March 31, 2021
either/view ⚖️
Law is a law
To: either/view subscribers
Good morning. Countries around the world use the Harmonized Commodity Description and Coding Systems (HS) to classify products. It is meant to allow countries to classify traded goods on a common basis for customs purposes. The Harmonized System uses a six-digit coding nomenclature to classify approximately 5,300 articles/products. Indian customs department also uses the Harmonized System for classifying tariff items.
📰 FEATURE STORY
Relief for Nikon, Canon, Sony and Samsung in customs duty case
On March 9, 2021, the Supreme Court of India set aside the order of Central Excise and Service Tax Appellate Tribunal (CESTAT) which had denied exemptions in customs duty that were granted to certain models of digital cameras belonging to Nikon, Canon, Sony and Samsung. The apex court questioned the authority of Directorate of Revenue Intelligence (DRI) to conduct reassessments in customs duty cases. It found that DRI did not possess the authority to do so.
Context
In 2012, the cameras were cleared for import by a team led by Deputy Commissioner of Customs at the Delhi airport, after they surmised that the cameras were eligible for exemption from customs duty. But in 2014, the camera brands were issued notice by the Directorate of Revenue Intelligence, a different department, to pay the duties as it felt that the brands had wilfully suppressed information regarding their cameras.
Directorate of Revenue Intelligence is the apex intelligence and investigative agency for matters relating to violation of the Customs Act. It functions under the Central Board of Indirect Taxes and Customs in the Ministry of Finance, Department of Revenue, Government of India.
The final order by CESTAT was based on an interpretation of the definition of a digital still image video camera. Prior to March 17, 2012 and post April 30, 2015, there was no explanation given for the definition of a digital still image video camera. However, between 2012 and 2015, an explanation was inserted after a notification was issued by the government. The explanation stated the following:
“For the purpose of this entry, “digital still image video camera” means a digital camera not capable of recording video with minimum resolution of 800 x 600 pixels, at minimum 23 frames per second, for at least 30 minutes in a single sequence using the maximum storage (including expanded) capacity.”
Any imported camera which satisfied the above conditions would have been eligible for customs duty exemption. While the cameras in this case satisfied the first two eligibility criteria as defined above, there was confusion regarding the third criteria.
DRI’s allegations:
All the four camera brands noted that their cameras could only record video for 29 minutes and 59 seconds in a single sequence, and hence they were exempted from paying customs duty. However, DRI contended that the length of the recording was artificially restricted through firmware (software installed in the camera).
“[E]ven though the sequence length was being restricted by stopping recording below 30 minutes, but user could record second and more sequences by just pressing the recording button as soon as the recording after the first sequence stopped,” stated the DRI. The CESTAT agreed with the assessment of DRI that the cameras did not fulfil all the conditions mentioned in the notification.
The CESTAT order also noted that the camera brands did not fully disclose the details of the cameras and had wrongly availed the benefit of customs duty exemption.
“Only during the course of investigation by DRI, it came to the light that, while the imported goods are capable to record video in a single sequence of more than 30 minutes, it was programmed through firmware to run for less than 30 minutes in a single sequence. It is clear that the appellants deliberately did not declare the full details of the imported goods and cleared the same by wrongly availing the benefit of notification. The correct facts came to the light only during investigation by DRI,” the CESTAT order noted.
Supreme Court’s judgment:
All the four camera brands appealed the Supreme Court against the final order of CESTAT.
The apex court noted that it was difficult to infer if there was any wilful misstatement of facts on the part of the camera brands. But the major focus of the court’s judgment was on the authority of DRI in issuing show cause notice for recovery of customs duty.
Section 28 [4] of the Customs Act, 1962 which deals with recovery of custom duties puts the onus on “the proper officer” to issue notice to persons who need to pay up. To check whether DRI had the authority in reassessing cases, the court relied on the definition of “the proper officer” as given in the Act. Section 2 [34] defines the proper officer as “the officer of customs who is assigned those functions by the Board or the Commissioner of Customs.”
The court noted that article ‘THE’ in ‘the proper officer’ represented a specific person who has been assigned the role, and not anybody else.
The recovery notice to the four camera brands was sent by the Additional Director General (ADG) of DRI. To check whether DRI had the authority in reassessing cases, the court looked at two questions:
- Is the ADG of DRI a customs officer?
