Delhi High Court
M/S Ismartu India Pvt. Ltd. vs Union Of India And Others on 7 March, 2025
Author: Yashwant Varma
Bench: Yashwant Varma
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 31.01.2025
Judgment pronounced on: 07.03.2025
+ W.P.(C) 15199/2023 & CM APPL. 60759/2023 (Stay)
M/S ISMARTU INDIA PVT. LTD. ...Petitioner
Through: Mr. Tarun Gulati, Sr. Adv. with
Mr. Tarun Jain, Ms. Kritika
Tuteja, Mr. Devansh Garg &
Ms. Sheena Tyagi, Advs.
versus
UNION OF INDIA AND OTHERS ...Respondents
Through: Mr. Gibran Naushad, SCC with
Mr. Harsh Singhal, Adv.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
1. The present petition impugns the Show Cause Notice1 dated 01
September 2023 issued under Section 28(4) of the Customs Act,
19622 by Respondent No. 2 and seeks a suitable writ quashing the
same relying on various grounds inter alia, as follows:
i. The impugned SCN dated 01 September 2023 is a subsequent
(second) SCN and since a prior SCN, dated 25 July 2023, was
already issued under Section 28(1) of the Act, the subsequent1
SCN
2
The ActW.P.(C) 15199/2023 Page 1 of 25
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
SCN (hereinafter ―the impugned SCN‖) is bad in Law and not
maintainable particularly since the previously issued SCN dated
25 July 2023 was on a similar factual matrix relating to the
importation of similar goods. Such a notice, would in fact,
constitute a ―change of opinion‖.
ii. The impugned SCN does not satisfy the requirements of Section
28(4) of the Act as the same lacks any particulars regarding any
alleged (a) collusion (b) deliberate misrepresentation, or (c) the
withholding of crucial information. The impugned SCN does
not satisfy the mandatory conditions for issuance of the same.
iii. The Petitioner has been making continuous and consistent
imports of the very same goods since the year 2016 and it is for
the first time that by the previous SCN dated 25 July 2023 and
the present impugned SCN that the Respondents have sought to
classify the imported goods under a different tariff heading
(Parts of Mobile Phones as against Complete Mobile Phones).
iv. The classification by the Petitioner under CTH
85171400/85171219 is held as disputed by the Respondent as
the Respondent claims that the said classification is incorrect.
Such incorrect classification or declaration by the Petitioner
cannot form the basis for a SCN under Section 28(4) of the Act
as the same would not fulfill the pre-requisites mandated by
Section 28(4) of the Act.
2. The primary grounds raised during arguments by the
Respondent in their defence, in respect of issuance of SCN under
Section 28(4) of the Act appears to be the following:
i. The Petitioner did not submit the requisite data nor reply and
W.P.(C) 15199/2023 Page 2 of 25
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
the same amounts to intentional suppression.
ii. The impugned SCN has been issued under Notification No. 42
of 2019 Customs (NT) dated 18 June 2019 which provides for a
supplementary notice to be issued once a notice under Sections
28 or 124 of the Act has been issued under circumstances
enumerated therein.
iii. The subject matter of the said SCN is related to different
periods and different bills of entries.
ANALYSIS:
3. For convenience, we have reproduced the contents of, besides
the common background facts, the two SCNs alongside and
underlined the differences between the two, as below:
SHOW CAUSE NOTICE DATED SHOW CAUSE NOTICE DATED
25.07.2023 (Annexure P-2) 01.09.2023 (Annexure P-3)****** ******
“The finding of the Investigation- “The finding of the Investigation-
9.12 The NCTC has suspected that the 9.12 The NCTC has suspected that the
declared weight of the good is declared weight of the good is
considerably low. However, the same considerably low. However, the same
has been verified and found to be 6610 has been verified and found to be 6610
Kgs against the declared weight of Kgs against the declared weight of
6633 Kgs which almost tallies. Vide 6633 Kgs which almost tallies. Vide
‗Electronics and IT Goods ‘Electronics and IT Goods
(Requirement for Compulsory (Requirement for Compulsory
Registration) Order, 2021. The MeitY Registration) Order, 2021, The MeitY
has notified the specific goods on has notified the specific goods on
which BIS norms will follow at the which BIS norms will follow at the
time of import. It was found that the time of import. It was found that the
said order does not cover parts of said order does not cover parts of
mobile phones. The goods mentioned mobile phones. The goods mentioned
in the alert i.e. BIS Label IN in the alert i.e. BIS Label IN
22*26mm’ is only a label meant for 22*26mm’ is only a label meant for
affixing after completion of the final affixing after completion of the final
product and the same also do not fall product and the same also do not fallW.P.(C) 15199/2023 Page 3 of 25
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
within the ambit of the said order. within the ambit of the said order.
Classification of unassembled goods Classification of unassembled goods
in respect of imported model in respect of imported model
IT5607: IT5607:
9.13 Facts of the case and submissions 9.13 Facts of the case and submissions
of the importer reveal that the of the importer reveal that the
consignment imported vide B/E No. consignment imported vide B/E No.
2432709 dated 14.09.2022 and invoice 2432709 dated 14.09.2022 and invoice
no. 0090048807 contains all the parts no. 0090048807 contains all the parts
required for the manufacturing of required for the manufacturing of
model No. IT5607 except for the model No. IT5607 except for the
battery and camera module. The goods battery and camera module. The goods
in respect of model No. IT5607 were in respect of model No. IT5607 were
examined by the Chartered Engineer, examined by the Chartered Engineer,
who, vide report dated 29.11.2022, who, vide report dated 29.11.2022,
reported that ―…they acquire the reported that ―…they acquire the
article shape of a mobile phone and article shape of a mobile phone and
thus, in light of the above, prima facie thus, in light of the above, prima facie
have the essential characteristics of the have the essential characteristics of the
article…” Further, an essential feature article…” Further, an essential feature
of a mobile phone is communication of a mobile phone is communication
between two or more people. All other between two or more people. All other
features, viz. camera, torch, earphone features, viz. camera, torch, earphone
slot, storage capacity, etc., are added slot, storage capacity, etc., are added
features of a mobile phone. Therefore, features of a mobile phone. Therefore,
a mobile phone will essentially remain a mobile phone will essentially remain
a mobile phone even without a camera a mobile phone even without a camera
feature. feature.
