CENTURY METAL RECYCLING PVT. LTD. AND versus UNION OF INDIA AND OTHERS
[2019] 8 S.C.R. 639, Supreme Court of India, 2019
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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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 Imported
Goods) Rules, 2007: rr.3, 12 – Appellants had been regularly
importing aluminium waste as a raw material for manufacturing
alluminium alloy – Case of appellants was that respondents-
authorities discarded the declared transactional value and
recomputed the consignment value – Held: As per s.14(1) of the
Customs Act, value of the imported goods shall be the transactional
value of such goods, which means the price actually paid or payable
for the goods when sold for export to India where the buyers and
sellers are not related and the price fixed is the sole consideration
for sale – r.3(1) states that value of the imported goods shall be the
transaction value adjusted in accordance with the provisions of
r.10 of the 2007 Rules – Sub-rule (2) to r.3 states that value of the
imported goods under sub-rule (1) shall be accepted i.e. accepted
by the customs authorities – Where the proper officer is not satisfied
and has reasonable doubt about the truth or accuracy of the value
so declared, it is deemed that the transactional value of such
imported 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, the
proper officer when required must intimate to the importer in
writing
the grounds for doubting the truth or accuracy of the value declared
–  The said mandate of sub-Rule (2) of r.12 cannot be ignored or
waived – In the instant case, the findings in the order-in-original
was that the appellants had declared value of the aluminium scrap
as Rs.81.31 per kg, albeit the contemporaneous import data in the
form of different bills of entry had indicated aluminium scrap values
between Rs. 83.26 to Rs. 120.897 per kg – The order-in-original
also recorded that the imported goods being aluminium scrap was
not a homogeneous commodity and therefore, cannot be evaluated
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on the basis of the samples or lab testing and that it was very difficult
to find any identical/similar goods imported in India having same
chemical and physical composition – Therefore, the order-in-original
was flawed and contrary to law for it did not give cogent reason in
terms of s.14(1) and r.12 for rejection of the transaction value as
declared in the bill of entry – Customs Act, 1962 – s.14 – Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007
– rr.3 to 12.
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007: r.12 – Rejection of declared value – Essential
requirement – Reasonable doubt of proper officer as to transactional
value – The proper officer should have reasonable doubt as to the
transactional value on account of truth or accuracy of the value
declared in relation to the imported goods – Proper officer must
ask the importer of such goods, further information which may
include documents or evidence – On receiving such information or
in the absence of response from the importer, the proper officer has
to apply his mind and decide whether or not reasonable doubt as to
the truth or accuracy of the value so declared persists  – When the
proper officer does not have reasonable doubt, the goods are cleared
on the declared value – When the doubt persists, sub-rule (1) to r.3
is not applicable and transaction value is determined in terms of
rr.4 to 9 of the 2007 Rules –
The importer has to be given opportunity
of hearing before the proper officer finally decides the transactional
value in terms of rr.4 to 9 of the 2007 Rules.
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 – r.12 – Interpretation of – Held: The choice of
words deployed in r.12 of the 2007 Rules are significant and of
much consequence – The Legislature did not use the expression
“reason to believe” or “satisfaction” or such other positive terms
as a pre-condition on the part of the proper officer – The expression
“reason to believe” which would have required the proper officer
to refer to facts and figures to show existence of positive belief on
the undervaluation or lower declaration of the transaction value –
The expression “reason to doubt” as a sequitur would require a
different threshold and examination – It cannot be equated with the
requirements of positive reasons to believe, for the word ‘doubt’
refers to un-certainty and irresolution reflecting suspicion and
apprehension.
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Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 – r.18 – Case of appellants that respondents-
authorities discarded the declared transactional value and
recomputed the consignment value by compelling the appellant to
give a letter of consent to assessment/valuation by custom authorities
– Contention of the respondents was predicated on letter of
appellants dated 6th March, 2017 that the appellants did not seek
provisional assessment of the bill of entry and had accepted and
paid duty on the valuation done by the customs authorities – The
contention is rejected since this letter exposited the predicament
faced by the appellants as it stated that the appellants were in urgent
requirement and wanted clearance of the goods – Appellants had
earlier also written several letters requesting for clearance of the
imported consignment of aluminium scrap on the declared
transaction value pointing out therein that on account of delay in
the clearance of the imported consignments, the appellants and its
sister concern had been compelled to pay excess duty of over Rs.25
crores – Therefore, respondent authorities had compelled and forced
the appellant to furnish letter dated 6th March, 2017 thereby waiving
of its right to provisional assessment and accepting valuation in
terms of rr.4 to 10.
Customs Act, 1962: Valuation Alerts – The Valuation Alerts
are issued by the Director General of Valuation based on the
monitoring of valuation trends of
sensitive commodities with a view
to take corrective measures – They provide guidance to the field
formation 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 the
discretion of the assessment authority who is required to pass an
Assessment Order in the given factual matrix – Declared valuation
can be rejected based upon the evidence which qualifies and meets
the criteria of ‘certain reasons’ – Besides, the opinion formed must
be reasonable – Reference to foreign journals for the price quoted
in exchanges etc., to find out the correct international price of
concerned goods would be relevant but reliance can be placed on
such material only when the adjudicating authority had conducted
enquiries and ascertained details with reference to the goods
imported which are identical or similar and ‘certain reasons’ exists
and justifies detailed investigation – These reasons are to be
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recorded and if requested disclosed/ communicated to the importer
– Valuation alerts could be relied upon for default valuation
computation under the Rules.
