Hon'ble Mr. Justice Arjan Kumar Sikri
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 18300-18305 OF 2017
COMMISSIONER OF CENTRAL EXCISE
AND SERVICE TAX, NOIDA .....APPELLANT(S)
VERSUS
M/S. SANJIVANI NON-FERROUS TRADING
PVT. LTD. .....RESPONDENT(S)
J U D G M E N T
A.K. SIKRI, J.
The issue raised in these appeals pertains to the transaction
value/assessable value in respect of imported Aluminum Scrap, which
was imported by the respondent herein. The respondent had imported
various varieties of the said Aluminum scrap during the period 27th
August, 2013 to 29th December, 2014 and filed 843 Bills of Entry along
with invoices and purchase orders in respect therein declaring the
transaction value of the imported goods for the purpose of paying
custom duty. The declared value was not accepted by the Assessing
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Officer who found the same to be low. Accordingly, the said declared
value was rejected and reassessment was done by increasing the
assessable value.
2) In a writ petition filed by the respondent in the High Court of Allahabad,
on the directions of the High Court directed the Deputy Commissioner of
Customs, NOIDA passed a speaking order dated 25th March, 2015,
giving his reasons to reject the transaction value as declared by the
respondent and enhancing the same by taking into consideration the
value of imported goods, namely, grades of scrap Aluminum contents
therein as well as quantum of presence of other metals.
3) The assessment order dated 25th March, 2015 passed by the Assessing
Officer was challenged by filing appeals before the Commissioner
(Appeals), Central Excise and Customs, NOIDA. All these appeals were
dismissed. Challenging the order of the Commissioner (Appeals), the
respondent approached the Customs, Excise and Service Tax Appellate
Tribunal (hereinafter referred to as the “Tribunal”). By the impugned
common judgment dated 17th January, 2017, the appeals of the
respondent were allowed thereby rejecting the enhancement of
assessable value by the Revenue. It is the said order of the Tribunal,
which is the subject matter of these appeals.
4) The entire basis of the order of the Tribunal is contained in paragraph 7
of the impugned judgment and since that paragraph contains the
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reasons which persuaded the Tribunal to set aside the order of the
authorities below, we reproduce this para along with paragraph 8 which
disclosed the outcome of the appeals, in entirety.
"7. Having considered the rival contentions and on perusal of
record, we find that the Original Authority was directed by the
Hon’ble High Court to pass speaking order on the enhancement
of assessable value. We find that the Original Authority in its
Order-in-Original dated 25/03/2015 passed comments on the
ground of writ petition and did not properly examine the evidence
available with the department required to be examined for
enhancement of assessable value. Further, we find that as held
in the case laws stated above and as provided by Section 14 of
Customs Act, 1962, the assessable value has to be arrived at on
the basis of the price which is actually paid and in a case the
price is not sole consideration or if the buyers and sellers are
related persons then after establishing that the price is not sole
consideration the transaction value can be rejected and taking the
other evidences into consideration the assessable value can be
arrived at. Such exercise has not been done in these cases on
hand. Therefore, we reject the enhancement of assessable value
in respect of the Bills of Entry which are involved in all the appeals
being decided and we restore the assessable value as declared
by the appellant in said Bills of Entry.
8. In result, we set aside all the impugned Orders-in-Appeal
and allow all the appeals. The appellant shall be entitled for
consequential relief, if any, in accordance with law.
5) The precise submission of Mr. K. Radhakrishna, learned senior counsel
appearing for the Revenue was that as per the Tribunal itself, the
reasons for upsetting the order in original are:
(a) That he did not properly examine the evidences available with the
Department, which were required to be examined for the purpose of
enhancement of assessable value.
(b) As per the provisions of Section 14 of the Customs Act, 1962 and
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the case law in respect thereof, the assessable value has to be arrived
at on the basis of the price which is actually paid and in case the price is
not the sole consideration or if the buyers and sellers are related
persons then after establishing that the price is not the sole
consideration, the transaction value can be rejected. However, such
exercise has not been done in these cases.
6) It was submitted that if the Original Authority/Assessing Officer had failed
to examine the evidence that was available with the Department and had
not undertaken the exercise regarding price being not the sole
consideration, the Tribunal should have remanded the case back to the
Assessing Officer for examining the material and undertaking that
exercise. To put it otherwise, the entire thrust of the argument of Mr.
