Section 130(E) of the Customs Act, 1962 and Section 18(2) read with Section 28(2) of the Customs Act, 1962.- sec.14 , rule 5 - import of goods - custom duty paid - after the lapse of 5 years show cause notice was given to pay additional duty with penalty basing on the information on computer outputs of department as those goods costs more than the declared - challenged - Apex court held that In the absence of any material produced by the Revenue in proof of the alleged comparable imports at a higher value, the impugned order which eventually confirmed the original order of assessment by the Assistant Commissioner of Customs dated 31.3.2001 cannot be sustained for two reasons– (1) the mere existence of an alleged computer printout is not proof of the existence of comparable imports; (2) assuming such a printout exists and the contents thereof are true, the question still remains whether the transaction evidenced by the said computer printout are comparable to the transaction of the appellant. The appellant will have to be given reasonable opportunity to establish (if he can) that the transactions are not comparable.The impugned order and the original assessment order are therefore, set aside. However, it will be open to the respondent(revenue) to proceed against the appellants herein pursuant to the show cause notice dated 25.9.2000 in accordance with law. The appeals are allowed accordingly.=
Subsequently, a show cause notice dated 25.9.2000 came to be issued
to the appellants by the Commissioner of Customs, Gujarat at Ahmedabad
calling upon the appellants to show cause why certain action indicated
therein cannot be taken against the appellants. The relevant portion of
the show cause notice is as follows:-
“Therefore, M/s. Gira Enterprises, Ahmedabad are hereby called upon
to show cause to the Commissioner of Customs, Ahmedabad as to why:
(I) the provisionally assessed Bills of Entry (as per Annexure 'A') should
not be finalised after taking in value of US $ 1860.00 PMT CIF.
(ii) The differential duty of Rs.31,53,833/-(as per Annexure 'A') should
not be recovered under Section 18(2) read with Section 28(2) of the Customs
Act, 1962.
(iii)The goods which are liable for confiscation under Section 111(m) of
the Customs Act, 1962 should not be confiscated and why fine in lieu of
confiscation should not be imposed as goods has already been cleared
provisionally against Bond for test and value verification.
(iv) Penalty should not be imposed on M/s. Gira Enterprises, Ahmedabad
under Section 114A/112(a) of the Customs Act, 1962.
(v) Interest under Section 28AB of the Customs Act, 1962 should not be
recovered.”
4. It is also stated in the show cause notice that the goods imported by
the appellants were subjected to a test in the Central Excise & Customs
Laboratory, Baroda. According to the show cause notice, the chemical name
of the goods was verified and it was found to be “Cyanuric Chloride” as
known in the International market. It is further stated in the show cause
notice that on the basis of certain information obtained through a computer
print out from the Customs House, Mumbai, the Commissioner of Customs,
Gujarat noticed that a large number of Cyanuric Chloride(100) import
transactions (between the months of June 1994 to November 1994) took place
and the cost of the unit price in each one of those imports was US $ 1950/-
PMT(CIF) as against the value declared by the appellants of US $ 500/- PMT.=
declares the price actually paid by him or payable by him.
Therefore, if
in a given case the Revenue notices identical goods have been imported by
other importers in comparable transactions at a different rate (normally
higher rate) then Revenue is enabled by Rules 5 to reject the valuation
made by the importer and determine the “price actually paid or payable” by
the importer.
21. In the case at hand, no doubt the revenue claims to have some
information based on certain alleged imports made at the Bombay port at the
relevant point of time that the import in question took place.
According
to the revenue, those imports at Bombay were declared and valued at a much
higher rate than the value declared by the appellants herein.
Therefore,
the valuation of the goods imported by the appellant was found
unacceptable. Hence, the procedure under Rule 5 was resorted to.
22. However, the respondent(revenue) did not supply the information
(alleged computer print out) which formed the basis of the conclusion that
the appellants herein under-valued the goods imported.
In such a
situation, the appellants obviously cannot and did not have any opportunity
of establishing that the claim of the revenue is unsustainable in law.
If
the information which formed the basis for the Revenue to reject the
appellant’s valuation is supplied to the appellants, the appellants perhaps
will have an opportunity to dispute the comparability of the import
transactions allegedly contained in the computer printout on various counts
may not be possible to catalogue.
23. The appellants, of course, admit that the goods imported by them are
known commercially as ‘Cyanuric Chloride’ as specified in the show cause.
Whether Cyanuric Chloride was imported at the relevant point of time by
others in comparable transactions, i.e., is “a sale at the same commercial
level and in substantially the same quantity” etc. is a matter to be
considered on the examination of the material relied upon by the Revenue.
A reasonable opportunity must be given to the appellant to demonstrate (if
at all) that the transactions relied upon by the Revenue are not comparable
transactions.
24. In the absence of any material produced by the Revenue in proof of
the alleged comparable imports at a higher value, the impugned order which
eventually confirmed the original order of assessment by the Assistant
Commissioner of Customs dated 31.3.2001 cannot be sustained for two reasons
–
(1) the mere existence of an alleged computer printout is not proof of
the existence of comparable imports;
(2) assuming such a printout exists
and the contents thereof are true, the question still remains whether the
transaction evidenced by the said computer printout are comparable to the
transaction of the appellant.