Allowing the appeal, the Court
HELD : 1.1 The word ‘payable’ used in Section 14(1) refers
to the particular transaction and the payability in respect of ‘the
transaction’.  It refers to the notional value, albeit the transaction
value as declared in the bill of entry plus the amount which has to
be added in terms of Rule 10 of the 2007 Rules. As per Section
14(1) of the Act, value of the imported goods shall be the
transactional value of such goods, which means the price actually
paid or payable for the goods when sold for export to India where
the buyers and sellers are not related and the price fixed is the
sole consideration for sale. [Para 7, 9] [655-G-H; 657-B]
Commissioner of Central Excise and Service Tax, Noida
v. M/s Sanjivini Non-Ferrous Trading Pvt. Ltd. (2019)
2 SCC 378 ; Commissioner of Customs, Calcutta
v. South India Television (P) Ltd. (2007) 6 SCC
373 : [2007] 8 SCR 95 ; Eicher Tractors Limited,
Haryana v. Commissioner of Customs, Mumbai (2001)
1 SCC 315 : [2000] 4 Suppl. SCR 597 – relied on.
1.2 Sub-section (2) of Section 14 is a non-obstante provision,
which applies notwithstanding sub-section (1), i.e. when the Board
has issued a notification in the Official Gazette fixing tariff values
for any class of imported or exported goods. The Board has
been
authorised to issue notifications under Section 14(2) of the Act
when it is satisfied that it is necessary or expedient.  In the instant
case, the Board has not considered it necessary and expedient
to issue a notification under Section 14(2) of the Act to fix a tariff
for the imported aluminium waste. The second proviso to Section
14(1) deals with different situations, enumerated under the three
clauses; (i) when buyers and sellers are deemed to be related;
(ii) when there is no sale, or buyers and sellers 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 accuracy of
such value. When the conditions specified in the second proviso
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are satisfied, the transactional value for the purpose of charging
of 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 were
enacted and enforced with effect from 10th October, 2007
replacing and superseding the 1988 Rules. Rule 3(1) of the 2007
Rules states that value of the imported goods shall be the
transaction value adjusted in accordance with the provisions of
Rule 10 of the 2007 Rules.  Sub-rule (2) to Rule 3 states that
value of the imported goods under sub-rule (1) shall be accepted
i.e. accepted by the customs authorities.  Rule 11 provides for
declaration to be given by the importer or his agent certifying
that they had disclosed full and accurate details of the value of
the imported goods and any other statement, information and
document. Sub-rule (2) states that the declared value shall be
accepted where the proper officer is satisfied about the truth and
accuracy of the declared value after an enquiry in consultation
with the importers. [Para 12] [658-A-E]
2.2  Sub-rule (3) to Rule 3 deals with cases when the buyer
and seller are related. As per sub-rule (4), where the value cannot
be determined under sub-rule (1) to Rule 3, the transaction is to
be valued by step wise applying Rules 4 to 9.  Rule 4 and 5 deal
with transaction value based on identical goods and on similar
goods
respectively.  Rule 6 deals with the determination of value
where the transactional value cannot be determined under Rules
3, 4 and 5. Rules 7 and 8 deal with deductive value and computed
value respectively.  Rule 9 prescribes the residual method for
computing the transaction value.  Rules 4 to 9 are subject to the
provisions of Rule 3 thereby giving primacy to Rule 3 which in
turn gives primacy to Rule 12 of the 2007 Rules.  Rule 12 uses
the expression ‘the proper officer has reason to doubt the truth or
accuracy 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 value
under the repealed Customs Valuation (Determination of Price
of Imported Goods) Rules,1988 and the pre-amended Section
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14(1) of the Act.  Thus, Rule 12, which enjoys primacy and pivotal
position, applies where the proper officer has reason to doubt
the 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 upon
the importer to furnish further information including documents
to justify the declared transactional value. The proper officer may
thereafter accept the transactional value as declared. However,
where the proper officer is not satisfied and has reasonable doubt
about the truth or accuracy of the value so declared, it is deemed
that the transactional value of such imported goods cannot be
determined under the provision of sub-rule (1) of Rule 3 of the
2007 Rules. Clause-(iii) of Explanation to Rule 12 states that the
proper officer can on ‘certain reasons’ raise doubts about the
truth or accuracy of declared value. ‘Certain reasons’ would
include conditions specified in clauses (a) to (f) i.e. higher value
of identical similar goods of comparable quantities in a comparable
transaction, abnormal discount or abnormal deduction from
ordinary 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. and
fraudulent or
manipulated documents. Grounds mentioned in (a)
to (f) however are not exhaustive of ‘certain reasons’ to raise
doubt about the truth or accuracy of the declared value. Clause
(ii) to Explanation states that the declared value shall be accepted
where the proper officer is satisfied about the truth and accuracy
of the declared value after enquiry in consultation with the
importers.  Clause-(i) to the Explanation states that Rule 12 does
not provide a method of determination of value but provides the
procedure or mechanism in cases where declared value can be
rejected when there is a reasonable doubt that the declared
transaction value does not represent the actual transaction value.
In such cases, the transaction value is to be sequentially
determined 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 the
grounds, i.e. the reason for doubting the truth or accuracy of the
value declared in relation to the imported goods. Further, the
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proper officer shall provide a reasonable opportunity of being
heard to the importer before he makes the valuation in the form
of 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 2007
Rules 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 the
proper officer. The expression “reason to believe” which would
have required the proper officer to refer to facts and figures to
show existence of positive belief on the undervaluation or lower
declaration of the transaction value. The expression “reason to
doubt” as a sequitur would require a different threshold and
examination. It cannot be equated with the requirements of
positive 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 of
objectivity and basis/foundation for the suspicion must be based
on ‘certain reasons’.  [Para 17] [661-B-D]
3.2  The expression ‘proof beyond reasonable doubt’ in
criminal law requires the prosecution to establish guilt and secure
conviction of the accused by proving the charge ‘beyond
reasonable doubt’. Proof beyond ‘reasonable doubt’ is certainly
not the requirement under proviso to Section 14 of the Act and
Rule 12 of the 2007 Rules.  In
the context of the proviso to
Section 14 read with Rule 12 and clause (iii) of Explanation to the
2007 Rules, the doubt must be reasonable and based on ‘certain
reasons’. The proper officer must record ‘certain reasons’
specified in (a) to (f) or similar grounds in writing at the second
stage before he proceeds to discard the declared value and
decides to determine the same by proceeding sequentially in
accordance with Rules 4 to 9 of the 2007 Rules.  It refers to a
doubt which the proper officer possesses even after the importer
has been asked to furnish further information including documents
and evidence during the preliminary enquiry to clear his doubt
about the truth and accuracy of the value declared.  Therefore,
there has to be a preliminary enquiry by the proper officer in
which the importer must be given an opportunity for clarification
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of the doubts of the officer by furnishing of documents and
evidence as to the accuracy or truth of the value declared.  It is
only in case where the doubt of the proper officer persists after
conducting examination of information including documents or
on account of non-furnishing of information that the procedure
for further investigation and determination of value in terms of
Rules 4 to 9 would come into operation and would be applicable.
