Delhi High Court
Aggarwal Traders vs Commissioner Of Customs on 27 November, 2024
Author: Yashwant Varma
Bench: Yashwant Varma
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 27 August 2024
Judgment pronounced on: 27 November 2024
+ CUSAA 26/2022 & CM APPL 22868/2022 (stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 27/2022 & CM APPL. 22870/2022 (stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
Mr. Krishnamohan Menon, Ms.
Parul Sachdeva, Advs. for
Intervenor.
+ CUSAA 90/2022 & CM APPL. 34838/2022 (stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 1 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
COMMISSIONER OF CUSTOMS (ICD)
PATPARGANJ NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 91/2022 & CM APPL 34841/2022 (stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 92/2022 & CM APPL. 34911/2022 (stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 93/2022 & CM APPL. 34914/2022 (Interim Stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 2 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 94/2022 & CM APPL. 34917/2022 (Interim Stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 95/2022 & CM APPL. 34920/2022 (Interim Stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 96/2022 & CM APPL. 34923/2022 (Interim Stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 3 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
+ CUSAA 97/2022 & CM APPL. 34926/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 98/2022 & CM APPL. 35014/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 99/2022 & CM APPL. 35019/2022 (Interim Stay)
NIRAJ SILK MILLS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 100/2022 & CM APPL. 35028/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 4 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 102/2022 & CM APPL. 35103/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 103/2022 & CM APPL. 35108/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 104/2022 & CM APPL. 35113/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 5 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 105/2022 & CM APPL. 35679/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 107/2022 & CM APPL. 35731/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 108/2022 & CM APPL. 35734/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 6 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 109/2022 & CM APPL. 35737/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 110/2022 & CM APPL. 35897/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 111/2022 & CM APPL. 35901/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 7 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
Through:
Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 112/2022 & CM APPL. 35904/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 114/2022 & CM APPL. 36495/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 115/2022& CM APPL. 36501/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 8 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
+ CUSAA 116/2022 & CM APPL. 36498/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 117/2022, CM APPL. 36552/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 118/2022, CM APPL. 36555/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 120/2022, CM APPL. 36561/2022 (Interim Stay)
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 9 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 121/2022, CM APPL. 36564/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 123/2022, CM APPL. 36924/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 124/2022, CM APPL. 36934/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 10 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 125/2022, CM APPL. 36943/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 126/2022, CM APPL. 37373/2022 (Stay)
MANAVI EXIM PVT. LTD. ..... Appellant
Through: Mr. Tarun Gulati, Sr. Adv. with
Mr. Prem Ranjan Kumar, Ms.
Shruti, Advocates.
versus
PRINCIPAL COMMISSIONER OF CUSTOMS
..... Respondent
Through: Mr. Harpreet Singh, SSC with
Ms. Suhani Mathur, Mr. Jatin
Kumar, Advs.
+ CUSAA 127/2022, CM APPL. 38033/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 11 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 128/2022, CM APPL. 38036/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUSAA 129/2022, CM APPL. 38041/2022 (Interim Stay)
HANUMAN PRASAD AND SONS ..... Appellant
Through: Mr. Yogendra Aldak, Mr. Sumit
Khadaria, Mr. Agrim Arora and
Ms. Purvi Sinha, Advocates.
versus
COMMISSIONER OF CUSTOMS (ICD) PATPARGANJ
NEW DELHI ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
+ CUS.A.C. 1/2023, CM APPL. 42196/2023 (Interim Stay)
AGGARWAL TRADERS ..... Appellant
Through: Mr. Subhash Chawla, Mr.
Vikash Kumar, Advs.
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 12 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
versus
COMMISSIONER OF CUSTOMS ..... Respondent
Through: Mr. Aditya Singla, SSC for
CBIC with Mr. Ritwik Saha,
Adv.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
JUDGMENT
Table of Contents
I. Background ……………………………………………………………………….. 13
II. The power of reassessment: a brief overview ………………………. 33
III. The submissions addressed ……………………………………………… 46
IV. Evaluation of the Court …………………………………………………… 82
A. Declared values and the power of reappraisal ………………….. 82
B. Exploring the concepts of abandonment and waiver ………. 104
C. Rejection of declared values: Assessing its validity …………. 119
D. Value enhancement on the basis of NIDB data ……………….. 122
V. Disposition ……………………………………………………………………….. 137
YASHWANT VARMA, J.
I. BACKGROUND
1. The instant appeals raise a challenge to the decision rendered by
the Customs Excise & Service Tax Appellate Tribunal1 holding that
the appellants, having conceded to the valuation undertaken by the
proper officer as contemplated under Section 17(5) of the Customs
1
CESTAT
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 13 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
Act, 19622, would have no right to question or assail such assessment
and would also be deemed to have waived their right to question that
decision by resorting to the statutory remedies otherwise available
under the Act. The lead appeal CUSAA 27/2022 came to be admitted
by us on 03 August 2022 on the following question of law:
―Whether the Tribunal misdirected itself in holding that the
appellants in the above-mentioned matter could not question the
enhancement made concerning the valuation of the imported goods,
once the appellants had given up their right to seek issuance of a
show cause notice and/or speaking order under Section 17 of the
Customs Act, 1962?‖
2. In the course of hearing this batch, we had also designated
CUSAA 126/2022 as one of the appeals which would be examined and
pursuant to which learned counsels for respective sides had also
addressed elaborate submissions on the said appeal. We thus, for the
purposes of disposal of this batch, deem it appropriate to notice the
facts as they obtain in the aforenoted two appeals.
3. The appellant in CUSAA 27/2022 had imported polyester knitted
fabrics of different weights during the period November 2018 to April
2019. Those imports were affected on the basis of 27 Bills of Entry3
which were submitted. The respondents appear to have disputed the
‗declared value’ of the imported goods on the basis of contemporaneous
import data obtained from the National Import Database4. It is the
case of the appellant that since the clearance of the goods was being
inordinately delayed, it was compelled to pay differential customs duty
on the enhanced value as computed by the proper officer. It is further
alleged that the appellant was compelled and coerced into voluntarily
2
Act
3
BoE
4
NIDB
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 14 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
relinquishing its right to receive a speaking order as contemplated
under Section 17(5) of the Act.
4. Post the BoE being reassessed, the appellant preferred first
appeals before the Commissioner of Customs (Appeals). The first
appellate authority by a common order disposed of 27 appeals filed by
the appellant holding that the mere clearance of goods at a higher value
would not deprive the assessee of the right to institute a statutory appeal
and that NIDB data alone could not have constituted the basis for
enhancing the value of the imported goods. It was this order of the first
appellate authority which was challenged by the respondents before the
CESTAT.
5. The CESTAT in terms of the order impugned has essentially held
that once the appellant had come to accept the enhanced valuation of
the imported goods and waived its right of adjudication, it could not
have challenged the reassessment by preferring appeals before the first
appellate authority. It has consequently proceeded to set aside the order
of the first appellate authority dated 26 April 2019 and allowed the
appeals that were preferred by the respondents.
6. The facts of CUSAA 126/2022 proceed along similar lines. The
appellant in that appeal had filed 8 BoE between 8 February 2019 and
15 February 2019 in respect of the import of two lots of polyester
knitted fabrics and non-textured polyester fabric. The ‗declared value’
as appearing on those BoE came to be doubted by the proper officer.
Since the appellant was desirous of obtaining delivery of those goods
and was incurring demurrage charges, it addressed various
communications calling upon the respondents to expedite the valuation
exercise and stating that it was ready and willing to pay additional
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 15 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
customs duty on the enhanced value of goods under protest. It
accordingly requested the respondents to clear the consignments at the
earliest.
7. Since those communications would have some bearing on the
issue which stands raised, we deem it apposite to extract some of those
communications hereinbelow:
―Date: 11.02.2019
To,
The Assistant Commissioner of Customs
lCD Palwal,
Village Janouli-Baghola,
Haryana-121102.
Subject: Customs Clearance of goods imported vide 5 Bills of
Entries.
Dear Sir,
We would like to inform you that we have filed the following bills of
entry for customs clearance, but the same has not been yet assessed.
S.# Bill of Entry No. & Date Item
1. 9990292 dated 08.02.2019 Lot of Polyester Knitted Fabric.
2. 9990355 dated 08.02.2019 Lot of Polyester Knitted Fabric.
3. 9990356 dated 08.02.2019 Lot of Polyester Knitted Fabric.
4. 9990359 dated 08.02.2019 Lot of Polyester Knitted Fabric.
5. 9990360 dated 08.02.2019 Lot of Polyester Knitted Fabric.
The containers are incurring detention and demurrage on daily basis.
In this regard we would like to request you if your goodself is going
to enhance the value of goods, we have no objection for that we are
ready to pay custom duty on enhance value under protest.
We request you to clear our consignments at the earliest to save us
financial losses of detention and demurrage.
Yours truly,
For Manavi Exim Pvt Ltd
Auth. Signatory
xxxx xxxx xxxx
Signature Not Verified
Digitally Signed
CUSAA 26/2022 & connected matters Page 16 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
Date: 15.02.2019
To,
The Assistant Commissioner of Customs
lCD Palwal,
Village Janouli-Baghola,
Haryana-121102.
Subject: Customs Clearance of goods imported vide 2 Bill of
EntryDear Sir,
We would like to inform you that we have filed the following bills of
entry for customs clearance, but the same has not been yet assessed.
S.# Bill of Entry No. & Date Item
1. 2054909 dated 14.02.2019 Lot of Non textured Polyester
PA Coated Fabric.
2. 2054913 dated 14.02.2019 Lot of Non textured Polyester
PA Coated Fabric.
The containers are incurring detention and demurrage on daily basis.
In this regard we would like to request you if your goodself is going
to enhance the value of goods, we have no objection for that we are
ready to pay custom duty on enhance value under protest.
We request you to clear our consignments at the earliest to save us
financial losses of detention and demurrage.
Yours truly,
For Manavi Exim Pvt Ltd
Auth. Signatory
xxxx xxxx xxxx
Date: 16.02.2019
To,
The Assistant Commissioner of Customs
lCD Palwal,
Village Janouli-Baghola,
Haryana-121102.
Subject: Customs Clearance of goods imported vide 1 Bill of
EntryDear Sir,
Signature Not Verified
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CUSAA 26/2022 & connected matters Page 17 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
We would like to inform you that we have filed the following bills of
entry for customs clearance, but the same has not been yet assessed.
S.# Bill of Entry No. & Date Item
1. 2065083 dated 15.02.2019 Lot of Non textured Polyester
PA Coated Fabric.
The containers are incurring detention and demurrage on daily basis.
In this regard we would like to request you if your goodself is going
to enhance the value of goods, we have no objection for that we are
ready to pay custom duty on enhance value under protest.
We request you to clear our consignments at the earliest to save us
financial losses of detention and demurrage.