10. Applicable legal provision in this 10. Applicable legal provision in this
regard is hereunder: regard is hereunder:
Rule 2(a) The General Rules for The Rule 2(a) The General Rules for The
Interpretation of Import Tariff read as Interpretation of Import Tariff read as
follows: follows:
“2. (a) Any reference in a heading to “2. (a) Any reference in a heading to
an article shall be taken to include a an article shall be taken to include a
reference to that article incomplete or reference to that article incomplete or
unfinished, provided that, as unfinished, provided that, as
presented, the incomplete or presented, the incomplete or
unfinished articles have the essential unfinished articles have the essential
character of the complete or finished character of the complete or finished
article. It shall also be taken to article. It shall also be taken to
include a reference to that article include a reference to that article
complete or finished (or falling to be complete or finished (or falling to be
classified as complete or finished by classified as complete or finished byW.P.(C) 15199/2023 Page 4 of 25
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
virtue of this rule), presented virtue of this rule), presented
unassembled or disassembled.” unassembled or disassembled.”
11. In order to find out that the mobile 11. In order to find out that the mobile
parts imported like the camera, Lens, parts imported like the camera, Lens,
Cover, Keypad, etc. by themselves Cover, Keypad, etc by themselves
have acquired the essential character have acquired the essential character
of a mobile phone, it will be relevant of a mobile phone, it will be relevant
in this context to refer to HSN in this context to refer to HSN
Explanatory Notes to the Rules of Explanatory Notes to the Rules of
Interpretation and also to the HSN Interpretation and also to the HSN
Explanatory Notes to Section XVI Explanatory Notes to Section XVI
thereof for understanding the thereof for understanding the
expression incomplete and expression incomplete and
unassembled machines. In the unassembled machines. In the
Explanatory Notes to Section XVI in Explanatory Notes to Section XVI in
HSN, incomplete machines and HSN, incomplete machines and
unassembled machines are of the unassembled machines are of the
following types:- following types:
Incomplete Machines Incomplete Machines
"Throughout the Section, any "Throughout the Section, any
reference to a machine or apparatus reference to a machine or apparatus
covers not only the complete machine covers not only the complete machine
but also an incomplete machine (i.e., but also an incomplete machine (i.e.,
an assembly of parts so far advanced an assembly of parts so far advanced
that it already has the main essential that it already has the main essential
features of the complete machine). features of the complete machine).
Thus, a machine lacking only a Thus, a machine lacking only a
flywheel, a bed plate, calender rolls, flywheel, a bed plate, calender rolls,
tool holders, etc., is classified in the tool holders, etc., is classified in the
same heading as the machine and not same heading as the machine and not
in any separate heading provided for in any separate heading provided for
parts. Similarly, a machine or parts. Similarly, a machine or
apparatus normally incorporating an apparatus normally incorporating an
electric motor (e.g., electromechanical electric motor (e.g., electromechanical
hand tools of Heading 85.08) is hand tools of Heading 85.08) is
classified in the same heading as the classified in the same heading as the
corresponding complete machine even corresponding complete machine even
if presented without that motor.” if presented without that motor.”
Unassembled Machines Unassembled Machines
"For convenience of transport many "For convenience of transport, many
machines and apparatus are machines and apparatus are
transported in an unassembled state. transported in an unassembled state.
Although in effect the goods are then a Although in effect the goods are then a
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Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
collection of parts, they are classified collection of parts, they are classified
as being the machine in question and as being the machine in question and
not in any separate heading for parts. not in any separate heading for parts.
The same applies to an incomplete The same applies to an incomplete
machine having the features of the machine having the features of the
complete machine [see Part (IV) complete machine [see Part (IV)
above], presented unassembled (see above], presented unassembled (see
also in this connection the General also in this connection the General
Explanatory Notes to Chapters 84 and Explanatory Notes to Chapters 84 and
85).However, unassembled 85). However, unassembled
components in excess of the number components in excess of the number
required for a complete machine or required for a complete machine or
for an incomplete machine having the for an incomplete machine having the
characteristics of a complete machine characteristics of a complete machine
are classified in their own appropriate are classified in their own appropriate
heading.” heading.”
11.1 The importer herein imported the 11.1 The importer herein imported the
parts designed and manufactured by a parts designed and manufactured by a
foreign entity as per their contracts foreign entity as per their contracts
resulting in merely assembling the resulting in merely assembling the
parts at the site. Therefore, the parts at the site. Therefore, the
operation undertaken by them can be operation undertaken by them can be
termed a simple assembly operation termed a simple assembly operation
falling within the scope of Rule 2(a) of falling within the scope of Rule 2(a) of
the Interpretative Rules. the Interpretative Rules.
11.2 Thus, the above clearly states that 11.2 Thus, the above clearly states that
imported goods can be used to imported goods can be used to
assemble a mobile device that can be assemble a mobile device that can be
used to communicate or can also be used to communicate or can also be
used as a different layout to create a used as a different layout to create a
complete set without a camera complete set without a camera
module. module.
11.3 Whereas, the importer cited the 11.3 Whereas, the importer cited the
judgment dated 23.09.2008 in the judgment dated 23.09.2008 in the
matter of Commissioner of Customs, matter of Commissioner of Customs,
New Delhi Vs. M/s Sony India Ltd. New Delhi Vs. M/s Sony India Ltd.
(Citation 2008(231) E.L.T 385 (SC)) (Citation 2008(231) E.L.T 385 (SC))
wherein the Hon’ble Supreme Court wherein the Hon’ble Supreme Court
had dismissed the appeal filed by the had dismissed the appeal filed by the
department and upheld the decision of department and upheld the decision of
the CESTAT Final Order No. the CESTAT Final Order No.