- Has the ADG of DRI been entrusted to be ‘the proper officer’ to issue show cause notices?
The Central Government had issued a notification dated March 7, 2002, in which it had appointed all ADG’s of DRI as the Commissioners of Customs. The court found this appointment to be valid, and it answered the first question.
Answer to the second question rested on the merit of the Central Board of Excise and Customs’ notification dated May 2, 2012.
Basically, Central Board of Excise and Customs claimed that it had the power under Section 2 (34) of the Customs Act to entrust functions of proper officer to any customs officer. But the court disagreed stating that Section 2 (34) only deals with definitions and does not provide any power. Instead, the court noted that the power rested only with the Central Government as mentioned in Section 6 of the Act, which states:
“Entrustment of functions of Board and customs officers on certain other officers – The Central Government may, by notification in the Official Gazette, entrust either conditionally or unconditionally to any officer of the Central or the State Government or a local authority any functions of the Board or any officer of customs under this Act.”
Since the Central Government did not issue any such notification, the court deduced that the ADG of DRI did not have the authority to issue show cause notice for recovering custom duties. Hence, the court dismissed the order of CESTAT, thereby granting relief to the four camera brands.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
- ‘Grievance Redressal’ mechanism in the new IT rules amounts to unlawful harassment of media.
For the Left:
- Academia has a flawed understanding of the Hindutva project and its relationship with politics of representation.
🗳️ ELECTION WATCH
Assam
(126 constituencies – 3-phase polls)
- The first phase of voting held last Saturday saw a voter turnout of 79.93% in the state. 75.79% of male voters, 76.07% of female voters and 11.29% of voters of the third gender (transgenders) voted during the first phase.
Kerala
(140 constituencies – 1-phase poll)
- The United Democratic Front (UDF) led by the Congress party has stated that it will announce the Chief Minister candidate only after the assembly elections which are scheduled for April 6, 2021.
Tamil Nadu
(234 constituencies – 1-phase poll)
- Former Union Minister and DMK leader A Raja has been issued a notice by the Election Commission asking him to explain his remarks about the Chief Minister Edappadi K Palaniswami before 6 pm today. “The Commission is of the view that the contents of the speeches made by you are not only derogatory but also obscene and lower the dignity of motherhood of women, which seems to be a serious violation of the provisions of the Model Code of Conduct,” the EC noted.
West Bengal
(294 constituencies – 8-phase polls)
- The Trinamool Congress party has complained to the Election Commission saying that Prime Minister Narendra Modi’s visit to Bangladesh violated the Model Code of Conduct. In its complaint, the party alleged that “no Indian Prime Minister has so brazenly indulged in an unethical and undemocratic act, and violated the Model Code of Conduct, by indirectly campaigning for his party from foreign soil.”
🏴 STATE OF THE STATES
Where are the trees? (Odisha) – The state’s Forest and Environment Minister Bikram Keshari Arukha stated in the assembly that over 1.85 crore trees were felled for widening of roads in the past decade. Compensatory afforestation guidelines state that twice the number of trees felled in non-forest areas and ten times the number of trees felled in forest areas need to be grown by user agencies through Odisha Forest Development Corporation. However, only 29.8 lakh trees have been planted in the decade from 2010-11 to 2020-21.
It’s burning (Delhi) – Monday was the hottest recorded day in Delhi in the month of March since 1945. The temperature touched 40.1 degree Celsius, which is 8 degrees higher than normal. Previously, the hottest day recorded in March was on March 31, 1945, when the temperature soared to 40.5 degree Celsius.
Refugee aid (Manipur) – The state government withdrew its controversial letter which directed officials to not setup refugee camps for Myanmar nationals who had crossed the border and entered India. The letter asked officials to provide medical help but ‘politely turn away’ those who seek refuge. The government has now stated that the contents of the letter were misconstrued and interpreted differently. It withdrew the letter and noted that the government was providing all aid to the refugees.
🔢 KEY NUMBER
14566 – Toll-free national helpline number to register cases of atrocities committed on members of Scheduled Castes and Scheduled Tribes communities. This number will be launched in April by Ministry of Social Justice and Empowerment. It will be available in Hindi, English and the local language of the State/UT. The helpline will enable victims to know about their rights and get relief.