CENTURY METAL RECYCLING PVT. LTD. AND versus UNION OF INDIA AND OTHERS on 17 May 2019

[2019] 8 S.C.R. 639

CENTURY METAL RECYCLING PVT. LTD. AND ANOTHER

v.

UNION OF INDIA AND OTHERS

(Civil Appeal No. 5011 of 2019)

MAY 17, 2019

[RANJAN GOGOI, CJI, DEEPAK GUPTA AND

SANJIV KHANNA, JJ.]

Customs Valuation (Determination of Value of ImportedGoods) Rules, 2007: rr.3, 12 – Appellants had been regularlyimporting aluminium waste as a raw material for manufacturingalluminium alloy – Case of appellants was that respondents-authorities discarded the declared transactional value andrecomputed the consignment value – Held: As per s.14(1) of theCustoms Act, value of the imported goods shall be the transactionalvalue of such goods, which means the price actually paid or payablefor the goods when sold for export to India where the buyers andsellers are not related and the price fixed is the sole considerationfor sale – r.3(1) states that value of the imported goods shall be thetransaction value adjusted in accordance with the provisions ofr.10 of the 2007 Rules – Sub-rule (2) to r.3 states that value of theimported goods under sub-rule (1) shall be accepted i.e. acceptedby the customs authorities – Where the proper officer is not satisfiedand has reasonable doubt about the truth or accuracy of the valueso declared, it is deemed that the transactional value of suchimported goods cannot be determined under the provision of sub-rule (1) of r.3 of the 2007 Rules – As per sub Rule (2) of r.12, theproper officer when required must intimate to the importer in writingthe grounds for doubting the truth or accuracy of the value declared– The said mandate of sub-Rule (2) of r.12 cannot be ignored orwaived – In the instant case, the findings in the order-in-originalwas that the appellants had declared value of the aluminium scrapas Rs.81.31 per kg, albeit the contemporaneous import data in theform of different bills of entry had indicated aluminium scrap valuesbetween Rs. 83.26 to Rs. 120.897 per kg – The order-in-originalalso recorded that the imported goods being aluminium scrap wasnot a homogeneous commodity and therefore, cannot be evaluated

A

B

C

D

EF

G

H

Aon the basis of the samples or lab testing and that it was very difficultto find any identical/similar goods imported in India having samechemical and physical composition – Therefore, the order-in-originalwas flawed and contrary to law for it did not give cogent reason interms of s.14(1) and r.12 for rejection of the transaction value asdeclared in the bill of entry – Customs Act, 1962 – s.14 – CustomsBValuation (Determination of Value of Imported Goods) Rules, 2007– rr.3 to 12.

Customs Valuation (Determination of Value of ImportedGoods) Rules, 2007: r.12 – Rejection of declared value – Essentialrequirement – Reasonable doubt of proper officer as to transactionalCvalue – The proper officer should have reasonable doubt as to thetransactional value on account of truth or accuracy of the valuedeclared in relation to the imported goods – Proper officer mustask the importer of such goods, further information which mayinclude documents or evidence – On receiving such information orDin the absence of response from the importer, the proper officer hasto apply his mind and decide whether or not reasonable doubt as tothe truth or accuracy of the value so declared persists – When theproper officer does not have reasonable doubt, the goods are clearedon the declared value – When the doubt persists, sub-rule (1) to r.3is not applicable and transaction value is determined in terms ofErr.4 to 9 of the 2007 Rules – The importer has to be given opportunityof hearing before the proper officer finally decides the transactionalvalue in terms of rr.4 to 9 of the 2007 Rules.

Customs Valuation (Determination of Value of ImportedGoods) Rules, 2007 – r.12 – Interpretation of – Held: The choice ofFwords deployed in r.12 of the 2007 Rules are significant and ofmuch consequence – The Legislature did not use the expression“reason to believe” or “satisfaction” or such other positive termsas a pre-condition on the part of the proper officer – The expression“reason to believe” which would have required the proper officerGto refer to facts and figures to show existence of positive belief onthe undervaluation or lower declaration of the transaction value –The expression “reason to doubt” as a sequitur would require adifferent threshold and examination – It cannot be equated with therequirements of positive reasons to believe, for the word ‘doubt’refers to un-certainty and irresolution reflecting suspicion andHapprehension.

Customs Valuation (Determination of Value of ImportedGoods) Rules, 2007 – r.18 – Case of appellants that respondents-authorities discarded the declared transactional value andrecomputed the consignment value by compelling the appellant togive a letter of consent to assessment/valuation by custom authorities – Contention of the respondents was predicated on letter ofappellants dated 6[th] March, 2017 that the appellants did not seekprovisional assessment of the bill of entry and had accepted andpaid duty on the valuation done by the customs authorities – Thecontention is rejected since this letter exposited the predicamentfaced by the appellants as it stated that the appellants were in urgentrequirement and wanted clearance of the goods – Appellants hadearlier also written several letters requesting for clearance of theimported consignment of aluminium scrap on the declaredtransaction value pointing out therein that on account of delay inthe clearance of the imported consignments, the appellants and itssister concern had been compelled to pay excess duty of over Rs.25crores – Therefore, respondent authorities had compelled and forcedthe appellant to furnish letter dated 6[th] March, 2017 thereby waivingof its right to provisional assessment and accepting valuation interms of rr.4 to 10.

Customs Act, 1962: Valuation Alerts – The Valuation Alertsare issued by the Director General of Valuation based on themonitoring of valuation trends of sensitive commodities with a viewto take corrective measures – They provide guidance to the fieldformation in valuation matters – They help ensure uniform practice,smooth functioning and prevent evasion and short payment of duty– However, they should not be construed as interfering with thediscretion of the assessment authority who is required to pass anAssessment Order in the given factual matrix – Declared valuationcan be rejected based upon the evidence which qualifies and meetsthe criteria of ‘certain reasons’ – Besides, the opinion formed mustbe reasonable – Reference to foreign journals for the price quotedin exchanges etc., to find out the correct international price ofconcerned goods would be relevant but reliance can be placed onsuch material only when the adjudicating authority had conductedenquiries and ascertained details with reference to the goodsimported which are identical or similar and ‘certain reasons’ existsand justifies detailed investigation – These reasons are to be AB

CD

E

F

G

H

[2019] 8 S.C.R.

Arecorded and if requested disclosed/ communicated to the importer– Valuation alerts could be relied upon for default valuationcomputation under the Rules.

