2025(03)LCX0029

Commissioner of Customs

Versus

Nippon Thermostat (India) Limited

Customs Appeal No. 41505 of 2015 decided on 12-03-2025

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH – COURT NO. I

Customs Appeal No. 41505 of 2015

(Arising out of Order-in-Appeal No. C.Cus. II No. 369/2015 dated 31.03.2015passed by the Commissioner of Customs (Appeals – II), Chennai)

Commissioner of Customs,                                        ...Appellant
Import Commissionerate - III,
Custom House, 60 Rajaji Salai,
Chennai-600 001.

Versus

M/s. Nippon Thermostat (India) Ltd.,                        ...Respondent
GA & GB “Rivera Park”,
No.11, 4^th Main Road Extension,
Kotturpuram, Chennai – 600 085.

APPEARANCE:

Ms. Anandalakshmi Ganeshram, Authorised Representative for the Appellant
Shri N. Viswanathan, Advocate for the Respondent

CORAM:
HON’BLE SHRI VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON’BLE SHRI AJAYAN T.V, MEMBER (JUDICIAL)

                                               FINAL ORDER No.40335/2025

DATE OF HEARING: 20.01.2025
DATE OF DECISION: 12.03.2025

Per Mr. Ajayan T.V.

The appeal has been preferred by the Commissioner of Customs, Chennai-III aggrieved by the Order-in-Appeal No.369/2015 dated 31.03.2015 whereby the Commissioner (Appeals) had dismissed the appeal preferred by the department against the Order-in-Original No.29566/2014 dated 16.09.2014 passed by the Deputy Commissioner of Customs Special valuation Branch in respect of M/s. Nippon Thermostat (India) Ltd, on the grounds that the Review Order authorising the department to prefer the appeal before the Commissioner (Appeals) has been passed beyond the period of 90 days prescribed under Section 129D(3) of the Customs Act, 1962 and thus the appeal is dismissed as time barred.

2. Brief facts are that the M/s. Nippon Thermostat Co. P. Ltd., Chennai the Respondent herein had imported raw materials and components from the related foreign supplier M/s. Nippon Thermostat Company Ltd., Japan. The said Order-in- Original was a periodical review of the earlier Order-in-Original No.17911/2011 dated 20.12.2011 which was accepted by the Commissioner imports on 14.03.2012. The adjudicating authority observed that the Indian company and the Foreign Company are related in terms of Rule 2(2) (iv) of the Customs valuation (Determination of value of the imported goods) 2007. The adjudicating authority, after scrutiny of the bills of entry and other relevant documents found that there is no change in the value/valuation pattern between the respondent and the foreign supplier. The adjudicating authority upon noticing a payment on account of royalty @ 3% on domestic sales and export sales subject to the approval of Central Government, then proceeded to examine the ‘Financial Technical Assistance and licence Agreement. The adjudicator found, inter-alia, that the agreement does not in any way prevent the respondent from sourcing the material elsewhere and there is no condition of sale enshrined in the agreement. The adjudicating authority also found that imported goods along with other indigenous goods are used in the manufacture of finished goods and it cannot be said that the imported goods alone is used in the finished product in order to establish a nexus with the imported goods and the payments neither relate to the import goods nor is a condition of sale and held that the same did not warrant addition under Rule 10(1)(c) & (e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The adjudicating authority ordered that the declared value in respect of import of raw materials shall continue to be accepted as transaction value under Rule 3(3)(a) of the CVR, 2007 for a further period of three years with a caveat that if any contemporaneous imports at higher prices are noticed, assessment groups may evaluate the goods under the appropriate provisions of the Customs Valuation Rules. The above said Order-in-Original was taken up for the review of the Reviewing Authority and vide Review Order No.197/2015 dated 20.01.2015, the adjudicating authority was directed to file an application before the Commissioner (Appeals) under Section 129(D) with a prayer to set aside the Order-in-Original of the Adjudicating Authority and to re-direct the case for proper examination of all records and evidences.

3. While the Order-in-Original was received on 01.10.2014 in the Review Cell, due to an inadvertent clerical error, the last date for review was shown as 31.01.2015 instead of 31.12.2014. Therefore, the Review Order which was dated 20.01.2025, was issued after a delay of 20 days. The Commissioner (Appeals) vide Impugned Order-in-Appeal had rejected the appeal as time barred observing that the Order dated 16.09.2014 which was received by the Review Cell, Custom House, Chennai on 30.09.2014 and the Review Order having been passed only on 20.01.2015, and thus been passed beyond the period of 90 days prescribed under Section 129(D) (3) of the Customs Act, 1962. Finding thus, the Appellate Authority has dismissed the appeal filed by the department as time barred.

4. Aggrieved by the Impugned Order-in-Appeal, and consequent to Review Order No.36/2015 dated 09.07.2015 of the Committee of Commissioners, the appellant has preferred the present appeal.