237/2002-B dated 28.05.2002 in 237/2002-B dated 28.05.2002 in
Appeal No. C/122/99-B – Sony India Appeal No. C/122/99-B – Sony India
W.P.(C) 15199/2023 Page 6 of 25
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
Ltd. vs. Commissioner of Customs, Ltd. vs. Commissioner of Customs,
ICD New Delhi (Citation 2002(143) ICD New Delhi (Citation 2002(143)
E.L.T. 411 (Tri-LB). However, the E.L.T. 411 (Tri-LB). However, the
facts and circumstances of the case facts and circumstances of the case
cited by the importer are different cited by the importer are different
from the instant case. In the cited case, from the instant case. In the cited case,
the appellant had imported 94 the appellant had imported 94
consignments of various components consignments of various components
of CTV, whereas in the instant case, of CTV, whereas in the instant case,
goods were brought in a single goods were brought in a single
consignment. consignment.
11.4 In contradiction, it appears that 11.4 In contradiction, it appears that
the findings in the case of M/s Bird the findings in the case of M/s Bird
Retail Pvt. Ltd. vs. Commissioner of Retail Pvt. Ltd. vs. Commissioner of
Customs (Import), ICD Tughlakabad Customs (Import), ICD Tughlakabad
(CESTAT’s Final Order No. (CESTAT’s Final Order No.
50362/2020 dated 24.02.2020 in 50362/2020 dated 24.02.2020 in
Appeal No. 51007-09 of 2019) are Appeal No. 51007-09 of 2019) are
applicable in the instant case. In this applicable in the instant case. In this
case, the appellant has been importing case, the appellant has been importing
―Segway‖ products in CKD condition “Segway” products in CKD condition
in the form of very assemblies such as in the form of very assemblies such as
power assembly, transmission power assembly, transmission
assembly, wheel assembly, etc., assembly, wheel assembly, etc.,
wherein they have filed bills of entry wherein they have filed bills of entry
for assessment and clearance of the for assessment and clearance of the
imported consignment, declaring the imported consignment, declaring the
product as ―CKD Parts of electrically product as “CKD Parts of electrically
operated two-wheeler/personal operated two-wheeler/personal
transport – lithium ION battery for transport – lithium ION battery for
captive use.” The product has been captive use.” The product has been
classified under Customs Tariff classified under Customs Tariff
Heading 87149990/87144011.The Heading 87149990/87144011.The
Adjudicating Authority ordered Adjudicating Authority ordered
classifying the product under CTH classifying the product under CTH
87119091. The Hon’ble CESTAT, 87119091. The Hon’ble CESTAT,
after due consideration, held as under: after due consideration, held as under:
“22. It can also be seen that as per the “22. It can also be seen that as per the
interpretative rules to the Customs interpretative rules to the Customs
Tariff Act, the General Rules for Tariff Act, the General Rules for
Interpretation of Schedule II provide Interpretation of Schedule II provide
as follows: as follows:
―Rule 2(a): Any reference in a heading “Rule 2(a): Any reference in a
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Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
to an article shall be taken to include heading to an article shall be taken to
a reference to that article incomplete include a reference to that article
or unfinished, provided that, as incomplete or unfinished, provided
presented, the incomplete or that, as presented, the incomplete or
unfinished article has the essential unfinished article has the essential
character of the complete or finished character of the complete or finished
article. It shall also be taken to article. It shall also be taken to
include a reference to that article include a reference to that article
complete or finished (or failing to be complete or finished (or failing to be
classified as complete or finished by classified as complete or finished by
virtue of this rule), presented virtue of this rule), presented
unassembled or disassembled.” unassembled or disassembled.”
23. The above-mentioned Rule 2(a) 23. The above-mentioned Rule 2(a)
makes it clear that any product which makes it clear that any product which
is imported in the form of completely is imported in the form of completely
knocked down (CKD) condition, and if knocked down (CKD) condition, and if
such components imported in CKD such components imported in CKD
condition have all the essential condition have all the essential
ingredients to work as a complete ingredients to work as a complete
vehicle after assembly, in that case, vehicle after assembly, in that case,
such components need to be classified such components need to be classified
as a complete motor vehicle, as a complete motor vehicle,
motorcycle, etc.” motorcycle, etc.”
Therefore, it appears that the ratio of Therefore, it appears that the ratio of
the above judgment is applicable in the above judgment is applicable in
the instant case. the instant case.
12. The issues were also examined in 12. The issues were also examined in
view of the Notification No. 33/2023- view of the Notification No. 33/2023-
Customs, dated 27.04.2023, submitted Cutsoms dated 27.04.2023 submitted
by the importer on 18.05.2023 (RUD- by the importer on 18.05.2023 (RUD-
X) which references Notification No. X) which Notification No. 11/2022-
11/2022-Customs dated 01.02.2022 Customs dated 01.02.2022 & 12/2022-
and 12/2022-Customs dated Customs dated 01.022023. It appears
01.02.2023. It appears that the same is that the same is applicable in the case
applicable in the case of Hearable or Hearable devices like speakers &
Devices like speakers and wearable wearable devices like smart watches
devices like smartwatches and not on and not on mobile phones. Hence, the
mobile phones. Hence, the same same doesn’t appear to be applicable in
doesn’t appear to be applicable in the the instant case.
instant case.
12.1 Hence, the importer was asked to
submit details of consignments for the
last two years consisting of PCBA
W.P.(C) 15199/2023 Page 8 of 25
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Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
along with other items/inputs for the
manufacture of mobile phones, vide
office letter dated 25.01.2023 (RUD-
XI), 22.02.2023, and 28.03.2023.
12.2 In response to this office letter,
the details of goods imported for the
last two years were submitted by the
importer vide its letter dated
31.03.2023. However, on perusal of
the same, it was noticed that the
importer submitted details of Model
‗IT5607′ only which was the disputed
model in the examined BE No.
2432709 dated 14.09.2022, and the
details submitted were not in
accordance with the prescribed format
mentioned in the said letters.
12.3 Further, the importer, vide email
dated 11.05.2023 (RUD-XII),
submitted data regarding details of
shipments having PCBA for the past
two years. On perusal, the Bill of
Entry as submitted by the importer
was checked from the ICES system.
Accordingly, differential duty has
been calculated for the consignments
imported in the past 2 years.
