WP/23558/2002 of M/S.SUNSHINE ENTERPRISE, Vs UNION OF INDIA,REP.BY ITS on 11 December 2003

:COMMON ORDER

In this batch of Writ Petitions, the common prayer is for theissuance of Writ of Mandamus, to direct the second respondent herein to assessthe respective petitioners' Bill of Entry pertaining to import of PortableEmergency Lamps, Model No.PRL-786 with DC Tubes to the usual Customs andCounter Veiling Duty on the value declared by the respective petitioners atthe rate of 3.25 US Dollars per unit and 16% on the maximum retail priceRs.330/- plus SAD 4% on the assessed value and to clear the goods.

2. It is common ground that all the respective petitioners are registered importers. They imported consignments consisting of differentquantities of Portable Emergency Lamps of Model No.PRL-786 with DC Tubes ofChinese Origin. The goods were stated to have been shifted from Hong Kong andwere supported by Invoices and the petitioners also filed their respectiveBills of Entry for the clearance of the goods.

3. It is stated that after submission of their Bills of Entry at the instance of the respondents, telegraphic communications came to beissued to the respective petitioners in respect of the consignment of PortableEmergency Lamps indicating that the value is to be enhanced to 5.25 US Dollarsas per the instructions of Special Investigating Intelligence Branch (in short'SIIB') and the respective petitioners were also called upon to put up their'DEPB SCRIP' for the differential duty. A perusal of one such telegraphicinstructions dated 28-6-2 002 filed in W.P.No.23558 of 2002 disclose that thesame was by way of a 'query' to the petitioner therein, and the saidpetitioner also submitted its reply dated 28-6-2002 stating that having regardto the Bill of Entry as well as the Invoice relating to the said consignment,the particulars of goods was 3.25 US Dollars per unit which is the correct andtrue value. It was also pointed out that identical goods imported by similarother registered importers were released by accepting the value at the rate of 3.25 US Dollars per unit.

4. It is in the above stated circumstances, the Writ Petitions came to be filed. While moving the above said Writ Petitions, anorder of Division Bench of this Court dated 24-9-2001 in W.A.No.1749 of 2001was relied upon. The said order of the Division Bench is to the followingeffect:

"The Writ Appeal is directed against the Interim Order passed by thelearned Single Judge dated 6-9-2001 in W.M.P.No.23731 of 2001 in W.P.No.15974 of 2001. The dispute relates for levy of Customs Duty on import ofemergency lamps from China. According to the appellant, he was paying the customs duty at 2.5 US $ per unit. But on knowing that the other identicaldealers are paying 3.25 US $ per unit. The appellant had been voluntarilypaying at the rate 3.25 US $ per unit. This was being accepted by theDepartment till recently. The last consignment was booked on 19-7-2001 andthe same has reached on 5-8-2001. It is not disputed that as on 19-7-201, theduty which was being collected by the customs department was at the rate of3.25 US $ per unit. If that be so, for the instant consignment what can becollected, prima facie, is only 3.25 US $ per unit. In that view of thematter, we allow the cargo to be cleared on payment of the appellant at therate of 3.25 US $ per unit. This is without prejudice to the rights of therespondent in the pending Writ Petition. We make it clear that in the eventof the Writ Petition being dismissed, then the appellant herein, who is thepetitioner in the Writ Petition shall be liable to pay the difference in dutybetween 5.25 and 3.25 U $ per unit with interest at 12% p.a. We also make itclear that we did not touch the merits of the levy and the respectivecontentions, for and against as such levy, are left open to be agitated in theWrit Petition. The Writ Appeal is disposed of accordingly. No costsconsequently C.M.P. No. 14620 of 2001 is closed."

