CWP No.9152 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No.9152 of 2010 Date of decision: 1.12.2010 M/s Ganesh Agro -----Petitioner Vs. Union of India and others ----Respondents CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Jagmohan Bansal, Advocate for the petitioner. Mr. HPS Ghuman, Senior Standing Counsel for respondent No.2. Adarsh Kumar Goel,J. 1. This order will dispose of CWP Nos. 9146 to 9152 of 2010 as all the petitions involve common questions of law. 2. In CWP No.9152 of 2010, challenge is to order dated 11.1.2010 , Annexure P.10, passed by the Commissioner of Customs (Appeals), Chandigarh upholding valuation of imported goods fixed by Assistant Commissioner of Customs vide order dated 5.2.2009, Annexure P.8 and order dated 7.5.2010, Annexure P.12 passed by Chief Commissioner, Customs and Central Excise, Chandigarh reiterating order dated 12.12.2008 of the Commissioner of Customs, Nhava Sheva in the matter of fixation of norms for valuation of Zinc skimming and Zinc Ash. 3. Background of the controversy as stated in the petition is that the petitioner imports Zinc ash and Zinc skimming for manufacture of fertilizer. In the year 2006, when it filed bills of entry for clearance of the imported goods, the department did not allow clearance on declared value and vide order dated 1 CWP No.9152 of 2010 30.5.2006, goods were released on provisional assessment at the rate of US$ 1000 per metric ton. As per interim order of this Court dated 15.6.2006 in CWP No.9341 of 2006, considering the contention of the petitioner that provisional valuation was exorbitant, the goods were allowed to be cleared at the value of US$ 1000 per MT. The dispute being of recurring nature, CWP No.16037 of 2008 was filed in this Court seeking regular assessment by speaking order as required under section 17(5) and Section 18 of the Customs Act, 1962. The stand of the respondents was that the issue of fixation of norms was pending consideration and final assessment was to be made as per the norms which may be fixed by the Commissioner of Customs, Nhava Sheva. The petition was accordingly disposed of on 22.2.2008. Operative part of the order is as under:- “Learned counsel for the respondents submits that the issue is being considered by the Commissioner of Customs, Nhava Sheva for laying down parameters. In the light of the said findings, final assessment will be made. We direct the Commissioner of customs, Nhava Sheva to finalise the matter expeditiously preferably within a period of two months from the date of receipt of a copy of this order and thereafter the respondents may finalise the assessments of the petitioners expeditiously within one month.” 4. The Deputy Commissioner of Customs, Ludhiana, respondent No.2 carried out a study and gave report dated 10.12.2008 stating that value of material is linked to London Metal Exchange (LME) Rules and also depends upon percentage of metallic content. Base price of Zinc skimming/Zinc ash may be taken to be 25% of LME if the same had no metallic contents. The said price could be loaded further depending upon the extent of metallic contents. Inspite of the said report, the Commissioner of Customs, Nhava Sheva vide order dated 12.12.2008 fixed the price equal to 40% of LME if metallic contents were nil. On the basis of the said parameters, order of final assessment dated 5.2.2009 was 2 CWP No.9152 of 2010 passed by the Commissioner of Customs, Ludhiana raising a demand against the petitioner over and above the provisional duty earlier paid. Against the said order, appeal of the petitioner was dismissed vide impugned order dated 11.1.2010 by the Commissioner (Appeals), Customs and Central Excise. The petitioner filed CWP No.6292 of 2010 challenging parameters laid down in order dated 12.12.2008 by Commissioner of Customs, Nhava Sheva on the ground that the base price equal to 40% LME was arbitrary and ignored report dated 10.12.2008, Annexure P.5 to the effect that base price should be taken to be 25% of the LME. Vide order dated 7.4.2010, the petition was disposed of directing Chief Commissioner, Customs and Central Excise to look into this aspect and to review the order of assessment dated 5.2.2009 as affirmed in appeal in case parameters for value were found to be erroneous. In pursuance of the said order of this Court, impugned order dated 7.5.2010 has been passed holding that the parameters laid down in order dated 12.12.2008 by Commissioner of Customs, Nhava Sheva were valid. Operative part of the said order is as under:- “As per Rule 12 of the Customs Valuation (Determination of value of Imported Goods) Rules, 2007 when the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, it shall be deemed that Transaction Values cannot be determined under the provisions of Sub Rule (1) of Rule 3. Rule 3(4) provides that if the value cannot be determined under the provisions of Sub Rule (1), the value shall be determined by proceeding sequentially through Rule 4 to 9. In the instant case, Rule 4 to 8 are not applicable. Thus assessable value cannot be determined under these Rules. Therefore, the same shall