Allowing the appeal, the Court

HELD : 1.1 The word ‘payable’ used in Section 14(1) refersBto the particular transaction and the payability in respect of ‘thetransaction’. It refers to the notional value, albeit the transactionvalue as declared in the bill of entry plus the amount which has tobe added in terms of Rule 10 of the 2007 Rules. As per Section14(1) of the Act, value of the imported goods shall be theCtransactional value of such goods, which means the price actuallypaid or payable for the goods when sold for export to India wherethe buyers and sellers are not related and the price fixed is thesole consideration for sale. [Para 7, 9] [655-G-H; 657-B]

Commissioner of Central Excise and Service Tax, NoidaDv. M/s Sanjivini Non-Ferrous Trading Pvt. Ltd. (2019)2 SCC 378 ; Commissioner of Customs, Calcuttav. South India Television (P) Ltd. (2007) 6 SCC373 : [2007] 8 SCR 95 ; Eicher Tractors Limited,Haryana v. Commissioner of Customs, Mumbai (2001)1 SCC 315 : [2000] 4 Suppl. SCR 597 – relied on.E1.2 Sub-section (2) of Section 14 is a non-obstante provision,which applies notwithstanding sub-section (1), i.e. when the Boardhas issued a notification in the Official Gazette fixing tariff valuesfor any class of imported or exported goods. The Board has beenauthorised to issue notifications under Section 14(2) of the ActFwhen it is satisfied that it is necessary or expedient. In the instantcase, the Board has not considered it necessary and expedientto issue a notification under Section 14(2) of the Act to fix a tarifffor the imported aluminium waste. The second proviso to Section14(1) deals with different situations, enumerated under the threeGclauses; (i) when buyers and sellers are deemed to be related;(ii) when there is no sale, or buyers and sellers are related or theprice is not the sole consideration for sale, etc. and (iii) wherethe proper officer has reason to doubt the truth or accuracy ofsuch value. When the conditions specified in the second proviso H

are satisfied, the transactional value for the purpose of chargingof customs duty is to be made as per rules framed in this behalf.[Paras 10, 11] [657-D-H]

2.1 Rules 3 and 12 of the 2007 Rules i.e. Customs Valuation(Determination of Value of Imported Goods) Rules, 2007 wereenacted and enforced with effect from 10[th] October, 2007replacing and superseding the 1988 Rules. Rule 3(1) of the 2007Rules states that value of the imported goods shall be thetransaction value adjusted in accordance with the provisions ofRule 10 of the 2007 Rules. Sub-rule (2) to Rule 3 states thatvalue of the imported goods under sub-rule (1) shall be acceptedi.e. accepted by the customs authorities. Rule 11 provides fordeclaration to be given by the importer or his agent certifyingthat they had disclosed full and accurate details of the value ofthe imported goods and any other statement, information anddocument. Sub-rule (2) states that the declared value shall beaccepted where the proper officer is satisfied about the truth andaccuracy of the declared value after an enquiry in consultationwith the importers. [Para 12] [658-A-E]

2.2 Sub-rule (3) to Rule 3 deals with cases when the buyerand seller are related. As per sub-rule (4), where the value cannotbe determined under sub-rule (1) to Rule 3, the transaction is tobe valued by step wise applying Rules 4 to 9. Rule 4 and 5 dealwith transaction value based on identical goods and on similargoods respectively. Rule 6 deals with the determination of valuewhere the transactional value cannot be determined under Rules3, 4 and 5. Rules 7 and 8 deal with deductive value and computedvalue respectively. Rule 9 prescribes the residual method forcomputing the transaction value. Rules 4 to 9 are subject to theprovisions of Rule 3 thereby giving primacy to Rule 3 which inturn gives primacy to Rule 12 of the 2007 Rules. Rule 12 usesthe expression ‘the proper officer has reason to doubt the truth oraccuracy of the value declared in relation to the imported goods’.This expression is distinctly different from the words and pre-conditions imposed for rejecting the declared transactional valueunder the repealed Customs Valuation (Determination of Priceof Imported Goods) Rules,1988 and the pre-amended Section A

B

C

D

EF

G

H

A14(1) of the Act. Thus, Rule 12, which enjoys primacy and pivotalposition, applies where the proper officer has reason to doubtthe truth or accuracy of the value declared for the imported goods.It envisages a two-step verification and examination exercise.At the first instance, the proper officer must ask and call uponthe importer to furnish further information including documentsBto justify the declared transactional value. The proper officer maythereafter accept the transactional value as declared. However,where the proper officer is not satisfied and has reasonable doubtabout the truth or accuracy of the value so declared, it is deemedthat the transactional value of such imported goods cannot beCdetermined under the provision of sub-rule (1) of Rule 3 of the2007 Rules. Clause-(iii) of Explanation to Rule 12 states that theproper officer can on ‘certain reasons’ raise doubts about thetruth or accuracy of declared value. ‘Certain reasons’ wouldinclude conditions specified in clauses (a) to (f) i.e. higher valueof identical similar goods of comparable quantities in a comparableDtransaction, abnormal discount or abnormal deduction fromordinary competitive prices, sales involving the special prices,misdeclaration on parameters such as description, quality, quantity,country of origin, year of manufacture or production, non-declaration of parameters such as brand and grade etc. andEfraudulent or manipulated documents. Grounds mentioned in (a)to (f) however are not exhaustive of ‘certain reasons’ to raisedoubt about the truth or accuracy of the declared value. Clause(ii) to Explanation states that the declared value shall be acceptedwhere the proper officer is satisfied about the truth and accuracyof the declared value after enquiry in consultation with theFimporters. Clause-(i) to the Explanation states that Rule 12 doesnot provide a method of determination of value but provides theprocedure or mechanism in cases where declared value can berejected when there is a reasonable doubt that the declaredtransaction value does not represent the actual transaction value.GIn such cases, the transaction value is to be sequentiallydetermined in accordance with Rules 4 to 9 of the 2007 Rules.Sub-rule (2) of Rule 12 stipulates that on request of an importer,the proper officer shall intimate to the importer in writing thegrounds, i.e. the reason for doubting the truth or accuracy of thevalue declared in relation to the imported goods. Further, theH

proper officer shall provide a reasonable opportunity of beingheard to the importer before he makes the valuation in the formof final decision under sub-rule (1). [Paras 7, 13, 14] [655-D-E;658-F-H; 659-G-H]

3.1 The choice of words deployed in Rule 12 of the 2007Rules are significant and of much consequence. The Legislature,has not used the expression “reason to believe” or “satisfaction”or such other positive terms as a pre-condition on the part of theproper officer. The expression “reason to believe” which wouldhave required the proper officer to refer to facts and figures toshow existence of positive belief on the undervaluation or lowerdeclaration of the transaction value. The expression “reason todoubt” as a sequitur would require a different threshold andexamination. It cannot be equated with the requirements ofpositive reasons to believe, for the word ‘doubt’ refers to un-certainty and irresolution reflecting suspicion and apprehension.However, this doubt must be reasonable i.e. have a degree ofobjectivity and basis/foundation for the suspicion must be basedon ‘certain reasons’. [Para 17] [661-B-D]

3.2 The expression ‘proof beyond reasonable doubt’ incriminal law requires the prosecution to establish guilt and secureconviction of the accused by proving the charge ‘beyondreasonable doubt’. Proof beyond ‘reasonable doubt’ is certainlynot the requirement under proviso to Section 14 of the Act andRule 12 of the 2007 Rules. In the context of the proviso toSection 14 read with Rule 12 and clause (iii) of Explanation to the2007 Rules, the doubt must be reasonable and based on ‘certainreasons’. The proper officer must record ‘certain reasons’specified in (a) to (f) or similar grounds in writing at the secondstage before he proceeds to discard the declared value anddecides to determine the same by proceeding sequentially inaccordance with Rules 4 to 9 of the 2007 Rules. It refers to adoubt which the proper officer possesses even after the importerhas been asked to furnish further information including documentsand evidence during the preliminary enquiry to clear his doubtabout the truth and accuracy of the value declared. Therefore,there has to be a preliminary enquiry by the proper officer inwhich the importer must be given an opportunity for clarification A