13. Initial investigations were around 13. Initial investigations were around
Model No. IT5607. Whereas data Model No. IT5607. Whereas data
submitted by the importer reveals that submitted by the importer reveals that
there has been importation of parts for there has been importation of parts for
manufacturing of mobile phones of manufacturing of mobile phones of
models other than IT5607, wherein the models other than 1T5607 wherein the
shipments/consignments contain shipments/consignments contain
PCBA and other parts essential for PCBA and other parts essential for
assembly/manufacturing of the mobile assembly/manufacturing of the mobile
phones. In other words, it appears that phones. In other words, it appears that
provisions of General Rules 2(a) provisions of General Rules 2(a)
would also be applicable in these cases would also be applicable in these cases
as well. as well.
Redetermination of classification of
goods and Computation of 13.1 The importer was asked to submit
Differential dutv: import data with respect to past import
W.P.(C) 15199/2023 Page 9 of 25
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
14. Details of differential duty vide this office letter dated 25.01.2023
calculation in respect of the invoices and in response to the same, the
containing PCBA for the period of the importer submitted import data for last
past two years are attached as two financial year only vide email
Annexure A. dated 11.05.2023. Accordingly, Show
Cause Notice No 103/2023-24/Gr.
*** 2G/Pr Commr./ICD-lMP/TKD dated
25.07.2023, was issued to importer.
14.1 From the investigations as
detailed above, it appears that the 13.2 Further, the importer was also
importer has misclassified the CTH of asked to submit import data of
the goods imported vide all invoices as remaining past import. However, it
mentioned in Annexure-A in the appeared that neither importer
corresponding Bills of Entry filed by submitted any data nor any reply.
them, resulting in short-payment of Accordingly, import data of the
duty. Therefore, it appears that the importer was retrieved from the ICES
importer has wrongly self-assessed the 2.0 and it was found that the importer
Bills of Entry mentioned in the Table had imported ―PCBA for
above under Section 17(1) of the manufacturing of mobile phones‖ vide
Customs Act, 1962. The impugned Bills of Entry. as detailed in Annexure
goods do not correspond in respect of - A to D attached hereto.
classification, being a complete mobile
set attracting CTH Redetermination of classification of
85171400/85171219 with respect to goods and Computation of
the declaration given in the Bills of Differential duty:
Entry as manufacturing parts of
mobile phones. Further, under the ***
provisions of Section 46(4A) of the
Act, ibid, it is the responsibility of the
14.1 From the above table and as per
importer to ascertain the accuracy of WCO Tariff, it is observed that
the information given in the Bill of complete mobile phones were
Entry. classifiable under CTH 85171210 (till
31 .12.20 19), CTH 85171219 (after
14.2 In view of the above and 01.01.2020 to 31.01,2022), CTH
submission by the importer, it appears 85171400 w. e. f 01.02.2022.
that the goods/mobile parts imported
vide invoices for the past two years as 14.2 Details of differential duly
mentioned in Annexure A have all the calculation in respect of the Invoices
components required for the containing PCBA for the period
manufacture of the mobile phone starting from 24.08.2018 to
which merit classification under tariff 24.07.2023 are attached as Annexure
item 85171400 (Applicable BCD @ A to D hereto. The summary of the
20%) instead under differential tariff calculation in Annexure A to D, is as
item of mobile parts. hereunder-
15. WHEREAS. a Pre-notice ***
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Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
Consultation letter dated 07.07.2023,
in compliance to Pre-notice 14.1 From the investigations as
Consultation Regulations, 2018. detailed above, it appears that the
notified vide Notification No.29/2018- importer has misclassified the goods
Cus (N.T) dated 02.04.2018, was viz. Liquid Crystal Module,
issued to importer by this office Microphone, Speaker, Front Cover,
wherein it was requested to deposit Back Cover, Keypad, Paper Sticker,
short levy duty amounting to Rs. Adhesive Tape, Adhesive Type Foam,
5,31,48,005/-, in respect of Bills of Advertising Paper, Antenna, Camera
Entry. as mentioned in Annexure-A & Protective Lens, Conductive Fabric,
B. Further, the importer was also Speaker Frame, Earphone, Keypad
informed of the intention to issue the Dome, LCM Protectiveness, Light
notice under Section 28(1) of the Emitting Diode (LED), Loaded
Customs Act. 1962 specifying the Printed Circuit Board, Motor, PE bag,
grounds on which such notice is Protective Lens, Screw, Tape MYLAR
proposed to be issued. However, no etc.”, imported vide Bills of Entry as
reply against said pre-notice has been mentioned in Annexure – A to D
received from the importer till date. resulting in short-payment of duty.
Therefore, it appears that the importer
*** has wrongly self-assessed the
impugned Bills of Entry under Section
17(1) of the Customs Act, 1962. The
Impugned goods do not correspond in
respect of classification being a
complete mobile set, which merit
classification under CTH
85171400/85171219/85171210, with
respect to the declaration given in the
Bills of Entry as manufacturing parts
of mobile phones. Further, under
provisions of Section 46(4A) of the
Act, ibid, it is the responsibility of the
importer to ascertain the accuracy of
the information given in the Bill of
Entry.
14.2 In view of the above and
submission by the importer, it appears
that the goods/mobile parts imported
vide Bills of Entry, as detailed in
Annexure-A to D, have all the
components required for the
manufacture of the mobile phone
which merit classification under Tariff
Item 85171400/85171219185171210
instead of under different tariff item of
W.P.(C) 15199/2023 Page 11 of 25
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:11.03.2025
10:20:12
mobile parts as declared by importer
in impugned bill of entry.