The appellant will have to be given
reasonable opportunity to establish (if he can) that the transactions are
not comparable.
25. The impugned order and the original assessment order are therefore,
set aside. However, it will be open to the respondent(revenue) to proceed
against the appellants herein pursuant to the show cause notice dated
25.9.2000 in accordance with law.
26. The appeals are allowed accordingly.
2014- Aug.Part - http://judis.nic.in/supremecourt/filename=41842
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 433-434 OF 2006
M/s. Gira Enterprises & Anr. …Appellants
Versus
Commissioner of Customs, Ahmedabad …Respondent
O R D E R
These are statutory appeals filed under Section 130(E) of the Customs
Act, 1962 from the judgment and order dated 23.8.2005, passed by the
Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at
Mumbai in Appeal No. C/791 & 792/03/Mum.
2. The appellants imported two consignments of “2-4-6 Tricloro 1-3-5
Triazine” aggregating 74.10 MT from China under two Bills of Entry, the
cost of which is declared by the appellants to be SG $ 750/- PMT equivalent
to US $ 500/- PMT. The goods were provisionally assessed and allowed
clearance on 17.9.1994.
3. Subsequently, a show cause notice dated 25.9.2000 came to be issued
to the appellants by the Commissioner of Customs, Gujarat at Ahmedabad
calling upon the appellants to show cause why certain action indicated
therein cannot be taken against the appellants. The relevant portion of
the show cause notice is as follows:-
“Therefore, M/s. Gira Enterprises, Ahmedabad are hereby called upon
to show cause to the Commissioner of Customs, Ahmedabad as to why:
(I) the provisionally assessed Bills of Entry (as per Annexure 'A') should
not be finalised after taking in value of US $ 1860.00 PMT CIF.
(ii) The differential duty of Rs.31,53,833/-(as per Annexure 'A') should
not be recovered under Section 18(2) read with Section 28(2) of the Customs
Act, 1962.
(iii)The goods which are liable for confiscation under Section 111(m) of
the Customs Act, 1962 should not be confiscated and why fine in lieu of
confiscation should not be imposed as goods has already been cleared
provisionally against Bond for test and value verification.
(iv) Penalty should not be imposed on M/s. Gira Enterprises, Ahmedabad
under Section 114A/112(a) of the Customs Act, 1962.
(v) Interest under Section 28AB of the Customs Act, 1962 should not be
recovered.”
4. It is also stated in the show cause notice that the goods imported by
the appellants were subjected to a test in the Central Excise & Customs
Laboratory, Baroda. According to the show cause notice, the chemical name
of the goods was verified and it was found to be “Cyanuric Chloride” as
known in the International market. It is further stated in the show cause
notice that on the basis of certain information obtained through a computer
print out from the Customs House, Mumbai, the Commissioner of Customs,
Gujarat noticed that a large number of Cyanuric Chloride(100) import
transactions (between the months of June 1994 to November 1994) took place
and the cost of the unit price in each one of those imports was US $ 1950/-
PMT(CIF) as against the value declared by the appellants of US $ 500/- PMT.
5. The appellants filed a detailed reply dated 11.12.2000 wherein they
disputed their liability to make any further payment as indicated in the
show cause notice. The appellants also took a specific stand that a copy
of the computer print out which formed the basis of show cause notice had
not been supplied to the appellants.
6. Eventually, the concerned Assistant Commissioner finalised the
assessment by valuing the imported goods at US $ 1860/- PMT by an order
dated 31.3.2001.
7. Aggrieved by the same, the appellants herein carried the matter in an
appeal to the Commissioner of Customs(Appeals). By an order dated 8.8.2001,
the said appeal was allowed wherein the appellate authority recorded “the
method of determination of the assessable value as per Rule 5 lacks
specific evidence, therefore, the same is not legal and proper”.
8. Revenue carried the matter in further appeal before the Customs,
Excise and Gold (Control) Appellate Tribunal. By an order dated 15.2.2002,
the said Tribunal remitted the matter back to the Commissioner (Appeals).
On such remittance, the Commissioner (Appeals) upheld the order of the
Assistant Commissioner confirming the enhancement of the value at US $ 1860
PMT CIF. Again, the matter was carried by the appellants to the Customs,
Excise and Service Tax Tribunal unsuccessfully. By an order dated
23.8.2005, which was impugned in the instant appeal, the appeal of the
appellants herein was dismissed by the Tribunal.
9. It is argued on behalf of the appellant that the assessment and
demand of the customs duty on the basis of the valuation of the goods at a
price much higher than what was declared by the appellant to be the price
paid by the appellant is without any basis in law, without any legally
admissible evidence and opposed to the principles of natural justice as the
only material relied upon by the Revenue i.e. copy of the alleged printout
was not supplied to the appellant. Therefore, the appellant had no means
of knowing as to whether any imports of comparable nature were made at the
relevant point of time.
10. On the other hand it is argued by the Revenue that the impugned order
calls for no interference.
