Notice Under Customs Act Can Be Issued Only After The Assessment Is Modified On Appeal: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that once an assessment is made, it stands unless it is reviewed under Section 28 of the Customs Act or modified in an appeal.

The two-member bench headed by Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that any assessment can be modified in two ways: first, through an appeal, and second, through a process of review under Section 28.

The appellant importers imported the goods described as "0.1 percent natural brassinolide fertilizer" and classified them as fertilizer under various headings of Chapter 31 of the Customs Tariff.

The issue raised was whether SCNs under Section 28 can be issued after the assessment is finalized (either through self-assessment or through assessment by an officer) without first appealing against the assessment.

The appellant contended that the SCN issued under Section 28 is not sustainable at all because the assessments were finalized, and as per the judgment of the larger bench of the Supreme Court in the case, ITC Ltd. v. Commissioner of Central Excise, all assessments, including self-assessments, can be appealed against before the Commissioner (Appeals) by either side. Having not appealed against the assessments, Revenue could not have issued a notice under Section 28.

The appellant submitted that in the order, the Commissioner did not agree with this submission, holding that the ITC Ltd. case pertained to refunds and not to demands under Section 28. This view was not correct, and the judgment equally applies to demands under Section 28 and has not assailed the assessments before the Commissioner (appeals), no SCN under Section 28 could have been issued.

The department contended that the ITC Ltd. case pertained only to refunds, which cannot be sanctioned unless the refund arises out of the assessment itself. The officer sanctioning the refund cannot sit in judgment over or modify the assessment or sanction the refund so as to effectively modify the assessment.

The CESTAT held that the power to issue SCN under Section 28 is the power of the assessment, which is specially conferred by law, and that through the SCN and the consequent adjudication, the assessment can be modified. The assessment can also be modified through an appeals process.

The tribunal stated that an appeal against an assessment (including self-assessment) of any Bill of Entry is available to both sides.

"A notice under Section 28 can be issued only after the assessment is modified on appeal, which renders Section 28 itself otiose because there cannot be any SCN and adjudication by an officer to modify the assessment after an appeal is passed by the Commissioner (Appeals)," the CESTAT ruled.

Case Title: M/s Midas Fertchem Impex Pvt Ltd. Versus Principal Commissioner of Customs

Citation: Customs Appeal No. 52239 Of 2021

Date: 13.01.2023

Counsel For Appellant: Advocate Amit Jain

Counsel For Respondent: Authorised Representative Nagendra Yadav

Click Here To Read The Order