Yours truly,
For Manavi Exim Pvt Ltd
Auth. Signatory‖
8. The aforesaid request as embodied in those letters was reiterated
with respect to the other lot which had been imported by the appellant
as would be evident from the contents of those communications which
were addressed to the respondents as follows:
―Date: 18.02.2019
To
The Assistant Commissioner of Customs
lCD Palwal,
Village Janouli-Baghola,
Haryana-121102.
Subject: Customs Clearance of goods imported vide 5 Bill of
EntryDear Sir,
With reference to our letter dated 13.02.2019 for each Bill of Entry’s.
We would like to inform you that we have filed the following bills of
entry for customs clearance, but the same has not been yet assessed.
S.# Bill of Entry No. & Date Item
1. 9990350 dated 08.02.2019 Lot of Polyester Knitted Fabric.
2. 9990356 dated 08.02.2019 Lot of Polyester Knitted Fabric.
3. 9990292 dated 08.02.2019 Lot of Polyester Knitted Fabric.
4. 9990360 dated 08.02.2019 Lot of Polyester Knitted Fabric.
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By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
5. 9990355 dated 08.02.2019 Lot of Polyester Knitted Fabric.
The containers are incurring detention and demurrage on daily basis.
In this regard we would like to request you if your goodself is going
to enhance the value of goods, we have no objection for that we are
ready to pay custom duty on enhance value under protest. If the
assessment of goods are going to take time then we request you to
clear our goods provisionally we are ready to submit PD Bond and
Bank Guarantee for 30% of the differential customs duty.
We request you to clear our consignments at the earliest to save us
financial losses of detention and demurrage.
Yours truly,
For Manavi Exim Pvt Ltd
Auth. Signatory
xxxx xxxx xxxx
Date: 20.02.2019
To
The Assistant Commissioner of Customs
lCD Palwal,
Village Janouli-Baghola,
Haryana-121102.
Subject: Customs Clearance of goods imported vide 5 Bill of
EntryDear Sir,
With reference to our letter dated 15-16.02.2019 for each Bill of
Entry’s. We would like to inform you that we have filed the
following bills of entry for customs clearance, but the same has not
been yet assessed.
S.# Bill of Entry No. & Date Item
1. 2065083 dated 15.02.2019 Lot of Non Textured Polyester
Fabric.
2. 2054913 dated 14.02.2019 Lot of Non Textured Polyester
Fabric.
3. 2054909 dated 14.02.2019 Lot of Non Textured Polyester
Fabric.
The containers are incurring detention and demurrage on daily basis.
In this regard we would like to request you if your goodself is going
to enhance the value of goods, we have no objection for that we are
ready to pay custom duty on enhance value under protest. If the
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By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
assessment of goods are going to take time then we request you to
clear our goods provisionally we are ready to submit PD Bond and
Bank Guarantee for 30% of the differential customs duty.
We request you to clear our consignments at the earliest to save us
financial losses of detention and demurrage.
Yours truly,
For Manavi Exim Pvt Ltd
Auth. Signatory‖
9. The requests as made in the aforementioned communications was
then again addressed in a letter dated 26 February 2019 and in terms of
which the appellant took the following stand:
―Date: 20.02.2019
To
The Assistant Commissioner of Customs
lCD Palwal,
Village Janouli-Baghola,
Haryana-121102.
Sir,
Subject:- Acceptance of enhancement of value of goods
covered under Bills of Entry No.9990355 dated 08.02.2019
Reg.
Please refer to your query on EDI System in respect of value
enhancement of the goods i.e. ‘Lot of Polyester Knitted Fabric’
covered under Bills of entry No.9990355 dated 08.02.2019.
In this regard, it is submitted that we have gone through the
details narrated by you including its grounds of rejection of declared
value under the provisions of Rule 12 of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 read with
Section 14 of the Customs Act, 1962.
We have also gone through and understood the details of
contemporaneous imports of similar/identical goods and we accept
that the value declared by us is significantly lower than the value at
which identical/similar goods imported at or about the same time in
comparable quantities in comparable commercial transactions were
assessed at other ports of the country.
We fully agree that the value of goods declared by us is liable to
be rejected by Customs Authorities under the provisions of Rule 12
of the Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962.
Thereafter, the value of the goods imported by us under the said Bill
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Signing Date:27.11.2024
18:20:25
of Entry is liable to be re-determined from the declared value US$
1.03 per kg. to US$1.94 per kg. on the basis of data of
contemporaneous import of similar/identical goods in terms of Rule
9 of the Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962
and the duty payable is liable to be enhanced accordingly under
Section 17 (5) of the Customs Act, 1962.
Accordingly, as we are in agreement with the proposed
enhancement of value/duty, we do not want any show cause notice
or speaking order in the matter, as we have to fulfil the commitments
to our customers therefore, You are requested to redetermine the
value and re-assess the duty in accordance with the value/duty as
proposed so that we can clear the goods asap to save us from the
financial burden of detention and demurrages.
Yours Sincerely
For Manavi Exim Pvt. Ltd.
Authorised Signatory‖
10. After having obtained clearance on payment of additional
customs duty on the enhanced value as determined, the appellant
proceeded to file appeals contemplated by Section 129A of the Act.
Those appeals when taken up for consideration by the first appellate
authority came to be allowed with that authority observing that the
challenge was liable to be answered in favour of the appellants in light
of its decision in C.C., Noida vs. VSM Impex Pvt. Ltd.5 and where
the CESTAT had taken the view that a statutory obligation stands cast
upon the adjudicating authority to pass a speaking order if it were to
choose to reassess a BoE. The CESTAT in VSM Impex also
distinguished the decisions rendered by it in M/s Advanced Scan
Support Technologies vs. C.C., Jodhpur6 and M/s Vikas Spinners
vs. C.C., Lucknow7 for reasons which are recorded in paragraph 10 of
the order of the first appellate authority in CUSAA 126/2022, and
5
Order No. 70976/2018 dated 22 May 2018
6
2015 SCC OnLine CESTAT 2046
7
2000 SCC OnLine CEGAT 1940
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By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
which is reproduced hereinbelow:
―10. Having considered the rival contentions and after perusal of the
records, we find that the issue here is no longer res-integra. Under
similar facts and circumstances on import of similar goods by the
M/s VSM Impex Pvt. Ltd., this Tribunal referring to Section 17(5)
read with Section 17(4), concluded that the adjudicating authority is
required to pass a speaking order within fifteen days of the re-
assessment of the Bills of Entry. Section 17(5) does not make any
whisper that the assessee/ importer is required to make a request or
to seek an order under Section 17(5) of the Act. Further, this
Tribunal observed that the reliance placed by Revenue on the ruling
of Advanced Scan support Technologies vs, CC, Jodhpur- 2015
(326) ELT 185 (Tri. Delhi) and Vikas Spinners vs. CC, Lucknow
– 2001 (128) ELT 143 (Tri. Delhi), that in these decisions, there is
no issue of passing an order under Section 17(5) of the Act, after
passing of Bills of entry within fifteen days, hence these decisions
are distinguishable and not applicable.‖
11. It was this decision which came to be subjected to challenge
before the CESTAT. The CESTAT in CUSAA 27/2022 as well as
CUSAA 126/2022 had taken an identical view. It has principally held
that once the importer concedes to the reassessment undertaken by the
proper officer in terms of Section 17(4) and gives up its right to
question the same, the authority would be justified in finalizing the
assessment based on the opinion so formed and that it would not be
open for the importer thereafter to resile from the concession so made.
This becomes evident from a reading of paragraph 23 of the order
impugned in CUSAA 27/2022 which is extracted hereinbelow:
―23. In the present case, as noticed above, the proper officer doubted
the truth or accuracy of the value declared by the importer for the
reason that contemporaneous data had a significantly higher value. It
was open to the importers to require the proper officer to intimate the
grounds in writing for doubting the truth or accuracy of the value
declared by them and seek a reasonable opportunity of being heard,
but they did not do so. On the other hand, the importers submitted in
writing that though they had declared the value of the imported
goods at 1.20 USD per kg., but on being shown contemporaneous
data, they have agreed that the value of the goods should be
enhanced to 1.80 USD per kg for Hanuman Prasad and to 1.94 USD
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By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
per kg. for Niraj Silk. The importers also specifically stated that they
did not want to avail of the right conferred on them under section
124 of the Customs Act and, therefore, they did not want any show
cause notice to be issued to them or personal hearing to be provided
to them. The importers also specifically stated that they did not want
a speaking order to be passed on the Bills of Entry. It needs to be
noted that section 124 of the Customs Act provides for issuance of a
show cause notice and personal hearing, and section 17(5) of the
Customs Act requires a speaking order to be passed on the Bills of
Entry, except in a case where the importer/exporter confirms the
acceptance in writing.‖
12. The CESTAT has proceeded to also negate the contention of the
appellants addressed in light of the provisions made in the Customs
Valuation (Determination or Value of Imported Goods) Rules,
20078. It has in this respect held as follows:
―30. The very fact that the importers had agreed for enhancement of
the declared value in the letters submitted by them to the assessing
authority, itself implies that the importers had not accepted the value
declared by them in the Bills of Entry. The value declared in the Bills
of Entry, therefore, automatically stood rejected. Further, once the
importers had accepted the enhanced value, it was really not
necessary for the assessing authority to undertake the exercise of
determining the value of the declared goods under the provisions of
rules 4 to 9 of the Valuation Rules. This is for the reason that it is
only when the value of the imported goods cannot be determined
under rule 3(1) for the reason that the declared value has been
rejected under sub rule 2, that the value of the imported goods is
required to be determined by proceeding sequentially through rule 4
to 9. As noticed above, the importers had accepted the enhanced
value and there was, therefore, no necessity for the assessing officer
to determine the value in the manner provided for in rules 4 to 9 of
the Valuation Rules sequentially.‖
13. The CESTAT has essentially followed its decisions rendered in
Advanced Scan Support and Vikas Spinners as would be evident from a
reading of paragraphs 31 and 32 of the judgment impugned before us:
―31. In this connection, it would be useful to refer to a decision of
this Tribunal in Advanced Scan Support Technologies vs
Commissioner of Customs, Jodhpur, wherein the Tribunal, after8
2007 Rules
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Signing Date:27.11.2024
18:20:25
making reference to the decisions of the Tribunal in Vikas Spinners
vs Commissioner of Customs, Lucknow and Guardian Plasticote
Ltd. v. CC (Port), Kolkotta, held that as the Appellant therein had
expressly given consent to the value proposed by the Revenue and
stated that it did not want any show cause notice or personal hearing,
it was not necessary for the Revenue to establish the valuation any
further as the consented value became the declared transaction value
requiring no further investigation or justification. Paragraph 5 of the
decision is reproduced below:
“5. We have considered the contentions of both sides. We
find that whatever may be the reasons, the appellant
expressly gave its consent to the value proposed by
Revenue and expressly stated that it did not want any Show
Cause Notice or personal hearing. Even the duty was paid
without protest. By consenting to enhancement of value and
thereby voluntarily foregoing the need for a Show Cause
Notice, the appellant made it unnecessary for Revenue to
establish the valuation any further as the consented value in
effect becomes the declared transaction value requiring no
further investigation or justification. To allow the appellant
to contest the consented value now is to put Revenue in an
impossible situation as the goods are no longer available for
inspection and Revenue rightly did not proceed to further
collect and compile all the evidences/basis into a Show
Cause Notice as doing so, in spite of the appellant having
consented to the enhancement of value and requested for no
Show Cause Notice, could/would have invited allegation of
harassment and delay in clearance of goods. When Show
Cause Notice is expressly foregone and the valuation is
consented, the violation of principles of natural justice
cannot be alleged. In the present case, while value can be
challenged but such a challenge would be of no avail as
with the goods not being available and valuation earlier
having been consented, the onus will be on the appellant to
establish that the valuation as per his consent suffered from
fatal infirmity and such onus has not been discharged.