5. In such circumstances, in all these Writ Petitions, while entertaining the Writ Petitions, by issuing Rule NISI, interim orders werealso granted following the above referred to Division Bench Order and one suchorder in W.M.P.NO.31079 of 2002 in W.P.No.22493 of 2002 is to the followingeffect:

"In the light of the similar orders passed in W.A.No.1749 of2001, the respondents are hereby directed to accept the payment of thepetitioner at the rate of 3.25 US $ per unit and release the goods covered bybill of entry No.404642 dated 21-6-2002 pertaining to the import of 3432pieces of Portable Emergency Philips, Model No.PRL-786 with Philips Tubeswithout prejudice to the contentions of the respondents.It is made clear that in the event of the dismissal of theWrit Petition, the petitioner shall be liable to pay the difference in duty aslevied by the respondents with interest at 12% p.a. Notice."

6. In this back ground, when all these Writ Petitions were grouped together and heard, the respective petitioners were represented byMr.M.Ranka, Mr.A.K.Jayaraj and Mr.F.X.A.F.Denny while the respondents wererepresented by the learned Addl.Solicitor General.

7. Mr.Renka and Mr.A.K.Jayaraj, learned counsel appearing for

the petitioner in the respective Writ Petitions, in their submissions, afterreferring to the relevant provisions of the Customs Act, as well as, CustomsValuation (Determination of Price of Imported Goods) Rules, 1988 and CustomsProvisional Assessment Regulations, contended that by virtue of Section 14read along with Rule 4, when once the registered importer sought for clearanceof goods imported by submitting the Bill of entry supported by the relevantInvoice, it is incumbent upon the respondent to accept the value as quoted inthe Bill of Entry, as well as, the Invoice relating to such Bill of Entryunless and until the respondents make out a definite case that such Bill ofEntry, as well as, Invoices did not reflect the correct value of the goodsimported by passing appropriate orders to that effect. It was also contendedthat any reliance placed upon by the respondents on materials collected behindthe back of the petitioners cannot be validly accepted in order to deprive the

Conclusion

petitioners of the release of the goods on payment of duty on the valuedeclared by the petitioners based upon the Bill of Entry as well as thesupporting Invoice. In fact, Mr.M.Renka appearing for the petitioners incertain Writ Petitions, contended that in these Writ Petitions, in the counteraffidavit filed on behalf of the respondents, though more than two years havelapsed after the filing the Writ Petitions, in some cases, the respondentswere unable to disclose before this Court as to how they are not in a positionto accept the value declared by the petitioners based upon the relevant Billof Entry and the supporting Invoices and in such circumstances, thepetitioners were fully justified in seeking for the release of the goods basedon the interim orders and no further liability can be fastened on thepetitioners based on irrelevant materials relied upon by the respondents andbased on which materials, no definite conclusion can be reached even as onthis date, that the nonacceptance of the value declared by the petitioners wasjustified. In other words, according to Mr.M.Renka, learned counsel of thepetitioners, the respondents failed to establish to the satisfaction of thisCourt that the doubt entertained by the respondents to the value of the goodsimported and as declared by the petitioners based on certain otherinformations referred to by them in their counter affidavit was not genuineand not bona fide. The learned counsel also pointed out that what was themarket survey conducted by them with relevant supporting materials and also asto what was the proof in support of the allegation of the respondents to statethat there was under invoicing at the instances of the petitioners. Accordingto the learned counsel, based on mere suspicion as suggested by therespondents, the relief claimed by the petitioners cannot be rejected.8. According to the learned counsel for the petitioners, whenthe bona fide importers on arrival of the goods at the Ports, filed allnecessary documents, based on mere suspicion, the allegation of underinvoicing cannot be presumed and in the circumstances, non-clearance of thegoods at the instance of the respondents necessitated the petitioners toapproach this Court for the issuance of the Writ of Mandamus as prayer for andalso seek for the release of the goods pending disposal of the Writ Petitions.It was therefore, contended that even if the respondents were to be allowed toproceed to make any assessment, the petitioners should not be mulcted with anyfurther liability apart from what had already been paid by them pursuant tointerim orders of this Court at the time of release of the goods. Lastly, Mr.Renka, learned counsel for the petitioners contended that even if therespondents were to be allowed to make any assessment, at best the respondentscan be directed to make their say in the form of a report to be submitted tothis Court, based on which final orders can be passed in these Writ Petitions.9. As against the above submissions made on behalf of thepetitioners, the learned Addl.Solicitor General prefaced his submissions bystating that all these Writ Petitions are pre-mature; that by virtue of theprovisions of the Customs Act as well as the relevant Rules framed thereunder,the respondents are fully empowered to make either a provisional assessment ora final assessment and while carrying out the above said exercise, the onlymandatory requirement is to follow the relevant rules. The learnedAddl.Solicitor General submitted that there is no provision in the Act or theRules that under all circumstances, the value claimed by an importer should beaccepted without any reservation. The learned Addl.Solicitor would state thatby virtue of Rule 4 read along with Rule 9 as well as Section 14 of the Act, there is every power vested with the authorities to make an investigation inthe event of any doubt arising as to the value declared by the importer andthe only requirement is to follow the prescribed procedure before making anyfurther assessment as regards the duty payable by an importer.