be determined under rule 9 of the Customs Valuation (Determination of value of Imported Goods) Rules, 2007 which provides “Subject to the provisions of rule 3, where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general 3 CWP No.9152 of 2010 provisions of these rules and on the basis of data available in India.” As such, the parameters laid down by the Commissioner of Customs, Nhava Sheva being consistent with the principles and general provisions of the Rules, are legal and valid. These are based on the value of contemporaneous imports at the relevant time. These are being accepted for valuation of import of Zinc Ash/Skimming at different ports of import. Valuation has to be done in terms of the Valuation Rules. The parameters adopted by the Committee at Ludhiana are not based on the Valuation Rules and are therefore extra-legal. These cannot be followed for determination of the assessable value. Therefore, having regard to above discussion and findings, I find that the party’s goods were assessed correctly on the cited parameters and pass following orders:- ORDER In view of discussions above, I hold the parameters laid down by the Commissioner of Customs, Nhava Sheva vide orders dated 12.12.2008 conform to the rules and are legal, just and fair for valuation of Zinc skimming and Zinc Ash at the time of its import and there is no reason to change or deviate from the same.” 5. In the writ petition, contention raised on behalf of the petitioner is that under the Customs Valuation (Determination of value of Imported Goods) Rules, 2007, framed with reference to section 14 of the Act, valuation has to be taken up either equal to the value of the transaction or lowest value in one of the transactions of identical goods and even under Rule 9, valuation has to be reasonable. Contrary to the said provisions, the Assessing authority i.e. Assistant Commissioner of Customs, has mechanically acted on the parameters laid down by the Commissioner of Customs, Nhava Sheva for taking base value equal to 40% of the LME. In the said order, there is no reference to lowest value in a transaction of identical goods. Report dated 10.12.2008, prepared by the Deputy Commissioner of Customs, Ludhiana, recommending value based on transactions of identical 4 CWP No.9152 of 2010 goods was 25% of the LME, has not been taken into account. The parameters laid down by the Commissioner of Customs, Nhava Sheva were beyond the rules and could not be mechanically accepted, ignoring the transaction value of identical goods and other material. 6. In the reply filed, the impugned orders have been defended. As regards report Annexure P.5, it has been stated that the Commissioner of Customs, Nhava Sheva has not accepted the said report and held that valuation be taken to be 40% of LME and the order of assessment and appellate order based on the said norms were valid. 7. We have heard learned counsel for the parties and perused the record. 8. Relevant statutory provisions are as 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 the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf : Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, 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 the manner specified in the rules made in this behalf : 5 CWP No.9152 of 2010 Provided further that the rules made in this behalf may provide for,- (i) the circumstances in which the buyer and the seller shall be deemed to be related; (ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case; (iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer 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 reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. (2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. Explanation. — For the purposes of this section — (a) “rate of exchange” means the rate of exchange — (i) determined by the Board, or 6 CWP No.9152 of 2010 (ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency; (b) “foreign currency” and ‘‘Indian currency” have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).] xx xx xx xx xx 17. Assessment of duty. – (1) After an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer. (2) After such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in section 85, be assessed. (3) For the purpose of assessing duty under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, broker’s note, policy of insurance, catalogue or other document whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which it is in his power to produce or furnish, and thereupon the importer, exporter or such other person shall produce such document and furnish such information. (4) Notwithstanding anything contained in this section, imported goods or export goods may, prior to the examination 7 CWP No.9152 of 2010 or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statements made in the entry relating thereto and the documents produced and the information furnished under sub-section (3); but if it is found subsequently on examination or testing of the goods or otherwise that any statement in such entry or document or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be