Further, valuation of such goods requires their physical
inspection and so reassessment of value in the absence of
goods will not be possible. The case of Eicher Tractors v.
Union of India (supra) cited by the appellant is not relevant
here as in that case there was no evidence that the assessee
had consented to enhancement of value.”
[emphasis supplied]
32. In Vikas Spinners, the Tribunal dealing with a similar situation,
observed as under :
“7. In our view in the present appeal, the question of
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Signing Date:27.11.2024
18:20:25
loading of the value of the goods cannot at all be legally
agitated by the appellants. Admittedly, the price of the
imported goods declared by them was US $ 0.40 per Kg.
but the same was not accepted and loaded to US $ 0.50 per
Kg. This loading in the value was done in consultation with
Shri Gautam Sinha, the Representative and Special Attorney
of the appellants who even signed an affirmation accepting
the loaded value of the goods on the back of the Bill of
Entry dated 7-5-1999. After loading of the value, the
appellants produced the special import licence and paid the
duty on the goods accordingly of Rs. 4,22,008/- on 19-5-
1990. Having once accepted the loaded value of the goods
and paid duty accordingly thereon without any protest or
objection they are legally estopped from taking somersault
and to deny the correctness of the same. There is nothing on
record to suggest that the loaded value was accepted by
them only for the purpose of clearance of the goods and that
they reserved their right to challenge the same subsequently.
They settled their duty liability once for all and paid the
duty amount on the loaded value of the goods. The ratio of
the law laid down by the Apex Court in Sounds N. Images,
(supra) is not at all attracted to the case of the appellants.
The benefit of this ratio could be taken by them only if they
had contested the loaded value at the time when it was done,
but not now after having voluntarily accepted the
correctness of loaded value of the goods as determined in
the presence of their Representative/Special Attorney and
paid the duty thereon accordingly.”
14. The CESTAT has ultimately proceeded to record the following
conclusions:
―35. The following position emerges from the aforesaid decisions of
the Tribunal:
(i) When an importer consents to the enhancement of value, it
becomes unnecessary for the revenue to establish the valuation as the
consented value, in effect, becomes the declared transaction value
requiring no further investigation;
(ii) When an importer accepts the loaded value of the goods without
any protest or objection, the importer cannot be permitted to deny its
correctness; and
(iii) The burden of the Department to establish the declared value to
be in correct is discharged if the enhanced value is voluntarily
accepted.‖Signature Not Verified
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CUSAA 26/2022 & connected matters Page 25 of 137
By:KAMLESH KUMAR
Signing Date:27.11.2024
18:20:25
15. It appears that in the course of the prosecution of those appeals,
the decisions of the Supreme Court in Eicher Tractors Ltd. vs.
Commr. of Customs9 as well as Century Metal Recycling (P) Ltd.
vs. Union of India10 were also cited for the consideration of the
CESTAT. However, both those decisions have been distinguished with
the CESTAT observing as follows:
―45. The Supreme Court observed in Eicher Tractors Ltd., which
decision has also been relied upon by the learned counsel for the
Respondent, that it is only when the transaction value under rule 4 of
the Valuation Rules is rejected that the transaction value is required
to be determined by proceeding sequentially through rules 5 to 8.
The decision of the Supreme Court in Century Metal Recycling
also holds that if the declared transaction value is rejected, then it has
to be determined in accordance with the procedure prescribed in
rules 4 to 9. These decisions of the Supreme Court, for the reasons
stated above, do not help the respondent.‖
16. Yet another contention which appears to have been urged before
the CESTAT was whether the NIDB data could have constituted a valid
basis for the rejection of the transaction values as disclosed in the BoE.
This question came to be answered in the affirmative by the CESTAT as
would be evident from the following:
―46. Learned counsel for the respondent has also emphasized that
NIDB data cannot be the sole basis to reject the transaction value
without any cogent reasons. As seen above, the importers had in
writing accepted the transaction value and it is perhaps for this
reason that they did not require any show cause notice to be issued to
them or a personal hearing to be granted to them. The respondent is,
therefore, not justified in asserting that the transaction value has been
determined on the basis NIDB data. It was their acceptance of the
value that formed the basis for determination of the value. The
decisions relied upon by the respondent to support the contention
sought to be raised are, therefore, of no benefit to them.
47. The general observations made the Commissioner (Appeals) in
the impugned order that the value declared in the Bills of Entry were
being enhanced uniformly by the Department for a considerable
9
(2001) 1 SCC 315
10
(2019) 6 SCC 655
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period of time was uncalled for. The Commissioner (Appeals)
completely failed to advert to the crucial aspect that the importers
had themselves accepted the enhanced value. The Commissioner
(Appeals) in fact, proceeded to examine the matter as if the assessing
officer had enhanced the declared value on the basis of other factors
and not on the acceptance by the importers. This casual observation
is not based on the factual position that emerges from the records of
the case.‖
17. The appeals in the case of Manavi Exim, the appellant in
CUSAA 126/2022, also came to be allowed on identical reasoning. This
is evident from the following observations appearing in the order of the
CESTAT:
―13. The Commissioner (Appeals), despite a categorical statement
made by the importers that they did not desire a speaking order to be
passed, observed “an obligation was cast on the assessing authority
to pass a speaking order disclosing the grounds for rejecting the
declared value and only then the assessing officer could have
enhanced the value .” This finding of the Commissioner (Appeals) is
perverse as it is clearly contrary to the specific statement made by
the importers in the letters submitted by them to the assessing officer.
What has also to be kept in mind is that section 17(5) of the Customs
Act permits the importers to waive this right.
14. It is seen from a perusal of section 17(4) of the Customs Act that
the proper officer can re-assess the duty leviable, if it is found on
verification, examination or testing of the goods or otherwise that the
self-assessment was not done correctly. Sub-section (5) of section 17
provides that where any re-assessment done under sub-section (4) is
contrary to the self-assessment done by the importer, the proper
officer shall pass a speaking order on the re-assessment, except in a
case where the importer confirms his acceptance of the said
reassessment in writing.
15. In the present case, as noticed above, the proper officer doubted
the truth or accuracy of the value declared by the importers for the
reason that contemporaneous data had a significantly higher value. It
was open to the importers to require the proper officer to intimate the
grounds in writing for doubting the truth or accuracy of the value
declared by them and seek a reasonable opportunity of being heard,
but they did not do so. On the other hand, the importers submitted in
writing that though they had declared the value of the imported
goods at a particular value, but on being shown contemporaneous
data, they agreed that the value of the goods should be enhanced.
The importers also specifically stated that they did not want to avail
of the right conferred on them under section 124 of the Customs Act
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Signing Date:27.11.2024
18:20:25
and, therefore, they did not want any show cause notice to be issued
to them or personal hearing to be provided to them. The importers
also specifically stated that they did not want a speaking order to be
passed on the Bills of Entry. It needs to be noted that section 124 of
the Customs Act provides for issuance of a show cause notice and
personal hearing, and section 17(5) of the Customs Act requires a
speaking order to be passed on the Bills of Entry, except in a case
where the importers/exporters confirm the acceptance in writing.‖
It is the correctness of the aforesaid view expressed by the CESTAT
which is questioned before us in this batch of appeals.
18. On 02 August 2023, we had briefly taken note of the rival
submissions in order to identify the principal questions which could be
said to arise. That order is extracted hereinbelow:
―1. This batch of appeals question the correctness of the view taken
and expressed by the Customs Excise and Service Tax Appellate
Tribunal [CESTAT] in the orders impugned and revolve upon the
construction to be accorded to the concession which may be
submitted by an importer as contemplated under Section 17(5) of the
Customs Act, 1962 [the Act].
2. Section 17 of the Act reads as follows: –
“17. Assessment of duty
(1) An importer entering any imported goods under section
46, or an exporter entering any export goods under section
50, shall, save as otherwise provided in section 85, self-
assess the duty, if any, leviable on such goods.
(2) The proper officer may verify the entries made under
section 46 or section 50 and the self-assessment of goods
referred to in sub section (1) and for this purpose, examine
or test any imported goods or export goods or such part
thereof as may be necessary:
PROVIDED that the selection of cases lor verification shall
primarily be on the basis of risk evaluation through
appropriate selection criteria.
(3) For the purposes of verification under sub-section (2),
the proper officer may require the importer, exporter or any
other person to produce any document or information,
whereby the duty leviable on the imported goods or export
goods, as the case may be, can be ascertained and
thereupon, the importer, exporter or such other person shall
produce such document or furnish such information.
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(4) Where it is found on verification, examination or testing
of the goods or otherwise that the self-assessment is not
done correctly, the proper officer may, without prejudice to
any other action which may be taken under this Act, re-
assess the duty leviable on such goods.
(5) Where any re-assessment done under sub-section (4) is
contrary to the self-assessment done by the importer or
exporter and in cases other than those where the importer or
exporter, as the case may be, confirms his acceptance of the
said re-assessment in writing, the proper officer shall pass a
speaking order on the re-assessment, within fifteen days
from the date of re-assessment of the bill of entry or the
shipping bill, as the case may be.‖
3. As would be manifest from a reading of the aforesaid provision,
importers initially follow a process of self-assessment and
declaration of the transaction value. In terms of sub-section (2) the
proper officer is entitled to examine the veracity of the self-
declaration that is made. To assist it in that exercise, Section 17(3)
empowers the proper officer to call upon the importer or the
exporter, as the ease may be, to produce further document or
information whereby the correct duty leviable on the imported or
exported goods could be ascertained.
4. Section 17(4) pertains to a situation where the proper officer on
verification, examination/testing of goods or otherwise harbors
doubts with respect to the correctness of the declared transaction
value and undertakes an exercise to reassess the duty leviable on
such goods.
