1. The Customs Act, 1962 provides a detailed framework for assessment of duties, including provisional assessments under Section 18. Recent developments, legislative amendments and judicial pronouncements have highlighted the importance of ensuring clarity in the process of assessment, particularly in distinguishing between provisional assessment, final assessment and reassessment.
2. In cases of import or export of goods, for the period upto 08.04.2011, each and every Bill of Entry (hereinafter referred to as “BoE”) or Shipping Bill was assessed by the proper officer under section 17 of the Customs Act, 1962 (hereinafter referred to as “the Act, 1962”).
3. That, however, from 08.04.2011 onwards, the existing system of assessment under section 17 of the Act, 1962 by the proper officer was replaced with self-assessment by the importer or exporter, as the case may be. That assessment of BoEs was no longer the task of the proper officer under section 17 ibid. That the proper officer can only do re-assessment in case he did not agree with the self-assessment.
4. That above-mentioned reasonings have also been appreciated by the Larger Bench of Hon’ble Supreme Court in its judgment dated 07.11.2024 issued in the matter of Commissioner of Customs Versus Canon India Pvt. Ltd. (Review Petition No. 400 of 2021 in Civil Appeal No. 1872 of 2018) reported as 2024 SCC Online SC 3188. To quote the relevant paras:
“85. We note that with effect from 08.04.2011, the functions of the proper officer Under Section 17 also underwent certain changes. One such change is that the assessment of bill(s) of entry and shipping bill(s) was no longer the task of the “proper officer”. With effect from 08.04.2011, Bill(s) of Entry and/or Shipping Bill(s) are self-assessed. This self-assessment is to be accepted or rejected by the proper officer subject to verification in certain cases.
86. The “proper officer” appointed for the purpose of Section 17 of the Act, 1962 under a notification issued Under Section 2(34) of the Act, 1962 could only make a re-assessment of the bill(s) of entry and shipping bill(s) in case they did not agree with the self-assessment of the importer or the exporter as the case may be.
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90. These changes highlight that the competence of the proper officer to conduct “assessment” is completely taken away by the legislature vide the amendment to section 17. The new section 17 empowers the proper officer to perform the functions of verification of self-assessment and subsequent re-assessment, if found necessary. However, such re-assessment is not a mandatory function on the same footing as “assessment” under the old section 17. Therefore, in our considered view the scope of the functions of the proper officer under the new section 17 is limited.”
5. That consequential amendments were also made in Section 18 of the Act, 1962 by Finance Act, 2011 to make the provisions relating to provisional assessment of duty applicable in cases where an importer is unable to make the self-assessment. That the existing circumstances for doing provisional assessment were modified to make them applicable in situations where proper officer wants to verify the self-assessment and goods cannot be re-assessed quickly but are required to be cleared by the importer on an urgent basis.
6. That, therefore, amongst various amendments made in Section 18 of the Act, 1962, the words “or re-assessed by the proper officer” / “or re-assessment order” / “or re-assessment of duty, as the case may be” were inserted after the words “assessed finally” / “final assessment order” / “duty finally” wherever appearing in Section 18 of the Act, 1962. That the words “finally assessed or re-assessed, as the case may be” were substituted for the words “finally assessed”.
7. That even the Board clarified the above-stated amendments vide its Circular No. 17/2011-Customs dated 08.04.2011 and stated when provisional assessment is to be converted into final assessment or re-assessment. To quote the relevant para:
“7. Hence, in both the cases where no self-assessment is done and when self-assessment is done and reassessment is required under Section 17, the importer or exporter can opt for provisional assessment of duty by the proper officer of Customs. The difference is that when no self-assessment is done, the provisional assessment shall get converted into final assessment and when self-assessment is done, the provisional assessment shall get converted into re-assessment. Consequential changes are being made in the Customs (Provisional Duty Assessment) Regulations, 1963.”
Furnishing of Security and Bond for the purposes of Provisional Assessment
8. That in order to do provisional assessment under section 18, importer or the exporter, as the case may be, is required to furnish such security as the proper officer deemed fit for the payment of differential duty. That in order to bring uniformity, Board laid down guidelines for provisional assessment under section 18 of the Customs Act, 1962 vide its Circular No. 38/2016-Customs dated 22.08.2016.
9. That in said Circular, Board noted the existing regulations in para 2 and duly noted that existing regulations considers differential duty to be difference between “provisional duty” and duty to be “finally assessed or re-assessed”.
The Issue
10. That while laying down the revised guidelines for provisional assessment in the year 2016, in para 2.2 of the said Circular, Board did not take note of amended language of Section 18 of the Act, 1962 and did not note that the words “or re-assessed, as the case may be” inserted by Finance Act, 2011 in the substituted language of Section 18(1). The language considered in Circular and language as per the provision is juxtaposed below:
Language of Section 18 as quoted in para 2.2 of the Circular 38 (supra)
the proper officer may direct that the duty leviable on such goods be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed and the duty provisionally assessed.
Language of the Section 18 after amendments by Finance Act, 2011
the proper officer may direct that the duty leviable on such goods be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed or re-assessed, as the case may be and the duty provisionally assessed.
[Emphasis Supplied]
11. Furthermore, as per the Circular, it is essential that the importer binds himself for the payment of deficiency (i.e., the differential duty). Therefore, provisional duty bond is asked only to cover the amount of differential duty. However, practically it has been seen that proper officers are asking for provisional duty bonds for an amount equivalent to the assessable value of goods.
Paksh Remarks
12. In view of the foregoing, the above-mentioned Circular 38 (supra) to include the reference of “or re-assessed, as the case may be” wherever the words “finally assessed” appearing. To quote the para where said amendment is required:
i) Para 2.2
ii) Para 2.3 (a)
iii) Para 2.4
iv) Para 2.8 (a)
v) In all formats of Bond – Individual Importation (with Bank Guarantee or Cash Deposit); Individual Importation (without Bank Guarantee or Cash Deposit); Continuity Bond (with Bank Guarantee or Cash Deposit); Continuity Bond (without Bank Guarantee or Cash Deposit)