which are equivalent to the standards under Bureau of Indian Standards (BIS). The analysis by the inspection agency reported moisture content of 7.2% and the ash content of 9.8%. At the port of import, the customs officer, without objecting to the correctness of the load port inspection report, drew its own samples by invoking its powers under section 18 of the Customs Act and got the samples tested by the Central Revenue Control Laboratory (CRCL). Further, at the time of sampling, the BIS sampling method was not followed. The examination showed different results on the basis of which the concessional rate of customs duty was denied.
The samples drawn by the customs officer in this case was incorrect in law as it had not followed the prescribed BIS sampling method and therefore the test reports could not be relied upon. The Court held that if the testing method of any item is not provided in the Central Excise tariff, then the testing methods prescribed under BIS should be applied.
Allowing the appeals, the Court observed, “In our opinion, the expression “deems it necessary” obviously means that the proper officer must have good reason to subject imported goods to chemical or other tests. And, on the facts of the present case, it is clear that where the importer has furnished all the necessary documents to support the fact that the ash content in the coking coal imported is less than 12%, the proper officer must, when questioned, state that, at the very least, the documents produced do not inspire confidence for some good prima facie reason. In the present case, as has been noted above, the Revenue has never stated that CASCO’s certificate of quality ought to be rejected or is defective in any manner. This being the case, it is clear that the entire chemical analysis of the imported goods done by the Department was ultra vires Section 18(b) of the Customs Act.”
Read the Judgment here.