Customs Deputy Commissioner's Order Contrary To AAR's Ruling, Bombay High Court Quashes

The Bombay High Court has quashed the customs deputy commissioner's order contrary to the ruling passed by the Authority of Advance Ruling (AAR).

The bench of Justice G.S. Kulkarni and Justice Jitendra Jain has observed that the ruling passed by the AAR in the petitioner's own case is binding under Section 28 J (1) on the petitioner and the respondents/department as there is no change in law post-decision and the decision has been accepted by the department in the absence of any further challenge before the higher forum.

The petitioner/assessee is in the business of importing various edible products, including products of betel nuts (processed supari). The petitioner has been importing various forms of supari, stated to be unflavored betel nuts (supari) and API betel nuts (supari). The petitioner is importing the goods from only two suppliers. The imports are received at Chennai and JNPT ports.

The assessee sought the advance ruling on the issue of classification under Customs Tariff Heading of the products of betel nuts. The AAR held that the goods sought to be imported, namely, 'unflavoured supari', 'flavoured supari', 'API supari', and 'Chikni supari', were being processed. Betelnut products that do not contain specified ingredients, namely lime, kath, and tobacco, but contain other flavouring materials or additives are classifiable under Customs Tariff Heading 2106 90 30.

The petitioner imported betel nuts from Indonesia at the Chennai port and classified them as 'unflavoured supari'. The goods were assessed under Custom Tariff Heading (CTH) 21069030 as 'unflavoured supari'. However, the officer of DRI did not permit the cargo to be cleared on the ground that the petitioner had misclassified the goods.

The petitioner challenged the action by filing a writ petition before the Madras High Court contending that the classification issue is resolved by the AAR, in which the AAR has given a ruling that 'unflavoured supari' is to be classified under CTH 21069030.

The petitioner imported unflavored supari from Myanmar by classifying it under CTH 21069030. The department passed an order rejecting the classification of the goods imported under CTH 21069030 and ordered them to be classified under heading 0802.

The petitioner contended that the classification issue in its own case has been decided by the AAR, which has attained finality since it was not challenged before the higher forum. Therefore, relying on Section 28J(1) of the Customs Act, we would contend that the said ruling is binding on the respondents. A mere dismissal of the appeal filed by parties before the Supreme Court against the orders passed by the Chennai Bench of the Tribunal cannot be considered a change of law so as to contend that the advance ruling is not binding under Section 28J (2).

The department contended that the O-I-O is an appealable order and, therefore, the petitioner should be relegated to an alternate remedy. The department relied on various decisions for the proposition, refusing to entertain writ jurisdiction. The appeal against the order has been dismissed by the Supreme Court, and the ruling given by the AAR is not binding as per Section 28J(2) of the Customs Act. Therefore, the respondents were justified in passing the order.

Section 28J(1) provides that the advance ruling pronounced by the authority shall be binding not only on the applicant who had sought it but also on the Principal Commissioner of Customs or Commissioner of Customs and the customs authorities subordinate to him, in respect of the applicant. However, Section 28J (2) provides that the advance ruling shall be binding unless there is a change of law or facts on the basis of which the advance ruling has been pronounced.

The court noted that the assessee can invoke writ jurisdiction under Article 226 of the Constitution of India, despite an alternate statutory remedy of an appeal interalia, on the grounds that there is a breach of fundamental rights, a breach of natural justice, an order passed without jurisdiction, or there is a challenge to the vires of the statute. The Court can exercise writ jurisdiction in spite of the appeal remedy being available to the petitioner.

The court held that an assessee can invoke writ jurisdiction if the action is in excess of jurisdiction. The department passed the O-I-O contrary to the provisions of Section 28J and, therefore, it is without jurisdiction. The order was passed without jurisdiction, and the writ petition is maintainable. The petitioner, therefore, ought not to be relegated to taking recourse to an appellate remedy.

Counsel For Petitioner: Prakash Shah

Counsel For Respondent: Jitendra B. Mishra

Case Title: Isha Exim carrying on business Versus UOI

Case No.: Writ Petition No.10512 Of 2023

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