10. As regards the contention made on behalf of the petitioner that in other Ports, similar imported items have been released byaccepting the value at 3.25 US Dollars, the learned Addl.Solicitor Generalsubmitted that while each Port is independent in its functions, the procedureor assessment made in some other Port cannot be quoted as binding order ofassessment on the Chennai Port and that the respondents are entitled to invokethe relevant provisions of the Customs Act and the Rules whenever they are notin a position to accept the value as declared by an importer while applyingthe relevant provisions.

11. While on behalf of the petitioner, reliance was placed upon the decisions reported in 2000 (122) ELT 321 (SC) (EICHER TRACTORS LTD.Versus COMMISSIONER OF CUSTOMS, MUMBAI); 1991(5)ELT 15(Bom.), 1998(97 ) ELT 42(KER.) (KARAN VIR MEHTA versus COLLECTOR OF CUSTOMS, COCHIN); 1992(61)ELT 432(BOMB.) (KAMANI OIL INDUSTRIES versus UNION OF INDIA); 1996(87) ELT 19 (S.C.)(RANADEY MICRONUTRIENTS versus COLLECTOR OF CENTRAL EXCISE); 1992(62) ELT 616(TRIBUNAL) (SAI IMPEX versus COLLECTOR OF CUSTOMS); 1992(62) ELT 613

(TRIBUNAL) (LAXMI COLOUR LAB versus COLLECTOR OF CUSTOMS) and AIR 2001 SC 196(M/S.EICHER TRACTORS LTD. HARYANA versus COMMISSIONER OF CUSTOMS), theAddl.Solicitor General relied upon 1983 ELT 1596 SC (S.C.) (GEEP FLASHLIGHTINDUSTRIES LTD. Versus UNION OF INDIA & OTHERS).

12. To appreciate the submissions of the learned counsel for either parties, certain provisions of the Customs Act are required to bereferred to. Section 14 of the Customs Act provides as to how the valuationof goods for the purpose of assessment can be done. While Section 17 of theAct empowers the authorities to pass orders by way of making assessment of theduty of the goods imported which is otherwise known as final assessment, underSection 18, the authorities competent have been empowered to make provisionalassessment of duty under certain circumstances. While invoking Section 14 ofthe Act, the manner in which the value is to be assessed for the purpose ofduty has been set out in the Rules and the relevant Rule for our presentpurpose are, Rules 4, 9, 10, 10(A) and 11.

13. Under Rule 4(1), it is stipulated that the transaction value of the imported goods shall be the price actually paid or payable forthe goods when sold for export to India, to be adjusted in accordance with theprovisions of Rule 9. Under Rule 9, while determining the transaction value,what are the other components to be added to the price actually paid orpayable for the imported goods are provided. Under Rule 4(2), in order toaccept the transaction value as declared, provisos (a) to (h) have been setout. A reading of proviso (a) to (h) under Rule 4(2) would state under whatcircumstances, the transaction value of imported goods can be accepted as theprice actually paid or payable for the goods when sold for export to India.By virtue of Rule 10, the importer or his agent is expected to furnish in theform of a declaration disclosing full and accurate details relating to thevalue of imported goods supported by any other statement. By virtue of SubRule 1 of Rule 10, the importer can also support the reliance placed by itupon the declaration made under Rule 4(1) with supporting documents. Under

