Case: CENTURY METAL RECYCLING PVT. LTD Vs. UNION OF INDIA

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 2 nd respondent i.e. the Principal Commissioner of Customs, 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 1 st 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 asthe 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 22.08.2016would for the reasons stated also examine validity of the adjudication order dated 7 th April, 2017.

Court's reasoning:
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.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).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 ‘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 ‘certainbeyond ‘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 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 importedsignificance 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, 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 22 nd 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 6 th 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 22 nd December, 2016 and 4 th 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 6 th 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, 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.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 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 7 th April, 2017 can be sustained and upheld. It is set aside and quashed.25. Before closing, we would observe that the Valuation Alerts, as also stated by the respondents, are issued by the Director General 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 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 India (2009) 3 SCC 365 ).