1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 7260 OF 2008 Life Style International Pvt.Ltd. ... Petitioner. V/s. 1. The Union of India, 2. The Commissioner of Customs, 3. The Deputy Commissioner of Customs. ... Respondents. Prakash Shah for the petitioner. P.S.Jetly for the respondents. CORAM : V.C.DAGA AND K.K.TATED, JJ. DATED : 8th April, 2010. JUDGMENT : (Per V.C.Daga, J.) Perused petition. Heard. 2. This petition filed under Article 226 of the Constitution of India is directed against the order of assessment made on bills of entry dated 22nd August, 2008 and 4th September, 2008 and the standing order dated 13th August, 2008 issued by the respondent No.2 – The Commissioner of Customs (Import), Nhava Sheva, Dist- Raigad contending that the order of assessment suffers from breach of natural justice and is wholly based on 2 the standing order No.36/2008 dated 13th August, 2008 which is ultra vires section 14 of the Customs Act, 1962 (“Customs Act’ for short). Factual Matrix : 3. The petitioners are a private limited company having their registered office at 7 and 8th Floors, Delta Towers, Sigma Soft Tech Park No.7, Whitefield Main Road, Bangalore. The petitioners are a part of landmark group located at Dubai engaged in the business of selling the goods in retail and has over 750 stores across the world. The products traded in the petitioners’ stores include Apparel, Footwear, Lifestyle Products, Furniture, Furnishings and Baby Products. These products are imported by the petitioners from South-East Asian countries and also from China. 4. The petitioners, in India, have 14 stores, out of which, in five stores, they are selling furniture. The turnover of the petitioners, for the year 2007-2008, was Rs.693 crore for Lifestyle Division. The petitioners directly import the goods from the manufacturers. The landmark group identifies the manufacturers in China/ South-East Asia and negotiates the price with the various manufacturers for import by the individuals member companies. Once the price is negotiated and arrived at between the manufacturer and the landmark group, then the individual companies or the group place purchase order on the manufacturer and import the goods directly. The petitioners have been importing the furniture for the past 10 years into Nhava Sheva port as well as into Chennai. The price at which 3 the furniture was imported by the petitioners in the past was accepted by the Customs Department based on the price negotiated by the landmark group at Dubai. The petitioners, under the bills of entry dated imported furniture. The assessment of the imported furniture has been done by respondent No.3 not on the basis of the negotiated value but on the basis of value indicated in the Standing Order No.36/2008 dated 13th August, 2008 issued by the respondent No.2. According to the petitioners, the transaction of the imported goods is ignored by respondent No.3 and the said standing order dated 13th August, 2008 is made basis of the assessment. According to the standing order, in order to arrive at assessable value the retail selling price (MRP) or weight of the goods is to be considered and a deduction of 60% is to be allowed towards various expenses viz. margin of the retailer, discount on wholesale purchase, towards transportation, storage and other expenses apart from VAT and taxes. According to the petitioners, the respondent No.3 is assessing the goods as per the standing order dated 13th August, 2008, discarding the transaction value recognised by the Act and Rules framed thereunder. This act of the respondent No.3 is the subject matter of challenge in the present petition filed under Article 226 of the Constitution of India. Points Urged : 5. Mr.Shah, learned counsel for the petitioners streneously urged that the aforesaid standing order dated 13th August, 2008 is contrary to the section 14 of the Customs Act and rules framed thereunder. The method prescribed in the said standing order relating to the 4 determination of value of the imported goods is running counter to the spirit of section 14 of the Customs Act. According to him, section 14 states that value of the goods shall be a value of transaction means price paid for the imported goods. He further submits that as per rules 3(1) and 3(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (“Customs Valuation Rules” for short) framed in terms of section 14(1) read with section 157, the transaction value should be accepted provided the transaction in question is not hit by any of the circumstances provided in the proviso to rule 3(2). According to Mr.Shah, the standing order has ignored section 14 of the Customs Act and prescribed a method not to be found in section 14 and rules framed thereunder. Hence standing order No. 36/2008 dated 13th August, 2008 being contrary to the provision of section 14 of the Customs Act is liable to be struck down. He also submits that the said standing order is contrary to the law laid down by the Supreme Court in Eicher Tractors Ltd. v. Commissioner of Customs, 2000 (122) ELT 321 (SC) followed in the case of Tolin Rubbers Pvt.Ltd. v. Commissioner of Customs, 2004 (163) ELT 289 (SC) and Commissioner v. Bureau Veritas, 2005 (181) ELT 3 (SC) 6. Mr.Shah while attacking assessment of the bills of entry dated 22nd August, 2008 and 4th September, 2008 strongly urged that the said assessment is in breach of principles of natural justice as no opportunity of hearing was given to the petitioners before making the impugned assessment. He, thus, submitted that the order of assessment is ab initio void and liable to be quashed and set aside and prayed for remitting the matter back 5 to the assessing authority with direction to assess the same afresh ignoring the standing order No.36/2008 dated 13th August, 2008 since the said standing order is ultra vires section 14 of the Customs Act. 7. At the outset, Mr.Jetly, learned counsel for the respondents, based on the written instructions given to him by the Deputy Commissioner of Customs vide his letter dated 15th January, 2010 (copy of which is placed on record of this Court), clarifies that the standing order dated 13th August, 2008 in the case of valuation of imported unbranded furniture has been issued merely by way of guidelines for assessing officers to arrive at a suitable conclusion in terms of rule 12 of the Customs Valuation Rules in the event of any reason to doubt the truth or accuracy of the declared value of the imported furniture. According to him, actual valuation of the imported goods is to be determined as per the provisions of the Customs Act, 1962 and Custom Valuation Rules. 