Rule 10(A), when the proper officer has reason to doubt the truth or accuracyof the value declared in relation to any imported goods, he may ask theimporter of such goods to furnish further information including documents orother evidence and if, after receiving such further information, or in theabsence of a response of such importer, if the proper officer still hasreasonable doubt about the truth or accuracy of the value so declared, itshall be deemed that the value of such imported goods cannot be determinedunder the provisions of sub-Rule (1) of rule 4. However, under Sub Rule (2)of Rule 10(A), at the request of an importer, the proper officer, shouldintimate the importer in writing the grounds for doubting the truth oraccuracy of the value declared in relation to goods imported by such importerand provide a reasonable opportunity of being heard, before taking a finaldecision under sub rule (1). In other words, while the proper officer hasbeen empowered under Rule 10(A) in regard to the consideration of theacceptance of the transaction value as declared by an importer under Rule 10for the purpose of Rule 4(1) in order to make payment of duty for the releaseof the goods where under the proper officer has been empowered either toaccept or for certain stated reasons to reject such declaration made, heshould given an opportunity in the event of an importer asking for suchopportunity to substantiate any such declaration made before a final decisionis to be rendered under Sub Rule (1) of Rule 4. Under Rule 11 in case of adispute between the importer and the proper officer of Customs valuing thegoods, the same shall be resolved consistent with the provisions contained insub-section (1) of Section 14 of the Customs Act. In other words, in theevent of the proper officer being not in a position to deal with the releaseof the goods, by straightaway applying Rule 4(1) read along with Rule 10 and10(A), thereafter the invocation of Section 14(1) comes into play.

14. Under Section 14(1) it is provided that- "14.Valuation of goods for purposes of assessment:-

(1) For the purposes of the Customs Tariff Act, 1975 (51 of1975) or any other law for the time being in force where under a duty ofcustoms is chargeable on any goods by reference to their value, the value ofsuch goods shall be deemed to be-the price at which such or like goods are ordinarily sold, oroffered for sale, for delivery at the time and place of importation orexportation, as the case may be, in the course of international trade, where-(a) the seller and the buyer have no interest in the businessof each other; or (b) one of them has no interest in the business of the other,and the price is the sold consideration for the sale or offer for sale.Provided that such price shall be calculated with reference tothe rate of exchange as in force on the date on which a bill of entry ispresented under Section 46, or a shipping bill or bill of export, as the casemay be, is presented under(1A) Subject to the provisions of sub-section (1), the pricereferred to in that sub-section in respect of imported goods shall bedetermined in accordance with the rules made in this behalf."Therefore, the invocation of Section 14(1) comes into play after exhaustingthe normal procedure as prescribed for the purpose of making an assessmentunder Section 17 (1) to (3) by invoking Rule 4 read along with the other Rules 9, 10 and 10(A). To put it differently, after carrying out an exercise as

9, 10 and 10(A). To put it differently, after carrying out an exercise as stipulated under Rules 4, 9, 10 and 10(A) the invocation of the provisioncontained under Section 14(1) comes into play by virtue of the very sectionrea d along with Rule 11. In such a situation, it will have to be stated thatthere is every scope for invoking Section 18 of the Customs Act for making aprovisional assessment of duty and for making such a provisional assessment,the necessary procedural requirement to be followed have been stipulated underthat very provision. In this contex t, it is also relevant to refer toCustoms (Provisional Duty Assessment) Regulations, 1963. Under which,'Conditions for allowing provisional assessment', 'Terms of the bond' and the'Surety or security of the bond' have been provided.

15. Therefore, a reading of the above stated provisions makes it clear that a definite procedure has been laid down as to how a declaredvalue of the importer can be accepted and under what circumstances, suchdeclaration of the value of the imported goods by an importer can be refusedto be accepted and under such circumstances, what are the other procedure tobe followed for the purpose of making an assessment by following certain welllaid down procedures with particular reference to the goods imported and passeither final assessment or in the event of the importer expressing his desireto have appropriate provisional assessment, to pass an order of provisionalassessment depending upon the urgency.