B

C

D

E

F

G

H

Aof the doubts of the officer by furnishing of documents andevidence as to the accuracy or truth of the value declared. It isonly in case where the doubt of the proper officer persists afterconducting examination of information including documents oron account of non-furnishing of information that the procedurefor further investigation and determination of value in terms ofBRules 4 to 9 would come into operation and would be applicable.A doubt to justify detailed enquiry under the proviso to Section14 read with Rule 12 should not be based on initial apprehension,be imaginary or a mere perception not founded on reasonableand ‘certain’ material. Subjecting imports to detailed enquiry onCmere suspicion because one is distrustful and unsure withoutreasonable and certain reasons would be contrary to the schemeand purpose behind the provisions which ensure quick andexpeditious clearance of imported goods. [Para 18] [661-G-H;662-A-E]

DRamakant Rai v. Madan Rai & Ors. (2003) 12 SCC395 : [2003] 4 Suppl. SCR 17 – relied on.4. Section 18 of the Act envisages that when there is adispute between the customs authorities and the importer asregards the valuation of the imported goods, on satisfaction ofEthe conditions enumerated in sub-section (1), the authoritiesshould make provisional assessment of customs duty underSection 18 of the Act. This expedites clearance, pending finaladjudication on merits which may take time. This is also themandate of the Board Circular No.38/2016 dated 22[nd] August,2016. Any insistence and compulsion by the authorities that theFimporter should disclaim and forgo his statutory right underSection 18 of the Act would not be correct. Neither would it beright to reject the valuation as declared by the importer withoutreasonable doubt for certain reasons. The contention of therespondents predicated on the letter of appellants dated 6[th]GMarch, 2017 that the appellants did not seek provisionalassessment of the bill of entry and had accepted and paid duty onthe valuation done by the customs authorities is rejected. Thisletter exposits the predicament faced by the appellants as it statesthat the appellants were in urgent requirement and wantedclearance of the goods. The appellants had earlier written several H

letters requesting for clearance of the imported consignment ofaluminium scrap on the declared transaction value pointing outtherein that on account of delay in the clearance of the importedconsignments. It is unfortunate and has to be accepted that therespondent authorities had compelled and forced the appellantto furnish the letter dated 6[th] March, 2017 thereby waiving of itsright to provisional assessment and accepting valuation in termsof Rules 4 to 10. [Paras 19, 20] [665-B-F]

5. As per sub Rule (2) of Rule 12, the proper officer whenrequired must intimate to the importer in writing the grounds fordoubting the truth or accuracy of the value declared. The saidmandate of sub-Rule (2) of Rule 12 cannot be ignored or waived.Formation of opinion regarding reasonable doubt as to the truthor accuracy of the valuation and communication of the said groundsto the importer is mandatory, subterfuge to by-pass andcircumvent the statutory mandate is unacceptable. Formation ofbelief and recording of reasons as to reasonable doubt andcommunication of the reasons when required is the only way andmanner in which the proper officer in terms of Rule 12 can proceedto make assessment under Rules 4 to 9 after rejecting thetransaction value as declared. The mandate to record reasons atthe second stage of enquiry is not expressly stipulated, albeit itis read by implication in Rule 12. Being conscious that thismandate if applied to past cases would possibly lead tocomplications and difficulties, the doctrine of prospectiveapplication is invoked with the direction that the past cases willbe decided on a case to case basis, depending upon the factualmatrix and considerations like whether the importer has askedfor ‘certain reasons’, whether the reasons were notcommunicated, whether ‘certain reasons’ can be deciphered fromthe assessment/valuation order, whether misdescription orfalse declaration was apparent, etc. [Paras 20, 21] [665-G-H;666-A-D]

Commissioner of Customs v. Prabhu Dayal Prem Chand(2010) 13 SCC 535 – relied on.

6. The findings of the order in original in this case was thatthe appellants had declared value of the aluminium scrap asRs.81.31 per kg, albeit the contemporaneous import data in the A

B

C

D

E

F

G

H

Aform of different bills of entry had indicated aluminium scrapvalues between Rs. 83.26 to Rs. 120.897 per kg. The said portionof the order refers to at least four bills of entries declaringassessable value of less than Rs. 85 per kg. The order in originalalso recorded that the imported goods being aluminium scrapwas not a homogeneous commodity and therefore, cannot beBevaluated on the basis of the samples or lab testing. Further, theorder held that it was very difficult to find any identical/ similargoods imported in India having same chemical and physicalcomposition and that the values of aluminium scrap identical/similar to the imported goods in nature and specification wereCnot available. Without commenting on correctness of the saidstatements, the aforesaid reasoning for rejection of thetransactional value, would not meet the mandate of Section 14and the Rules. Wherein it was held that the transaction valuementioned in the bill of entry should not be discarded unless there are contrary details of contemporaneous imports or otherDmaterial indicating and serving as corroborative evidence ofimport at or near the time of import which would justify rejectionof the declared value and enhancement of the price declared inthe bill of entry. Therefore, in the facts and circumstances of thepresent case, it has to be held that the adjudication order inEoriginal is flawed and contrary to law for it does not give cogentand good reason in terms of Section 14(1) and Rule 12 for rejectionof the transaction value as declared in the bill of entry. The orderin original is not in accordance with Section 14 and Rules 3 and12 as the mandate of these provisions has been ignored.[Paras 23, 24] [666-F-H; 667-A-E]F

7. The Valuation Alerts are issued by the Director Generalof Valuation based on the monitoring of valuation trends ofsensitive commodities with a view to take corrective measures.They provide guidance to the field formation in valuation matters.Valuation alerts could be relied upon for default valuationGcomputation under the Rules. [Para 25] [667-F; 668-B]

Varsha Plastic Pvt. Ltd. v. Union of India (2009) 3 SCC365 : [2009] 1 SCR 896 – relied on.

H

A

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5011of 2019.

C

From the Judgment and Order dated 12.09.2017 of the High Courtof Judicature at Allahabad in Writ Petition Tax No. 307 of 2017.

Ms. Meenakshi Arora, Sr. Adv., Chirag M. Shroff and Ms. NehaSangwan, Advs. for the Appellants.

D

Vikramjit Banerjee, ASG, Ms. Nisha Bagchi, Abhishek, VikasBansal and B. Krishna Prasad, Advs. for the Respondents.

The Judgment of the Court was delivered by SANJIV KHANNA, J. 1. Leave granted.

E

2. Impugned order dated 12[th] September, 2017 passed by theDivision Bench of the High Court of Judicature at Allahabad dismissesWrit Petition Tax No.307 of 2017 filed by the appellants, namely M/sCentury Metal Recycling Pvt. Ltd. and Gauri Shankar Agarwala, interalia, on the grounds that the High Court would not exercise extraordinaryjurisdiction under Article 226 of the Constitution of India as the matterrelates to the valuation of imported aluminium scrap which could beassailed in a statutory appeal and it would not be appropriate for the writcourt to decide whether the appellant had or had not agreed to valuationby the customs authorities.