11. Section 12 of the Customs Act, 1962 mandates that duties of customs
shall be levied at such rates as may be specified under the Customs Tariff
Act, 1975(51 of 1975), or any other law for the time being in force, on
goods imported into, or exported from, India. Undisputedly, the goods
imported by the appellants are goods which are assessable to Customs Duty
under Entry 2942 of the First Schedule of the Customs Tariff Act, 1975. It
is also not in dispute that the duty is an ad valorem duty. Section 14 of
the Customs Act stipulates the method and manner of the valuation of the
goods which are exigible to duties under the Customs Tariff Act and
assessable to ad-valorem duty.
12. Section 14 reads as follows:-
“Valuation of goods for purposes of assessment. –
(1) For the purposes of [the Customs Tariff Act, 1975(51 of 1975)], or any
other law for the time being in force whereunder a duty of customs is
chargeable on any goods by reference to their value, the value of such
goods 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 of exportation, as the case maybe, in the course of
international trade, 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
or offer for sale:
[Provided 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 or bill of export, as the
case may be, is presented under Section 50;]
1 *
[1A Subject to the provisions of sub-section (1), the price referred
to in that sub-section in respect of imported goods shall be determined in
accordance with the rules made in this behalf.]
2...
3...”
13. It can be seen from Section 14 that the value of the imported goods
is “deemed to be the price at which such goods are ordinarily sold, or
offered for sale ……”. The Section further stipulates that such price of
the imported goods is to be determined in accordance with the rules made in
that behalf.
14. The Government of India made rules known as Customs Valuation
(Determination of the Price of Imported Goods) Rules, 1988. Rule 3(i)[1]
stipulates that for the purpose of the rules, the value of the imported
goods shall be the transaction value. Rule 3(ii)[2] provides that where
the value of the imported goods cannot be determined under Rule 3(i) then
the same is to be determined in accordance with the various methods of
determination (of the value of the goods) provided under Rules 5 to 8
sequentially.
15. The expression “transaction value” is defined under the Rule 2(f) of
the Customs Valuation(Determination of Price of Imported Goods) Rules, 1988
as follows:-
2(f) “transaction value” means the value determined in accordance with Rule
4 of these rules.”
16. Rule 4(1) stipulates as follows:-
“The transaction value of imported goods shall be the price actually paid
or payable for the goods when sold for export to India, adjusted in
accordance with the provisions of Rule 9.”
17. Sub-rule (2)[3] stipulates that the transaction value of the imported
goods shall be accepted subject to the various exceptions specified in the
said Section, the details of which many not be necessary for the present
purpose.
18. In substance, Rule 5 stipulates the next alternative procedure for
determining the value of the imported goods and it reads as follows:-
5. Transaction value of identical goods –
(1)(a) Subject to the provisions of Rule 3 of these rules, the value
of imported goods shall be the transaction value of identical goods sold
for export to India and imported at or about the same time as the goods
being valued.
(b) In applying this rule, the transaction value of identical goods in a
sale at the same commercial level and in substantially the same quantity as
the goods being valued shall be used to determine the value of imported
goods.
(c) Where no sale referred to in clause (b) of sub-rule (1) of this rule,
is found, the transaction value of identical goods sold at a different
commercial level or in different quantities or both, adjusted to take
account of the difference attributable to commercial level or to the
quantity or both shall be used, provided that such adjustments shall be
made on the basis of demonstrated evidence which clearly establishes the
reasonableness and accuracy of the adjustments, whether such adjustment
leads to an increase or decrease in the value.
(2) Where the costs and changes referred to in sub-rule(2) of Rule
9 of these rules are included in the transaction value of identical goods,
an adjustment shall be made, if there are significant differences in such
costs and charges between the goods being valued and the identical goods in
question arising from differences in distances and means of transport.
(3) In applying this rule, if more than one transaction value of
identical goods is found; the lowest such value shall be used to determine
the value of imported goods.”
19. In substance, Rule 5 enables the Revenue to determine the value of
the imported goods on the basis of the identical imported goods of
comparable import transaction. Such a procedure/course of action is
authorized notwithstanding the mandate of Rule 4(2) that the transaction
value shall be accepted. Obviously, such an alternative mode of valuation
is authorized as Rule 4 declares that the transaction value of the imported
goods shall be the “price actually paid or payable”. Necessarily the rule
implies the need of determination of the price actually paid or payable.
20. It is not necessary that in every case of import the importer
declares the price actually paid by him or payable by him. Therefore, if
in a given case the Revenue notices identical goods have been imported by
other importers in comparable transactions at a different rate (normally
higher rate) then Revenue is enabled by Rules 5 to reject the valuation
made by the importer and determine the “price actually paid or payable” by
the importer.
21. In the case at hand, no doubt the revenue claims to have some
information based on certain alleged imports made at the Bombay port at the
relevant point of time that the import in question took place. According
to the revenue, those imports at Bombay were declared and valued at a much
higher rate than the value declared by the appellants herein. Therefore,
the valuation of the goods imported by the appellant was found
unacceptable. Hence, the procedure under Rule 5 was resorted to.