5. The scope of Section 17(4) and the exercise which is liable to be
undertaken by the proper officer must also be appreciated in the
backdrop of Rule 12 of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007 which reads as follows:-
“RULE 12. Rejection of declared value. –
1) When the proper officer has reason to doubt the truth or
accuracy of the value declared in relation to any imported
goods, he may ask the importer of such goods to furnish
further information including documents or other evidence
and if, after receiving such further information, or in the
absence of a response of such importer, the proper officer
still has reasonable doubt about the truth or accuracy of the
value so declared, it shall be deemed that the transaction
value of such imported goods cannot be determined under
the provisions of sub-rule (1) of rule 3.
(2) At the request of an importer, the proper officer, shall
intimate the importer in writing the grounds for doubting
the truth or accuracy of the value declared in relation to
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goods imported by such importer and provide a reasonable
opportunity of being heard, before taking a final decision
under sub-rule (1).
Explanation.-(1) For the removal of doubts, it is hereby
declared that:-
(i) This rule by itself does not provide a method for
determination of value, it provides a mechanism and
procedure for rejection of declared value in cases where
there is reasonable doubt that the declared value does not
represent the transaction value; where the declared value is
rejected, the value shall be determined by proceeding
sequentially in accordance with rules 4 to 9.
(ii) The declared value shall be accepted where the proper
officer is satisfied about the truth and accuracy of the
declared value after the said enquiry in consultation with the
importers.
(iii) The proper officer shall have the powers to raise
doubts on the truth or accuracy of the declared value based
on certain reasons which may include –
(a) the significantly higher value at which identical or
similar goods imported at or about the same time in
comparable quantities in a comparable commercial
transaction were assessed;
(b) the sale involves an abnormal discount or abnormal
reduction from the ordinary competitive price;
(c) the sale involves special discounts limited to exclusive
agents;
(d) the misdeclaration of goods in parameters such as
description, quality, quantity, country of origin, year of
manufacture or production;
(e) the non declaration of parameters such as brand, grade,
specifications that have relevance to value;
(f) the fraudulent or manipulated documents.‖
6. The scope and ambit of Rule 12 has been lucidly explained by the
Supreme Court In Century Metal Recycling Private Limited &
Anr. vs. Union of India & Ors. as follows: –
“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
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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.
15. 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).
16. The requirements of Rule 12, therefore, can be
summarised as under:
16.1. 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.
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16.2. Proper officer must ask the importer of such goods
further information which may include documents or
evidence.
16.3. 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.
16.4. When the proper officer does not have reasonable
doubt, the goods are cleared on the declared value.
16.5. 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.
16.6. 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 sub-clauses (a) to (f)
in clause (iii) of the Explanation.
16.7. 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.
16.8. 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.―
7. The instant batch of cases however pertain to eases where the
importer had submitted its consent contemplated in terms of Section
17(5). The Tribunal has taken the view that once the importer
concedes to a re-assessment being undertaken by the Proper Officer
in terms of sub-section (5), it loses the right to question the result of
that assessment either by way of an appeal or to even question the
quantification of additional duty that may be payable.
8. The appellants would contend that the concession which is spoken
of in sub-section (5) essentially appears to stand restricted to a
reassessment being undertaken by the proper officer and the
formation of opinion contemplated under Section 17(4) or Rule 12
not being questioned. However, that concession would not detract
from the right of the importer to question the correctness of the
assessment undertaken and which right otherwise stands protected
under different provisions of the Act. According to the appellants,
while the concession submitted in terms of Section 17(5) may
deprive the importer of the right to question whether there was
material which would constitute sufficient ground for the proper
officer to harbor a “reason to believe” and doubt the transaction
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value, the same would not take away the right of the importer to
question the final assessment itself.
9. We also bear in consideration the submission of the respondents
who contend that the scheme of sub-sections (4) and (5) of Section
17 clearly suggests that a reassessment has already been undertaken
and completed by the proper officer and which establishes the
incorrectness of the self-declaration being a precursor to the importer
submitting the concession. This flows from Section 17(5) which
commences with the phrase “Where any reassessment done….” and
proceeds to speak of the importer “confirming his acceptance of the
said re-assessment in writing”.
10. On a preliminary examination of the scheme of Section 17 we
are also of the view that while it may be open for an importer to
proceed in terms of Section 17(5), the same would not detract from
the obligation of the proper officer to have formed the requisite
belief to doubt the transaction value and record reasons in respect
thereof on the file before proceeding to invite the importer in terms
as contemplated under Section 17(5).
11. The right of the importer to reagitate or question the result of the
re-assessment would have to be examined in the aforesaid light. 12.
In order to enable Mr. Singla, learned counsel to address submissions
in the aforesaid light, let the matter be called again on 18.09.2023.‖
II. THE POWER OF REASSESSMENT: A BRIEF OVERVIEW
19. Before we proceed to record the submissions that were advanced
by and on behalf of respective sides, it would be appropriate to take
note of and extract the relevant statutory provisions on the basis of
which the question as posited would be liable to be answered. The
subject of valuation of goods is firstly dealt with in Section 14 of the
Act. The said provision reads thus:
―14. Valuation of goods.–
(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or
any other law for the time being in force, the value of the imported
goods and export goods shall be the transaction value of such goods,
that is to say, the price actually paid or payable for the goods when
sold for export to India for delivery at the time and place of
importation, or as the case may be, for export from India for delivery
at the time and place of exportation, where the buyer and seller of
the goods are not related and price is the sole consideration for the
sale subject to such other conditions as may be specified in the rules
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made in this behalf:
PROVIDED that such transaction value in the case of
imported goods shall include, in addition to the price as aforesaid,
any amount paid or payable for costs and services, including
commissions and brokerage, engineering, design work, royalties and
licence fees, costs of transportation to the place of importation,
insurance, loading, unloading and handling charges to the extent and
in the manner specified in the rules made in this behalf:
PROVIDED further that the rules made in this behalf may
provide for,–
(i) the circumstances in which the buyer and the seller shall be
deemed to be related;
(ii) the manner of determination of value in respect of goods when
there is no sale, or the buyer and the seller are related, or price is
not the sole consideration for the sale or in any other case;
(iii) the manner of acceptance or rejection of value declared by
the importer or exporter, as the case may be, where the proper
officer has reason to doubt the truth or accuracy of such value,
and determination of value for the purposes of this section:
[(iv) the additional obligations of the importer in respect of any
class of imported goods and the checks to be exercised, including
the circumstances and manner of exercising thereof, as the Board
may specify, where, the Board has reason to believe that the value
of such goods may not be declared truthfully or accurately, having
regard to the trend of declared value of such goods or any other
relevant criteria:]
PROVIDED also that such price shall be calculated with
reference to the rate of exchange as in force on the date on which a
bill of entry is presented under Section 46, or a shipping bill of
export, as the case may be, is presented under Section 50.
(2) Notwithstanding anything contained in sub-section (1), if the
Board is satisfied that it is necessary or expedient so to do, it may, by
notification in the Official Gazette, fix tariff values for any class of
imported goods or export goods, having regard to the trend of value
of such or like goods, and where any such tariff values are fixed, the
duty shall be chargeable with reference to such tariff value.
Explanation.–For the purposes of this section–
(a) ―rate of exchange‖ means the rate of exchange–
(i) determined by the Board, or
(ii) ascertained in such manner as the Board may direct, for the
conversion of Indian currency into foreign currency or foreign
currency into Indian currency;
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(b) ―foreign currency‖ and ―Indian currency‖ have the meanings
respectively assigned to them in clause (m) and clause (q) of
Section 2 of the Foreign Exchange Management Act, 1999 (42 of
1999).]‖
20. As is evident from a reading of Section 14, the value of imported
and exported goods is recognized to be the transaction value and which
expression is explained to mean the price actually paid or payable for
those goods when sold for export to India or for export from India for
delivery at the time and place of exportation. The Proviso to Section
14(1) then stipulates that the transaction value would include various
additional components such as amounts paid or payable for costs and
services, design work, royalties, license fees and others to be
determined in the manner specified by statutory rules which may be
made in that regard. The Second Proviso thereafter proceeds to identify
some of the aspects which could be regulated by way of those rules.
21. Sections 15 and 16 of the Act deal with the date with reference to
which the rate of duty and tariff evaluation of imported or exported
goods is to be determined. Those provisions are extracted hereunder:
―15. Date for determination of rate of duty and tariff valuation of
imported goods.–
(1) [The rate of duty [* * *] and tariff valuation, if any, applicable to
any imported goods, shall be the rate and valuation in force,–
(a) in the case of goods entered for home consumption under Section
46, on the date on which a bill of entry in respect of such goods is
presented under that section;
(b) in the case of goods cleared from a warehouse under Section 68,
on the date on which [a bill of entry for home consumption in respect
of such goods is presented under that section];
(c) in the case of any other goods, on the date of payment of duty:
[PROVIDED that if a bill of entry has been presented before the date
of entry inwards of the vessel or the arrival of the aircraft [or the
vehicle] by which the goods are imported, the bill of entry shall be
deemed to have been presented on the date of such entry inwards or
the arrival, as the case may be.]
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(2) The provisions of this section shall not apply to baggage and
goods imported by post.
(3) [* * *]
16. Date for determination of rate of duty and tariff valuation of
export goods.–
[(1) The rate of duty and tariff valuation, if any, applicable to any
export goods, shall be the rate and valuation in force,–
(a) in the case of goods entered for export under Section 50, on
the date on which the proper officer makes an order permitting
clearance and loading of the goods for exportation under Section
51.
(b) in the case of any other goods, on the date of payment of
duty.]
(2) The provisions of this section shall not apply to baggage and
goods exported by post.‖
22. The principal provision with which we are concerned is Section
17 and which relates to ‗assessment of duty’. Section 17 reads as
follows:
―17. Assessment of duty.–
(1) An importer entering any imported goods under Section 46, or an
exporter entering any export goods under Section 50, shall, save as
otherwise provided in Section 85, self-assess the duty, if any,
leviable on such goods.
(2) The proper officer may verify [the entries made under Section 46
or Section 50 and the self-assessment of goods referred to in sub-
section (1)] and for this purpose, examine or test any imported goods
or export goods or such part thereof as may be necessary.
[PROVIDED that the selection of cases for verification shall
primarily be on the basis of risk evaluation through appropriate
selection criteria.]
[(3) For [the purposes of verification] under sub-section (2), the
proper officer may require the importer, exporter or any other person
to produce any document or information, whereby the duty leviable
on the imported goods or export goods, as the case may be, can be
ascertained and thereupon, the importer, exporter or such other
person shall produce such document or furnish such information.]
(4) Where it is found on verification, examination or testing of the
goods or otherwise that the self-assessment is not done correctly, the
proper officer may, without prejudice to any other action which may
be taken under this Act, re-assess the duty leviable on such goods.
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(5) Where any re-assessment done under sub-section (4) is contrary
to the self-assessment done by the importer or exporter [* * *] and in
cases other than those where the importer or exporter, as the case
may be, confirms his acceptance of the said re-assessment in writing,
the proper officer shall pass a speaking order on the re-assessment,
within fifteen days from the date of re-assessment of the bill of entry
or the shipping bill, as the case may be.
