ORDER
K.D. Mankar, Member (T)
1. The appeal is directed against the impugned order-in-appeal passed by the Commissioner (Appeals). The Commissioner (Appeals) had allowed the revenue’s appeal against the order-in-original passed by the Deputy Commissioner relating to the final assessment order dated 20/03/2002 in respect of Bill of Entry No. SBY/82/2000-2001 dated 22/06/2001.
2. The facts in brief are that:-
“The seller M/s. Export Trade Corporation Ltd., Hong Kong had sold the vessel MV Karakoram having LDT of 4150 MT = 4084 LT to the appellants through a Memorandum of Agreement (MOA) dated 02/06/200, at a price of US $ 756,561/-. The importer filed the Bill of Entry on 22/06/2001 declaring the total price of US $ 726,952/- and US $ 115,70/- (diff. 0.65 MT LT) for 4150 MT LDT (4048.65 MT LT) on the strength of an Addendum I & II dated Nil. According to the importer, the said addendum was necessitated, as the Vessel was not as per the MOA. The Bill of Entry was finally assessed at the price of US $ 7,26,952/-.”
3. The department in the review appeal to the Commissioner (Appeals) had claimed that, the Deputy Commissioner, while finalising their assessment has not considered the value of the vessel as shown in the original MOA dated 02/06/2001 i.e. US $ 7,56,561/- and on the other hand, has charged duty on the value i.e. US $ 7,26,952/-. As such, duty amounting to Rs. 3,75,010/- has been short levied. It was also claimed that the department was not a party to the survey on the basis of which the price has been reduced. The appellants filed a cross objection before the Commissioner (Appeals) pleading in support of the Deputy Commissioner’s final assessment order to be legal and correct. Before the Commissioner (Appeals), the appellants had made the following submissions:-
“They stated that disputed ship arrived on 13.06.2001. The Memorandum of Agreement was signed on 02.06.2001. The LDT mentioned was 4150 MT. There is no dispute about the LDT. However,the description of the Ship shows the same is in Single Skin. The Bill of Entry was filed on 22.06.2001 and the goods were provisionally assessed. According to him a survey was conducted by Metcalfe and Hodgkinson on 23.06.2001 wherein it has been mentioned that the vessel had double skin at Hatch No. 3, 4, 5 & 6 in between frame No. 60 to 130. He also referred to the Survey Report of Sigma Marine Surveyors dated 04.07.2001. According to the said report, the vessel was fitted with side tank of Double Skin at hatch No. 3, 4, 5 & 6 in between frame No. 60 to 130. On specific question as to on what date, the Addendum No. 2 showing reduction in price to US $ 7,26,952/- was signed, the representative stated that there is no mention of date on the Addendum. He could not show any document to give any indication about the date on which the same was signed. On another specific question as to how the reduction in value was claimed in the Bill of Entry dated 22.06.2001, when the Survey Report is of 23.06.2001, the representatives showed their inability to explain. It was pointed out to them that Ericson and Richards had conducted a Survey on 16.06.2001 wherein they had mentioned vide report No. 2001/ERG-208-D at Paragraph 3 that the vessel is Single Skin. On this, they stated that they would not comment on this.”
4. It was further stated that the vessel was purchased at a price, which has been shown in the Bill of Entry, and no extra payment was made. A copy of the invoice No. 3577/01 dated 14/06/2001 showing the price of US $ 726,952/- was produced. On being specifically asked as to how this invoice was obtained when even the first survey report was available only on 16/06/2001, it was stated that though the discrepancy was known, they could not explain anything on that. However, they asserted that no extra payment was ever made. The Commissioner (Appeals), after detailed consideration of the various aspects, accepted the revenue’s appeal and the claim for enhancement of assessable value to US $ 756,561/- and differential duty of Rs. 3,75,010/-.
5. We have heard the Ld. DR. The appellants are not present. They have however, submitted written submissions.
6. The first and foremost attack on the order is on the ground that the bills of entry have been finally cleared and, therefore, it is pleaded that the duty could be demanded only in terms of Section 28 of the Act. The department had sought re-open the assessment through the mechanism of review of the adjudication order by filing appeal in terms of Section 129D of the Customs Act, 1962.
7. So far as this ground is concerned, we note that it is a formidable ground. Since the entire provisions related to recovery of duty which is allegedly short levied, the least was required to be done was, to issue a demand under Section 28 of the Customs Act, 1962, indicating therein the ground of short levy etc. No amount of duty short levied can be collected without such a notice. The exercise of reviewing the order under Section 129D of the Customs Act provides no saving to the department against the requirements of issue of show cause notice under Section 28. Therefore, even if one were to assume a favourable result in department’s favour on the appeal filed, in terms of Section 129D, even then, the same would not help the revenue to collect the duty, which escaped as a result of wrong decision on the valuation, without issuing a demand under Section 28 of the Act. Therefore, we are unable to agree with the findings of the Commissioner (Appeals) holding that, on conclusion of proceedings under Section 129D of the Act. In revenue’s favour will automatically lead to confirmation of duty demand without issue of demand under Section 28. Therefore, without going into the merits of the issue of undervaluation, we hold that the appellants could not be made liable to differential duty without the process of issue of notice under Section 28 of the Customs Act.
8. Accordingly, we partly allow the appeal and set aside that portion of the order passed by the Commissioner (Appeals), which has the effect of confirming the duty liability against the appellants on account of value enhancement.
(Pronounced in Court 15/7/2004)