22. However, the respondent(revenue) did not supply the information
(alleged computer print out) which formed the basis of the conclusion that
the appellants herein under-valued the goods imported. In such a
situation, the appellants obviously cannot and did not have any opportunity
of establishing that the claim of the revenue is unsustainable in law. If
the information which formed the basis for the Revenue to reject the
appellant’s valuation is supplied to the appellants, the appellants perhaps
will have an opportunity to dispute the comparability of the import
transactions allegedly contained in the computer printout on various counts
may not be possible to catalogue.
23. The appellants, of course, admit that the goods imported by them are
known commercially as ‘Cyanuric Chloride’ as specified in the show cause.
Whether Cyanuric Chloride was imported at the relevant point of time by
others in comparable transactions, i.e., is “a sale at the same commercial
level and in substantially the same quantity” etc. is a matter to be
considered on the examination of the material relied upon by the Revenue.
A reasonable opportunity must be given to the appellant to demonstrate (if
at all) that the transactions relied upon by the Revenue are not comparable
transactions.
24. In the absence of any material produced by the Revenue in proof of
the alleged comparable imports at a higher value, the impugned order which
eventually confirmed the original order of assessment by the Assistant
Commissioner of Customs dated 31.3.2001 cannot be sustained for two reasons
– (1) the mere existence of an alleged computer printout is not proof of
the existence of comparable imports; (2) assuming such a printout exists
and the contents thereof are true, the question still remains whether the
transaction evidenced by the said computer printout are comparable to the
transaction of the appellant. The appellant will have to be given
reasonable opportunity to establish (if he can) that the transactions are
not comparable.
25. The impugned order and the original assessment order are therefore,
set aside. However, it will be open to the respondent(revenue) to proceed
against the appellants herein pursuant to the show cause notice dated
25.9.2000 in accordance with law.
26. The appeals are allowed accordingly.
………………………….J.
(J.
Chelameswar)
……………………..….J.
(A.K. Sikri)
New Delhi;
August 21, 2014
-----------------------
[1] 3. Determination of the method of valuation – For the purpose of
these rules-
(i) the value of imported goods shall be the transaction value.
[2]
[3] (ii) if the value cannot be determined under the provisions of
clause (i) above, the value shall be determined by proceeding sequentially
through Rules 5 to 8 of these Rules.
[4] (2) The transaction value of imported goods under sub-rule(1)
above shall be accepted:
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 same 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 9 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.
Subsequently, a show cause notice dated 25.9.2000 came to be issued
to the appellants by the Commissioner of Customs, Gujarat at Ahmedabad
calling upon the appellants to show cause why certain action indicated
therein cannot be taken against the appellants. The relevant portion of
the show cause notice is as follows:-
“Therefore, M/s. Gira Enterprises, Ahmedabad are hereby called upon
to show cause to the Commissioner of Customs, Ahmedabad as to why:
(I) the provisionally assessed Bills of Entry (as per Annexure 'A') should
not be finalised after taking in value of US $ 1860.00 PMT CIF.
(ii) The differential duty of Rs.31,53,833/-(as per Annexure 'A') should
not be recovered under Section 18(2) read with Section 28(2) of the Customs
Act, 1962.
(iii)The goods which are liable for confiscation under Section 111(m) of
the Customs Act, 1962 should not be confiscated and why fine in lieu of
confiscation should not be imposed as goods has already been cleared
provisionally against Bond for test and value verification.
(iv) Penalty should not be imposed on M/s. Gira Enterprises, Ahmedabad
under Section 114A/112(a) of the Customs Act, 1962.
(v) Interest under Section 28AB of the Customs Act, 1962 should not be
recovered.”
4. It is also stated in the show cause notice that the goods imported by
the appellants were subjected to a test in the Central Excise & Customs
Laboratory, Baroda. According to the show cause notice, the chemical name
of the goods was verified and it was found to be “Cyanuric Chloride” as
known in the International market. It is further stated in the show cause
notice that on the basis of certain information obtained through a computer
print out from the Customs House, Mumbai, the Commissioner of Customs,
Gujarat noticed that a large number of Cyanuric Chloride(100) import
transactions (between the months of June 1994 to November 1994) took place
and the cost of the unit price in each one of those imports was US $ 1950/-
PMT(CIF) as against the value declared by the appellants of US $ 500/- PMT.=
Section 14 reads as follows:-
“Valuation of goods for purposes of assessment. –
(1) For the purposes of [the Customs Tariff Act, 1975(51 of 1975)], or any
other law for the time being in force whereunder a duty of customs is
chargeable on any goods by reference to their value, the value of such
goods 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 of exportation, as the case maybe, in the course of
international trade, 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
or offer for sale:
[Provided 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 or bill of export, as the
case may be, is presented under Section 50;]
1 *
[1A Subject to the provisions of sub-section (1), the price referred
to in that sub-section in respect of imported goods shall be determined in
accordance with the rules made in this behalf.]
2...
3...”
13. It can be seen from Section 14 that the value of the imported goods
is “deemed to be the price at which such goods are ordinarily sold, or
offered for sale ……”. The Section further stipulates that such price of
the imported goods is to be determined in accordance with the rules made in
that behalf.