(6) [* * *]
Explanation.–For the removal of doubts, it is hereby declared that
in cases where an importer has entered any imported goods under
Section 46 or an exporter has entered any export goods under
Section 50 before the date on which the Finance Bill, 2011 receives
the assent of the President, such imported goods or export goods
shall continue to be governed by the provisions of Section 17 as it
stood immediately before the date on which such assent is
received.]‖
23. By virtue of Section 18 of the Act, an importer or exporter is
statutorily enabled to seek clearance of goods upon a provisional
assessment of duty. That provision stands framed in the following
terms:
―18. Provisional assessment of duty.–
[(1) Notwithstanding anything contained in this Act but without
prejudice to the provisions of Section 46 [and Section 50],–
(a) where the importer or exporter is unable to make self-
assessment under sub-section (1) of Section 17 and makes a
request in writing to the proper officer for assessment; or
(b) where the proper officer deems it necessary to subject any
imported goods or export goods to any chemical or other test; or
(c) where the importer or exporter has produced all the necessary
documents and furnished full information but the proper officer
deems it necessary to make further enquiry; or
(d) where necessary documents have not been produced or
information has not been furnished and the proper officer deems it
necessary to make further enquiry, the proper officer may direct
that the duty leviable on such goods be assessed provisionally if
the importer or the exporter, as the case may be, furnishes such
security as the proper officer deems fit for the payment of the
deficiency, if any, between the duty as may be finally assessed or
re-assessed as the case may be, and the duty provisionally
assessed.]
[(1-A) Where, pursuant to the provisional assessment under sub-
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section (1), if any document or information is required by the proper
officer for final assessment, the importer or exporter, as the case may
be, shall submit such document or information within such time, and
the proper officer shall finalise the provisional assessment within
such time and in such manner, as may be prescribed.]
(2) When the duty leviable on such goods is assessed finally [or re-
assessed by the proper officer] in accordance with the provisions of
this Act, then–
(a) in the case of goods cleared for home consumption or
exportation, the amount paid shall be adjusted against the
duty [finally assessed or re-assessed, as the case may be] and if
the amount so paid falls short of, or is in excess of, [the
duty [finally assessed or re-assessed, as the case may be]], the
importer or the exporter of the goods shall pay the deficiency or
be entitled to a refund, as the case may be;
(b) in the case of warehoused goods, the proper officer may,
where the duty [finally assessed or re-assessed, as the case may
be] is in the excess of the duty provisionally assessed, require the
importer to execute a bond, binding himself in a sum equal to
twice the amount of the excess duty.
[(3) The importer or exporter shall be liable to pay interest, on any
amount payable to the Central Government, consequent to the final
assessment order [or re-assessment order] under sub-section (2), at
the rate fixed by the Central Government under Section [28-AA]
from the first day of the month in which the duty is provisionally
assessed till the date of payment thereof.
(4) Subject to sub-section (5), if any refundable amount referred to in
clause (a) of sub-section (2) is not refunded under that sub-section
within three months from the date of assessment of duty finally [or-
re-assessment of duty, as the case may be], there shall be paid an
interest on such unrefunded amount at such rate fixed by the Central
Government under Section 27-A till the date of refund of such
amount.
(5) The amount of duty refundable under sub-section (2) and the
interest under sub-section (4), if any, shall, instead of being credited
to the Fund, be paid to the importer or the exporter, as the case may
be, if such amount is relatable to–
(a) the duty and interest, if any, paid on such duty paid by the
importer, or the exporter, as the case may be, if he had not passed
on the incidence of such duty and interest, if any, paid on such
duty to any other person;
(b) the duty and interest, if any, paid on such duty on imports
made by an individual for his personal use;
(c) the duty and interest, if any, paid on such duty borne by the
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buyer, if he had not passed on the incidence of such duty and
interest, if any, paid on such duty to any other person;
(d) the export duty as specified in Section 26;
(e) drawback of duty payable under Sections 74 and 75.]‖
24. The 2007 Rules have been framed in order to give effect to the
statutory mandate of Section 14. The words ‗computed value’,
‗deductive value’, ‗similar goods’ and ‗transaction value’ are defined by
Rule 2 as under:
―2. Definitions.–
(1) In these rules, unless the context otherwise requires,–
(a) ―computed value‖ means the value of imported goods determined
in accordance with Rule 8;
(b) ―deductive value‖ means the value determined in accordance
with Rule 7;
xxxx xxxx xxxx
(f) ―similar goods‖ means imported goods–
(i) which although not alike in all respects, have like
characteristics and like component materials which enable them
to perform the same functions and to be commercially
interchangeable with the goods being valued having regard to the
quality, reputation and the existence of trade mark;
(ii) produced in the country in which the goods being valued were
produced; and
(iii) produced by the same person who produced the goods being
valued, or where no such goods are available, goods produced by
a different person,
but shall not include imported goods where engineering,
development work, art work, design work, plan or sketch
undertaken in India were completed directly or indirectly by the
buyer on these imported goods free of charge or at a reduced cost
for use in connection with the production and sale for export of
these imported goods;
(g) ―transaction value‖ means the value referred to in sub-section (1)
of Section 14 of the Customs Act, 1962…‖
25. The procedure for the determination and identification of an
appropriate method of valuation is regulated by Rule 3 and which reads
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thus:
―3. Determination of the method of valuation.–
(1) Subject to Rule 12, the value of imported goods shall be the
transaction value adjusted in accordance with provisions of Rule 10;
(2) Value of imported goods under sub-rule (1) shall be accepted:
Provided that–
(a) there are no restrictions as to the disposition or use of the
goods by the buyer other than restrictions which–
(i) are imposed or required by law or by the public authorities
in India; or
(ii) limit the geographical area in which the goods may be
resold; or
(iii) do not substantially affect the value of the goods;
(b) the sale or price is not subject to some condition or
consideration for which a value cannot be determined in respect
of the goods being valued;
(c) no part of the proceeds of any subsequent resale, disposal or
use of the goods by the buyer will accrue directly or indirectly to
the seller, unless an appropriate adjustment can be made in
accordance with the provisions of Rule 10 of these rules, and
(d) the buyer and seller are not related, or where the buyer and
seller are related, that transaction value is acceptable for customs
purposes under the provisions of sub-rule (3) below.
(3)(a) Where the buyer and seller are related, the transaction value
shall be accepted provided that the examination of the
circumstances of the sale of the imported goods indicate that the
relationship did not influence the price.
(b) In a sale between related persons, the transaction value shall
be accepted, whenever the importer demonstrates that the
declared value of the goods being valued, closely approximates to
one of the following values ascertained at or about the same time.
(i) the transaction value of identical goods, or of similar goods,
in sales to unrelated buyers in India;
(ii) the deductive value for identical goods or similar goods;
(iii) the computed value for identical goods or similar goods:
PROVIDED that in applying the values used for
comparison, due account shall be taken of demonstrated
difference in commercial levels, quantity levels, adjustments in
accordance with the provisions of Rule 10 and cost incurred by
the seller in sales in which he and the buyer are not related.
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(c) Substitute values shall not be established under the provisions
of clause (b) of this sub-rule.
(4) If the value cannot be determined under the provisions of sub-
rule (1), the value shall be determined by proceeding sequentially
through Rules 4 to 9.‖
26. Rules 4 and 5 prescribe the procedure for the determination of
the transaction value of identical and similar goods. Those two rules
read as under:
―4. Transaction value of identical goods.–
(1)(a) Subject to the provisions of Rule 3, 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:
PROVIDED that such transaction value shall not be the value
of the goods provisionally assessed under Section 18 of the Customs
Act, 1962.
(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), 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 charges referred to in sub-rule (2) of Rule 10
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.
5. Transaction value of similar goods.–
(1) Subject to the provisions of Rule 3, the value of imported goods
shall be the transaction value of similar goods sold for export to
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India and imported at or about the same time as the goods being
valued:
PROVIDED that such transaction value shall not be the value
of the goods provisionally assessed under Section 18 of the Customs
Act, 1962.
(2) The provisions of clauses (b) and (c) of sub-rule (1), sub-rule (2)
and sub-rule (3), of Rule 4 shall, mutatis mutandis, also apply in
respect of similar goods.‖
27. In terms of Rule 6, if the value of imported goods is found to be
indeterminable in accordance with Rules 3, 4 and 5, the value is liable
to be determined in accordance with the provisions made in Rules 7 and
8. Those rules are extracted hereinbelow:
―6. Determination of value where value cannot be determined
under Rules 3, 4 and 5.–
If the value of imported goods cannot be determined under the
provisions of Rules 3, 4 and 5, the value shall be determined under
the provisions of Rule 7 or, when the value cannot be determined
under that rule, under Rule 8:
PROVIDED that at the request of the importer, and with the
approval of the proper officer, the order of application of Rules 7 and
8 shall be reversed.
7. Deductive value.–
(1) Subject to the provisions of Rule 3, if the goods being valued or
identical or similar imported goods are sold in India, in the condition
as imported at or about the time at which the declaration for
determination of value is presented, the value of imported goods
shall be based on the unit price at which the imported goods or
identical or similar imported goods are sold in the greatest aggregate
quantity to persons who are not related to the sellers in India, subject
to the following deductions:–
(i) either the commission usually paid or agreed to be paid or the
additions usually made for profits and general expenses in
connection with sales in India of imported goods of the same class
or kind;
(ii) the usual costs of transport and insurance and associated costs
incurred within India;
(iii) the customs duties and other taxes payable in India by reason
of importation or sale of the goods.
(2) If neither the imported goods nor identical nor similar imported
goods are sold at or about the same time of importation of the goods
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being valued, the value of imported goods shall, subject otherwise to
the provisions of sub-rule (1), be based on the unit price at which the
imported goods or identical or similar imported goods are sold in
India, at the earliest date after importation but before the expiry of
ninety days after such importation.
(3)(a) If neither the imported goods nor identical nor similar
imported goods are sold in India in the condition as imported,
then, the value shall be based on the unit price at which the
imported goods, after further processing, are sold in the greatest
aggregate quantity to persons who are not related to the seller in
India.
(b) In such determination, due allowance shall be made for the
value added by processing and the deductions provided for in
items (i) to (iii) of sub-rule (1).
8. Computed value.–
Subject to the provisions of Rule 3, the value of imported goods shall
be based on a computed value, which shall consist of the sum of:–
(a) the cost or value of materials and fabrication or other
processing employed in producing the imported goods;
(b) an amount for profit and general expenses equal to that usually
reflected in sales of goods of the same class or kind as the goods
being valued which are made by producers in the country of
exportation for export to India;
(c) the cost or value of all other expenses under sub-rule (2) of
Rule 10.‖
28. The residual method of valuation stands embodied in Rule 9 and
which reads as follows:
―9. Residual method.–
(1) Subject to the provisions of Rule 3, where the value of imported
goods cannot be determined under the provisions of any of the
preceding rules, the value shall be determined using reasonable
means consistent with the principles and general provisions of these
rules and on the basis of data available in India:
PROVIDED that the value so determined shall not exceed
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, when the seller or buyer has no interest
in the business of other and price is the sole consideration for the
sale or offer for sale.
