COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, NOIDA versus M/S. SANJIVANI NON-FERROUS TRADING PVT. LTD. on 10 December 2018

1. The issue raised in these appeals pertains to the transactionvalue/assessable value in respect of imported Aluminum Scrap, whichwas imported by the respondent herein. The respondent had importedvarious varieties of the said Aluminum scrap during the period 27[th]August, 2013 to 29[th] December, 2014 and filed 843 Bills of Entry alongwith invoices and purchase orders in respect therein declaring thetransaction value of the imported goods for the purpose of paying customduty. The declared value was not accepted by the Assessing Officerwho found the same to be low. Accordingly, the said declared valuewas rejected and reassessment was done by increasing the assessablevalue.

2. In a writ petition filed by the respondent in the High Court ofAllahabad, on the directions of the High Court directed the DeputyCommissioner of Customs, NOIDA passed a speaking order dated 25[th]March, 2015, giving his reasons to reject the transaction value as declaredby the respondent and enhancing the same by taking into considerationthe value of imported goods, namely, grades of scrap Aluminum contentstherein as well as quantum of presence of other metals.

3. The assessment order dated 25[th] March, 2015 passed by theAssessing Officer was challenged by filing appeals before theCommissioner (Appeals), Central Excise and Customs, NOIDA. All theseappeals were dismissed. Challenging the order of the Commissioner(Appeals), the respondent approached the Customs, Excise and ServiceTax Appellate Tribunal (hereinafter referred to as the “Tribunal”). Bythe impugned common judgment dated 17[th] January, 2017, the appealsof the respondent were allowed thereby rejecting the enhancement ofassessable value by the Revenue. It is the said order of the Tribunal,which is the subject matter of these appeals.

4. The entire basis of the order of the Tribunal is contained inparagraph 7 of the impugned judgment and since that paragraph containsthe reasons which persuaded the Tribunal to set aside the order of theauthorities below, we reproduce this para along with paragraph 8 whichdisclosed the outcome of the appeals, in entirety.

A

BC

D

E

F

G

A“7. Having considered the rival contentions and on perusal ofrecord, we find that the Original Authority was directed by theHon’ble High Court to pass speaking order on the enhancementof assessable value. We find that the Original Authority in itsOrder-in-Original dated 25/03/2015 passed comments on theground of writ petition and did not properly examine the evidenceBavailable with the department required to be examined forenhancement of assessable value. Further, we find that as held inthe case laws stated above and as provided by Section 14 ofCustoms Act, 1962, the assessable value has to be arrived at onthe basis of the price which is actually paid and in a case theCprice is not sole consideration or if the buyers and sellers arerelated persons then after establishing that the price is not soleconsideration the transaction value can be rejected and taking theother evidences into consideration the assessable value can bearrived at. Such exercise has not been done in these cases onhand. Therefore, we reject the enhancement of assessable valueDin respect of the Bills of Entry which are involved in all the appealsbeing decided and we restore the assessable value as declared bythe appellant in said Bills of Entry.

8. In result, we set aside all the impugned Orders-in-Appeal andallow all the appeals. The appellant shall be entitled forEconsequential relief, if any, in accordance with law.

5. The precise submission of Mr. K. Radhakrishna, learned seniorcounsel appearing for the Revenue was that as per the Tribunal itself,the reasons for upsetting the order in original are:

F(a) That he did not properly examine the evidences available withthe Department, which were required to be examined for the purpose ofenhancement of assessable value.

(b) As per the provisions of Section 14 of the Customs Act, 1962and the case law in respect thereof, the assessable value has to beGarrived at on the basis of the price which is actually paid and in case theprice is not the sole consideration or if the buyers and sellers are relatedpersons then after establishing that the price is not the sole consideration,the transaction value can be rejected. However, such exercise has notbeen done in these cases.

H

6. It was submitted that if the Original Authority/Assessing Officerhad failed to examine the evidence that was available with the Departmentand had not undertaken the exercise regarding price being not the soleconsideration, the Tribunal should have remanded the case back to theAssessing Officer for examining the material and undertaking thatexercise. To put it otherwise, the entire thrust of the argument of Mr.Radhakrishna was that appeals could not have been allowed straightawayby accepting the transaction value given by the respondent/assesseeand another opportunity should have been given to the Assessing Authorityin this behalf.