F

3. The appellant Company is stated to be engaged in themanufacture of aluminium alloys, for which they regularly importaluminium waste as a raw material for self-consumption. Imported scrap,it is accepted, falls under different code names as per specifications ofthe Institute of Recycling Industry. The grievance raised by the appellantsis that the 2[nd] respondent i.e. the Principal Commissioner of Customs, G

H

ANoida Customs Commissionerate and its Officers almost uniformly donot clear the consignments as per the declared transaction value in thebill of entry but insist that the appellants write a letter agreeing to paycustoms duty as per the valuation by the customs authorities and compelthem to forego their right to provisional assessment under Section 18 ofthe Customs Act, 1962 (‘the Act’, for short). The appellants, coercedBand intimated, have no option but to give in and issue a letter of consentagreeing to assessment/valuation by the customs authorities to avoiddelay in clearance, levy of demurrage, ground rent and container detentioncharges, etc. It is also alleged that the respondents without observingand contrary to the mandate of Section 14 of the Act discard the declaredCtransactional value and recompute the consignment value in view of theValuation Alert dated 1[st] December, 2016 issued by the Central Boardof Excise and Customs (‘the Board’, for short).

4. At the outset, we would record that the appellants had given upprayers (a) and (b) before the High Court as is recorded in the impugnedDorder and we are, therefore, primarily to confine our decision to prayer(c) of the Writ Petition which reads as under:

“In the aforesaid facts and circumstances of the petitionerrespectfully prays that this Hon’ble Court may be graciouslypleased to:

E

(c) Issue a suitable writ, order or direction in the nature ofMANDAMUS commanding the Assessing Officer thatRespondent No.2 and his subordinate officers to make assessmentof aluminium scrap being imported by the petitioner on the basisof the declared transaction value in accordance with statutoryFprovisions under Section 14 & 17(1) of the Customs Act, and incase of non-acceptance, to allow Provisional Assessment thereofunder Section 18 of the Customs Act in accordance with CircularNo.38 dated 22.08.2016 (Annexure-5)”

We would for the reasons stated also examine validity of theGadjudication order dated 7[th] April, 2017.

5. We are not inclined to remit the appellant to an alternativeremedy by way of statutory appeal under Section 128 of the Act for thereason that the impugned order dated 7[th] April, 2017 in Assessment No.12/AC/CUS/2017 cannot be sustained in view of the decision of this Courtin Commissioner of Central Excise and Service Tax, Noida v. M/sH

Sanjivini Non-Ferrous Trading Pvt. Ltd.[1], the latter being the sisterconcern of the first appellant in this case. Further, having heard learnedcounsel for the parties, we would like to clarify the legal position andtherefore in the facts of this case would exercise our discretion to entertainthis appeal despite the alternative remedy.

6. We would begin by reproducing Section 14 of the Act andRules 3 and 12 of the Customs Valuation (Determination of Value ofImported Goods) Rules, 2007 (‘the 2007 Rules’, for short) which readas under:

“Section 14: Valuation of Goods.

(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975),or any other law for the time being in force, the value of theimported goods and export goods shall be the transaction value ofsuch goods, that is to say, the price actually paid or payable forthe goods when sold for export to India for delivery at the timeand place of importation, or as the case may be, for export fromIndia for delivery at the time and place of exportation, where thebuyer and seller of the goods are not related and price is the soleconsideration for the sale subject to such other conditions as maybe specified in the rules made in this behalf:

Provided that such transaction value in the case of imported goodsshall include, in addition to the price as aforesaid, any amount paidor payable for costs and services, including commissions andbrokerage, engineering, design work, royalties and licence fees,costs of transportation to the place of importation, insurance,loading, unloading and handling charges to the extent and in themanner specified in the rules made in this behalf:

Provided further that the rules made in this behalf may providefor, —

(i) the circumstances in which the buyer and the seller shall bedeemed to be related;

(ii) the manner of determination of value in respect of goodswhen there is no sale, or the buyer and the seller are related, orprice is not the sole consideration for the sale or in any othercase; 1 Civil Appeal Nos. 18300-18305 of 2017 decided on December 10, 2018

A

B

C

D

EF

G

A

B

C

D

E

F

G

H

(iii) the manner of acceptance or rejection of value declared bythe importer or exporter, as the case may be, where the properofficer has reason to doubt the truth or accuracy of such value,and determination of value for the purposes of this section:

Provided also that such price shall be calculated with referenceto the rate of exchange as in force on the date on which a bill ofentry is presented under section 46, or a shipping bill of export, asthe case may be, is presented under section 50.

(2) Notwithstanding anything contained in sub-section (1), if theBoard is satisfied that it is necessary or expedient so to do, it may,by notification in the Official Gazette, fix tariff values for anyclass of imported goods or export goods, having regard to thetrend of value of such or like goods, and where any such tariffvalues are fixed, the duty shall be chargeable with reference tosuch tariff value.

Explanation. —For the purposes of this section—

(a) “rate of exchange” means the rate of exchange—

(i) determined by the Board, or

(ii) ascertained in such manner as the Board may direct, forthe conversion of Indian currency into foreign currency orforeign currency into Indian currency; (b) ”foreign currency” and “Indian currency” have the meaningsrespectively assigned to them in clause (m) and clause (q) ofsection 2 of the Foreign Exchange Management Act, 1999 (42 of1999).

xxxxxx

RULES

Rule 3. Determination of the method valuation:

(1) Subject to rule 12, the value of imported goods shall be thetransaction value adjusted in accordance with provisions of rule10;

(2) Value of imported goods under sub-rule (1) shall be accepted:

Provided that –

(a) there are no restrictions as to the disposition or use of thegoods by the buyer other than restrictions which-

(i) are imposed or required by law or by the public authoritiesin India; or

(ii) limit the geographical area in which the goods may be resold;or

(iii) do not substantially affect the value of the goods; (b) the sale or price is not subject to some condition or considerationfor which a value cannot be determined in respect of the goodsbeing valued;

(c) no part of the proceeds of any subsequent resale, disposal oruse of the goods by the buyer will accrue directly or indirectly tothe seller, unless an appropriate adjustment can be made inaccordance with the provisions of rule 10 of these rules; and (d) the buyer and seller are not related, or where the buyer andseller are related, that transaction value is acceptable for customspurposes under the provisions of sub-rule (3) below.

(3) (a) Where the buyer and seller are related, the transactionvalue shall be accepted provided that the examination of thecircumstances of the sale of the imported goods indicate that therelationship did not influence the price.

(b) In a sale between related persons, the transaction value shallbe accepted, whenever the importer demonstrates that thedeclared value of the goods being valued, closely approximates toone of the following values ascertained at or about the same time.

(i) the transaction value of identical goods, or of similar goods,in sales to unrelated buyers in India;

(ii) the deductive value for identical goods or similar goods;

(iii) the computed value for identical goods or similar goods:

Provided that in applying the values used for comparison, dueaccount shall be taken of demonstrated difference in commerciallevels, quantity levels, adjustments in accordance with theprovisions of rule 10 and cost incurred by the seller in sales inwhich he and the buyer are not related; A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

(c) substitute values shall not be established under the provisionsof clause (b) of this sub-rule.