5. Ld. AR Ms. Anandalakshmi Ganeshram appeared for the appellant and submitted that the Impugned Order-in-Appeal is not legal and proper as per the grounds of appeal preferred. Ld. AR submitted that the Appellate Authority has erred in rejecting the appeal as time barred, since passing of the Review Order within 3 months from the date of Communication of the OIO by the communication of Commissioners under Section 129D(3) is an internal procedural matter and the substantive condition was to file the appeal within 1 month of the passing of the Review Order as per provisions of Section 129(D)(4) of the customs Act, 1962 within the overall time frame of 4 months.

The Ld. AR submitted that the appeal filled by the Revenue before the Commissioner (Appeals) is thus in time and the matter may be remanded to the Appellate Authority to take up the case and decide on merits. The Ld. AR placed the reliance in this regard on the decisions in:-

(a) M/s.Monnet & Energy Ltd. {2010 (257) ELT 239 - CESTAT New Delhi}

(b) M/s. KAP CONES {2017 (50) STR 194 - SC}

(c) M/s.Vasta Biotech P. Ltd. {2024 (7) ΤΜΙ 1530 –CESTAT, CHENNAI}

6. The Ld. Counsel for the Respondent Shri N. Viswanathan supports the dismissal of the appeal by the Appellate Authority and states that the findings rendering the appeal was time barred is correct in fact as well as in law. He submits that the department had not sought any Condonation of Delay when admittedly the appellant has conceded in the statement of facts of the appeal preferred that there was a delay of 20 days in issuing the Reviewing Order requiring the filing of appeal before the Commissioner Appeals. The Ld. Counsel submits that as per mandate of Section 129(D)(3) the review order necessarily had to be made within a period of three months from the date of communication of the order in original of the adjudicating authority. It is the submission of the Ld. Counsel that if at all there was a delay it was necessary that the approval of the board had to be taken for passing the Review Order even with such delay showing justifiable reasons, since the proviso to sub-section (3) of Section 129D mandates that the Board may, on sufficient cause being shown, extend the said period (period of passing the review order) by another thirty days. The Ld. Counsel submits that the appellant while preferring an appeal before the Commissioner appeals had neither produced any sanction by the Board extending the period for passing the review order by the Reviewing Commissioner, nor has the appellant, filed any application for Condonation of Delay in passing the said review order, before the Commissioner (Appeals). It is his submission that even before this Tribunal the appellant has not sought or filed any application for condonation of the above mentioned delay of passing the review order beyond the statutory period prescribed or produced any sanction of the Board extending the period for filing the review order as mandated by proviso to Section 129D(3).

7. Heard both sides and perused the appeal records. It is seen that indisputably there is a delay of 20 days in the issue of the review order. It is seen that the Revenue has in the appeal preferred before this Tribunal raised the following grounds:

“6. The subject Order-in-Appeal does not appear to be legal and proper for the following reasons:

(i) The departmental appeal was filed on the following grounds

"The view of the LAA that Royalty payment is neither related to the imported goods nor is condition of sale appears to be erroneous for the reason that without Technical Assistance or related foreign supplier the importer is not able to manufacture the finished goods out of the goods imported from related foreign supplier From the order it is also seen that importer has not demonstrated that they have procured goods from any unrelated foreign supplier to manufacture their finished goods. Thus, there appears to exist a direct nexus between payment of royalty and goods imported from related foreign supplier Further, condition of sale may not be expressly provided in the agreement. Hence, it is necessary to examine the agreement to draw on inference as to whether without payment of royalty, the importer was able to import the goods from related foreign supplier or having paid the royalty was the importer free to import the goods from any other supplier This aspect has not been examined and discussed in the order. If the importer is not in a position to import the goods from unrelated suppliers in the case of non-payment of royalty to the related foreign supplier, the royalty warrants addition in the value of the imported goods in terms of provisions of Rule 10(1)(C) & (e) Customs Valuation (Determination of Value of Imported Goods) Rules 2007"

Since, the Appellate Authority has not decided the case on merits and has rejected the appeal under section 129(D) (4) of the Customs Act 1962 on the ground of limitation, there would be a loss of revenue due to the implementation of the Order in-Original though it does not appear to be legal and proper. The issue raised by the department before the Appellate Authority needs to be examined for safeguarding of the revenue.”

8. As rightly contended by the Ld. Counsel for the Respondent, proviso to Section 129D(3) mandates that the Board may, on sufficient cause being shown extend the said period(the period for passing the review order) by another thirty days and even before this Tribunal the appellant has not evidenced that the appellant has shown sufficient cause to the Board and had obtained the sanction of the Board as mandated in the proviso to Section 129D(3) ibid for preferring the appeal before the Commissioner Appeals beyond the statutorily prescribed period provided in sub-section (3) of Section 129D. Further, the appellant has also not evidenced that in the absence of any such order of the Board providing the extension sought on sufficient cause being shown, the appellant had filed an application seeking condonation of delay of 20 days stating justifiable reasons before the Commissioner Appeals. As can be seen from the grounds of the appeal before this Tribunal reproduced supra, the appeal is only on the grounds that the rejection of the appeal on the ground of limitation by the Lower Appellate Authority would be a loss for the Revenue and the Appellate Authority has not decided the case on merits.