14. The Government of India made rules known as Customs Valuation
(Determination of the Price of Imported Goods) Rules, 1988. Rule 3(i)[1]
stipulates that for the purpose of the rules, the value of the imported
goods shall be the transaction value. Rule 3(ii)[2] provides that where
the value of the imported goods cannot be determined under Rule 3(i) then
the same is to be determined in accordance with the various methods of
determination (of the value of the goods) provided under Rules 5 to 8
sequentially.
15. The expression “transaction value” is defined under the Rule 2(f) of
the Customs Valuation(Determination of Price of Imported Goods) Rules, 1988
as follows:-
2(f) “transaction value” means the value determined in accordance with Rule
4 of these rules.”
16. Rule 4(1) stipulates as follows:-
“The transaction value of imported goods shall be the price actually paid
or payable for the goods when sold for export to India, adjusted in
accordance with the provisions of Rule 9.”
17. Sub-rule (2)[3] stipulates that the transaction value of the imported
goods shall be accepted subject to the various exceptions specified in the
said Section, the details of which many not be necessary for the present
purpose.
18. In substance, Rule 5 stipulates the next alternative procedure for
determining the value of the imported goods and it reads as follows:-
5. Transaction value of identical goods –
(1)(a) Subject to the provisions of Rule 3 of these rules, the value
of imported goods shall be the transaction value of identical goods sold
for export to India and imported at or about the same time as the goods
being valued.
(b) In applying this rule, the transaction value of identical goods in a
sale at the same commercial level and in substantially the same quantity as
the goods being valued shall be used to determine the value of imported
goods.
(c) Where no sale referred to in clause (b) of sub-rule (1) of this rule,
is found, the transaction value of identical goods sold at a different
commercial level or in different quantities or both, adjusted to take
account of the difference attributable to commercial level or to the
quantity or both shall be used, provided that such adjustments shall be
made on the basis of demonstrated evidence which clearly establishes the
reasonableness and accuracy of the adjustments, whether such adjustment
leads to an increase or decrease in the value.
(2) Where the costs and changes referred to in sub-rule(2) of Rule
9 of these rules are included in the transaction value of identical goods,
an adjustment shall be made, if there are significant differences in such
costs and charges between the goods being valued and the identical goods in
question arising from differences in distances and means of transport.
(3) In applying this rule, if more than one transaction value of
identical goods is found; the lowest such value shall be used to determine
the value of imported goods.”=
It is not necessary that in every case of import the importer“Valuation of goods for purposes of assessment. –
(1) For the purposes of [the Customs Tariff Act, 1975(51 of 1975)], or any
other law for the time being in force whereunder a duty of customs is
chargeable on any goods by reference to their value, the value of such
goods 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 of exportation, as the case maybe, in the course of
international trade, 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
or offer for sale:
[Provided 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 or bill of export, as the
case may be, is presented under Section 50;]
1 *
[1A Subject to the provisions of sub-section (1), the price referred
to in that sub-section in respect of imported goods shall be determined in
accordance with the rules made in this behalf.]
2...
3...”
13. It can be seen from Section 14 that the value of the imported goods
is “deemed to be the price at which such goods are ordinarily sold, or
offered for sale ……”. The Section further stipulates that such price of
the imported goods is to be determined in accordance with the rules made in
that behalf.
14. The Government of India made rules known as Customs Valuation
(Determination of the Price of Imported Goods) Rules, 1988. Rule 3(i)[1]
stipulates that for the purpose of the rules, the value of the imported
goods shall be the transaction value. Rule 3(ii)[2] provides that where
the value of the imported goods cannot be determined under Rule 3(i) then
the same is to be determined in accordance with the various methods of
determination (of the value of the goods) provided under Rules 5 to 8
sequentially.
15. The expression “transaction value” is defined under the Rule 2(f) of
the Customs Valuation(Determination of Price of Imported Goods) Rules, 1988
as follows:-
2(f) “transaction value” means the value determined in accordance with Rule
4 of these rules.”
16. Rule 4(1) stipulates as follows:-
“The transaction value of imported goods shall be the price actually paid
or payable for the goods when sold for export to India, adjusted in
accordance with the provisions of Rule 9.”
17. Sub-rule (2)[3] stipulates that the transaction value of the imported
goods shall be accepted subject to the various exceptions specified in the
said Section, the details of which many not be necessary for the present
purpose.
18. In substance, Rule 5 stipulates the next alternative procedure for
determining the value of the imported goods and it reads as follows:-
5. Transaction value of identical goods –
(1)(a) Subject to the provisions of Rule 3 of these rules, the value
of imported goods shall be the transaction value of identical goods sold
for export to India and imported at or about the same time as the goods
being valued.
(b) In applying this rule, the transaction value of identical goods in a
sale at the same commercial level and in substantially the same quantity as
the goods being valued shall be used to determine the value of imported
goods.