(4) if the value cannot be determined under the provisions of sub-rule (1), the value shall be determined by proceeding sequentiallythrough rule 4 to 9.

xxxx

xx

Rule 12. Rejection of declared value:

(1) When the proper officer has reason to doubt the truth oraccuracy of the value declared in relation to any imported goods,he may ask the importer of such goods to furnish furtherinformation including documents or other evidence and if, afterreceiving such further information, or in the absence of a responseof such importer, the proper officer still has reasonable doubt aboutthe truth or accuracy of the value so declared, it shall be deemedthat the transaction value of such imported goods cannot bedetermined under the provisions of sub-rule (1) of rule 3.

(2) At the request of an importer, the proper officer, shall intimatethe importer in writing the grounds for doubting the truth oraccuracy of the value declared in relation to goods imported bysuch importer and provide a reasonable opportunity of being heard,before taking a final decision under sub-rule (1).

Explanation. - (1) For the removal of doubts, it is hereby declaredthat: -

(i) This rule by itself does not provide a method for determinationof value, it provides a mechanism and procedure for rejection ofdeclared value in cases where there is reasonable doubt that thedeclared value does not represent the transaction value; wherethe declared value is rejected, the value shall be determined byproceeding sequentially in accordance with rules 4 to 9.

(ii) The declared value shall be accepted where the proper officeris satisfied about the truth and accuracy of the declared valueafter the said enquiry in consultation with the importers.

(iii) The proper officer shall have the powers to raise doubts onthe truth or accuracy of the declared value based on certain reasonswhich may include –

(a) the significantly higher value at which identical or similargoods imported at or about the same time in comparablequantities in a comparable commercial transaction wereassessed; (b) the sale involves an abnormal discount or abnormal reductionfrom the ordinary competitive price;

(c) the sale involves special discounts limited to exclusiveagents; (d) the misdeclaration of goods in parameters such asdescription, quality, quantity, country of origin, year ofmanufacture or production; (e) the non-declaration of parameters such as brand, grade,specifications that have relevance to value; (f) the fraudulent or manipulated documents.”

7. Section 14 has to be read with Rule 12 of the 2007 Rules. Rule12 uses the expression ‘the proper officer has reason to doubt thetruth or accuracy of the value declared in relation to the importedgoods’. This expression is distinctly different from the words andpreconditions imposed for rejecting the declared transactional value underthe repealed Customs Valuation (Determination of Price of ImportedGoods) Rules,1988 (‘the 1988 Rules’, for short) and the pre-amendedSection 14(1) of the Act which were considered and interpreted by thisCourt in Eicher Tractors Limited, Haryana v. Commissioner ofCustoms, Mumbai[2]. In fact, the judgment in Eicher Tractors Limited(supra) had not considered Rule 10-A of the 1988 Rules enforced witheffect from 19[th] February, 1998 as the imports therein related to theyear 1993. Rule 10-A brought the concept of ‘reason to doubt the declaredvalue’ in place of special or extraordinary circumstances particularisedin Rule 4(2) of the 1988 Rules. However, the interpretation given toSection 14(1) in Eicher Tractors Limited (supra) as to the meaning ofthe word ‘payable’ used therein would be still applicable. The word‘payable’ used in Section 14(1) refers to the particular transaction andthe payability in respect of ‘the transaction’. It refers to the notionalvalue, albeit the transaction value as declared in the bill of entry plus theamount which has to be added in terms of Rule 10 of the 2007 Rules.

A

B

C

DE

F

G

A8. This Court in M/s Sanjivini Non-Ferrous Trading Pvt. Ltd.(supra), while interpreting the provisions of Section 14 and Rules 3, 4and 12 of the 2007 Rules, had held as under:

“10. 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 deemedto be the price as referred to in that provision. Section 14(1) is adeeming provision as it talks of ‘deemed value’ of such goods.Therefore, normally, the Assessing Officer is supposed to act onthe basis of price which is actually paid and treat the same asassessable value/transaction value of the goods. This, ordinarily,is the course of action which needs to be followed by the AssessingOfficer. This principle of arriving at transaction value to be theassessable value applies. This is also the effect of Rule 3(1) andRule 4(1) of the Customs Valuation Rules, namely, the adjudicatingauthority is bound to accept price actually paid or payable forgoods as the transaction value. Exceptions are, however, carvedout and enumerated in Rule 4(2). As per that provision, thetransaction value mentioned in the Bills of Entry can be discardedin case it is found that there are any imports of identical goods orsimilar goods at a higher price at around the same time or if thebuyers and sellers are related to each other. In order to invokesuch a provision it is incumbent upon the Assessing Officer togive reasons as to why the transaction value declared in the Billsof Entry was being rejected; to establish that the price is not thesole consideration; and to give the reasons supported by materialon the basis of which Assessing Officer arrives at his ownassessable value.”

B

C

D

E

F

The Division Bench has quoted the following sub-para fromCommissioner of Customs, Calcutta v. South India Television (P)Ltd.[3]:

“13. Section 14(1)speaks of “deemed value”. Therefore, invoiceprice can be disputed. However, it is for the Department to proveGthat the invoice price is incorrect. When there is no evidence ofcontemporaneous 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 at which goods are ordinarily sold at the time and place of importation.This is where the conceptual difference between value and pricecomes into discussion.”

9. As per Section 14(1) of the Act, value of the imported goodsshall be the transactional value of such goods, which means the priceactually paid or payable for the goods when sold for export to Indiawhere the buyers and sellers are not related and the price fixed is thesole consideration for sale. As per the first proviso to Section 14(1) ofthe Act, the transactional value for the purpose of customs duty wouldinclude amounts paid or payable as costs and services like commission,brokerage, engineering, design work, cost of transportation, etc., as maybe specified in the rules made in this behalf. These amounts are to beadded to the declared transactional value. Accordingly, in terms of Rule10 of the 2007 Rules, the value and price of costs and services areadded to the price actually paid or payable for the imported goods fordetermining the transaction value.

10. Sub-section (2) of Section 14 is a non-obstante provision,which applies notwithstanding sub-section (1), i.e. when the Board hasissued a notification in the Official Gazette fixing tariff values for anyclass of imported or exported goods. The Board has been authorised toissue notifications under Section 14(2) of the Act when it is satisfied thatit is necessary or expedient. Thus, whenever tariff has been fixed videnotification issued by the Board under Section 14(2) of the Act, thennotwithstanding the transactional value of the imported goods under sub-section (1) to Section 14 of the Act, as per sub-section (2) to Section 14of the Act the customs duty is payable as per the tariff value so fixed. Inthe present case, the Board has not considered it necessary and expedientto issue a notification under Section 14(2) of the Act to fix a tariff for theimported aluminium waste.

11. The second proviso to Section 14 (1) deals with differentsituations, enumerated under the three clauses; (i) when buyers andsellers are deemed to be related; (ii) when there is no sale, or buyers andsellers are related or the price is not the sole consideration for sale, etc.and (iii) where the proper officer has reason to doubt the truth or accuracyof such value. When the conditions specified in the second proviso aresatisfied, the transactional value for the purpose of charging of customsduty is to be made as per rules framed in this behalf.