Radhakrishna was that appeals could not have been allowed
straightaway by accepting the transaction value given by the
respondent/assessee and another opportunity should have been given
to the Assessing Authority in this behalf.
7) This argument may seem to be attractive, but only when there is a
cursory look at the aforesaid observations of the Tribunal that the
Assessing Officer did not examine the evidence available with the
Department which was necessitated for such a purpose. However, the
observations of the Tribunal have to be understood in their entirety and
in the context in which these are made. The Tribunal has categorically
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mentioned that as per the provisions of Section 14 of the Customs Act
and the principles laid down in the case law (which it referred to in the
earlier part of the judgment) interpreting this provision, the assessable
value has to be arrived at on the basis of the price which is actually paid.
It is the basic principle enshrined in the aforesaid provision, i.e., Section
14, which can be culled out from the catena of judgments pronounced by
this Court.
8) In Eisher Tractors Ltd., Haryana vs. Commissioner of Customs,
Mumbai1
, this Court held as under:
"6. Under the Act customs duty is chargeable on goods. According
to Section 14(1) of the Act, the assessment of duty is to be made
on the value of the goods. The value may be fixed by the Central
Government under Section 14(2). Where the value is not so fixed,
the value has to be determined under Section 14(1). The value,
according to Section 14(1), shall be deemed to be the price at
which such or like goods are ordinarily sold, or offered for sale, for
delivery at the time and place of importation — in the course of
international trade. The word “ordinarily” necessarily implies the
exclusion of “extraordinary” or “special” circumstances. This is
clarified by the last phrase in Section 14 which describes an
“ordinary” sale as one “where the seller and the buyer have no
interest in the business of each other and the price is the sole
consideration for the sale …”. Subject to these three conditions
laid down in Section 14(1) of time, place and absence of special
circumstances, the price of imported goods is to be determined
under Section 14(1-A) in accordance with the Rules framed in this
behalf.
xxx xxx xxx
9. These exceptions are in expansion and explicatory of the
special circumstances in Section 14(1) quoted earlier. It follows
that unless the price actually paid for the particular transaction
falls within the exceptions, the Customs Authorities are bound to
assess the duty on the transaction value.
1(2001) 1 SCC 315
6
xxx xxx xxx
12. Rule 4(1) speaks of the transaction value. Utilisation of the
definite article indicates that what should be accepted as the
value for the purpose of assessment to customs duty is the price
actually paid for the particular transaction, unless of course the
price is unacceptable for the reasons set out in Rule 4(2).
“Payable” in the context of the language of Rule 4(1) must,
therefore, be read as referring to “theparticular transaction” and
payability in respect of the transaction envisages a situation
where payment of price may be deferred.
xxx xxx xxx
13. That Rule 4 is limited to the transaction in question is also
supported by the provisions of the other rules each of which
provide for alternate modes of valuation and allow evidence of
value of goods other than those under assessment to be the basis
of the assessable value. Thus, Rule 5 allows for the transaction
value to be determined on the basis of identical goods imported
into India at the same time; Rule 6 allows for the transaction value
to be determined on the value of similar goods imported into India
at the same time as the subject goods. Where there are no
contemporaneous imports into India, the value is to be determined
under Rule 7 by a process of deduction in the manner provided
therein. If this is not possible the value is to be computed under
Rule 7-A. When value of the imported goods cannot be
determined under any of these provisions, the value is required to
be determined under Rule 8 “using reasonable means consistent
with the principles and general provisions of these Rules and subsection (1) of Section 14 of the Customs Act, 1962 and on the
basis of data available in India”. If the phrase “the transaction
value” used in Rule 4 were not limited to the particular transaction
then the other rules which refer to other transactions and data
would become redundant.