(c) Where no sale referred to in clause (b) of sub-rule (1) of this rule,
is found, the transaction value of identical goods sold at a different
commercial level or in different quantities or both, adjusted to take
account of the difference attributable to commercial level or to the
quantity or both shall be used, provided that such adjustments shall be
made on the basis of demonstrated evidence which clearly establishes the
reasonableness and accuracy of the adjustments, whether such adjustment
leads to an increase or decrease in the value.
(2) Where the costs and changes referred to in sub-rule(2) of Rule
9 of these rules are included in the transaction value of identical goods,
an adjustment shall be made, if there are significant differences in such
costs and charges between the goods being valued and the identical goods in
question arising from differences in distances and means of transport.
(3) In applying this rule, if more than one transaction value of
identical goods is found; the lowest such value shall be used to determine
the value of imported goods.”=
declares the price actually paid by him or payable by him.
Therefore, if
in a given case the Revenue notices identical goods have been imported by
other importers in comparable transactions at a different rate (normally
higher rate) then Revenue is enabled by Rules 5 to reject the valuation
made by the importer and determine the “price actually paid or payable” by
the importer.
21. In the case at hand, no doubt the revenue claims to have some
information based on certain alleged imports made at the Bombay port at the
relevant point of time that the import in question took place.
According
to the revenue, those imports at Bombay were declared and valued at a much
higher rate than the value declared by the appellants herein.
Therefore,
the valuation of the goods imported by the appellant was found
unacceptable. Hence, the procedure under Rule 5 was resorted to.
22. However, the respondent(revenue) did not supply the information
(alleged computer print out) which formed the basis of the conclusion that
the appellants herein under-valued the goods imported.
In such a
situation, the appellants obviously cannot and did not have any opportunity
of establishing that the claim of the revenue is unsustainable in law.
If
the information which formed the basis for the Revenue to reject the
appellant’s valuation is supplied to the appellants, the appellants perhaps
will have an opportunity to dispute the comparability of the import
transactions allegedly contained in the computer printout on various counts
may not be possible to catalogue.
23. The appellants, of course, admit that the goods imported by them are
known commercially as ‘Cyanuric Chloride’ as specified in the show cause.
Whether Cyanuric Chloride was imported at the relevant point of time by
others in comparable transactions, i.e., is “a sale at the same commercial
level and in substantially the same quantity” etc. is a matter to be
considered on the examination of the material relied upon by the Revenue.
A reasonable opportunity must be given to the appellant to demonstrate (if
at all) that the transactions relied upon by the Revenue are not comparable
transactions.
24. In the absence of any material produced by the Revenue in proof of
the alleged comparable imports at a higher value, the impugned order which
eventually confirmed the original order of assessment by the Assistant
Commissioner of Customs dated 31.3.2001 cannot be sustained for two reasons
–
(1) the mere existence of an alleged computer printout is not proof of
the existence of comparable imports;
(2) assuming such a printout exists
and the contents thereof are true, the question still remains whether the
transaction evidenced by the said computer printout are comparable to the
transaction of the appellant.
The appellant will have to be given
reasonable opportunity to establish (if he can) that the transactions are
not comparable.
25. The impugned order and the original assessment order are therefore,
set aside. However, it will be open to the respondent(revenue) to proceed
against the appellants herein pursuant to the show cause notice dated
25.9.2000 in accordance with law.
26. The appeals are allowed accordingly.
2014- Aug.Part - http://judis.nic.in/supremecourt/filename=41842
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 433-434 OF 2006
M/s. Gira Enterprises & Anr. …Appellants
Versus
Commissioner of Customs, Ahmedabad …Respondent
O R D E R
These are statutory appeals filed under Section 130(E) of the Customs
Act, 1962 from the judgment and order dated 23.8.2005, passed by the
Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at
Mumbai in Appeal No. C/791 & 792/03/Mum.
2. The appellants imported two consignments of “2-4-6 Tricloro 1-3-5
Triazine” aggregating 74.10 MT from China under two Bills of Entry, the
cost of which is declared by the appellants to be SG $ 750/- PMT equivalent
to US $ 500/- PMT. The goods were provisionally assessed and allowed
clearance on 17.9.1994.
3. Subsequently, a show cause notice dated 25.9.2000 came to be issued
to the appellants by the Commissioner of Customs, Gujarat at Ahmedabad
calling upon the appellants to show cause why certain action indicated
therein cannot be taken against the appellants. The relevant portion of
the show cause notice is as follows:-
“Therefore, M/s. Gira Enterprises, Ahmedabad are hereby called upon
to show cause to the Commissioner of Customs, Ahmedabad as to why:
(I) the provisionally assessed Bills of Entry (as per Annexure 'A') should
not be finalised after taking in value of US $ 1860.00 PMT CIF.
(ii) The differential duty of Rs.31,53,833/-(as per Annexure 'A') should
not be recovered under Section 18(2) read with Section 28(2) of the Customs
Act, 1962.
(iii)The goods which are liable for confiscation under Section 111(m) of
the Customs Act, 1962 should not be confiscated and why fine in lieu of
confiscation should not be imposed as goods has already been cleared
provisionally against Bond for test and value verification.
(iv) Penalty should not be imposed on M/s. Gira Enterprises, Ahmedabad
under Section 114A/112(a) of the Customs Act, 1962.