A doubt to justify detailed enquiry under the proviso to 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.  Subjecting imports to detailed enquiry on
mere suspicion because one is distrustful and unsure without
reasonable and certain reasons would be contrary to the scheme
and purpose behind the provisions which ensure quick and
expeditious clearance of imported goods. [Para 18] [661-G-H;
662-A-E]
Ramakant Rai v. Madan Rai & Ors. (2003) 12 SCC
395 : [2003] 4 Suppl. SCR 17 – relied on.
4. Section 18 of the Act envisages that when there is a
dispute between the customs authorities and the importer as
regards the valuation of the imported goods, on satisfaction of
the conditions enumerated in sub-section (1), the authorities
should make provisional assessment of customs duty under
Section 18 of the Act. This expedites clearance, pending final
adjudication on merits which may
take time. This is also the
mandate of the Board Circular No.38/2016 dated 22nd August,
2016. Any insistence and compulsion by the authorities that the
importer should disclaim and forgo his statutory right under
Section 18 of the Act would not be correct. Neither would it be
right to reject the valuation as declared by the importer without
reasonable doubt for certain reasons.   The contention of the
respondents predicated on the letter of appellants dated 6th
March, 2017 that the appellants did not seek provisional
assessment of the bill of entry and had accepted and paid duty on
the valuation done by the customs authorities is rejected. This
letter exposits the predicament faced by the appellants as it states
that the appellants were in urgent requirement and wanted
clearance of the goods. The appellants had earlier written several
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letters requesting for clearance of the imported consignment of
aluminium scrap on the declared transaction value pointing out
therein that on account of delay in the clearance of the imported
consignments. It is unfortunate and has to be accepted that the
respondent authorities had compelled and forced the appellant
to furnish the letter dated 6th March, 2017 thereby waiving of its
right to provisional assessment and accepting valuation in terms
of Rules 4 to 10.  [Paras 19, 20] [665-B-F]
5. As per sub Rule (2) of Rule 12, the proper officer when
required must intimate to the importer in writing the grounds for
doubting the truth or accuracy of the value declared.  The said
mandate of sub-Rule (2) of Rule 12 cannot be ignored or waived.
Formation of opinion regarding reasonable doubt as to the truth
or accuracy of the valuation and communication of the said grounds
to the importer is mandatory, subterfuge to by-pass and
circumvent the statutory mandate is unacceptable.  Formation of
belief and recording of reasons as to reasonable doubt and
communication of the reasons when required is the only way and
manner in which the proper officer in terms of Rule 12 can proceed
to make assessment under Rules 4 to 9 after rejecting the
transaction value as declared.  The mandate to record reasons at
the second stage of enquiry is not expressly stipulated, albeit it
is read by implication in Rule 12. Being conscious that this
mandate if applied to past cases would
possibly lead to
complications and difficulties, the doctrine of prospective
application is invoked with the direction that the past cases will
be decided on a case to case basis, depending upon the factual
matrix and considerations 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, whether misdescription or
false 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 that
the appellants had declared value of the aluminium scrap as
Rs.81.31 per kg, albeit the contemporaneous import data in the
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form of different bills of entry had indicated aluminium scrap
values between Rs. 83.26 to Rs. 120.897 per kg.  The said portion
of the order refers to at least four bills of entries declaring
assessable value of less than Rs. 85 per kg.  The order in original
also recorded that the imported goods being aluminium scrap
was not a homogeneous commodity and therefore, cannot be
evaluated on the basis of the samples or lab testing.  Further, the
order held that it was very difficult to find any identical/ similar
goods imported in India having same chemical and physical
composition and that the values of aluminium scrap identical/
similar to the imported goods in nature and specification were
not available. Without commenting on correctness of the said
statements, the aforesaid reasoning for rejection of the
transactional value, would not meet the mandate of Section 14
and the Rules.  Wherein it was held that the transaction value
mentioned in the bill of entry should not be discarded unless
there are contrary details of contemporaneous imports or other
material indicating and serving as corroborative evidence of
import at or near the time of import which would justify rejection
of the declared value and enhancement of the price declared in
the bill of entry.  Therefore, in the facts and circumstances of the
present case, it has to be held that the adjudication order in
original is flawed and contrary to law for it does
not give cogent
and good reason in terms of Section 14(1) and Rule 12 for rejection
of the transaction value as declared in the bill of entry.  The order
in original is not in accordance with Section 14 and Rules 3 and
12 as the mandate of these provisions has been ignored.
[Paras 23, 24] [666-F-H; 667-A-E]
7. The Valuation Alerts are issued by the Director General
of Valuation based on the monitoring of valuation trends of
sensitive 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 valuation
computation under the Rules. [Para 25] [667-F; 668-B]
Varsha Plastic Pvt. Ltd. v. Union of India (2009) 3 SCC
365 : [2009] 1 SCR 896 – relied on.
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Case Law Reference
(2019) 2 SCC 378
relied on
Para 8
[2000] 4 Suppl. SCR 597 
relied on
Para 7
[2007] 8 SCR 95
relied on
Para 8
[2003] 4 Suppl. SCR 17
relied on
Para 18
(2010) 13 SCC 535
relied on
Para 22
[2009] 1 SCR 896  
relied on
Para 25
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5011
of 2019.
From the Judgment and Order dated 12.09.2017 of the High Court
of Judicature at Allahabad in Writ Petition Tax No. 307 of 2017.