7. This argument may seem to be attractive, but only when thereis a cursory look at the aforesaid observations of the Tribunal that theAssessing Officer did not examine the evidence available with theDepartment which was necessitated for such a purpose. However, theobservations of the Tribunal have to be understood in their entirety andin the context in which these are made. The Tribunal has categoricallymentioned that as per the provisions of Section 14 of the Customs Actand the principles laid down in the case law (which it referred to in theearlier part of the judgment) interpreting this provision, the assessablevalue has to be arrived at on the basis of the price which is actually paid.It is the basic principle enshrined in the aforesaid provision, i.e., Section14, which can be culled out from the catena of judgments pronouncedby this Court.

8. In Eisher Tractors Ltd., Haryana vs. Commissioner ofCustoms, Mumbai[1], this Court held as under:

“6. Under the Act customs duty is chargeable on goods. Accordingto Section 14(1) of the Act, the assessment of duty is to be madeon the value of the goods. The value may be fixed by the CentralGovernment under Section 14(2). Where the value is not so fixed,the value has to be determined under Section 14(1). The value,according to Section 14(1), shall be deemed to be the price atwhich such or like goods are ordinarily sold, or offered for sale,for delivery at the time and place of importation — in the courseof international trade. The word “ordinarily” necessarily impliesthe exclusion of “extraordinary” or “special” circumstances. This

A

B

CD

E

FG

1198 SUPREME COURT REPORTS [2018] 14 S.C.R.

A

B

C

D

E

F

G

H

is clarified by the last phrase in Section 14 which describes an“ordinary” sale as one “where the seller and the buyer have nointerest in the business of each other and the price is the soleconsideration for the sale …”. Subject to these three conditionslaid down in Section 14(1) of time, place and absence of specialcircumstances, the price of imported goods is to be determinedunder Section 14(1-A) in accordance with the Rules framed inthis behalf.

xxxxxxxxx

9. These exceptions are in expansion and explicatory of the specialcircumstances in Section 14(1) quoted earlier. It follows that unlessthe price actually paid for the particular transaction falls withinthe exceptions, the Customs Authorities are bound to assess theduty on the transaction value.

xxxxxxxxx

12. Rule 4(1) speaks of the transaction value. Utilisation of thedefinite article indicates that what should be accepted as the valuefor the purpose of assessment to customs duty is the price actuallypaid for the particular transaction, unless of course the price isunacceptable for the reasons set out in Rule 4(2). “Payable” inthe context of the language of Rule 4(1) must, therefore, be readas referring to “theparticular transaction” and payability in respectof the transaction envisages a situation where payment of pricemay be deferred.

xxxxxxxxx

xxxxxxxxx

13. That Rule 4 is limited to the transaction in question is alsosupported by the provisions of the other rules each of which providefor alternate modes of valuation and allow evidence of value ofgoods other than those under assessment to be the basis of theassessable value. Thus, Rule 5 allows for the transaction value tobe determined on the basis of identical goods imported into Indiaat the same time; Rule 6 allows for the transaction value to bedetermined on the value of similar goods imported into India atthe same time as the subject goods. Where there are nocontemporaneous imports into India, the value is to be determined under Rule 7 by a process of deduction in the manner providedtherein. If this is not possible the value is to be computed underRule 7-A. When value of the imported goods cannot be determinedunder any of these provisions, the value is required to be determinedunder Rule 8 “using reasonable means consistent with theprinciples and general provisions of these Rules and sub-section(1) of Section 14 of the Customs Act, 1962 and on the basis ofdata available in India”. If the phrase “the transaction value” usedin Rule 4 were not limited to the particular transaction then theother rules which refer to other transactions and data wouldbecome redundant.

22. In the case before us, it is not alleged that the appellant hasmisdeclared the price actually paid. Nor was there a misdescriptionof the goods imported as was the case in Padia SalesCorpn. [1993 Supp (4) SCC 57] It is also not the respondent’scase that the particular import fell within any of the situationsenumerated in Rule 4(2). No reason has been given by the AssistantCollector for rejecting the transaction value under Rule 4(1) exceptthe price list of vendor. In doing so, the Assistant Collector notonly ignored Rule 4(2) but also acted on the basis of the vendor’sprice list as if a price list is invariably proof of the transactionvalue. This was erroneous and could not be a reason by itself toreject the transaction value. A discount is a commercially-acceptable measure which may be resorted to by a vendor for avariety of reasons including stock clearance. A price list is reallyno more than a general quotation. It does not preclude discountson the listed price. In fact, a discount is calculated with referenceto the price list. Admittedly in this case a discount up to 30% wasallowable in ordinary circumstances by the Indian agent itself.There was the additional factor that the stock in question was oldand it was a one-time sale of 5-year-old stock. When a discountis permissible commercially, and there is nothing to show that thesame would not have been offered to anyone else wishing to buythe old stock, there is no reason why the declared value in questionwas not accepted under Rule 4(1).”