xxx xxx xxx
22. In the case before us, it is not alleged that the appellant has
misdeclared the price actually paid. Nor was there a
misdescription of the goods imported as was the case in Padia
Sales Corpn. [1993 Supp (4) SCC 57] It is also not the
respondent's case that the particular import fell within any of the
situations enumerated in Rule 4(2). No reason has been given by
the Assistant Collector for rejecting the transaction value under
Rule 4(1) except the price list of vendor. In doing so, the Assistant
Collector not only ignored Rule 4(2) but also acted on the basis of
the vendor's price list as if a price list is invariably proof of the
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transaction value. This was erroneous and could not be a reason
by itself to reject the transaction value. A discount is a
commercially-acceptable measure which may be resorted to by a
vendor for a variety of reasons including stock clearance. A price
list is really no more than a general quotation. It does not preclude
discounts on the listed price. In fact, a discount is calculated with
reference to the price list. Admittedly in this case a discount up to
30% was allowable in ordinary circumstances by the Indian agent
itself. There was the additional factor that the stock in question
was old and it was a one-time sale of 5-year-old stock. When a
discount is permissible commercially, and there is nothing to show
that the same would not have been offered to anyone else
wishing to buy the old stock, there is no reason why the declared
value in question was not accepted under Rule 4(1).”
9) To the same effect, are other judgments, reiterating the aforesaid
principle, such as, Commissioner of Customs, Calcutta vs. South
India Television (P) Ltd.2
, Chaudhary Ship Breakers vs.
Commissioner of Customs, Ahmedabad3
and Commissioner of
Customs, Vishakhapatnam vs. Aggarwal Industries Ltd.4
.
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
2(2007) 6 SCC 373
3(2010) 10 SCC 576
4(2012) 1 SCC 186
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value to be the assessable value applies. That 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 the Assessing Officer arrives at his own
assessable value.
11) In South India Television (P) Ltd., the Court explained as to how the
value is derived from the price and under what circumstances the
deemed value mentioned in Section 14(1) can be departed with.
Following discussion in the said judgment needs to be quoted
hereunder:
"10. We do not find any merit in this civil appeal for the following
reasons. Value is derived from the price. Value is the function of
the price. This is the conceptual meaning of value. Under Section
2(41), “value” is defined to mean value determined in accordance
with Section 14(1) of the Act. Section 14 of the Customs Act, 1962
is the sole repository of law governing valuation of goods. The
Customs Valuation Rules, 1988 have been framed only in respect
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of imported goods. There are no rules governing the valuation of
export goods. That must be done based on Section 14 itself. In
the present case, the Department has charged the respondent
importer alleging misdeclaration regarding the price. There is no
allegation of misdeclaration in the context of the description of the
goods. In the present case, the allegation is of underinvoicing.
The charge of underinvoicing has to be supported by evidence of
prices of contemporaneous imports of like goods. It is for the
Department to prove that the apparent is not the real. Under
Section 2(41) of the Customs Act, the word “value” is defined in
relation to any goods to mean the value determined in accordance
with the provisions of Section 14(1). The value to be declared in
the bill of entry is the value referred to above and not merely the
invoice price.
xxx xxx xxx
12. However, before rejecting the invoice price the Department
has to give cogent reasons for such rejection. This is because the
invoice price forms the basis of the transaction value. Therefore,
before rejecting the transaction value as incorrect or
unacceptable, the Department has to find out whether there are
any imports of identical goods or similar goods at a higher price at
around the same time. Unless the evidence is gathered in that
regard, the question of importing Section 14(1-A) does not arise.
In the absence of such evidence, invoice price has to be accepted
as the transaction value. Invoice is the evidence of value. Casting
suspicion on invoice produced by the importer is not sufficient to
reject it as evidence of value of imported goods. Undervaluation
has to be proved. If the charge of undervaluation cannot be
supported either by evidence or information about comparable
imports, the benefit of doubt must go to the importer. If the
Department wants to allege undervaluation, it must make detailed
inquiries, collect material and also adequate evidence. When
undervaluation is alleged, the Department has to prove it by
evidence or information about comparable imports. For proving
undervaluation, if the Department relies on declaration made in
the exporting country, it has to show how such declaration was
procured. We may clarify that strict rules of evidence do not apply
to adjudication proceedings. They apply strictly to the courts'
proceedings. However, even in adjudication proceedings, the AO
has to examine the probative value of the documents on which
reliance is placed by the Department in support of its allegation of
undervaluation. Once the Department discharges the burden of
proof to the above extent by producing evidence of
contemporaneous imports at higher price, the onus shifts to the
importer to establish that the invoice relied on by him is valid.
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Therefore, the charge of underinvoicing has to be supported by
evidence of prices of contemporaneous imports of like goods.