Ms. Meenakshi Arora, Sr. Adv., Chirag M. Shroff and Ms. Neha
Sangwan, Advs. for the Appellants.
Vikramjit Banerjee, ASG, Ms. Nisha Bagchi, Abhishek, Vikas
Bansal and B. Krishna Prasad, Advs. for the Respondents.
The Judgment of the Court was delivered by
SANJIV KHANNA, J. 1. Leave granted.
2. Impugned order dated 12th September, 2017 passed by the
Division Bench of the High Court of Judicature at Allahabad dismisses
Writ Petition Tax No.307 of 2017 filed by the appellants, namely M/s
Century Metal Recycling Pvt. Ltd. and Gauri Shankar Agarwala, inter
alia, on the grounds that the High Court would not exercise extraordinary
jurisdiction under Article 226 of the Constitution of India as the matter
relates to the valuation of imported aluminium scrap which could be
assailed in a statutory appeal and it would not be appropriate for the writ
court to decide whether the appellant had or had not agreed to valuation
by the customs authorities.
3. The appellant Company is stated to be engaged in the
manufacture of aluminium alloys, for
which they regularly import
aluminium waste as a raw material for self-consumption. Imported scrap,
it is accepted, falls under different code names as per specifications of
the Institute of Recycling Industry. The grievance raised by the appellants
is that the 2nd respondent i.e. the Principal Commissioner of Customs,
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Noida Customs Commissionerate and its Officers almost uniformly do
not clear the consignments as per the declared transaction value in the
bill of entry but insist that the appellants write a letter agreeing to pay
customs duty as per the valuation by the customs authorities and compel
them to forego their right to provisional assessment under Section 18 of
the Customs Act, 1962 (‘the Act’, for short). The appellants, coerced
and intimated, have no option but to give in and issue a letter of consent
agreeing to assessment/valuation by the customs authorities to avoid
delay in clearance, levy of demurrage, ground rent and container detention
charges, etc. It is also alleged that the respondents without observing
and contrary to the mandate of Section 14 of the Act discard the declared
transactional value and recompute the consignment value in view of the
Valuation Alert dated 1st December, 2016 issued by the Central Board
of Excise and Customs (‘the Board’, for short).
4. At the outset, we would record that the appellants had given up
prayers (a) and (b) before the High Court as is recorded in the impugned
order 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 petitioner
respectfully prays that this Hon’ble Court may be graciously
pleased to:
(c)  Issue a suitable writ, order or direction in the nature of
MANDAMUS commanding the Assessing Officer that
Respondent No.2 and his subordinate officers to make assessment
of aluminium scrap being imported by the petitioner on the basis
of the declared transaction value in accordance with statutory
provisions under Section 14 & 17(1) of the Customs Act, and in
case of non-acceptance, to allow Provisional Assessment thereof
under Section 18 of the Customs Act in accordance with Circular
No.38 dated 22.08.2016 (Annexure-5)”
We would for the reasons stated also examine validity of the
adjudication order dated 7th April, 2017.
5. We are not inclined to remit the appellant to an alternative
remedy by way of statutory appeal under Section 128 of the Act for the
reason that the impugned order dated 7th April, 2017 in Assessment No.12/
AC/CUS/2017 cannot be sustained in view of the decision of this Court
in Commissioner of Central Excise and Service Tax, Noida v. M/s
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Sanjivini Non-Ferrous Trading Pvt. Ltd.1, the latter  being the sister
concern of the first appellant in this case. Further, having heard learned
counsel for the parties, we would like to clarify the legal position and
therefore in the facts of this case would exercise our discretion to entertain
this appeal despite the alternative remedy.
6. We would begin by reproducing Section 14 of the Act and
Rules 3 and 12 of the Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007 (‘the 2007 Rules’, for short) which read
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:
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;
1 Civil Appeal Nos. 18300-18305 of 2017 decided on December 10, 2018
CENTURY METAL RECYCLING PVT. LTD. v. UNION OF
INDIA [SANJIV KHANNA, J.]
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(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
(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).
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RULES
Rule 3. Determination
of the method valuation:
(1) Subject to rule 12, the value of imported goods shall be the
transaction value adjusted in accordance with provisions of rule
10;
(2) Value of imported goods under sub-rule (1) shall be accepted:
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Provided that –
(a) there are no restrictions as to the disposition or use of the
goods by the buyer other than restrictions which-
(i) are imposed or required by law or by the public authorities
in 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 consideration
for which a value cannot be determined in respect of the goods
being valued;
(c) no part of the proceeds of any subsequent resale, disposal or
use of the goods by the buyer will accrue directly or indirectly to
the seller, unless an appropriate adjustment can be made in
accordance with the provisions of rule 10 of these rules; and
(d) the buyer and seller are not related, or where the buyer and
seller are related, that transaction value is acceptable for customs
purposes under the provisions of sub-rule (3) below.
(3) (a) Where the buyer and seller are related, the transaction
value shall be accepted provided that the examination of the
circumstances of the sale of the imported goods indicate that the
relationship did not influence the price.
(b) In a sale between related persons, the transaction value shall
be accepted, whenever the importer demonstrates that the
declared value of the goods being valued, closely approximates to
one 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, due
account shall be taken of demonstrated difference in commercial
levels, quantity levels, adjustments in accordance with the
provisions of rule 10 and cost incurred by the seller in sales in
which he and the buyer are not related;
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(c) substitute values shall not be established under the provisions
of 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 sequentially
through rule 4 to 9.
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Rule 12. Rejection of declared value:
(1) When the proper officer has reason to doubt the truth or
accuracy of the value declared in relation to any imported goods,
he may ask the importer of such goods to furnish further
information including documents or other evidence and if, after
receiving such further information, or in the absence of a response
of such importer, the proper officer still has reasonable doubt about
the truth or accuracy of the value so declared, it shall be deemed
that the transaction value of such imported goods cannot be
determined under the provisions of sub-rule (1) of rule 3. 