(2) No value shall be determined under the provisions of this rule on
the basis of–
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(i) the selling price in India of the goods produced in India;
(ii) a system which provides for the acceptance for customs
purposes of the highest of the two alternative values;
(iii) the price of the goods on the domestic market of the country
of exportation;
(iv) the cost of production other than computed values which have
been determined for identical or similar goods in accordance with
the provisions of Rule 8;
(v) the price of the goods for the export to a country other than
India;
(vi) minimum customs values; or
(vii) arbitrary or fictitious values.‖
29. Rule 11 stipulates the declarations which an importer is liable to
make and reads thus:
―11. Declaration by the importer.–
(1) The importer or his agent shall furnish–
(a) a declaration disclosing full and accurate details relating to the
value of imported goods; and
(b) any other statement, information or document including an
invoice of the manufacture or producer of the imported goods
where the goods are imported from or through a person other than
the manufacturer or producer, as considered necessary by the
proper officer for determination of the value of imported goods
under these rules.
(2) Nothing contained in these rules shall be construed as restricting
or calling into question the right of the proper officer of customs to
satisfy himself as to the truth or accuracy of any statement,
information, document or declaration presented for valuation
purposes.
(3) The provisions of the Customs Act, 1962 (52 of 1962) relating to
confiscation, penalty and prosecution shall apply to cases where
wrong declaration, information, statement or documents are
furnished under these rules.‖
30. The power of the proper officer to reject ‗declared value’ and the
circumstances in which that power may be wielded is then elaborately
spelt out in Rule 12. The said provision is extracted hereinbelow:
―12. Rejection of declared value.–
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(1) When the proper officer has reason to doubt the truth or accuracy
of the value declared in relation to any imported goods, he may ask
the importer of such goods to furnish further information including
documents or other evidence and if, after receiving such further
information, or in the absence of a response of such importer, the
proper officer still has reasonable doubt about the truth or accuracy
of the value so declared, it shall be deemed that the transaction value
of such imported goods cannot be determined under the provisions
of sub-rule (1) of Rule 3.
(2) At the request of an importer, the proper officer, shall intimate the
importer in writing the grounds for doubting the truth or accuracy of
the value declared in relation to goods imported by such importer
and provide a reasonable opportunity of being heard, before taking a
final decision under sub-rule (1).
Explanation.–(1) For the removal of doubts, it is hereby declared
that:–
(i) This rules by itself does not provide a method for
determination of value, it provides a mechanism and procedure
for rejection of declared value in cases where there is reasonable
doubt that the declared value does not represent the transaction
value; where the declared value is rejected, the value shall be
determined by proceeding sequentially in accordance with Rules
4 to 9.
(ii) The declared value shall be accepted where the proper officer
is satisfied about the truth and accuracy of the declared value after
the said inquiry in consultation with the importers.
(iii) The proper officer shall have the powers to raise doubts on
the truth or accuracy of the declared value based on certain
reasons which may include–
(a) the significantly higher value at which identical or similar
goods imported at or about the same time in comparable
quantities in a comparable commercial transaction were assessed;
(b) the sale involves an abnormal discount or abnormal reduction
from the ordinary competitive price;
(c) the sale involves special discounts limited to exclusive agents;
(d) the misdeclaration of goods in parameters such as description,
quality, quantity, country of origin, year of manufacture or
production;
(e) the non-declaration of parameters such as brand, grade,
specifications that have relevance to value;
(f) the fraudulent or manipulated documents.‖
It is against the backdrop of the aforenoted statutory provisions that
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arguments were canvassed before us.
III. THE SUBMISSIONS ADDRESSED
31. Leading submissions on behalf of the appellants, Mr. Gulati,
learned senior counsel addressed the following submissions. It was at
the outset submitted that the view as expressed by the CESTAT is, ex
facie, unsustainable when tested on the basis of the salient principles
which came to be laid down by the Supreme Court in Century Metal
Recycling and the enunciation of the legal position which appears
therein. Mr. Gulati submitted that the facts as brought on our record in
CUSAA 126/2022 would establish beyond a measure of doubt that the
importer was compelled and constrained to submit concessions before
the proper officer in order to expedite clearance of the imported goods
and to avoid spiralling costs of warehousing and demurrage.
32. Mr. Gulati submitted that the appellant, Manavi Exim had
ultimately, and left with no option, stated that it would be ready and
willing to accept the enhanced value suggested by the proper officer
and pay additional customs duty on the basis thereof in order to seek
expedited clearance of goods. Those communications, according to Mr.
Gulati, evidence the importer having chosen to proceed along those
lines solely in light of the burgeoning detention and demurrage charges
which it was facing as a consequence of the consignment having been
illegally detained. Notwithstanding the above, Mr. Gulati submitted that
Manavi Exim had throughout maintained the position that it had paid
the customs duty under protest. According to learned senior counsel,
the communications which were addressed to the proper officer would
also establish that the importer had also expressed a desire for the
goods being released provisionally subject to appropriate security being
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provided.
33. All of the above, according to Mr. Gulati, is evidence of Manavi
Exim having been clearly coerced into accepting the enhanced
valuation and to pay the additional customs duty in order to expedite
the clearance of the imported goods. It was those constraints, according
to learned senior counsel, which weighed upon Manavi Exim to
ultimately give up its right to a speaking order being passed by the
proper officer and to submit a request for goods being reassessed, it
being permitted to deposit additional customs duty and thus avoid the
financial burden of warehousing and demurrage.
34. Mr. Gulati submitted that even if it were assumed that the
importer had conceded to the proper officer proceeding to re-determine
the transaction value, the same could have clearly not been read as
detracting from its right to question and impugn the assessment at a
later stage. According to Mr. Gulati, the concession, even if assumed to
have been made, could have neither deprived the importer of the right
to assail the reassessment at a later stage nor could it have operated as
estoppel or debarred it from pursuing a statutory remedy which the Act
itself conferred.
35. The harassment faced by importers as a result of declared value
being mechanically and invariably rejected, according to Mr. Gulati,
was an aspect which had fallen for adverse comment of the Supreme
Court itself in Century Metal Recycling. Mr. Gulati drew our attention
to the following paragraphs of that judgment and which, according to
him, lucidly enunciate the statutory position:
―8. This Court in Sanjivani Non-Ferrous Trading (P)
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378] , while interpreting the provisions of Section 14 and Rules 3, 4
and 12 of the 2007 Rules, had held as under : (SCC p. 383, para 10)
―10. The law, thus is clear. As per Sections 14(1) and 14(1-A), the
value of any goods chargeable to ad valorem duty is deemed to be
the price as referred to in that provision. Section 14(1) is a deeming
provision as it talks of ―deemed value‖ of such goods. Therefore,
normally, the assessing officer is supposed to act on the basis of
price which is actually paid and treat the same as assessable
value/transaction value of the goods. This, ordinarily, is the course of
action which needs to be followed by the assessing officer. This
principle of arriving at transaction value to be the assessable value
applies. This is also the effect of Rule 3(1) and Rule 4(1) of the
Customs Valuation Rules, namely, the adjudicating authority is
bound to accept price actually paid or payable for goods as the
transaction value. Exceptions are, however, carved out and
enumerated in Rule 4(2). As per that provision, the transaction value
mentioned in the bills of entry can be discarded in case it is found
that there are any imports of identical goods or similar goods at a
higher price at around the same time or if the buyers and sellers are
related to each other. In order to invoke such a provision it is
incumbent upon the assessing officer to give reasons as to why the
transaction value declared in the bills of entry was being rejected; to
establish that the price is not the sole consideration; and to give the
reasons supported by material on the basis of which assessing officer
arrives at his own assessable value.‖
The Division Bench has quoted the following sub-paragraph
from Commr. of Customs v. South India Television (P) Ltd. [Commr.
of Customs v. South India Television (P) Ltd., (2007) 6 SCC 373] :
(SCC p. 380, para 13)
―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.‖
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
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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.
16. The requirements of Rule 12, therefore, can be summarised as
under:
16.1. 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.
16.2. Proper officer must ask the importer of such goods further
information which may include documents or evidence.
16.3. 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.
16.4. When the proper officer does not have reasonable doubt, the
goods are cleared on the declared value.
16.5. 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.
16.6. The proper officer can raise doubts as to the truth or accuracy
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of the declared value on ―certain reasons‖ which could include the
grounds specified in sub-clauses (a) to (f) in clause (iii) of the
Explanation.
16.7. 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.
16.8. 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.‖
36. Proceeding further to explain the circumstances in which a
proper officer could initiate a valuation under the 2007 Rules, the
Supreme Court in Century Metal Recycling rendered the following
pertinent observations:
―17. 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
the Explanation appended to Rule 12 which sets out some of the
conditions when the ―reason to doubt‖ exists. The instances
mentioned in sub-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.
18. 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 precondition 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 uncertainty and
irresolution reflecting suspicion and apprehension. However, this
doubt must be reasonable i.e. have a degree of objectivity and
basis/foundation for the suspicion must be based on ―certain
reasons‖.
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19. The expression ―proof beyond reasonable doubt‖ in criminal law
requires the prosecution to establish guilt and secure conviction of
the accused by proving the charge ―beyond reasonable doubt‖.
In Ramakant Rai v. Madan Rai [Ramakant Rai v. Madan Rai, (2003)
12 SCC 395 : 2004 SCC (Cri) Supp 445] referring to the expression
―reasonable doubt‖ in criminal law it was held as under : (SCC p.
405, para 24)
―24. Doubts would be called reasonable if they are free
from a zest for abstract speculation. Law cannot afford any
favourite other than the truth. To constitute reasonable
doubt, it must be free from an overemotional response.
Doubts must be actual and substantial doubts as to the guilt
of the accused persons arising from the evidence, or from
the lack of it, as opposed to mere vague apprehensions. A
reasonable doubt is not an imaginary, trivial or a merely
possible doubt; but a fair doubt based upon reason and
common sense. It must grow out of the evidence in the
case.‖‖
37. The Supreme Court had also adverted to the procedure of
provisional assessment as embodied in Section 18 and explained its
significance in the following words:
―22. The significance of Section 18 of the Act can be understood in
the 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 the
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.