16. Applying the above said legal provisions to the goods involved, I find that as soon as the goods imported by the petitioners arrivedat the Port, they were stated to have filed the necessary Bills of Entry withsupporting Invoices and thereby, invocation of Rule 4(1) was attracted. Itwas at that stage, it is stated that the respondents sent a 'query' to theeffect that the value is to be enhanced to 5.2 5 US Dollars as per theinstructions of 'SIIB'. According to the petitioners, the said 'query'virtually amounted to not only not accepting the value declared by thepetitioners based on the Bill of Entry with supporting Invoices, that therewas a definite demand at the instance of the respondents that the value shouldbe enhanced to an extent of 5.25 US Dollars as against the petitioners'declared value of 3.25 US Dollars per unit; As far as the said 'query' wasconcerned, the learned Addl.Solicitor General has now made it clear that asthe very communication goes to say that it was only a 'query', and in anyevent, the learned Addl.Solicitor General upon instructions clearly statedthat the respondents never decided in the said communication that they haveassessed the value at 5.25 US Dollars per unit as against the declared valueat 3.25 US Dollars as claimed by the petitioners. According to the learnedAddl.Solicitor General what was indicated in the said 'query' was the primafacie doubt of the respondents based on certain preliminary investigationsundertaken at the instance of the respondents and as intimated to them by SIIBwhich made them to form a preliminary opinion to the effect that the declaredvalue of the petitioners cannot be straight away accepted in regard to thegoods imported, viz., Portable Emergency Lamps of Model PRL-786. When to thatextent, the position has now been made clear, it will have to be stated thatit cannot be held that the respondents are bound to accept the transactionvalue as declared by the petitioners on the import of the goods based on theBills of Entry and the supporting Invoices submitted by them. In other words,it will have to be held that the respondents were really not convinced thatthe petitioners satisfied Rule 4(2) and its provisos in order to accept the

transaction value as declared by them under Rule 4(1). In such a situation,the consequence would be the invocation of Rule 10(A) of the Customs Act.17. On a perusal of the materials available on records, itwill have to be held that the petitioners approached this Court at a stageeven before any further proceedings could be launched by the respondents byinvoking Rule 10(A). In other words, it will have to be held that the WritPetitions came to be filed by the petitioners at a stage which was highlypremature in point of time and in fact, by virtue of the various WritPetitions filed by the petitioners, the respondents were virtually preventedfrom invoking the procedures contemplated under Rule 10(A) and the other Rulesand the other provisions of the Act. If that is the hurdle, which hasresulted in by virtue of the pendency of these Writ Petitions, it will have tobe held that it would be wholly inappropriate at this stage and in these WritPetitions to make any attempt to evaluate the claim of the petitioners asregards the value of the goods imported in order to render a decision asregards the said value as declared by them or as doubted at the instance ofthe respondents. It would be travesty of justice if the claim of thepetitioners in regard to the value of the goods imported is to be determinedat this stage merely based upon the averments contained in the affidavits orthe stand taken by the respondents in the counter affidavits filed in theseWrit Petitions.

18. But at the same time, it cannot be held that merelybecause the respondents have come out with certain basic informations in theircounter affidavits, there is every scope for this Court to make aninvestigation as to what should be the value of the goods imported in order tofinally state one way or the other whether the declaration as made by thepetitioners in regard to the value of the imported goods are to be accepted oris to be rejected based on the value suggested by the respondents based oncertain informati on gathered by them as stated in their counter affidavits.If any such investigation is attempted to be made in these Writ Petitions, itwould be making an unnecessary inroad into the very exercise which is to beoriginated from the office of the Proper Officer as provided under theprovisions of the Customs Act and the Rules, in particular Rule 10(A) and 11read along with Section 14, 17 and 18 of the Act.

19. Therefore, I am of the firm view that these Writ Petitions are highly premature in nature and have been virtually came to befiled at the instance of the petitioners to thwart the statutory exercise tobe carried out by the respondents by virtue of the relevant Rules read alongwith the substantive provisions contained under the Customs Act. In suchcircumstances, it should be left to the authorities concerned to exercisetheir statutory power in accordance with law and in the event of thepetitioners being aggrieved of any such exercise of such statutory power, theprovisions of the Customs Act themselves provide for the appropriate remedyfor agitating their rights.