9. There is no explanation or justification provided for not adhering to the mandate of proviso to Section 129(D)(3) nor any explanation provided for not preferring an application for condonation of delay for filing the review order beyond the period prescribed in Section 129 D(3) before the Commissioner of Appeals in the absence of any sanction obtained/permission accorded by the Board as per proviso to Section 129D(3).

10. In this context it is pertinent to note the findings of the Honourable Supreme Court with respect to the amendment made to proviso to clause (3) of section 35 E of the Central Excise Act, 1944, a Section pari-materia to clause (3) of Section 129D of the Customs Act, 1962. The Honourable Supreme Court noticed the amendment of 2014 to proviso to clause (3) of Section 35 E in para 17 and 18 of the decision in CCE, Delhi III v KAP Cones, 2017 (50) STR 194 (S.C), as under:

“17. Vide amendment of 2014, proviso to Clause (3) of Section 35E was added which reads as follows:

‘Provided that the Board may, on sufficient cause being shown, extend the said period by another thirty days.’

18. It is apt to note here that the controversy in the instant case is governed by the 2008 amendments. We have referred to the 2014 amendment, as by the said amendment it has been stipulated that the Board has power to extend the time for passing an order under sub-sections (1) and (2) by a period of 30 days. We shall overt to the impact of the same at a later stage.”

After so stating, the Honourable Apex Court then held in para 25 as under:

“25. As stated earlier, we must advert to the proviso inserted in sub-section (3) to Section 35 E by the Finance Acct, 2014. The said proviso has a different purport. It empowers the Board to extend the time of passing of an order under sub-sections (1) and (2) by a period of 30 days. Once an order has been passed by the Board in exercise of the said power under the proviso, there would be no need and necessity to file an application seeking condonation of delay for the periods specified, which cannot exceed 30 days. The insertion of the said proviso by Finance Act, 2014 does not negate and is not contrary to the legislative mandate by Section 35E as it existed prior to or after insertion of the said proviso.”

( emphasis supplied ).

11. As observed earlier, clause (3) of Section 35 E is pari- materia to clause (3) of Section 129D of the Customs Act, 1962 and the findings of the Honourable Apex Court in this regard is equally applicable to Section 129(3) and proviso thereto, since even in Section 129(3) the proviso was inserted w.e.f 06-08- 2014 by Section 88 of the Finance (No.2) Act, 2014 (25 of 2014). It can be seen from the aforesaid finding of the Supreme Court that once an order has been passed by the Board in exercise of the said power under the proviso, there would be no need and necessity to file an application seeking condonation of delay for the periods specified, which cannot exceed 30 days. Thus, the requirement of obtaining an order passed by the Board in exercise of the said power is seen as sacrosanct to obviate the necessity to file an application seeking condonation. The appellant had placed reliance on a decision of the coordinate bench in CC v Vasta Biotech Pvt Ltd in this regard. We notice that there are two crucial aspects that distinguishes the facts and circumstances of the case from that before us. Firstly, as can be seen from para 3.2 of the said decision, the Ld. Counsel for the respondent had conceded that they are not contesting the issue of time bar. Secondly, the aspect of whether the appellant therein had obtained the permission of the Board was not an issue that arose for consideration and thus the Bench had no occasion to dwell on such a factual aspect or deal with such a situation, which distinguishes the matter from the present case. We there find that the said order is thus distinguishable as the facts and circumstances therein are different from the facts and circumstances of this case. In any event, the findings of the Apex Court on the necessity to act in accordance with the mandate of the proviso inserted in sub-section (3) to Section 35 E by the Finance Act, 2014, which is pari-materia with the proviso inserted in sub-section (3) to Section 129D (3), as elucidated supra, settles the issue.

12. In this case, neither has any evidence been let in that an application showing sufficient cause has been preferred to the Board to extend the period for filing of review order nor has any such order of the Board extending the period for filing of the review order been produced. It has also not been shown that the appellant had preferred any application for condonation of non- filing of the extension order of the Board or seeking condonation of delay of 20 days in passing the review order, in the absence of such sanction/permission of the Board before the learned Appellate Authority. The appellant has no right to any preferential consideration to get its delay or non-compliance of the mandate of law condoned mechanically and without adhering to the mandate of law. In view of our aforesaid discussions, we find no justifiable reason shown to interfere with the impugned Order-in-Appeal of the Commissioner of Customs (Appeals) and the same is upheld.

13. The appeal preferred by the appellant is therefore dismissed.

(Order pronounced in open court on 12. 03. 2025)