23. 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
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Circular No. 38/2016 dated 22-8-2016. Any insistence and
compulsion by the Authorities that the importer should disclaim and
forego 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.‖
38. Mr. Gulati also drew our attention to the following observations
rendered by the Supreme Court in Century Metal Recycling:
―24. We would ex facie for the reasons recorded below reject the
contention of the respondents predicated on the letter of the
appellants dated 6-3-2017 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 22-12-2016 and 4-3-2017
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-
3-2017 thereby waiving of its right to provisional assessment and
accepting valuation in terms of Rules 4 to 10.
25. 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.‖
39. Mr. Gulati submitted that the Supreme Court had pertinently
observed that the power to doubt the declared value would have to be
guided by the statutory provisions comprised in Rule 12. It was thus
submitted that the power to reject declared value was clearly
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recognized by the Supreme Court as not being liable to be invoked on
the basis of arbitrary considerations or the whims and fancies of the
proper officer.
40. Mr. Gulati pointed out that the fact that the decision to initiate
reassessment would have to be founded on justiciable grounds was an
aspect which was also duly highlighted by the Supreme Court in Tata
Chemicals Ltd. vs. Commr. of Customs11 when it had observed:
―14. In our opinion, the expression ―deems it necessary‖ obviously
means that the proper officer must have good reason to subject
imported goods to a chemical or other tests. And, on the facts of the
present case, it is clear that where the importer has furnished all the
necessary documents to support the fact that the ash content in the
coking coal imported is less than 12%, the proper officer must, when
questioned, state that, at the very least, the documents produced do
not inspire confidence for some good prima facie reason. In the
present case, as has been noted above, the Revenue has never stated
that Casco’s certificate of quality ought to be rejected or is defective
in any manner. This being the case, it is clear that the entire chemical
analysis of the imported goods done by the Department was ultra
vires Section 18(1)(b) of the Customs Act.‖
41. Mr. Gulati then invited our attention to the decision rendered by a
Division Bench of this Court in Commr. of Customs vs. CISCO
Systems India (P) Ltd.12 CISCO Systems was principally concerned
with the reckoning of the period of limitation for the purposes of
refund. It was in that context also called upon to examine the
correctness of the contention of the Revenue that since the assessee had
initially paid the enhanced value as determined without protest, its
claim for refund would be barred by virtue of Section 27 of the Act.
Rejecting that contention, the Division Bench in CISCO Systems had
held:
11
(2015) 11 SCC 628
12
2023 SCC OnLine Del 509
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―19. In the aforesaid context, the only issue to be addressed is
whether filing of an appeal against the Order-in-Original dated
25/26.08.2004 while at the same time paying the duty on the
enhanced value, would amount to paying the same under protest.
20. The respondent claims that it was obvious that the additional
duty was paid under protest as the respondent had appealed the
Order-in-Original dated 25/26.08.2004 enhancing the declared value
of the goods resulting in the increase in custom duty. The Revenue
contends that since no formal protest had been lodged while paying
the duty, the benefit of second proviso to Section 27(1) of
the Customs Act is not available to the respondent.
21. It is difficult for this Court to accept that the payment of custom
duty imposed pursuant to an order while appealing the same can be
construed as payment of duty without protest. The very act of filing
an appeal against an order imposing customs duty is a protest against
the duty as assessed. The entire purpose of such an appeal is to seek
reduction of the levy. It is, thus, obvious that the assessee does not
accept the said levy and, payment of the same would necessarily
have to be construed as payment under protest.
22. The learned Tribunal had relied on the Constitution Bench
decision of the Supreme Court in the case of Mafatlal Industries
Ltd. v. Union of India (supra) and referred to the following passage
from the said decision:
“83. It is then pointed out by the learned Counsel for the
petitioners-appellants that if the above interpretation is
placed upon amended Section 118, a curious consequence
will follow. It is submitted that a claim for refund has to be
filed within six months from the relevant date according to
Section 11B and the expression ―relevant date‖ has been
defined in Clause (B) of the Explanation appended to
subsection (1) of Section 11B to mean the date of payment
of duty in cases other than those falling under Clauses (a),
(b), (c), (d) and (e) of the said Explanation. It is submitted
that Clauses (a) to (e) deal with certain specific situations
whereas the one applicable in most cases is the date of
payment. It is submitted that the appellate/revision
proceedings, or for that matter proceedings in High
Court/Supreme Court, take a number of years and by the
time the claimant succeeds and asks for refund, his claim
will be barred; it will be thrown out on the ground that it has
not been filed within six months from the date of payment
of duty. We think that the entire edifice of this argument is
erected upon an incomplete reading of Section 11B. The
second proviso to Section 11B (as amended in 1991)
expressly provides that ―the limitation of six months shall
not apply where any duty has been paid under
protest‖. Now, where a person proposes to contest his
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liability by way of appeal, revision or in the higher
courts, he would naturally pay the duty, whenever he
does, under protest. It is difficult to imagine that a
manufacturer would pay the duty without protest even
when he contests the levy of duty, its rate, classification
or any other aspect. If one reads the second proviso to
subsection (1) of Section 118 along with the definition of
“relevant date”, there is no room for any apprehension
of the kind expressed by the learned Counsel.”
(emphasis supplied)
23. In view of the authoritative decision of the Supreme Court
in Mafatlal Industries Ltd. v. Union of India (supra), the question
whether payment of duty while appealing its imposition, is required
to be construed as payment under protest, is no longer res integra.
Although the said decision was rendered in the context of
Section 11B of the Central Excise Act, 1944, the second proviso to
Section 11B of the Central Excise Act, 1944 is pari materia to
second proviso of Section 27(1) of the Customs Act.
24. We concur with the decision of the learned Tribunal that the duty
paid by the respondent on the enhanced value of the goods is
required to be accepted as duty paid under protest.‖
42. A lucid explanation of the scope of the 2007 Rules and the
manner in which the individual rules are to be deployed is found in the
decision of the Supreme Court in Eicher Tractors, a judgment which
was cited for our consideration by Mr. Gulati. It would be appropriate
to extract the following passages from that decision:
―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
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Section 14(1-A) in accordance with the Rules framed in this behalf.
7. The Rules which have been framed are the Customs, Valuation
(Determination of Price of Imported Goods) Rules, 1988. The Rules
came into force on 16-8-1988. Under Rule 3(i) ―the value of
imported goods shall be the transaction value‖. ―Transaction value‖
has been defined in Rule 2(f) as meaning the value determined in
accordance with Rule 4. Rule 4(1) in turn states:
―4. (1) 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 of these Rules.‖
8. Reading Rule 3(i) and Rule 4(1) together, it is clear that a mandate
has been cast on the authorities to accept the price actually paid or
payable for the goods in respect of the goods under assessment as the
transaction value. But the mandate is not invariable and is subject to
certain exceptions specified in Rule 4(2) namely:
―4. (2)(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.‖
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.
10. The respondent’s submission is that the phrase ―the transaction
value‖ read in conjunction with the word ―payable‖ in Rule 4(1)
allows determination of the ordinary international value of the goods
to be ascertained on the basis of data other than the price actually
paid for the goods. This, according to the respondent, would be in
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keeping with the overriding effect of Section 14(1). We cannot agree.
11. It is true that the Rules are framed under Section 14(1-A) and are
subject to the conditions in Section 14(1). Rule 4 is in fact directly
relatable to Section 14(1). Both Sections 14(1) and Rule 4 provide
that the price paid by an importer to the vendor in the ordinary
course of commerce shall be taken to be the value in the absence of
any of the special circumstances indicated in Section 14(1) and
particularised in Rule 4(2).
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 ―the particular transaction‖ and payability in respect
of the transaction envisages a situation where payment of price may
be deferred.
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 sub-section (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.
14. It is only when the transaction value under Rule 4 is rejected, that
under Rule 3(ii) the value shall be determined by proceeding
sequentially through Rules 5 to 8 of the Rules. Conversely, if the
transaction value can be determined under Rule 4(1) and does not
fall under any of the exceptions in Rule 4(2), there is no question of
determining the value under the subsequent rules.
15. The Assistant Collector in this case determined the value of the
imported goods under Rule 8. The question is whether he should
have determined the transaction value under Rule 4 at the price
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actually paid by the appellant for the 1989 bearings. Naturally, if
Rule 4 applies to the facts of this case, the Assistant Collector’s
reasoning under Rule 8 must, by virtue of the language of Rule 3(ii),
be set aside.
16. The Assistant Collector appears to have proceeded on the law as
it was prior to the 1988 Rules when ―special considerations‖ on the
basis of which a transaction was held not to be an ordinary sale in
the course of international trade within the meaning of Section 14(1),
had not been statutorily particularised.
17. As to what would constitute such ―special consideration‖ has
been considered in several decisions of this Court. For example, a
special quotation for the importer singling him out from other
importers in India was held to be a special consideration in Padia
Sales Corpn. v. Collector of Customs [1993 Supp (4) SCC 57]
justifying the rejection of price paid as the transaction value. On the
other hand in Basant Industries v. Addl. Collector of Customs [1995
Supp (3) SCC 320 : (1996) 81 ELT 195] a special quotation for an
―old and valued customer‖ was upheld as not being a special
circumstance.
18. The decision in Sharp Business Machines (P) Ltd. [(1991) 1 SCC
154 : 1991 SCC (Cri) 114] relied upon by the respondent is another
case where the transaction value was rejected. In that case, the
importer had wrongly misdescribed the imported goods and sought
to defraud the Revenue by attempting to surreptitiously import items
prohibited under the import policy. It was found that there was
justification, in the circumstances, for rejecting the price shown in
the invoice. The transaction value having been rejected, assessment
of value was made on the basis of the price list of the foreign vendor.
19. Both the decisions, Padia Sales Corpn. [1993 Supp (4) SCC 57]
and Sharp Business Machines (P) Ltd. [(1991) 1 SCC 154 : 1991
SCC (Cri) 114] were distinguished subsequently in Mirah Exports
(P) Ltd. v. Collector of Customs [(1998) 3 SCC 292 : (1998) 98 ELT
3] . As the facts of this case are somewhat similar to the case before
us, it is dealt with in some detail.
20. Mirah Exports Pvt. Ltd. along with other importers had imported
bearings at high rates of discount. The declared value was rejected
by the Customs Authorities on the basis of the price list of the
vendors. This Court set aside the decision of the respondent
Authorities accepting the argument that a discount is a recognised
feature of international trade practice and that as long as those
discounts are uniformly available to all and based on logical
commercial bases, they cannot be denied under Section 14. It
appears from the judgment that a distinction was drawn between a
discounted price special to a particular customer and discounts
available to all customers.
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21. As already noted, all these cases dealt with imports made prior to
the coming into force of the Rules in 1988. Now the ―special
considerations‖ are detailed statutorily in Rule 4(2).