20. Having regard to my above said conclusion, I am not in aposition to countenance any of the submissions made on behalf of thepetitioners at this stage. In fact, the decision relied upon by the learnedAddl.Solicitor General reported in "1983 Vol.13 ELT 1596 (S.C.) ( GEEPFLASHLIGHT INDUSTRIES LTD. Versus UNION OF INDIA AND OTHERS)" fully supportthe above said view. The Hon'ble Supreme Court has stated the legal positionas under in para 24:

"24. The appellant's prayers for writs of certiorari and mandamus are misconceived. There is no order either judicial or quasijudicialwhich can attract certiorari. No mandamus can go because there is nothingwhich required to be done or forborne under the Act. The issue of the noticein the present case requires the parties to represent their case. There is noscope for mandamus to do any duty or act under the statute. A writ ofprohibition cannot be issued for the obvious reason that the CentralGovernment has jurisdiction to revise."

The above passage from the above quoted judgment of the Hon'bleSupreme Court is apposite in all respects to the facts of this case.21. As far as the decisions relied upon by the petitionersare concerned, a perusal of the various decisions will show that in all thosecases, the parties approached the Court at a stage where the action of theauthorities concerned came to be questioned after their exercise of powerwhich resulted in passing of a final order and thereby their decision came tobe clearly indicated to the aggrieved parties therein. Therefore, theprinciples set out in the various decisions cited on behalf of the petitionerscan have no application to the facts of this case. In the case on hand, goingby the only communication which has been placed before the Court on behalf ofthe petitioners, it cannot be concluded that a valid decision came to berendered at the instance of the respondents rejecting the transaction value asdeclared by the petitioners in respect of the goods imported. The saidcommunication as the caption goes to state is only in the nature of a 'query'.In other words, it can at best be stated to be an ' expression of doubt' whichlooms large in the mind of the respondents in accepting the transaction valueas declared by the petitioner for its face value. Beyond that, it cannot beheld that that communication itself can form a basis for the rejection of thetransaction value as declared by the petitioners based on the Bills of Entryor the Invoices. In any event, the learned Addl.Solicitor General having madeit clear that it was only a 'query' and by virtue of the said communication,the respondents never intended to communicate the petitioners that therespondents did not accept the value as declared by the petitioners. Butnevertheless the respondents were not prepared to accept the value as declaredby the petitioners, though there was every possibility of the respondentsinvoking the relevant Rules for passing consequential orders for the purposeof determining the correct value of the goods imported by the petitioners.22. As far as the submission made on behalf of the petitioners that having regard to the release of the goods by virtue of theinterim orders of the Division bench of this Court, they should not be mulctedwith any further liability, I can only state that the said question can nolonger be diluted further, in the light of the binding orders of the DivisionBench of this Court referred to by me earlier and extracted in the openingpart of this order. Therefore, the rejection of the stand of the petitionersin these Writ Petitions would automatically result in the consequence flowingfrom the said order of the Division Bench which has been followed in all thesubsequent interim orders pending Writ Petitions.23. Having regard to my above said conclusions, I do not findany merits in these Writ Petitions. The Writ Petitions fail and they aredismissed. However, taking note of the pendency of these Writ Petitions, I amof the view that the respondents can be directed to hasten the process ofpassing appropriate orders invoking the relevant rules in order to determine the duty payable on the goods imported by passing appropriate orders of assessment. The respondents shall pass appropriate orders as per law withinthree months from the date of receipt of copy of this order. No costs.Consequently, all connected W. P.M.Ps. are closed.

Index: YesInternet: Yes

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To

1. The Secretary,Union of India,Ministry of Finance,Department of Revenue,North Block,New Delhi-110 001.

2. The Deputy Commissioner of Customs,Group-VII-A, Custom House,No.60, Rajaji Salai,Chennai-600 001.