AB

C

DEFG

1200 SUPREME COURT REPORTS [2018] 14 S.C.R.

A

9. To the same effect, are other judgments, reiterating the aforesaidprinciple, such as, Commissioner of Customs, Calcutta vs. South IndiaTelevision (P) Ltd.[2], Chaudhary Ship Breakers vs. Commissionerof Customs, Ahmedabad[3] and Commissioner of Customs,Vishakhapatnam vs. Aggarwal Industries Ltd.[4].

B10. The law, thus, is clear. As per Sections 14(1) and 14(1-A),the value of any goods chargeable to ad valorem duty is deemed to bethe price as referred to in that provision. Section 14(1) is a deemingprovision as it talks of ‘deemed value’ of such goods. Therefore, normally,the Assessing Officer is supposed to act on the basis of price which isactually paid and treat the same as assessable value/transaction valueCof the goods. This, ordinarily, is the course of action which needs to befollowed by the Assessing Officer. This principle of arriving at transactionvalue to be the assessable value applies. That is also the effect of Rule3(1) and Rule 4 (1) of the Customs Valuation Rules, namely, theadjudicating authority is bound to accept price actually paid or payableDfor goods as the transaction value. Exceptions are, however, carved outand enumerated in Rule 4(2). As per that provision, the transactionvalue mentioned in the Bills of Entry can be discarded in case it is foundthat there are any imports of identical goods or similar goods at a higherprice at around the same time or if the buyers and sellers are related toeach other. In order to invoke such a provision it is incumbent upon theEAssessing Officer to give reasons as to why the transaction value declaredin the Bills of Entry was being rejected; to establish that the price is notthe sole consideration; and to give the reasons supported by material onthe basis of which the Assessing Officer arrives at his own assessablevalue.

F

11. In South India Television (P) Ltd., the Court explained as tohow the value is derived from the price and under what circumstancesthe deemed value mentioned in Section 14(1) can be departed with.Following discussion in the said judgment needs to be quoted hereunder:

“10. We do not find any merit in this civil appeal for the followingGreasons. Value is derived from the price. Value is the function ofthe price. This is the conceptual meaning of value. Under Section2(41), “value” is defined to mean value determined in accordance 2(2007) 6 SCC 3733(2010) 10 SCC 576H4(2012) 1 SCC 186

with Section 14(1) of the Act. Section 14 of the Customs Act,1962 is the sole repository of law governing valuation of goods.The Customs Valuation Rules, 1988 have been framed only inrespect of imported goods. There are no rules governing thevaluation of export goods. That must be done based on Section 14itself. In the present case, the Department has charged therespondent importer alleging misdeclaration regarding the price.There is no allegation of misdeclaration in the context of thedescription of the goods. In the present case, the allegation is ofunderinvoicing. The charge of underinvoicing has to be supportedby evidence of prices of contemporaneous imports of like goods.It is for the Department to prove that the apparent is not the real.Under Section 2(41) of the Customs Act, the word “value” isdefined in relation to any goods to mean the value determined inaccordance with the provisions of Section 14(1). The value to bedeclared in the bill of entry is the value referred to above and notmerely the invoice price.

xxxxxx

xxx

xxxxxx

xxx

12. However, before rejecting the invoice price the Departmenthas to give cogent reasons for such rejection. This is because theinvoice price forms the basis of the transaction value. Therefore,before rejecting the transaction value as incorrect or unacceptable,the Department has to find out whether there are any imports ofidentical goods or similar goods at a higher price at around thesame time. Unless the evidence is gathered in that regard, thequestion of importing Section 14(1-A) does not arise. In theabsence of such evidence, invoice price has to be accepted as thetransaction value. Invoice is the evidence of value. Castingsuspicion on invoice produced by the importer is not sufficient toreject it as evidence of value of imported goods. Undervaluationhas to be proved. If the charge of undervaluation cannot besupported either by evidence or information about comparableimports, the benefit of doubt must go to the importer. If theDepartment wants to allege undervaluation, it must make detailedinquiries, collect material and also adequate evidence. Whenundervaluation is alleged, the Department has to prove it byevidence or information about comparable imports. For proving