***
17. On perusal of the aforementioned 16. On perusal of the aforementioned
Investigation Report, it is observed Investigation Report, it is observed
that the importer has wrongly that the importer has wrongly
classified said goods by suppressing classified the said goods by
the fact that the said goods are suppressing the fact that the said
complete mobile set in CKD goods are complete mobile sets in
condition. It was because of the timely CKD condition. It was because of the
intervention of the investigation timely intervention of the investigation
agency the said fact came to light agency that the said fact came to light,
which proves that the importer had which proves that the importer had
intentionally suppressed the facts and intentionally suppressed the facts and
evaded applicable customs duty which evaded applicable customs duty which
resulted in short payment of duty of resulted in short payment of duty of
Rs. Rs.5,30,87,373/-, as detailed in Rs. 1,11,21,12,551/-,as detailed in
Annexure-A & B, and the same is Annexure-A to D, and the same is
recoverable under Section 28(1) of the recoverable under Section 28(4) of the
Customs Act, 1962 along with interest Customs Act, 1962, along with
under Section 28AA of the act ibid. interest under Section 28AA of the
Act ibid.
17.1 The importer by their aforesaid 16.1 The importer by their aforesaid
act of omission and commission has act of omission and commission has
contravened the provisions of Section contravened the provisions of Section
46(4) and 46(4A) of the Customs 46(4) and 46(4A) of the Customs Act,
Act,1962 in as much they have failed 1962 in as much as they have failed to
to furnish correct particulars with furnish correct particulars with respect
respect to description and to the description and classification of
classification of the said goods. the said goods. Section 111(m) of the
Section 111(m) of the Customs Act, Customs Act, 1962, provides that any
1962 provides that any goods which goods which do not correspond in
do not correspond in respect of value respect of value or in any other
or in any other particular with the particular with the entry made under
entry made under this Act, are liable to this Act, are liable to confiscation. As
confiscation. As the importer had mis- the importer had mis-declared the
declared the value of the goods with value of the goods with an intention to
an intention to evade proper Customs evade proper customs duties against
Duties against the goods imported vide the goods imported vide impugned
impugned Bills of Entry, as detailed in Bills of Entry, as detailed in
Annexure-A & B, the same are liable Annexure-A to D, the same are liable
to confiscation under Section 111(m) to confiscation under Section 111(m)
of the Customs Act, 1962. of the Customs Act, 1962.
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BHATIA
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17.2 Section 112(a)(ii) of the Customs 16.2 SECTION 114A of the Customs
Act, 1962 provides that any person, Act, 1962 inter alia provides that
who, in relation to any goods, does or where the duty has not been levied or
omits to do any act which act or has been short-levied or the interest
omission would render such goods has not been charged or paid or has
liable to confiscation under section been partly paid or the duty or interest
111, or abets the doing or omission of has been erroneously refunded by
such an act, shall be liable, in the case reason of collusion or any wilful mis-
of dutiable goods, other than statement or suppression of facts, the
prohibited goods, subject to the person who is liable to pay the duty or
provisions of section 114A, to a interest, as the case may be, as
penalty under this Section. In the determined under sub-section (8) of
present case. the importer has mis- Section 28, shall also be liable to pay a
declared description of the impugned penalty. In the present case, the
goods and evaded applicable Customs importer has wilfully suppressed vital
Duties in the Bills of Entry, as facts with respect to the description of
elaborated in above, and thus, the the impugned goods in the Bills of
importer is liable to penalty under Entry, as elaborated above, and thus,
Section 112(a)(ii) of the Customs Act, the importer is liable to penalty under
1962. Section 114A of the Customs Act,
1962, with respect to the said bills of
Entry.
18. Now, therefore, on the basis of the 17. Now, therefore, on the basis of the
discussion here-in-above and discussion hereinabove and
investigations into the matter, M/s. investigations into the matter, M/s.
Ismartu India Pvt Ltd, D-197, 198, Ismartu India Pvt. Ltd., D-197, 198,
199, Sector- 63, Noida, Gautam Budh 199, Sector-63, Noida, Gautam Budh
Nagar, Uttar Pradesh, 201301 (IEC: Nagar, Uttar Pradesh, 201301 (IEC:
0516984080), is hereby called upon to 0516984080), is hereby called upon to
Show Cause to the Principal Show Cause to the Principal
Commissioner of Customs, Import Commissioner of Customs, Import
Commissionerate, Inland Container Commissionerate, Inland Container
Depot, Tughlakabad, Delhi – 110 020, Depot, Tughlakabad, Delhi – 110020,
in writing within 30 days of receipt of in writing within 30 days of receipt of
this notice as to why:- this notice as to why:
i. The Bill of Entry No.2432709 dated i. The classification of the goods,
14.09.2022, should not be finalized by imported vide Bills of Entry as
changing the classification to CTH detailed in Annexure-A to D, should
85171400 under Section 18(2) of the not be rejected and the same should
Customs Act, 1962; not be classified under CTH
85171219/85171210/85171400 as
ii. Total differential duty amounting to mentioned in the respective annexures;
Rs.60,632/- (Rupees Sixty Thousand
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Six Hundred and Thirty Two only), in ii. The goods having an assessable
respect of Bill of Entry No. 2432709 value of Rs. 5,83,12,84,286/- (Rupees
dated 14.09.2022, should not be Five Hundred Eighty-Three Crore,
demanded and recovered from the Twelve Lakh, Eighty-Four
importer under Section 28(1) of the Thousand, Two Hundred and
Customs Act. 1962 along with Eighty-Six only), imported vide Bills
applicable interest under Section of Entry as detailed in Annexure-A to
28AA of the Act ibid; an D, should not be held liable to
confiscation under Section 111(m) of
iii. Penalty under Section 112(a)(ii) of the Customs Act, 1962;
Customs Act, 1962 of the Customs
Act, 1962, should not be imposed on iii. Total differential duty amounting
the importer for improper importation to Rs. 1,11,21,12,550/- (Rupees One
of goods imported vide Bill of Entry Hundred Eleven Crore, Twenty-
No.2432709 dated 14.09.2022 and One Lakh, Twelve Thousand, Five
evasion of Customs duty thereof. Hundred and Fifty only), as detailed
in Annexure-A to D, should not be
iv. The Bank Guarantee of demanded and recovered from the
Rs.37,26,502/- and Rs.3,00,000/-, importer under Section 28(4) of the
should not be appropriated towards Customs Act, 1962, along with
Fine and Penalty imposed upon the applicable interest under Section
importer in respect of Bill of Entry 28AA of the Act ibid; and
No.2432709 dated 14.09.2022
iv. Penalty under Section
v. The classification of the goods, 114A/112(a)(ii) of the Customs Act,
imported vide Bills of Entry as 1962, should not be imposed on the
detailed in Annexure-A & Annexure- importer for improper importation of
B, should not be rejected and the same goods and evasion of customs duty.‖
should not be classified under CTH
85171400;
vi. The goods having re-determined
assessable value of
Rs.1,46,83,51,738/-, imported vide
Bills of Entry as detailed in Annexure-
A and Annexure-B, should not be held
liable to confiscation under Section
111(m) of the Customs Act, 1962;
vii. Total differential duty amounting
to Rs.5,30,87,373/- (Rupees Five
Crore Thirty Lakh Eighty Seven
Thousand Three Hundred and Seventy
Three only), as detailed in Annexure –
A & Annexure-B. should not be
demanded and recovered from the
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importer under Section 28(1) of the
Customs Act, 1962 along with
applicable interest under Section
28AA of the Act ibid; and
viii. Penalty under Section 112a (ii) of
Customs Act, 1962 of the Customs
Act, 1962, should not be imposed on
the importer for improper importation
of goods and evasion of Customs duty,
in respect of Bills of Entry other than
Bill of Entry No. 2432709 dated
14.09.2022;‖
19. This show cause notice is being 18. This show cause notice is being
issued without prejudice to any other issued without prejudice to any other
action that may be taken in respect of action that may be taken in respect of
the impugned goods and/or the the impugned goods and/or the
persons/company etc., mentioned in persons/company etc., mentioned in
the notice, under the provisions of the the notice, under the provisions of the
Customs Act. 1962 and/or any other Customs Act. 1962 and/or any other
law for the time being in force. law for the time being in force.