(2)  At the request of an importer, the proper officer, shall intimate
the importer in writing the grounds for doubting the truth or
accuracy of the value declared in relation to goods imported by
such 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 declared
that: -
(i) This rule by itself does not provide a method for determination
of value, it provides a mechanism and procedure for rejection of
declared value in cases where there is
reasonable doubt that the
declared value does not represent the transaction value; where
the declared value is rejected, the value shall be determined by
proceeding sequentially in accordance with rules 4 to 9.
(ii) The declared value shall be accepted where the proper officer
is satisfied about the truth and accuracy of the declared value
after the said enquiry in consultation with the importers.
(iii) The proper officer shall have the powers to raise doubts on
the truth or accuracy of the declared value based on certain reasons
which may include –
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(a)   the significantly higher value at which identical or similar
goods imported at or about the same time in comparable
quantities in a comparable commercial transaction were
assessed;
(b) the sale involves an abnormal discount or abnormal reduction
from the ordinary competitive price;
(c) the sale involves special discounts limited to exclusive
agents;
(d) the misdeclaration of goods in parameters such as
description, quality, quantity, country of origin, year of
manufacture 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. Rule
12 uses the expression ‘the proper officer has reason to doubt the
truth or accuracy of the value declared in relation to the imported
goods’.  This expression is distinctly different from the words and
preconditions imposed for rejecting the declared transactional value under
the repealed Customs Valuation (Determination of Price of Imported
Goods) Rules,1988 (‘the 1988 Rules’, for short) and the pre-amended
Section 14(1) of the Act which were considered and interpreted by this
Court in Eicher Tractors Limited, Haryana v. Commissioner of
Customs, Mumbai2.  In fact, the judgment in Eicher Tractors Limited
(supra) had not considered Rule 10-A of the 1988 Rules enforced with
effect from 19th February, 1998 as the imports therein related to the
year 1993.
Rule 10-A brought the concept of ‘reason to doubt the declared
value’ in place of special or extraordinary circumstances particularised
in Rule 4(2) of the 1988 Rules. However, the interpretation given to
Section 14(1) in Eicher Tractors Limited (supra) as to the meaning of
the word ‘payable’ used therein would be still applicable.  The word
‘payable’ used in Section 14(1) refers to the particular transaction and
the payability in respect of ‘the transaction’.  It refers to the notional
value, albeit the transaction value as declared in the bill of entry plus the
amount which has to be added in terms of Rule 10 of the 2007 Rules.
2 (2001) 1 SCC 315
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8. This Court in M/s Sanjivini Non-Ferrous Trading Pvt. Ltd.
(supra), while interpreting the provisions of Section 14 and Rules 3, 4
and 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 deemed
to be the price as referred to in that provision.  Section 14(1) is a
deeming provision as it talks of ‘deemed value’ of such goods.
Therefore, normally, the Assessing Officer is supposed to act on
the basis of price which is actually paid and treat the same as
assessable value/transaction value of the goods.  This, ordinarily,
is the course of action which needs to be followed by the Assessing
Officer.  This principle of arriving at transaction value to be the
assessable value applies.  This is also the effect of Rule 3(1) and
Rule 4(1) of the Customs Valuation Rules, namely, the adjudicating
authority is bound to accept price actually paid or payable for
goods as the transaction value.  Exceptions are, however, carved
out and enumerated in Rule 4(2).  As per that provision, the
transaction value mentioned in the Bills of Entry can be discarded
in case it is found that there are any imports of identical goods or
similar goods at a higher price at around the same time or if the
buyers and sellers are related to each other.  In order to invoke
such a provision it is incumbent upon the Assessing Officer to
give reasons
as to why the transaction value declared in the Bills
of Entry was being rejected; to establish that the price is not the
sole consideration; and to give the reasons supported by material
on the basis of which Assessing Officer arrives at his own
assessable value.”
The Division Bench has quoted the following sub-para from
Commissioner of Customs, Calcutta v. South India Television (P)
Ltd.3:
“13. Section 14(1) speaks of “deemed value”. Therefore, invoice
price can be disputed. However, it is for the Department to prove
that the invoice price is incorrect. When there is no evidence of
contemporaneous imports at a higher price, the invoice price is
liable to be accepted. The value in the export declaration may be
relied upon for ascertainment of the assessable value under the
Customs Valuation Rules and not for determining the price at
3 (2007) 6 SCC 373
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which goods are ordinarily sold at the time and place of importation.
This is where the conceptual difference between value and price
comes into discussion.”
9. As per Section 14(1) of the Act, value of the imported goods
shall be the transactional value of such goods, which means the price
actually paid or payable for the goods when sold for export to India
where the buyers and sellers are not related and the price fixed is the
sole consideration for sale. As per the first proviso to Section 14(1) of
the Act, the transactional value for the purpose of customs duty would
include amounts paid or payable as costs and services like commission,
brokerage, engineering, design work, cost of transportation, etc., as may
be specified in the rules made in this behalf. These amounts are to be
added to the declared transactional value. Accordingly, in terms of Rule
10 of the 2007 Rules, the value and price of costs and services are
added to the price actually paid or payable for the imported goods for
determining 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 has
issued a notification in the Official Gazette fixing tariff values for any
class of imported or exported goods. The Board has been authorised to
issue notifications under Section 14(2) of the Act when it is satisfied that
it is necessary or expedient. Thus, whenever tariff has been fixed vide
notification issued by the Board under Section 14(2) of the Act, then
notwithstanding the transactional value of the imported goods under sub-
section (1) to Section 14 of the Act, as per sub-section (2) to Section 14
of the Act the customs duty is payable as per the tariff value so fixed. In
the present case, the Board has not considered it necessary and expedient
to issue a notification under Section 14(2) of the Act to fix a tariff for the
imported aluminium waste.
11. The second proviso to Section 14 (1) deals with different
situations, enumerated under the three clauses; (i) when buyers and
sellers are deemed to be related; (ii) when there is no sale, or buyers and
sellers 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 accuracy
of such value. When the conditions specified in the second proviso are
satisfied, the transactional value for the purpose of charging of customs
duty is to be made as per rules framed in this behalf.