ABC

D

EF

G

H

1202 SUPREME COURT REPORTS [2018] 14 S.C.R.

A

undervaluation, if the Department relies on declaration made inthe exporting country, it has to show how such declaration wasprocured. We may clarify that strict rules of evidence do not applyto adjudication proceedings. They apply strictly to the courts’proceedings. However, even in adjudication proceedings, the AOhas to examine the probative value of the documents on whichreliance is placed by the Department in support of its allegation ofundervaluation. Once the Department discharges the burden ofproof to the above extent by producing evidence ofcontemporaneous imports at higher price, the onus shifts to theimporter to establish that the invoice relied on by him is valid.Therefore, the charge of underinvoicing has to be supported byevidence of prices of contemporaneous imports of like goods.

B

C

13. Section 14(1) speaks of “deemed value”. Therefore, invoiceprice can be disputed. However, it is for the Department to provethat the invoice price is incorrect. When there is no evidence ofDcontemporaneous imports at a higher price, the invoice price isliable to be accepted. The value in the export declaration may berelied upon for ascertainment of the assessable value under theCustoms Valuation Rules and not for determining the price atwhich goods are ordinarily sold at the time and place of importation.EThis is where the conceptual difference between value and pricecomes into discussion.”

D

12. The observations of the Tribunal made in the impugnedjudgment are to be appreciated in the light of the principles of law specifiedin the aforesaid judgment, inasmuch as the Tribunal has categoricallyremarked that the normal rule is that assessable value has to be arrivedat on the basis of the price which is actually paid, as provided by Section14 of the Customs Act and the case law referred to by it (In paragraph5, the Tribunal referred to its own judgments which follow the aforesaidprinciple laid down by this Court).

F

13. It is, therefore, rightly contended by Mr. Dushyant A. Dave,learned senior counsel appearing for the respondent that the reason givenfor setting aside the order that the normal rule was that the assessablevalue has to be arrived at on the basis of the price which was actuallypaid, and that was mentioned in the Bills of Entry. The Tribunal has G

H

clearly mentioned that this declared price could be rejected only withcogent reasons by undertaking the exercise as to on what basis theAssessing Authority could hold that the paid price was not the soleconsideration of the transaction value. Since there is no such exercisedone by the Assessing Authority to reject the price declared in the Billsof Entry, Order-in-Original was, therefore, clearly erroneous.

14. In Commissioner of Customs vs. Prabhu Dayal PremChand[5], this Court was confronted with almost same kind of factsituation. On the basis of the information received subsequently fromthe London Metal Exchange (for short, ‘LME’) to the effect that theprice of the two metals, viz., brass scrap and copper scrap, in LME ason the date of import was more than the price declared by the respondent,demanded additional duty amounting to Rs. 90,248/- and Rs. 1,94,035respectively, from the assessee on the said two Bills of Entry. Thisorder was set aside by the Tribunal and appeals there against by theCustoms were dismissed by this Court. The Court noted, while acceptingthe plea of the assessee, that they were not confronted with anycontemporaneous material relied upon by the Revenue for enhancingthe price declared by them in the Bills of Entry. It also noted the followingremarks of the Tribunal:

“In the present case as mentioned above, even though there is areference to contemporaneous import in the order passed by theDeputy Commissioner no material regarding such import has beenplaced before us or made available by the appellant at any pointof time. Therefore, assessment in this case has to be taken ashaving been made purely on the basis of LME bulletin withoutany corroborative evidence of imports at or near that price whichis not permissible under law. We, therefore, set asidethe impugnedorder and allow the appeal.”

Dismissing the appeals, this Court observed as follows:

“….It is manifest from the aforeextracted order of the Tribunalthat no details of any contemporaneous imports or any othermaterial indicating the price notified by LME had either beenreferred to by the adjudicating officer in the adjudication order orsuch material was placed before the Tribunal at the time of hearingof the appeal. The learned counsel for the Revenue has not been 5(2010) 13 SCC 535

A

B

C

D

E

F

G

H

1204 SUPREME COURT REPORTS [2018] 14 S.C.R.

Aable to controvert the said observations by the Tribunal. In thatview of the matter no fault can be found with the order passed bythe Tribunal setting aside the additional demand created againstthe assessee.”

15. We, thus, do not find any merit in these appeals and dismissBthe same.

Ankit Gyan

Appeals dismissed.

C

D

E

F

G

H