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
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.”
12) The observations of the Tribunal made in the impugned judgment are to
be appreciated in the light of the principles of law specified in the
aforesaid judgment, inasmuch as the Tribunal has categorically
remarked that the normal rule is that assessable value has to be arrived
at on the basis of the price which is actually paid, as provided by Section
14 of the Customs Act and the case law referred to by it (In paragraph 5,
the Tribunal referred to its own judgments which follow the aforesaid
principle laid down by this Court).
13) It is, therefore, rightly contended by Mr. Dushyant A. Dave, learned
senior counsel appearing for the respondent that the reason given for
setting aside the order that the normal rule was that the assessable
value has to be arrived at on the basis of the price which was actually
paid, and that was mentioned in the Bills of Entry. The Tribunal has
clearly mentioned that this declared price could be rejected only with
cogent reasons by undertaking the exercise as to on what basis the
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Assessing Authority could hold that the paid price was not the sole
consideration of the transaction value. Since there is no such exercise
done by the Assessing Authority to reject the price declared in the Bills
of Entry, Order-in-Original was, therefore, clearly erroneous.
14) In Commissioner of Customs vs. Prabhu Dayal Prem Chand5
, this
Court was confronted with almost same kind of fact situation. On the
basis of the information received subsequently from the London Metal
Exchange (for short, ‘LME’) to the effect that the price of the two metals,
viz., brass scrap and copper scrap, in LME as on the date of import was
more than the price declared by the respondent, demanded additional
duty amounting to Rs. 90,248/- and Rs. 1,94,035 respectively,
from the assessee on the said two Bills of Entry. This order was set
aside by the Tribunal and appeals there against by the Customs were
dismissed by this Court. The Court noted, while accepting the plea of
the assessee, that they were not confronted with any contemporaneous
material relied upon by the Revenue for enhancing the price declared by
them in the Bills of Entry. It also noted the following remarks of the
Tribunal:
"In the present case as mentioned above, even though there is a
reference to contemporaneous import in the order passed by the
Deputy Commissioner no material regarding such import has
been placed before us or made available by the appellant at any
point of time. Therefore, assessment in this case has to be taken
as having been made purely on the basis of LME bulletin without
any corroborative evidence of imports at or near that price which
5(2010) 13 SCC 535
12
is not permissible under law. We, therefore, set aside the
impugned order and allow the appeal.”
Dismissing the appeals, this Court observed as follows:
"….It is manifest from the aforeextracted order of the Tribunal that
no details of any contemporaneous imports or any other material
indicating the price notified by LME had either been referred to by
the adjudicating officer in the adjudication order or such material
was placed before the Tribunal at the time of hearing of the
appeal. The learned counsel for the Revenue has not been able
to controvert the said observations by the Tribunal. In that view of
the matter no fault can be found with the order passed by the
Tribunal setting aside the additional demand created against the
assessee.”
15) We, thus, do not find any merit in these appeals and dismiss the same.
.............................................J.
(A.K. SIKRI)
.............................................J.
(S. ABDUL NAZEER)
NEW DELHI;
DECEMBER 10, 2018.
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ITEM No. 1501 Court No. 3 SECTION IIA
(For Judgment)
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
CIVIL APPEALS NOS. 1830018305 OF 2017
COMMISSIONER OF CENTRAL EXCISE AND Appellant(s)
SERVICE TAX, NOIDA
VERSUS
M/S. SANJIVANI NON FERROUS TRADING PVT. LTD. Respondent(s)
Date : 10.12.2018 This matter was called on for pronouncement of
judgment today.
For Appellant(s) Mr. B.Krishna Prasad, Adv.
For Respondent(s) Mr. Chirag M.Shroff, Adv.
Ms. Neha Sangwan, Adv.
Ms. Mahima C.Shroff, Adv.
Hon'ble Mr. Justice A.K.Sikri pronounced the
judgment of the Bench comprising His Lordship and
Hon'ble Mr. Justice S.Abdul Nazeer.
The appeals are dismissed in terms of the
signed reportable judgment.
Pending applications, if any, shall stand
disposed of.
(Shashi Sareen)
ARcumPS
(Rajinder Kaur)
Branch Officer
(Signed reportable judgment is placed on the file)