20. The aforesaid noticee are to submit 19. The aforesaid noticee are to submit
their written reply within the stipulated their written reply within the stipulated
time. In their reply, they should clearly time. In their reply, they should clearly
state whether they wish to be heard in state whether they wish to be heard in
person or not. In case, they do not person or not. In case, they do not
reply or no such requests is made in reply or no such requests is made in
their reply or they do not appear their reply or they do not appear
before the adjudicating authority on before the adjudicating authority on
the date and time fixed, without any the date and time fixed, without any
sufficient cause, the case will be sufficient cause, the case will be
decided ex-parte on the basis of decided ex-parte on the basis of
available records without any further available records without any further
reference to them. reference to them.
21. The Department reserves its right 20. The Department reserves its right
to add, amend, modify, etc. this notice to add, amend, modify, etc. this notice
based on any fresh facts or evidence based on any fresh facts or evidence
which may come to the notice of the which may come to the notice of the
Department after the issue of this Department after the issue of this
notice but prior to adjudication notice but prior to adjudication
thereof. thereof.
22. The notices have the option to 21. The notices have the option to
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make an application under Section make an application under Section
127(B) of the Customs Act, 1962 prior 127(B) of the Customs Act, 1962 prior
to adjudication of this notice, to the to adjudication of this notice, to the
Settlement Commissioner to have the Settlement Commissioner to have the
case settled, in such form and in such case settled, in such form and in such
manner, as specified in the Rules. manner, as specified in the Rules.
23. List of the documents relied upon 22. List of the documents relied upon
in this notice (RUDs) enclosed with in this notice (RUDs) enclosed with
this show cause notice is an integral this show cause notice is an integral
part of this show cause notice which is part of this show cause notice which is
also being served through email of the also being served through email of the
noticee. noticee.
***** *****
TWO SEPARATE NOTICES UNDER SECTIONS 28(1) AND
28(4) IN SIMILAR CIRCUMSTANCES CANNOT BE ISSUED:
4. A bare perusal would show that the two SCNs are identical in
almost every respect except for the differences as highlighted. Apart
from the more obvious differences relating to the Notices being under
Sections 28(1) and 28(4) and the corresponding penalty provisions
being Sections 112 and 114A which are consequential upon the
Section under which the notices are issued, some of the differences,
inter alia, are the periods to which they pertain, the invoices and
quantities of the goods therein.
5. Interestingly, both notices conclude that ―the importer has
wrongly classified said goods by suppressing the fact that the said
goods are complete mobile set in CKD condition. It was because of
the timely intervention of the investigation agency that the said fact
came to light which proves that the importer had intentionally
suppressed the facts ……‖, but chooses to invoke Sections 28(1) and
28(4) of the Act, respectively in the two notices.
6. The SCNs also have identically worded paragraphs with
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different numbers which further conclude as follows:
―The importer by their aforesaid act of omission and
commission has contravened the provisions of Section 46(4) and
46(4A) of the Customs Act, 1962 in as much they have failed to
furnish correct particulars with respect to description and
classification of the said goods. Section 111(m) of the Customs
Act, 1962 provides that any goods which do not correspond in
respect of value or in any other particular with the entry made
under this Act, are liable to confiscation As the importer had
mis-declared the value of the goods with an intention to evade
proper Customs Duties against the goods imported vide
impugned Bills of Entry, as detailed in Annexure‖ _____, ―the
same are liable to confiscation under Section 111 (m) of the
Customs Act, 1962.‖
7. Section 28 of the Act, as relevant, reads as follows:
“Section 28. Recovery of duties not levied or not paid or
short-levied or short-paid or erroneously refunded.
(1) Where any duty has not been levied or not paid or has been
short-levied or short-paid or erroneously refunded, or any
interest payable has not been paid, part-paid or erroneously
refunded, for any reason other than the reasons of collusion or
any wilful mis-statement or suppression of facts, —
(a). the proper officer shall, within two years from the relevant
date, serve notice on the person chargeable with the duty or
interest which has not been so levied or paid or which has
been short-levied or short-paid or to whom the refund has
erroneously been made, requiring him to show cause why
he should not pay the amount specified in the notice:
Provided that before issuing notice, the proper officer
shall hold pre-notice consultation with the person
chargeable with duty or interest in such manner as may be
prescribed;
(b). the person chargeable with the duty or interest, may pay,
before service of notice under clause (a), on the basis of–
(i) his own ascertainment of such duty; or
(ii) the duty ascertained by the proper officer,
the amount of duty along with the interest payable thereon under
section 28AA or the amount of interest which has not been so
paid or part-paid:
Provided that the proper officer shall not serve such show-cause
notice, where the amount involved is less than rupees one
hundred.