(v) Interest under Section 28AB of the Customs Act, 1962 should not be
recovered.”
4. It is also stated in the show cause notice that the goods imported by
the appellants were subjected to a test in the Central Excise & Customs
Laboratory, Baroda. According to the show cause notice, the chemical name
of the goods was verified and it was found to be “Cyanuric Chloride” as
known in the International market. It is further stated in the show cause
notice that on the basis of certain information obtained through a computer
print out from the Customs House, Mumbai, the Commissioner of Customs,
Gujarat noticed that a large number of Cyanuric Chloride(100) import
transactions (between the months of June 1994 to November 1994) took place
and the cost of the unit price in each one of those imports was US $ 1950/-
PMT(CIF) as against the value declared by the appellants of US $ 500/- PMT.
5. The appellants filed a detailed reply dated 11.12.2000 wherein they
disputed their liability to make any further payment as indicated in the
show cause notice. The appellants also took a specific stand that a copy
of the computer print out which formed the basis of show cause notice had
not been supplied to the appellants.
6. Eventually, the concerned Assistant Commissioner finalised the
assessment by valuing the imported goods at US $ 1860/- PMT by an order
dated 31.3.2001.
7. Aggrieved by the same, the appellants herein carried the matter in an
appeal to the Commissioner of Customs(Appeals). By an order dated 8.8.2001,
the said appeal was allowed wherein the appellate authority recorded “the
method of determination of the assessable value as per Rule 5 lacks
specific evidence, therefore, the same is not legal and proper”.
8. Revenue carried the matter in further appeal before the Customs,
Excise and Gold (Control) Appellate Tribunal. By an order dated 15.2.2002,
the said Tribunal remitted the matter back to the Commissioner (Appeals).
On such remittance, the Commissioner (Appeals) upheld the order of the
Assistant Commissioner confirming the enhancement of the value at US $ 1860
PMT CIF. Again, the matter was carried by the appellants to the Customs,
Excise and Service Tax Tribunal unsuccessfully. By an order dated
23.8.2005, which was impugned in the instant appeal, the appeal of the
appellants herein was dismissed by the Tribunal.
9. It is argued on behalf of the appellant that the assessment and
demand of the customs duty on the basis of the valuation of the goods at a
price much higher than what was declared by the appellant to be the price
paid by the appellant is without any basis in law, without any legally
admissible evidence and opposed to the principles of natural justice as the
only material relied upon by the Revenue i.e. copy of the alleged printout
was not supplied to the appellant. Therefore, the appellant had no means
of knowing as to whether any imports of comparable nature were made at the
relevant point of time.
10. On the other hand it is argued by the Revenue that the impugned order
calls for no interference.
11. Section 12 of the Customs Act, 1962 mandates that duties of customs
shall be levied at such rates as may be specified under the Customs Tariff
Act, 1975(51 of 1975), or any other law for the time being in force, on
goods imported into, or exported from, India. Undisputedly, the goods
imported by the appellants are goods which are assessable to Customs Duty
under Entry 2942 of the First Schedule of the Customs Tariff Act, 1975. It
is also not in dispute that the duty is an ad valorem duty. Section 14 of
the Customs Act stipulates the method and manner of the valuation of the
goods which are exigible to duties under the Customs Tariff Act and
assessable to ad-valorem duty.
12. Section 14 reads as follows:-
“Valuation of goods for purposes of assessment. –
(1) For the purposes of [the Customs Tariff Act, 1975(51 of 1975)], or any
other law for the time being in force whereunder a duty of customs is
chargeable on any goods by reference to their value, the value of such
goods 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 of exportation, as the case maybe, in the course of
international trade, 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
or offer for sale:
[Provided 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 or bill of export, as the
case may be, is presented under Section 50;]
1 *
[1A Subject to the provisions of sub-section (1), the price referred
to in that sub-section in respect of imported goods shall be determined in
accordance with the rules made in this behalf.]
2...
3...”
13. It can be seen from Section 14 that the value of the imported goods
is “deemed to be the price at which such goods are ordinarily sold, or
offered for sale ……”. The Section further stipulates that such price of
the imported goods is to be determined in accordance with the rules made in
that behalf.
14. The Government of India made rules known as Customs Valuation
(Determination of the Price of Imported Goods) Rules, 1988. Rule 3(i)[1]
stipulates that for the purpose of the rules, the value of the imported
goods shall be the transaction value. Rule 3(ii)[2] provides that where
the value of the imported goods cannot be determined under Rule 3(i) then
the same is to be determined in accordance with the various methods of
determination (of the value of the goods) provided under Rules 5 to 8
sequentially.
15. The expression “transaction value” is defined under the Rule 2(f) of
the Customs Valuation(Determination of Price of Imported Goods) Rules, 1988
as follows:-
2(f) “transaction value” means the value determined in accordance with Rule
4 of these rules.”
16. Rule 4(1) stipulates as follows:-
“The transaction value of imported goods shall be the price actually paid
or payable for the goods when sold for export to India, adjusted in
accordance with the provisions of Rule 9.”