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12. Rules 3 and 12 of the 2007 Rules i.e. Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 were enacted
and enforced with effect from 10th October, 2007 replacing and
superseding the 1988 Rules. Rule 3(1) of the 2007 Rules states that
value of the imported goods shall be the transaction value adjusted in
accordance with the provisions of Rule 10 of the 2007 Rules which
Rule, as observed above, deals with the costs and services which are to
be added to the price actually paid or payable for the imported goods for
determining the transaction value. Sub-rule (1) to Rule 3 is however
subject to Rule 12 and therefore give primacy to Rule 12 which we shall
subsequently elaborate and explain.  Sub-rule (2) to Rule 3 states that
value of the imported goods under sub-rule (1) shall be accepted i.e.
accepted by the customs authorities. The proviso then vide different
clauses sets out the pre-conditions for accepting value of the imported
goods. Rule 11 provides for declaration to be given by the importer or his
agent certifying that they had disclosed full and accurate details of the
value of the imported goods and any other statement, information and
document including invoice of the manufacturer or producer of the goods
where the goods are imported from or through a person other than the
manufacturer of goods, as considered necessary by the proper officer
for valuation of the imported goods.  Sub-rule
(2) states that the declared
value shall be accepted where the proper officer is satisfied about the
truth and accuracy of the declared value after an enquiry in consultation
with the importers.
13. Sub-rule (3) to Rule 3 deals with cases when the buyer and
seller are related. We would not dilate on the said sub-rule for this is not
required for the purpose of the present decision.  As per sub-rule (4),
where the value cannot be determined under sub-rule (1) to Rule 3, the
transaction is to be valued by step wise applying Rules 4 to 9.  Rule 4
deals with transaction value based on identical goods. Rule 5 deals with
transaction value based on similar goods.  Rule 6 deals with the
determination of value where the transactional value cannot be
determined under Rules 3, 4 and 5.  Rules 7 and 8 deal with deductive
value and computed value respectively.  Rule 9 prescribes the residual
method for computing the transaction value.  What is important to note
is that Rules 4 to 9 are subject to the provisions of Rule 3 thereby giving
primacy to Rule 3 which in turn gives primacy to Rule 12 of the 2007
Rules.
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14. Rule 12, which as noticed above enjoys primacy and pivotal
position, applies where the proper officer has reason to doubt the 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 upon the importer to furnish further
information including documents to justify the declared transactional
value. The proper officer may thereafter accept the transactional value
as declared. However, where the proper officer is not satisfied and has
reasonable doubt about the truth or accuracy of the value so declared, it
is deemed that the transactional value of such imported goods cannot be
determined under the provision of sub-rule (1) of Rule 3 of the 2007
Rules. Clause-(iii) of Explanation to Rule 12 states that the proper officer
can on ‘certain reasons’ raise doubts about the truth or accuracy of
declared value. ‘Certain reasons’ would include conditions specified in
clauses (a) to (f) i.e. higher value of identical similar goods of comparable
quantities in a comparable transaction, abnormal discount or abnormal
deduction from ordinary 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. and fraudulent or manipulated
documents. Grounds mentioned in (a)
to (f) however are not exhaustive
of ‘certain reasons’ to raise doubt about the truth or accuracy of the
declared value. Clause (ii) to Explanation states that the declared value
shall be accepted where the proper officer is satisfied about the truth
and accuracy of the declared value after enquiry in consultation with the
importers.  Clause-(i) to the Explanation states that Rule 12 does not
provide a method of determination of value but provides the procedure
or mechanism in cases where declared value can be rejected when
there is a reasonable doubt that the declared transaction value does not
represent the actual transaction value.  In such cases the transaction
value is to be sequentially determined 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 the grounds,
i.e. the reason for doubting the truth or accuracy of the value declared in
relation to the imported goods. Further, the proper officer shall provide a
reasonable opportunity of being heard to the importer before he makes
the valuation in the form of final decision under sub-rule (1).
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15. The requirements of Rule 12, therefore, can be summarised
as under:
(a) The proper officer should have reasonable doubt as to the
transactional value on account of truth or accuracy of the value
declared in relation to the imported goods.
(b) Proper officer must ask the importer of such goods further
information which may include documents or evidence;
(c) On receiving such information or in the absence of response
from the importer, the proper officer has to apply his mind and
decide whether or not reasonable doubt as to the truth or accuracy
of the value so declared persists.
(d) When the proper officer does not have reasonable doubt, the
goods are cleared on the declared value.
(e) When the doubt persists, sub-rule (1) to Rule 3 is not applicable
and transaction value is determined in terms of Rules 4 to 9 of the
2007 Rules.
(f) The proper officer can raise doubts as to the truth or accuracy
of the declared value on ‘certain reasons’ which could include the
grounds specified in clauses (a) to (f) in clause (iii) of the
Explanation.
(g) The proper officer, on a request made by the importer, has to
furnish and intimate to the importer in writing the grounds for
doubting the truth or accuracy of the value declared in relation to
the imported goods.  Thus, the proper officer has to record reasons
in writing which have to be communicated when requested.
(h) The importer has to be given opportunity of hearing before
the
proper officer finally decides the transactional value in terms of
Rules 4 to 9 of the 2007 Rules.
16. Proper officer can therefore reject the declared transactional
value based on ‘certain reasons’ to doubt the truth or accuracy of the
declared value in which event the proper officer is entitled to make
assessment as per Rules 4 to 9 of the 2007 Rules. What is meant by the
expression “grounds for doubting the truth or accuracy of the value
declared” has been explained and elucidated in clause (iii) of Explanation
appended to Rule 12 which sets out some of the conditions when the
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‘reason to doubt’ exists. The instances mentioned in clauses (a) to (f)
are not exhaustive but are inclusive for there could be other instances
when the proper officer could reasonably doubt the accuracy or truth of
the value declared.