re- assessed to duty. [(5) Where any assessment done under sub-section (2) is contrary to the claim of the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification therefor under this Act, and in cases other than those where the importer or the exporter, as the case may be, confirms his acceptance of the said assessment in writing, the proper officer shall pass a speaking order within fifteen days from the date of assessment of the bill of entry or the shipping bill, as the case may be.] 18. Provisional assessment of duty. – (1) Notwithstanding anything contained in this Act but without prejudice to the provisions contained in section 46 - (a) where the proper officer is satisfied that an importer or exporter is unable to produce any document or furnish any information necessary for the assessment of duty on the imported goods or the export goods, as the case may be; or (b) where the proper officer deems it necessary to subject any imported goods or export goods to any chemical or other test for the purpose of assessment of duty thereon; or (c) where the importer or the exporter has produced all the necessary documents and furnished full information for the 8 CWP No.9152 of 2010 assessment of duty but the proper officer deems it necessary to make further enquiry for assessing the duty, the proper officer may direct that the duty leviable on such goods may, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty finally assessed and the duty provisionally assessed. (2) When the duty leviable on such goods is assessed finally in accordance with the provisions of this Act, then - (a) in the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty finally assessed and if the amount so paid falls short of, or is in excess of [the duty finally assessed], the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund, as the case may be; (b) in the case of warehoused goods, the proper officer may, where the duty finally assessed is in excess of the duty provisionally assessed, require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty. [(3) The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment order under sub-section (2), at the rate fixed by the Central Government under section 28AB from the first day of the month in which the duty is provisionally assessed till the date of payment thereof. 9 CWP No.9152 of 2010 (4) Subject the sub-section (5), if any refundable amount referred to in clause (a) of sub-section (2) is not refunded under that sub-section within three months from the date of assessment of duty finally, there shall be paid an interest on such unrefunded amount at such rate fixed by the Central Government under section 27A till the date of refund of such amount. (5) The amount of duty refundable under sub-section (2) and the interest under sub-section (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to - (a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal use; (c) the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (d) the export duty as specified in section 26; (e) drawback of duty payable under sections 74 and 75.]” “Rule 4. Determination of export value by comparison. – (1) The value of the export goods shall be based on the transaction value of goods of like kind and quality exported at or about the same time to other buyers in the same destination country of importation or in its absence another destination 10 CWP No.9152 of 2010 country of importation adjusted in accordance with the provisions of sub-rule (2). (2) In determining the value of export goods under sub-rule (1), the proper officer shall make such adjustments as appear to him reasonable, taking into consideration the relevant factors, including- (i) difference in the dates of exportation, (ii) difference in commercial levels and quantity levels, (iii) difference in composition, quality and design between the goods to be assessed and the goods with which they are being compared, (iv) difference in domestic freight and insurance charges depending on the place of exportation.” 9. Question for consideration is whether assessment of duty under Section 17(2) read with the rules or provisional assessment under section 18 is permissible solely on the basis of norms fixed by the Commissioner of Customs, Nhava Sheva ignoring genuine transaction value or the provisions of the rules. 10. In our view, the said norms cannot be mechanically applied, irrespective of genuineness of transaction value or value as may be arrived at as per statutory requirements. Normally, it is not for this Court to lay down the valuation in individual cases or to interfere with an order of assessment or appellate order on the issue of assessment of value but when valuation has not been fixed as per statutory provisions, the same has to be set aside and matter remanded for fresh assessment. 11. Accordingly, we allow this petition and quash the impugned orders and remand the matter to the Assessing Officer to pass a fresh order in the matter in accordance with law. 11 CWP No.9152 of 2010 (Adarsh Kumar Goel) Judge December 1, 2010 (Ajay Kumar Mittal) ‘gs’ Judge 12