17. Sub-rule (2)[3] stipulates that the transaction value of the imported
goods shall be accepted subject to the various exceptions specified in the
said Section, the details of which many not be necessary for the present
purpose.
18. In substance, Rule 5 stipulates the next alternative procedure for
determining the value of the imported goods and it reads as follows:-
5. Transaction value of identical goods –
(1)(a) Subject to the provisions of Rule 3 of these rules, the value
of imported goods shall be the transaction value of identical goods sold
for export to India and imported at or about the same time as the goods
being valued.
(b) In applying this rule, the transaction value of identical goods in a
sale at the same commercial level and in substantially the same quantity as
the goods being valued shall be used to determine the value of imported
goods.
(c) Where no sale referred to in clause (b) of sub-rule (1) of this rule,
is found, the transaction value of identical goods sold at a different
commercial level or in different quantities or both, adjusted to take
account of the difference attributable to commercial level or to the
quantity or both shall be used, provided that such adjustments shall be
made on the basis of demonstrated evidence which clearly establishes the
reasonableness and accuracy of the adjustments, whether such adjustment
leads to an increase or decrease in the value.
(2) Where the costs and changes referred to in sub-rule(2) of Rule
9 of these rules are included in the transaction value of identical goods,
an adjustment shall be made, if there are significant differences in such
costs and charges between the goods being valued and the identical goods in
question arising from differences in distances and means of transport.
(3) In applying this rule, if more than one transaction value of
identical goods is found; the lowest such value shall be used to determine
the value of imported goods.”
19. In substance, Rule 5 enables the Revenue to determine the value of
the imported goods on the basis of the identical imported goods of
comparable import transaction. Such a procedure/course of action is
authorized notwithstanding the mandate of Rule 4(2) that the transaction
value shall be accepted. Obviously, such an alternative mode of valuation
is authorized as Rule 4 declares that the transaction value of the imported
goods shall be the “price actually paid or payable”. Necessarily the rule
implies the need of determination of the price actually paid or payable.
20. It is not necessary that in every case of import the importer
declares the price actually paid by him or payable by him. Therefore, if
in a given case the Revenue notices identical goods have been imported by
other importers in comparable transactions at a different rate (normally
higher rate) then Revenue is enabled by Rules 5 to reject the valuation
made by the importer and determine the “price actually paid or payable” by
the importer.
21. In the case at hand, no doubt the revenue claims to have some
information based on certain alleged imports made at the Bombay port at the
relevant point of time that the import in question took place. According
to the revenue, those imports at Bombay were declared and valued at a much
higher rate than the value declared by the appellants herein. Therefore,
the valuation of the goods imported by the appellant was found
unacceptable. Hence, the procedure under Rule 5 was resorted to.
22. However, the respondent(revenue) did not supply the information
(alleged computer print out) which formed the basis of the conclusion that
the appellants herein under-valued the goods imported. In such a
situation, the appellants obviously cannot and did not have any opportunity
of establishing that the claim of the revenue is unsustainable in law. If
the information which formed the basis for the Revenue to reject the
appellant’s valuation is supplied to the appellants, the appellants perhaps
will have an opportunity to dispute the comparability of the import
transactions allegedly contained in the computer printout on various counts
may not be possible to catalogue.
23. The appellants, of course, admit that the goods imported by them are
known commercially as ‘Cyanuric Chloride’ as specified in the show cause.
Whether Cyanuric Chloride was imported at the relevant point of time by
others in comparable transactions, i.e., is “a sale at the same commercial
level and in substantially the same quantity” etc. is a matter to be
considered on the examination of the material relied upon by the Revenue.
A reasonable opportunity must be given to the appellant to demonstrate (if
at all) that the transactions relied upon by the Revenue are not comparable
transactions.
24. In the absence of any material produced by the Revenue in proof of
the alleged comparable imports at a higher value, the impugned order which
eventually confirmed the original order of assessment by the Assistant
Commissioner of Customs dated 31.3.2001 cannot be sustained for two reasons
– (1) the mere existence of an alleged computer printout is not proof of
the existence of comparable imports; (2) assuming such a printout exists
and the contents thereof are true, the question still remains whether the
transaction evidenced by the said computer printout are comparable to the
transaction of the appellant. The appellant will have to be given
reasonable opportunity to establish (if he can) that the transactions are
not comparable.
25. The impugned order and the original assessment order are therefore,
set aside. However, it will be open to the respondent(revenue) to proceed
against the appellants herein pursuant to the show cause notice dated
25.9.2000 in accordance with law.
26. The appeals are allowed accordingly.
………………………….J.
(J.
Chelameswar)
……………………..….J.
(A.K. Sikri)
New Delhi;
August 21, 2014
-----------------------
[1] 3. Determination of the method of valuation – For the purpose of
these rules-
(i) the value of imported goods shall be the transaction value.
[2]
[3] (ii) if the value cannot be determined under the provisions of
clause (i) above, the value shall be determined by proceeding sequentially
through Rules 5 to 8 of these Rules.
[4] (2) The transaction value of imported goods under sub-rule(1)
above shall be accepted:
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 same 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 9 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.