A

BC

DE

F

G

H

A

BC

DE

F

G

H

A12. Rules 3 and 12 of the 2007 Rules i.e. Customs Valuation(Determination of Value of Imported Goods) Rules, 2007 were enactedand enforced with effect from 10[th] October, 2007 replacing andsuperseding the 1988 Rules. Rule 3(1) of the 2007 Rules states thatvalue of the imported goods shall be the transaction value adjusted inaccordance with the provisions of Rule 10 of the 2007 Rules whichBRule, as observed above, deals with the costs and services which are tobe added to the price actually paid or payable for the imported goods fordetermining the transaction value. Sub-rule (1) to Rule 3 is howeversubject to Rule 12 and therefore give primacy to Rule 12 which we shallsubsequently elaborate and explain. Sub-rule (2) to Rule 3 states thatCvalue of the imported goods under sub-rule (1) shall be accepted i.e.accepted by the customs authorities. The proviso then vide differentclauses sets out the pre-conditions for accepting value of the importedgoods. Rule 11 provides for declaration to be given by the importer or hisagent certifying that they had disclosed full and accurate details of thevalue of the imported goods and any other statement, information andDdocument including invoice of the manufacturer or producer of the goodswhere the goods are imported from or through a person other than themanufacturer of goods, as considered necessary by the proper officerfor valuation of the imported goods. Sub-rule (2) states that the declaredvalue shall be accepted where the proper officer is satisfied about theEtruth and accuracy of the declared value after an enquiry in consultationwith the importers.

13. Sub-rule (3) to Rule 3 deals with cases when the buyer andseller are related. We would not dilate on the said sub-rule for this is notrequired for the purpose of the present decision. As per sub-rule (4),Fwhere the value cannot be determined under sub-rule (1) to Rule 3, thetransaction is to be valued by step wise applying Rules 4 to 9. Rule 4deals with transaction value based on identical goods. Rule 5 deals withtransaction value based on similar goods. Rule 6 deals with thedetermination of value where the transactional value cannot bedetermined under Rules 3, 4 and 5. Rules 7 and 8 deal with deductiveGvalue and computed value respectively. Rule 9 prescribes the residualmethod for computing the transaction value. What is important to noteis that Rules 4 to 9 are subject to the provisions of Rule 3 thereby givingprimacy to Rule 3 which in turn gives primacy to Rule 12 of the 2007Rules.

H

H

14. Rule 12, which as noticed above enjoys primacy and pivotalposition, applies where the proper officer has reason to doubt the truthor accuracy of the value declared for the imported goods. It envisages atwo-step verification and examination exercise. At the first instance, theproper officer must ask and call upon the importer to furnish furtherinformation including documents to justify the declared transactionalvalue. The proper officer may thereafter accept the transactional valueas declared. However, where the proper officer is not satisfied and hasreasonable doubt about the truth or accuracy of the value so declared, itis deemed that the transactional value of such imported goods cannot bedetermined under the provision of sub-rule (1) of Rule 3 of the 2007Rules. Clause-(iii) of Explanation to Rule 12 states that the proper officercan on ‘certain reasons’ raise doubts about the truth or accuracy ofdeclared value. ‘Certain reasons’ would include conditions specified inclauses (a) to (f) i.e. higher value of identical similar goods of comparablequantities in a comparable transaction, abnormal discount or abnormaldeduction from ordinary competitive prices, sales involving the specialprices, misdeclaration on parameters such as description, quality, quantity,country of origin, year of manufacture or production, non-declaration ofparameters such as brand and grade etc. and fraudulent or manipulateddocuments. Grounds mentioned in (a) to (f) however are not exhaustiveof ‘certain reasons’ to raise doubt about the truth or accuracy of thedeclared value. Clause (ii) to Explanation states that the declared valueshall be accepted where the proper officer is satisfied about the truthand accuracy of the declared value after enquiry in consultation with theimporters. Clause-(i) to the Explanation states that Rule 12 does notprovide a method of determination of value but provides the procedureor mechanism in cases where declared value can be rejected whenthere is a reasonable doubt that the declared transaction value does notrepresent the actual transaction value. In such cases the transactionvalue is to be sequentially determined in accordance with Rules 4 to 9 ofthe 2007 Rules.

Sub-rule (2) of Rule 12 stipulates that on request of an importer,the proper officer shall intimate to the importer in writing the grounds,i.e. the reason for doubting the truth or accuracy of the value declared inrelation to the imported goods. Further, the proper officer shall provide areasonable opportunity of being heard to the importer before he makesthe valuation in the form of final decision under sub-rule (1).

AB

C

DE

F

G

H

A15. The requirements of Rule 12, therefore, can be summarisedas under:

(a) The proper officer should have reasonable doubt as to thetransactional value on account of truth or accuracy of the valuedeclared in relation to the imported goods.

B

(b) Proper officer must ask the importer of such goods furtherinformation which may include documents or evidence;

(c) On receiving such information or in the absence of responsefrom the importer, the proper officer has to apply his mind anddecide whether or not reasonable doubt as to the truth or accuracyof the value so declared persists.

C

(d) When the proper officer does not have reasonable doubt, thegoods are cleared on the declared value.

(e) When the doubt persists, sub-rule (1) to Rule 3 is not applicableand transaction value is determined in terms of Rules 4 to 9 of theD2007 Rules.

(f) The proper officer can raise doubts as to the truth or accuracyof the declared value on ‘certain reasons’ which could include thegrounds specified in clauses (a) to (f) in clause (iii) of theExplanation.

E

(g) The proper officer, on a request made by the importer, has tofurnish and intimate to the importer in writing the grounds fordoubting the truth or accuracy of the value declared in relation tothe imported goods. Thus, the proper officer has to record reasonsin writing which have to be communicated when requested.

F

(h) The importer has to be given opportunity of hearing before theproper officer finally decides the transactional value in terms ofRules 4 to 9 of the 2007 Rules.

16. Proper officer can therefore reject the declared transactionalvalue based on ‘certain reasons’ to doubt the truth or accuracy of thedeclared value in which event the proper officer is entitled to makeassessment as per Rules 4 to 9 of the 2007 Rules. What is meant by theexpression “grounds for doubting the truth or accuracy of the valuedeclared” has been explained and elucidated in clause (iii) of Explanationappended to Rule 12 which sets out some of the conditions when the G

H

‘reason to doubt’ exists. The instances mentioned in clauses (a) to (f)are not exhaustive but are inclusive for there could be other instanceswhen the proper officer could reasonably doubt the accuracy or truth ofthe value declared.

17. The choice of words deployed in Rule 12 of the 2007 Rulesare significant and of much consequence. The Legislature, we mustagree, has not used the expression “reason to believe” or “satisfaction”or such other positive terms as a pre-condition on the part of the properofficer. The expression “reason to believe” which would have requiredthe proper officer to refer to facts and figures to show existence ofpositive belief on the undervaluation or lower declaration of the transactionvalue. The expression “reason to doubt” as a sequitur would require adifferent threshold and examination. It cannot be equated with therequirements of positive reasons to believe, for the word ‘doubt’ refersto un-certainty and irresolution reflecting suspicion and apprehension.However, this doubt must be reasonable i.e. have a degree of objectivityand basis/foundation for the suspicion must be based on ‘certain reasons’.