17. The choice of words deployed in Rule 12 of the 2007 Rules
are significant and of much consequence. The Legislature, we must
agree, has not used the expression “reason to believe” or “satisfaction”
or such other positive terms as a pre-condition on the part of the proper
officer. The expression “reason to believe” which would have required
the proper officer to refer to facts and figures to show existence of
positive belief on the undervaluation or lower declaration of the transaction
value. The expression “reason to doubt” as a sequitur would require a
different threshold and examination. It cannot be equated with the
requirements of positive 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 of objectivity
and basis/foundation for the suspicion must be based on ‘certain reasons’.
18. The expression ‘proof beyond reasonable doubt’ in criminal
law requires the prosecution to establish guilt and secure conviction of
the accused by proving the charge ‘beyond reasonable doubt’. In
Ramakant Rai Vs. Madan Rai & Ors. (2003) 12 SCC 395 referring to
the expression ‘reasonable doubt’ in criminal law it
was held as under:
“24. Doubts would be called reasonable if they are free from a
zest for abstract speculation.  Law cannot afford any favourite
other than the truth.  To constitute reasonable doubt, it must be
free from an overemotional response.  Doubts must be actual and
substantial doubts as to the guilt of the accused persons arising
from the evidence, or from the lack of it, as opposed to mere
vague apprehensions.  A reasonable doubt is not an imaginary,
trivial or a merely possible doubt; but a fair doubt based upon
reason and common sense.  It must grow out of the evidence in
the case.”
Proof beyond ‘reasonable doubt’ is certainly not the requirement
under 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 a
doubt which is reasonable. In the context of the proviso to Section 14
read with Rule 12 and clause (iii) of Explanation to the 2007 Rules, the
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doubt must be reasonable and based on ‘certain reasons’. The proper
officer must record ‘certain reasons’ specified in (a) to (f) or similar
grounds in writing at the second stage before he proceeds to discard the
declared value and decides to determine the same by proceeding
sequentially in accordance with Rules 4 to 9 of the 2007 Rules.  It refers
to a doubt which the proper officer possesses even after the importer
has been asked to furnish further information including documents and
evidence during the preliminary enquiry to clear his doubt about the truth
and accuracy of the value declared.  Therefore, there has to be a
preliminary enquiry by the proper officer in which the importer must be
given an opportunity for clarification of the doubts of the officer by
furnishing of documents and evidence as to the accuracy or truth of the
value declared.  It is only in case where the doubt of the proper officer
persists after conducting examination of information including documents
or on account of non-furnishing of information that the procedure for
further investigation and determination of value in terms of Rules 4 to 9
would come into operation and would be applicable.  Reasonable doubt
will exist if the doubt is reasonable and for ‘certain reasons’ and not
fanciful and absurd.  A doubt to justify detailed enquiry under the proviso
to 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 and
material in the form of ‘certain reasons’ and not mere ipse dixit.
Subjecting imports to detailed enquiry on mere suspicion because one is
distrustful and unsure without reasonable and certain reasons would be
contrary to the scheme and purpose behind the provisions which ensure
quick and expeditious clearance of imported goods.
19. Section 18 of the Act, reads:
“Section 18. Provisional assessment of duty. —
(1) Notwithstanding anything contained in this Act but without
prejudice to the provisions of Section 46 and Section 50, —
(a) where the importer or exporter is unable to make self-
assessment under sub-section (1) of Section 17 and makes a
request in writing to the proper officer for assessment; or
(b)  where the proper officer deems it necessary to subject any
imported goods or export goods to any chemical or other test; or
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(c)  where the importer or exporter has produced all the necessary
documents and furnished full information but the proper officer
deems it necessary to make further enquiry; or
(d) where necessary documents have not been produced or
information has not been furnished and the proper officer deems
it necessary to make further enquiry,
the proper officer may direct that the duty leviable on such goods
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 as
may be finally assessed or re-assessed as the case may be, and
the duty provisionally assessed.
(1A) Where, pursuant to the provisional assessment under sub-
section (1), if any document or information is required by the proper
officer for final assessment, the importer or exporter, as the case
may be, shall submit such document or information within such
time, and the proper officer shall finalise the provisional assessment
within such time and in such manner, as may be prescribed.
(2) When the duty leviable on such goods is assessed finally or
re-assessed by the proper officer 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 or re-assessed, as the case may be and if
the amount so paid falls short of, or is in excess of,  the
duty finally
assessed or re-assessed, as the case may be, 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 or re-assessed, as the case may be, is in
the 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 or re-assessment order under sub-section
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(2), at the rate fixed by the Central Government under
Section 28AA from the first day of the month in which the duty is
provisionally assessed till the date of payment thereof.
(4) Subject to 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 or re-assessment of duty, as the case may be, 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 under Sections 74 and
75.”
The significance of Section 18 of the Act can be understood in
light of the above provisions. Section 18 provides for provisional
assessment of duty in cases specified in sub-section (1) of the Section.
Clause (c) of sub-section (1) deals with cases where importer or exporter
has produced necessary documents and furnished full information for
assessment of duty but the proper officer deems it necessary to make
further enquiry for assessing the duty. However, Clause (d) is wider and
would apply when the importer or exporter does not produce necessary
documents or furnish information. In all cases covered under Clauses
(a) to (d), the proper officer may direct provisional assessment of the
duty leviable on the imported goods. Where duty is assessed provisionally,
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the importer or exporter has to furnish security as the proper officer
deems fit for payment of deficiency, if any, between the duty provisionally
paid and the duty finally assessed.
On interpreting Section 18 of the Act, it is held that when there is
a dispute between the customs authorities and the importer as regards
the valuation of the imported goods, on satisfaction of the conditions
enumerated in sub-section (1), the authorities should make provisional
assessment of customs duty under Section 18 of the Act. This expedites
clearance, pending final adjudication on merits which may take time.
This is also the mandate of the Board Circular No.38/2016 dated 22nd
August, 2016. Any insistence and compulsion by the authorities that the
importer should disclaim and forgo his statutory right under Section 18
of the Act would not be correct. Neither would it be right to reject the
valuation as declared by the importer without reasonable doubt for certain
reasons.