8. Mr.Jetly, thus, reiterates that the instructions are issued for the purposes of uniformity in the matter of determination of actual valuation of the imported goods for levy of duty and to avoid discriminatory treatment to the importers of the same and similar goods imported in the similar condition by determining different valuations. He further submits that the assessing authority is a quasi-judicial authority and acts independently in exercise of its quasi-judicial powers. The guidelines framed are not mandatory but they are framed to prevent assessing officers from exercising their powers in an arbitrary manner. The idea is to channelize their discretion. He 6 placed reliance on the judgment of the Supreme Court in the case of Varsha Plastics Pvt.Ltd. v. Union of India, 2009 (235) ELT 193 (SC), judgment of this Court in the case of Godrej Industries Limited v. Union of India, 2004 (171) ELT 5 (Bom.) and that of Gujarat High Court in the case of Ramchandra Art Silk Yarn v. Union of India, 2002 (139) ELT 540 (Guj.) in support of his submission. 9. So far as challenge to the assessment of the bills of entry dated 22nd August, 2008 and 4th September, 2008 is concerned, Mr.Jetly found it difficult to counter the argument advanced by Mr.Shah that order of assessment is in breach of principles of natural justice. Mr.Jetly, thus, submits that the impugned order of assessment be set aside by consent of parties without examining merit or demerits thereof and the matter be remitted back to the assessing officer for de novo assessment in accordance with law clarifying the status of the standing order No.36/2008 dated 13th August, 2008 that it is merely guidelines to assist the assessing officers. Consideration : 10. Having heard rival contentions, having examined the length and breadth of the guidelines and the scope of section 14 of the Customs Act and the Customs Valuation Rules, the standing order No.36/2008 dated 13th August, 2008 is merely departmental guidelines without any statutory force issued with a view to assist the assessing officer, but that does not mean that the assessing officer should abdicate his powers and assess 7 the matter de horse the provisions of section 14 of the Customs Act and Customs Valuation Rules. The said guidelines can only be used wherever the assessing officer finds that Customs Valuation Rules are silent or they need to be supplemented. The assessing officer is expected to bear in mind that wherever the standing order is running counter to the Customs Valuation Rules or mandate thereof or to the spirit of section 14 of the Customs Act, the standing order cannot be put into operation. Mr.Shah’s apprehension that once the standing orders are framed by the higher authorities, the sub-ordinate authorities are bound to consider the case of the assessee as per the standing orders or the guidelines incorporated therein cannot be without any foundation. But at the same time the assessing officer cannot ignore the law laid down by the Apex Court from time to time. Readily available judgment is quoted hereinbelow. 11. In the case of Indian Railway Construction Co. Ltd. v. Ajay Kumar, (2003) 4 SCC 579, the Apex Court ruled that whenever there is failure to exercise discretion under the discretionary powers construed by the statute then it is permissible by the appellate Court or the appellate authority or Tribunal and the higher Courts to take note of such inaction and give direction to consider the same in accordance with law. The Apex Court in the case of U.P. State Road Transport Corporation and Another, v. Mohd. Ismail and others, (1991) 3 SSC 239, in para-13, observed as under: "13. In the instant case, the Corporation has denied itself the discretion to offer an alternative job 8 which the regulation requires it to exercise in individual cases of retrenchment. As earlier stated, the Managing Director has issued two circulars; (i) dated December 19, 1986 and (ii) dated March 12, 1987 directing the Regional Managers to dispense with the services of the drivers who are found to be medically unfit to drive the vehicles. It is directed in the circulars that such drivers should be paid benefits like retrenchment compensation which they are entitled to under the U.P. Industrial Disputes Act. The circulars thus leave no scope for exercising discretion to consider the individual cases of retrenched drivers for any alternative job. It may be stated that the statutory discretion cannot be fettered by self-created rules or policy. Although it is open to an authority to which discretion has been entrusted to lay down the norms or rules to regulate exercise of discretion it cannot, however, deny itself the discretion which the statute requires it to exercise in individual cases. The concerned authority of the Corporation therefore, notwithstanding the said circulars are required to consider the cases of retrenched drivers for alternative jobs." 12. The aforesaid observations made it clear beyond doubt that the standing orders which are formulated by respondent No.2 cannot fetter jurisdiction and vest power under the statute under section 14 of the Customs Act and the Customs Valuation Rules framed thereunder. It shall be the duty of the assessing officer to consider the case of the assessee independent of the said standing orders and the guidelines framed therein. The said standing orders and the guidelines framed therein, as admitted by Mr.Jetly, cannot have the effect of superseding provision of section 14 of the Customs 9 Act and Customs Valuation Rules which have a statutory force. The guidelines framed do not have statutory force. They are only meant by way of guidance to the assessing officer and the said guidelines can only be used where the rules are silent. These guidelines cannot be used where they are running counter to the statutory provisions. Clarification submitted by Mr.Jetly and clarified by this Court herein would take care of the apprehension expressed by the petitioners. It is, thus, not necessary to set aside the said standing order No.36/2008 dated 13th August, 2008 as prayed by Mr.Shah. The clarification made herein would meet the ends of justice. 13. So far as merits of the assessments of the bills of entry dated 22nd August, 2008 and 4th September, 2008 is concerned, the same being in breach of principles of natural justice, considering the rival submissions, without examining merits or demerits thereof and dispensing with the reasons in support of this order, by consent of parties, we set aside the order of assessment and remit the matter back to the assessing officer for consideration afresh in the light of the clarification made herein with regard to the Standing Order No.36/2008 dated 13th August, 2008. 14. In the result, petition is allowed. Rule is made absolute in terms of this order with no order as to costs. (K.K.TATED, J.) (V.C.DAGA J.)