18. The expression ‘proof beyond reasonable doubt’ in criminallaw requires the prosecution to establish guilt and secure conviction ofthe accused by proving the charge ‘beyond reasonable doubt’. InRamakant Rai Vs. Madan Rai & Ors. (2003) 12 SCC 395 referring tothe expression ‘reasonable doubt’ in criminal law it was held as under:

“24. Doubts would be called reasonable if they are free from azest for abstract speculation. Law cannot afford any favouriteother than the truth. To constitute reasonable doubt, it must befree from an overemotional response. Doubts must be actual andsubstantial doubts as to the guilt of the accused persons arisingfrom the evidence, or from the lack of it, as opposed to merevague apprehensions. A reasonable doubt is not an imaginary,trivial or a merely possible doubt; but a fair doubt based uponreason and common sense. It must grow out of the evidence inthe case.”

Proof beyond ‘reasonable doubt’ is certainly not the requirementunder proviso to Section 14 of the Act and Rule 12 of the 2007 Rules,albeit the above quote draws a distinction between a simple doubt and adoubt which is reasonable. In the context of the proviso to Section 14read with Rule 12 and clause (iii) of Explanation to the 2007 Rules, the A

B

C

D

E

F

G

H

Adoubt must be reasonable and based on ‘certain reasons’. The properofficer must record ‘certain reasons’ specified in (a) to (f) or similargrounds in writing at the second stage before he proceeds to discard thedeclared value and decides to determine the same by proceedingsequentially in accordance with Rules 4 to 9 of the 2007 Rules. It refersto a doubt which the proper officer possesses even after the importerBhas been asked to furnish further information including documents andevidence during the preliminary enquiry to clear his doubt about the truthand accuracy of the value declared. Therefore, there has to be apreliminary enquiry by the proper officer in which the importer must begiven an opportunity for clarification of the doubts of the officer byCfurnishing of documents and evidence as to the accuracy or truth of thevalue declared. It is only in case where the doubt of the proper officerpersists after conducting examination of information including documentsor on account of non-furnishing of information that the procedure forfurther investigation and determination of value in terms of Rules 4 to 9would come into operation and would be applicable. Reasonable doubtDwill exist if the doubt is reasonable and for ‘certain reasons’ and notfanciful and absurd. A doubt to justify detailed enquiry under the provisoto Section 14 read with Rule 12 should not be based on initial apprehension,be imaginary or a mere perception not founded on reasonable and‘certain’ material. It should be based and predicated on grounds andEmaterial in the form of ‘certain reasons’ and not mere ipse dixit.Subjecting imports to detailed enquiry on mere suspicion because one isdistrustful and unsure without reasonable and certain reasons would becontrary to the scheme and purpose behind the provisions which ensurequick and expeditious clearance of imported goods.F19. Section 18 of the Act, reads:“Section 18. Provisional assessment of duty. —

(1) Notwithstanding anything contained in this Act but withoutprejudice to the provisions of Section 46 and Section 50, —

G(a) where the importer or exporter is unable to make self-assessment under sub-section (1) of Section 17 and makes arequest in writing to the proper officer for assessment; or (b) where the proper officer deems it necessary to subject anyimported goods or export goods to any chemical or other test; or H

(c) where the importer or exporter has produced all the necessarydocuments and furnished full information but the proper officerdeems it necessary to make further enquiry; or (d) where necessary documents have not been produced orinformation has not been furnished and the proper officer deemsit necessary to make further enquiry, the proper officer may direct that the duty leviable on such goodsbe assessed provisionally if the importer or the exporter, as thecase may be, furnishes such security as the proper officer deemsfit for the payment of the deficiency, if any, between the duty asmay be finally assessed or re-assessed as the case may be, andthe duty provisionally assessed.

(1A) Where, pursuant to the provisional assessment under sub-section (1), if any document or information is required by the properofficer for final assessment, the importer or exporter, as the casemay be, shall submit such document or information within suchtime, and the proper officer shall finalise the provisional assessmentwithin such time and in such manner, as may be prescribed.

(2) When the duty leviable on such goods is assessed finally orre-assessed by the proper officer in accordance with the provisionsof this Act, then—

(a) in the case of goods cleared for home consumption orexportation, the amount paid shall be adjusted against theduty finally assessed or re-assessed, as the case may be and ifthe amount so paid falls short of, or is in excess of, the duty finallyassessed or re-assessed, as the case may be, the importer or theexporter of the goods shall pay the deficiency or be entitled to arefund, as the case may be; (b) in the case of warehoused goods, the proper officer may, wherethe duty finally assessed or re-assessed, as the case may be, is inthe excess of the duty provisionally assessed, require the importerto execute a bond, binding himself in a sum equal to twice theamount of the excess duty.

(3) The importer or exporter shall be liable to pay interest, on anyamount payable to the Central Government, consequent to thefinal assessment order or re-assessment order under sub-section A

B

C

D

E

F

G

H

A

(2), at the rate fixed by the Central Government underSection 28AA from the first day of the month in which the duty isprovisionally assessed till the date of payment thereof.

(4) Subject to sub-section (5), if any refundable amount referredto in clause (a) of sub-section (2) is not refunded under that sub-Bsection within three months from the date of assessment of dutyfinally or re-assessment of duty, as the case may be, there shallbe paid an interest on such unrefunded amount at such rate fixedby the Central Government under Section 27A till the date ofrefund of such amount.

(5) The amount of duty refundable under sub-section (2) and theinterest under sub-section (4), if any, shall, instead of being creditedto the Fund, be paid to the importer or the exporter, as the casemay be, if such amount is relatable to—

C

(a) the duty and interest, if any, paid on such duty paid by theDimporter, or the exporter, as the case may be, if he had not passedon the incidence of such duty and interest, if any, paid on suchduty to any other person; (b) the duty and interest, if any, paid on such duty on importsmade by an individual for his personal use; E(c) the duty and interest, if any, paid on such duty borne by thebuyer, if he had not passed on the incidence of such duty andinterest, if any, paid on such duty to any other person; (d) the export duty as specified in Section 26; (e) drawback of duty under Sections 74 and 75.”F

The significance of Section 18 of the Act can be understood inlight of the above provisions. Section 18 provides for provisionalassessment of duty in cases specified in sub-section (1) of the Section.Clause (c) of sub-section (1) deals with cases where importer or exporterhas produced necessary documents and furnished full information forGassessment of duty but the proper officer deems it necessary to makefurther enquiry for assessing the duty. However, Clause (d) is wider andwould apply when the importer or exporter does not produce necessarydocuments or furnish information. In all cases covered under Clauses(a) to (d), the proper officer may direct provisional assessment of theHduty leviable on the imported goods. Where duty is assessed provisionally, the importer or exporter has to furnish security as the proper officerdeems fit for payment of deficiency, if any, between the duty provisionallypaid and the duty finally assessed.