***
(4) Where any duty has not been levied or not paid or has beenW.P.(C) 15199/2023 Page 17 of 25
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short-levied or short-paid or erroneously refunded, or interest
payable has not been paid, part-paid or erroneously refunded, by
reason of–
(a) collusion; or
(b) any wilful mis-statement; or
(c) suppression of facts,
by the importer or the exporter or the agent or employee of the
importer or exporter, the proper officer shall, within five years
from the relevant date, serve notice on the person chargeable
with duty or interest which has not been so levied or not paid or
which has been so short-levied or short-paid or to whom the
refund has erroneously been made, requiring him to show cause
why he should not pay the amount specified in the notice.
***
(7A) Save as otherwise provided in clause (a) of sub-section (1)
or in sub-section (4), the proper officer may issue a
supplementary notice under such circumstances and in such
manner as may be prescribed, and the provisions of this section
shall apply to such supplementary notice as if it was issued
under the said sub-section (1) or sub-section (4).
……‖
8. Section 28 of the Act provides for two separate types of notices:
– one under Section 28(1) for all notices to be issued where the
elements of Section 28(4) of the Act are absent, namely, those of
collusion, wilful mis-statement and suppression: meaning thereby that
it is only in those circumstances where Section 28(4) of the Act is not
attracted that a Notice under Section 28(1) of the Act is issued. The
other is under Section 28(4) and such a notice may come to be issued
provided it fulfils the requirements of the same.
9. Notices under Section 28(1) and Section 28(4) operate in
different scenarios and even by an exaggerated stretch, cannot
possibly be said to be interchangeably issued.
10. In the present case, a prior notice under Section 28(1) of the Act
had already come to be issued, in respect of similar goods, with a
similar alleged ―mis-declaration‖. Both notices have the benefit of the
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reports dated 29 November 2022 and 05 January 2023 by the
Chartered Engineer engaged by the Respondents.
11. Surely, two notices with (i) an almost identical factual matrix,
(ii) relying upon the same reports by a Chartered Engineer and (iii)
with almost identical conclusions cannot result in two different
Notices under two different sub-sections, especially when one [Section
28(1)] can operate only in the absence of the conditions prescribed in
the second [Section 28(4)].
12. The issuance of the impugned Show Cause Notice, under the
said facts and circumstances, is clearly unsustainable.
CHANGE OF OPINION:
13. The fact that the same officer, within a span of just 6 weeks,
presented with an almost identical set of facts, has chosen to issue the
two notices under different Sections, would also, in our view taint the
impugned SCN with the vice of a ―change of opinion‖ and for that
reason too, render it unsustainable.
14. We would refer favourably to the judgments of the Hon’ble
Supreme Court in respect of ―change of opinion‖ as follows:
State of U.P. v. Aryaverth Chawal Udyog, (2015) 17 SCC 324;
Commr. of Customs v. G.C. Jain, (2011) 12 SCC 713;
Prabhu Steel Industries Ltd. v. CCE, (1998) 1 SCC 303.
15. The Hon’ble Supreme Court in State of U.P. v. Aryaverth
Chawal Udyog, (2015) 17 SCC 324, (3-Judges) while contemplating
on requisite parameters for „change of opinion‟ by the authorities held
that:
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“29. The standard of reason exercised by the assessing authority
is laid down as that of an honest and prudent person who would
act on reasonable grounds and come to a cogent conclusion. The
necessary sequitur is that a mere change of opinion while
perusing the same material cannot be a ―reason to believe‖ that a
case of escaped assessment exists requiring assessment
proceedings to be reopened. (See Binani Industries
Ltd. v. CCT [Binani Industries Ltd. v. CCT, (2007) 15 SCC
435]; A.L.A. Firm v. CIT [A.L.A. Firm v. CIT, (1991) 2 SCC
558]). If a conscious application of mind is made to the relevant
facts and material available or existing at the relevant point of
time while making the assessment and again a different or
divergent view is reached, it would tantamount to ―change of
opinion‖. If an assessing authority forms an opinion during the
original assessment proceedings on the basis of material facts
and subsequently finds it to be erroneous; it is not a valid reason
under the law for reassessment. Thus, reason to believe cannot
be said to be the subjective satisfaction of the assessing
authority but means an objective view on the disclosed
information in the particular case and must be based on firm and
concrete facts that some income has escaped assessment.