20. We would ex facie for the reasons recorded below reject the
contention of the respondents predicated on the letter of appellants dated
6th March, 2017 that the appellants did not seek provisional assessment
of the bill of entry and had accepted and paid duty on the valuation done
by the customs authorities. This letter exposits the predicament faced
by the appellants as it states that the appellants were in urgent requirement
and wanted clearance of the goods.  Pertinently, the appellants had
earlier
written several letters, including communications dated 22nd December,
2016 and 4th March, 2017 requesting for clearance of the imported
consignment of aluminium scrap on the declared transaction value pointing
out therein that on account of delay in the clearance of the imported
consignments, the appellants and its sister concern had been compelled
to pay excess duty of over Rs.25 crores from August 2013 onwards. It
is unfortunate and has to be accepted that the respondent authorities
had compelled and forced the appellant to furnish the letter dated 6th
March, 2017 thereby waiving of its right to provisional assessment and
accepting valuation in terms of Rules 4 to 10.
As per sub Rule (2) of Rule 12, the proper officer when required
must intimate to the importer in writing the grounds for doubting the
truth or accuracy of the value declared.  The said mandate of sub-Rule
(2) of Rule 12 cannot be ignored or waived.  Formation of opinion
regarding reasonable doubt as to the truth or accuracy of the valuation
and communication of the said grounds to the importer is mandatory,
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subterfuge to by-pass and circumvent the statutory mandate is
unacceptable.  Formation of belief and recording of reasons as to
reasonable doubt and communication of the reasons when required is
the only way and manner in which the proper officer in terms of Rule 12
can proceed to make assessment under Rules 4 to 9 after rejecting the
transaction value as declared.
21. The mandate to record reasons at the second stage of enquiry
is not expressly stipulated, albeit it has been read by us by implication in
Rule 12. Being conscious that this mandate if applied to past cases would
possibly lead to complications and difficulties, we would invoke the doctrine
of prospective application with the direction that the past cases will be
decided on a case to case basis, depending upon the factual matrix and
considerations 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, whether
misdescription or false declaration was apparent, etc.
22. In Commissioner of Customs vs. Prabhu Dayal Prem
Chand4, this Court had rejected the plea that the Revenue was justified
in redetermining the value of brass and copper scrap on the basis of
information received from London Metal Exchange on the price of the
said metals on the ground that the importer was not confronted with any
contemporaneous material for enhancing
the transaction value.  This
Court affirmed the order of the Tribunal in Prabhu Dayal Prem Chand
(supra) and held that the order in original had not indicated details of any
contemporaneous import or other material in the form of corroborative
material which had necessitated the enhancement in the transaction
valuation.
23. We would now refer to the findings of the order in original in
the present case which observes that the appellants had declared value
of the aluminium scrap as Rs.81.31 per kg, albeit the contemporaneous
import data in the form of different bills of entry had indicated aluminium
scrap values between Rs. 83.26 to Rs. 120.897 per kg.  The said portion
of the order refers to at least four bills of entries declaring assessable
value of less than Rs. 85 per kg.  Interestingly, the order in original also
records that the imported goods being aluminium scrap was not a
homogeneous commodity and therefore, cannot be evaluated on the basis
of the samples or lab testing.  Further, the order holds that it was very
4 2010 (13) SCC 535
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difficult to find any identical/ similar goods imported in India having same
chemical and physical composition and that the values of aluminium scrap
identical/similar to the imported goods in nature and specification were
not available. Without commenting on correctness of the said statements,
we would observe that the aforesaid reasoning for rejection of the
transactional value, would not meet the mandate of Section 14 and the
Rules as elucidated in M/s Sanjivini Non-Ferrous Trading Pvt. Ltd.
(supra) wherein it was held that the transaction value mentioned in the
bill of entry should not be discarded unless there are contrary details of
contemporaneous imports or other material indicating and serving as
corroborative evidence of import at or near the time of import which
would justify rejection of the declared value and enhancement of the
price declared in the bill of entry. We have also elaborated and explained
the 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 and
contrary to law for it does not give cogent and good reason in terms of
Section 14(1) and Rule 12 for rejection of the transaction value as
declared in the bill of entry.  The order in original is not in accordance
with Section 14 and Rules 3 and 12 as the mandate of these provisions
has been ignored. The Assistant Collector has rejected the
transaction
value as declared in the bill of entry which, as noticed above, is clearly
and fundamentally erroneous besides being contradictory. In the aforesaid
circumstances, we do not think that the order in assessment dated 7th
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 of
Valuation based on the monitoring of valuation trends of sensitive
commodities with a view to take corrective measures.  They provide
guidance to the field formation 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 the discretion of the assessment authority who is required to pass
an Assessment Order in the given factual matrix. Declared valuation
can be rejected based upon the evidence which qualifies and meets the
criteria of ‘certain reasons’.  Besides the opinion formed must be
reasonable. Reference to foreign journals for the price quoted in
exchanges etc., to find out the correct international price of concerned
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goods would be relevant but reliance can be placed on such material
only when the adjudicating authority had conducted enquiries and
ascertained details with reference to the goods imported which are
identical or similar and ‘certain reasons’ exists and justifies detailed
investigation. These reasons are to be recorded and if requested disclosed/
communicated to the importer. Valuation alerts could be relied upon for
default valuation computation under the Rules. (See Varsha Plastic Pvt.
Ltd. vs. Union of India5).
26. We would also like to clarify that we have not issued any
general or omnibus direction that the transaction value declared in the
bill of entries should invariably be accepted in all cases and/or that in all
cases where imports of aluminium scrap are involved. The matter has to
be examined on a case to case basis, the evidence before the authorities,
the material placed on record and the enquiries conducted by the
adjudicating authorities etc.
With the aforesaid clarification, we allow the present appeal and
quash and set aside the order of Assessment dated 7th April, 2017 by
issuing a writ of certiorari.  In the facts of the case, there shall be no
order as to costs.
5 (2009) 3 SCC 365
Devika Gujral
Appeal allowed.