On interpreting Section 18 of the Act, it is held that when there isa dispute between the customs authorities and the importer as regardsthe valuation of the imported goods, on satisfaction of the conditionsenumerated in sub-section (1), the authorities should make provisionalassessment of customs duty under Section 18 of the Act. This expeditesclearance, pending final adjudication on merits which may take time.This is also the mandate of the Board Circular No.38/2016 dated 22[nd]August, 2016. Any insistence and compulsion by the authorities that theimporter should disclaim and forgo his statutory right under Section 18of the Act would not be correct. Neither would it be right to reject thevaluation as declared by the importer without reasonable doubt for certainreasons.

20. We would ex facie for the reasons recorded below reject thecontention of the respondents predicated on the letter of appellants dated6[th] March, 2017 that the appellants did not seek provisional assessmentof the bill of entry and had accepted and paid duty on the valuation doneby the customs authorities. This letter exposits the predicament facedby the appellants as it states that the appellants were in urgent requirementand wanted clearance of the goods. Pertinently, the appellants had earlierwritten several letters, including communications dated 22[nd] December,2016 and 4[th] March, 2017 requesting for clearance of the importedconsignment of aluminium scrap on the declared transaction value pointingout therein that on account of delay in the clearance of the importedconsignments, the appellants and its sister concern had been compelledto pay excess duty of over Rs.25 crores from August 2013 onwards. Itis unfortunate and has to be accepted that the respondent authoritieshad compelled and forced the appellant to furnish the letter dated 6[th]March, 2017 thereby waiving of its right to provisional assessment andaccepting valuation in terms of Rules 4 to 10.

As per sub Rule (2) of Rule 12, the proper officer when requiredmust intimate to the importer in writing the grounds for doubting thetruth or accuracy of the value declared. The said mandate of sub-Rule(2) of Rule 12 cannot be ignored or waived. Formation of opinionregarding reasonable doubt as to the truth or accuracy of the valuationand communication of the said grounds to the importer is mandatory, A

B

C

D

E

F

G

H

Asubterfuge to by-pass and circumvent the statutory mandate isunacceptable. Formation of belief and recording of reasons as toreasonable doubt and communication of the reasons when required isthe only way and manner in which the proper officer in terms of Rule 12can proceed to make assessment under Rules 4 to 9 after rejecting thetransaction value as declared.B

21. The mandate to record reasons at the second stage of enquiryis not expressly stipulated, albeit it has been read by us by implication inRule 12. Being conscious that this mandate if applied to past cases wouldpossibly lead to complications and difficulties, we would invoke the doctrineof prospective application with the direction that the past cases will beCdecided on a case to case basis, depending upon the factual matrix andconsiderations like whether the importer has asked for ‘certain reasons’,whether the reasons were not communicated, whether ‘certain reasons’can be deciphered from the assessment/valuation order, whethermisdescription or false declaration was apparent, etc.

D

D

22. In Commissioner of Customs vs. Prabhu Dayal PremChand[4], this Court had rejected the plea that the Revenue was justifiedin redetermining the value of brass and copper scrap on the basis ofinformation received from London Metal Exchange on the price of thesaid metals on the ground that the importer was not confronted with anyEcontemporaneous material for enhancing the transaction value. ThisCourt affirmed the order of the Tribunal in Prabhu Dayal Prem Chand(supra) and held that the order in original had not indicated details of anycontemporaneous import or other material in the form of corroborativematerial which had necessitated the enhancement in the transactionvaluation.F

23. We would now refer to the findings of the order in original inthe present case which observes that the appellants had declared valueof the aluminium scrap as Rs.81.31 per kg, albeit the contemporaneousimport data in the form of different bills of entry had indicated aluminiumscrap values between Rs. 83.26 to Rs. 120.897 per kg. The said portionGof the order refers to at least four bills of entries declaring assessablevalue of less than Rs. 85 per kg. Interestingly, the order in original alsorecords that the imported goods being aluminium scrap was not ahomogeneous commodity and therefore, cannot be evaluated on the basisof the samples or lab testing. Further, the order holds that it was very difficult to find any identical/ similar goods imported in India having samechemical and physical composition and that the values of aluminium scrapidentical/similar to the imported goods in nature and specification werenot available. Without commenting on correctness of the said statements,we would observe that the aforesaid reasoning for rejection of thetransactional value, would not meet the mandate of Section 14 and theRules as elucidated in M/s Sanjivini Non-Ferrous Trading Pvt. Ltd.(supra) wherein it was held that the transaction value mentioned in thebill of entry should not be discarded unless there are contrary details ofcontemporaneous imports or other material indicating and serving ascorroborative evidence of import at or near the time of import whichwould justify rejection of the declared value and enhancement of theprice declared in the bill of entry. We have also elaborated and explainedthe legal position with reference to Rule 12 of the 2007 Rules.

24. Therefore, in the facts and circumstances of the present case,it has to be held that the adjudication order in original is flawed andcontrary to law for it does not give cogent and good reason in terms ofSection 14(1) and Rule 12 for rejection of the transaction value asdeclared in the bill of entry. The order in original is not in accordancewith Section 14 and Rules 3 and 12 as the mandate of these provisionshas been ignored. The Assistant Collector has rejected the transactionvalue as declared in the bill of entry which, as noticed above, is clearlyand fundamentally erroneous besides being contradictory. In the aforesaidcircumstances, we do not think that the order in assessment dated 7[th]April, 2017 can be sustained and upheld. It is set aside and quashed.

25. Before closing, we would observe that the Valuation Alerts,as also stated by the respondents, are issued by the Director General ofValuation based on the monitoring of valuation trends of sensitivecommodities with a view to take corrective measures. They provideguidance to the field formation in valuation matters. They help ensureuniform practice, smooth functioning and prevent evasion and shortpayment of duty. However, they should not be construed as interferingwith the discretion of the assessment authority who is required to passan Assessment Order in the given factual matrix. Declared valuationcan be rejected based upon the evidence which qualifies and meets thecriteria of ‘certain reasons’. Besides the opinion formed must bereasonable. Reference to foreign journals for the price quoted inexchanges etc., to find out the correct international price of concerned A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

Agoods would be relevant but reliance can be placed on such materialonly when the adjudicating authority had conducted enquiries andascertained details with reference to the goods imported which areidentical or similar and ‘certain reasons’ exists and justifies detailedinvestigation. These reasons are to be recorded and if requested disclosed/communicated to the importer. Valuation alerts could be relied upon forBdefault valuation computation under the Rules. (See Varsha Plastic Pvt.Ltd. vs. Union of India[5]).

26. We would also like to clarify that we have not issued anygeneral or omnibus direction that the transaction value declared in thebill of entries should invariably be accepted in all cases and/or that in allCcases where imports of aluminium scrap are involved. The matter has tobe examined on a case to case basis, the evidence before the authorities,the material placed on record and the enquiries conducted by theadjudicating authorities etc.

With the aforesaid clarification, we allow the present appeal andDquash and set aside the order of Assessment dated 7[th] April, 2017 byissuing a writ of certiorari. In the facts of the case, there shall be noorder as to costs.

Devika GujralE

Appeal allowed.

F

G