30. In case of there being a change of opinion, there must
necessarily be a nexus that requires to be established between
the ―change of opinion‖ and the material present before the
assessing authority. Discovery of an inadvertent mistake or non-
application of mind during assessment would not be a justified
ground to reinitiate proceedings under Section 21(1) of the Act
on the basis of change in subjective opinion (CIT v. Dinesh
Chandra H. Shah [CIT v. Dinesh Chandra H. Shah, (1972) 3
SCC 231] ; CIT v. Nawab Mir Barkat Ali Khan
Bahadur [CIT v. Nawab Mir Barkat Ali Khan Bahadur, (1975) 4
SCC 360 : 1975 SCC (Tax) 316]).‖
16. The Hon’ble Supreme Court in Commr. of Customs v. G.C.
Jain, (2011) 12 SCC 713 rejected the ‗change of opinion’ of the
Authorities in the following terms:
“29. In the instant case the respondents had declared the goods
as butyl acrylate monomer with correct classification of the
same and the word ―adhesive‖ was added in the ex-bond bill as
per the respondents’ understanding that BAM is an adhesive. In
these circumstances it was for the Revenue to check whether
BAM was covered by the expression ―adhesive‖ or not and if
even after drawing of samples they have allowed the clearances
to be effective as an adhesive the respondents cannot be held
responsible for the same and subsequently, if the Revenue hasW.P.(C) 15199/2023 Page 20 of 25
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changed their opinion as regards the adhesive character of
BAM, extended period cannot be invoked against them. As
such, we are of the view that the demand of duty in respect of
the 14 consignments is also barred by limitation.‖
17. Similarly, the Hon’ble Supreme Court in Prabhu Steel
Industries Ltd. v. CCE, (1998) 1 SCC 303 held that:
“4. From the admitted facts of this case there can be no doubt
that none of the requirements of the above-quoted proviso is
satisfied in the present case to give to the Department the benefit
of the larger period of limitation. The removal of the goods was
in accordance with the approved classification list and all the
material facts were before the authorities concerned. Simply
because there was a change in opinion as to the correct
description of the input, it cannot be said that the case falls
within the ambit of proviso to Section 11-A. Admittedly, there
was no concealment of the true facts and the classification list
submitted by the assessee had been duly approved under which
the removal was made.‖SHOW CAUSE NOTICE DOES NOT FULFILL
REQUIREMENTS OF SECTION 28(4):
18. In order for the Impugned SCN to survive, it would,
independently, have to satisfy the requirements of Section 28(4),
which we have already extracted hereinabove.
19. The entire case of the Respondent at Para 16 of the SCN is that
the Petitioner ―…has wrongly classified said goods by suppressing the
fact that the said goods are complete mobile set in CKD condition.‖.
This apparently was done intentionally to evade payment of Customs
Duty.
20. The records bear out the fact that the Petitioner has made a
classification of the goods and in support of the same has disclosed all
the relevant invoices and other importation details.
21. The Petitioner’s employee had initially made a statement in
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respect of the goods. However, the said employee, at a later stage,
retracted from the same and the Respondent, considering this
―contradiction‖ in the stand of the Petitioner, got the goods examined
by a Chartered Engineer for his opinion.
22. The Chartered Engineer gave his opinion and followed it up
with a further opinion.
23. Without adverting to the merits of the opinion, the fact that
there existed ambiguity in the mind of the Respondent with respect to
the correct classification of the goods, which doubt could only be
based on a conspectus of all the facts before the parties, itself negates
any ―suppression‖. This is also evidenced by the fact that the
Chartered Engineer, who gave his report, has drawn the samples from
the consignments under question, and which goods were already in the
Respondent’s knowledge. There was nothing new that was brought to
the table.
24. The doubt in respect of the classification of the goods was
based on the complete disclosure by the Petitioner of the goods
imported by it, meaning thereby, that there was no suppression of the
relevant facts.
25. Based on the set of facts as they presented themselves, both
parties are entitled to make contesting claims. However, a genuine
disagreement, as in the present case, of the classification of the goods
cannot possibly be elevated to ―suppression‖.
26. The Respondents have not referred to ―collusion‖ or ―wilful
misstatement of facts‖ to support the issue of the SCN under Section
28(4).
27. Nonetheless, it is apparent that there is no ―collusion‖ and there
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cannot even be a ―wilful misstatement of facts‖ as all the imported
goods with their description were before the Respondent and the entire
dispute related to their classification.
28. It would appear that in the present case, there is a mere
incantation of the provisions of the Section without any substance to
back it up leading to the issuance of two SCNs under sub-sections (1)
and (4) of Section 28.
29. In the counter, the Respondents have adverted to the alleged
non-submission by the Petitioners of details of their prior imports in
support of the allegation of ―suppression‖. This is a bogey that needs
to be rejected resoundingly. The data allegedly suppressed was data
that was available with the Respondents themselves and was in fact,
admittedly, retrieved by them, from their own system. How can data
that was already available with the Department be data that was
―suppressed‖?
30. Since we have held that the impugned SCN does not fulfill the
requirements of the Section, the Respondent would also cease to have
the benefit of an extended period of limitation for the purpose of its
issuance.
IMPUGNED NOTICE IS NOT A SUPPLEMENTARY NOTICE:
31. The respondents, in Paragraph 9 of their Counter Affidavit, seek
to derive sustenance from the notification dated 18 June 2019. Para 9
reads as follows:
―9. The Respondents would also seek to highlight Notification
42/2019- Customs (NT) dated 18.06.2019 which provides for a
supplementary notice to be issued once a notice under Section
28 or Section 124 of the Act has been issued. The circumstances
in which such supplementary notices can be issued are asW.P.(C) 15199/2023 Page 23 of 25
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follows:
i. In cases where there is a difference in the quantum of duty
demanded in such cases;
ii. For invoking penal action against a person under the
provisions of the Act in addition to those charged in the
said notice;
iii. For invoking additional section / sections of the Act in
such notice;
iv. In cases where there is additional evidence which may
have a significant bearing on the case.‖
32. The Respondent, in the Counter, makes a bald averment without
specifying under which of the said heads the impugned notice would
fall. In view of the abject failure on behalf of the Respondents to state
either in the SCN itself or even specify as to which of the four heads
enumerated in the counter, the alleged impugned notice is being issued
as a ―Supplementary Notice‖, we are of the view that the said
contention needs to be rejected.
33. Additionally, Section 28 of the Act, by its very nature posits, in
a given set of facts and circumstances, the issuance of a SCN either
under Section 28(1) or under Section 28(4) of the Act and not under
both. Under the circumstances, we are unable to agree that the
impugned SCN under section 28(4) of the Act post the issuance of the
SCN under Section 28(1) could be termed a ―Supplementary Notice‖.
34. While both parties also sought to address arguments on the
classification of the goods, with the Respondent relying primarily
upon Rule 2(a) of the General Rules for the Interpretation of the
Harmonised Systems, since we are of the opinion, for the reasons
stated above, that the impugned SCN dated 01 September 2023 under
Section 28(4) of the Act is not maintainable, we do not propose to
examine the said issue. Needless to state that the said question may be
examined on merits by the concerned forum in appropriate
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proceedings.
35. Resultantly, and for the reasons afore-stated, we are of the view
that the impugned SCN under Section 28(4) is liable to be set aside.
36. We allow the Petition in the above terms and dispose of the
pending application(s).
YASHWANT VARMA, J.
HARISH VAIDYANATHAN SHANKAR, J.
MARCH 07, 2025/nd/er
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