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 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).‖
43. From the compilation of judgments which was submitted for our
consideration by Mr. Gulati as well as Mr. Aldak who appeared for the
appellant Hanuman Prasad & Sons, we find that the benches of the
CESTAT appear to have taken a somewhat inconsistent or divergent
view on both the scope of Section 17(5), the nature of the
contemporaneous data that could be borne in consideration as well as
the impact of the concession submitted by importers. This we note
notwithstanding the majority of those decisions taking a position
affirming the right of an importer to question a re-evaluation that the
adjudicating officer may have undertaken in terms of Section 17 of the
Act. For the sake of completeness, we propose to notice some of those
decisions hereinafter.
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44. In CMR Nikkei India (P) Ltd. vs. Commr. of Customs 13, the
Ahmedabad Bench of the CESTAT, while faced with a contention
identical to that which was advanced by the respondents before us, had
succinctly observed as follows:
―8. Heard both sides and perused the records. We find that the
dispute in the present case is regarding the valuation of the goods
imported by the Appellant. The Assessing Authority re-assessed the
imported goods at values higher than what was declared by the
Appellant in the Bills of Entry for self-assessment. The Appellant
accepted the enhanced value by submitting the consent letter. In spite
of the acceptance before the Assessing Authority, the Appellant
challenged the valuation/assessment of goods by filing appeals. The
learned Commissioner (Appeals) upheld the impugned reassessment.
The Commissioner (Appeals) has observed in the impugned orders
that the Appellant had given their written acceptance of the enhanced
value and thereby has forgone his right to speaking order under
Section 17(5) of the Customs Act. We noticed that in view of such
admission, no speaking order was issued as per requirements for
Section 17(5) of the Customs Act, 1962.
9. Section 14 of the Customs Act, 1962 read with Customs
Valuation Rules makes it abundantly clear that transaction value in
the ordinary course of commerce is to be taken as the assessable
value. The Customs Valuation Rules outlines the step-by-step
methodology to be adopted for re-determination of the assessable
value in certain cases. The primary requirement for re-determination
of the value is that the transaction value should be rejected for
cogent reasons prescribed in the Customs Valuation Rules. If the
transaction value is rejected, then the Customs Valuation Rules
prescribes the sis for arriving at the assessable value.
10. Perusal of the records of the case indicates that the only
reason cited for re-assessment of value is that the Appellant has
accepted the enhanced value. No doubt acceptance of the enhanced
value in writing waives the requirement of the issue of speaking
order under Section 17(5) ibid. However, the requirement of Section
14 and the Customs Valuation Rules need to be satisfied for
enhancement of value. Nothing is forthcoming from the record of
the case that what is the basis for such re-assessment.
11. Revenue has vehemently argued that the department were
justified in enhancement of value since the importer had accepted
such enhancement. We note that in the present matter, other than the
admission on the part of the importer, no basis for the adoption of the13
2022 SCC OnLine CESTAT 2765
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enhanced value is given. We find that the Appellant in their grounds
of Appeals also submitted that the assessment orders have been
passed in complete defiance of the provisions of Section 14 of the
Customs Valuation Rules, 2011. Neither the provisions of Section
14 of the Customs Act dealing with ―Valuation of Goods‖ nor the
provisions of Customs valuation Rules, 2011 have been followed
while assessing the impugned bills of entry. The assessment orders
do not assign any reason for discarding the transaction value nor do
then mention under which rule of Customs Valuation Rules, the
value has been determined.
12. Considering the above facts, we are of the view that, in spite
of the admission on behalf of the importer, the Revenue is required
to satisfy the requirements prescribed under Section 14 of the
Customs Act read with Customs Valuation Rules before any
enhancement of valuation.‖
45. The CESTAT in Commissioner of Central Excise vs. Hingora
Industries Ltd.14 had proceeded to summarily dismiss the appeal of the
customs authority rejecting the argument of the assessee being
precluded from challenging the reassessment observing as follows:
―S.S. Kang, Vice-President:– Heard both sides. Revenue filed this
appeal against the impugned order passed by Commissioner
(Appeals). The only contention of Revenue is that at the time of
clearance of goods, the respondent accepted the loading of the value
of the goods once the loading of the value of the goods is accepted
by the respondent and duty has been paid without any protest they
cannot challenge the assessment order hence setting aside the
assessment order by Commissioner (Appeals) is not sustainable.
2. The contention of respondent is that to avoid demurrage charges,
the respondent accepted the enhanced value and thereafter filed
appeal.
3. Respondent relied upon the decision in the case of Laxmi Colour
Lab v. Collector of Customs reported in 1992 62 E.L.T. 613
(Tribunal).
4. We find that in this case, value of the goods was enhanced by the
Customs Authorities and goods were assessed at the enhanced value.
Thereafter respondent filed appeal and the same was allowed. The
only contention of Revenue is that value of goods was enhanced
which was accepted by the respondent. We find that in the Tribunal’s
case Laxmi Colour Lab (supra) after relied upon the decision of the
Hon’ble Supreme Court in the case of Dunlop India Ltd. & Madras
14
2008 SCC OnLine CESTAT 1232
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Rubber Factory Ltd. v. Union of India reported in 1983 13 E.L.T.
1566 (S.C.), held as under:–
―There is no estoppel in law against a party in taxation
matter. If a party, in order to clear the goods for customs,
has given the classification in accordance with the wishes of
the authorities or even under some misapprehension, and if
the law allows it a right to ask for refund on proper
appraisement and which is actually applied for the party
cannot be estopped from making such application and ask
for such refund.‖
5. In view of the above decision, we find no merit in the appeal, the
same is dismissed.
(Dictated and pronounced in open court)‖
46. This very question fell for consideration of the Principal Bench
of the CESTAT at New Delhi in Commr. of Customs vs. M/s Artex
Textile Private Limited15. The aspect of importers being left with no
option but to concede to a reappraisal of declared value fell for adverse
comment as would be evident from the following observations
appearing in that decision of the CESTAT:
―6. Opposing the appeal learned Counsel for respondent Shri Prem
Ranjan Kumar urges that the importer was under pressure to take the
delivery of the goods to mitigate losses, including demurrage
charges, etc. In case of prayer for provisional assessment, the
adjudicating authority are reluctant to grant the same and it leads to
delay in getting out of charge, resulting in demurrage charges. It is
further urged that the loaded values as per NIDB data, are not the
declared value, but the same are loaded value. Thus, the loaded value
is not the proper value or the contemporaneous value for the purpose
of assessment. Further, it is evident from the facts on record that the
assessing officer was left with no choice, but to make enhancement
under the direction(s) of their superiors through circulars, direction
etc. Thus, there is no illegality or impropriety in the impugned order
and prays for dismissing the appeal by Revenue.
7. Having considered the rival contentions, we find that assessing
officer have been making enhancement in a routine manner and the
respondent who are regular importers are left with no choice but to
sign on the dotted line for taking delivery of their goods to carry on
their business, and also save the demurrage charges if the
consignment is delayed in the port for want of clearance. Relying on15
Final Order No. 50769-50825/2020 dated 14 September 2020.
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the precedent Final Order No. 63455- 63456/2018 dated 25.10.2018
of this Tribunal and also in view of the Order-in-Appeal No.
CC(A)/CUS/D-II/ICD/788-1083/2014 dated 31.12.2014 had been
accepted in respondent own case, we uphold the impugned common
order(s) in appeal. Accordingly, these appeals by Revenue are
dismissed being without merit.
The stay applications also stand disposed of accordingly.‖
47. A similar view was expressed by the Principal Bench of the
CESTAT in ACC (Import), TKD vs. AAA Impex16. This emerges
from the following paragraphs of that decision:
―12. Perusal of the records of the case indicates that the only
reason cited reason for re-assessment of value is that the respondent
has accepted the enhanced value. No doubt acceptance of the
enhanced value in writing waives the requirement of the issue of
speaking order under Section 17(5) ibid. However, the requirement
of Section 14 and the Customs Valuation Rules need to be satisfied
for enhancement of value. Nothing is forthcoming in the record of
the case from which the basis for such re-assessment can be made
out.
13. Revenue has vehemently argued that the Customs Authorities
were justified in enhancement of value since the importer had
accepted such enhancement. They have also relied upon the recent
decision in which the Tribunal has taken the view that admitted facts
need not be proved. In the case of Sodagar Network (supra), the
Tribunal upheld the enhancement of value. The importer had
specifically admitted the basis for re-determination of value in his
statement. He had also specifically waived the issue of the show
cause notice before the Adjudicating Authority. It is to be noted that
re-assessment was done by the process of adjudication at the level of
Additional Commissioner, and the value was re-determined as per
Rule 7 of the Customs Valuation Rules. And the basis for such
enhancement was shown to the importer and his concurrence
recorded by means of statement. The facts are also similar in the
case of DJP Inbternational (supra). In contradistinction to the facts
in these cases, we note that in the present appeal, other than the
admission on the part of the importer, we find no basis for the
adoption of the enhanced value.
14. We are of the view that, in spite of the admission on behalf of
the importer, the Revenue is required to satisfy the requirements
prescribed under Section 14 of the Customs Act read with Customs
Valuation Rules before any enhancement of valuation. It has been16
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argued by Revenue before us that the Revenue did not record the
basis for such enhancement since the requirement of speaking order
was waived by importer.
15. In view of the above discussion, the matter is required to be
remanded to the Original Assessing Authority for sharing the basis
for such re-assessment with the importer. Thereafter he will pass the
speaking order after extending an opportunity to the representative of
the importer to rebut the basis for such enhancement. To facilitate
this, we set aside the impugned order.‖
48. A similar controversy again arose for consideration of the
Principal Bench in River Side Impex vs. Commr.17 By a detailed
judgment rendered by the CESTAT in this matter and on a
consideration of the relevant provisions of the Act as well as the 2007
Rules, the following pertinent observations were rendered:
―11. 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 above-mentioned
conditions when the ‗reason to doubt’ exists. These instances 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. The expression ―reason to doubt‖ cannot be equated
with the requirements of positive reasons to believe, for the word
‗doubt’ refers to un-certainty and irresolution reflecting suspicion
and apprehension. However, this doubt must be reasonable i.e. have
a degree of objectivity and basis/foundation for the suspicion must
be based on ‗certain reasons’.
12. The expression ‗reasonable doubt’ has been explained by
Hon’ble Supreme Court in In Ramakant Rai v. Mad an Rai, (2003)
12 SCC 395 as under:
―24. Doubts would be called reasonable if they are free from a
zest for abstract speculation. Law cannot afford any favourite
other than the truth. To constitute reasonable doubt, it must be
free from an over emotional response. Doubts must be actual
and substantial doubts as to the guilt of the accused persons
arising from the evidence, or from the lack of it, as opposed to
mere vague apprehensions. A reasonable doubt is not an
imaginary, trivial or a merely possible doubt; but a fair doubt
17
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based upon reason and common sense. It must grow out of the
evidence in the case.‖
13. It is therefore held that 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 Clause (a) to
(f) Rule 12 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.
xxxx xxxx xxxx
20. We observe that the Adjudicating Authority has mentioned the
market survey report to be based on contemporaneous import data,
but no such data has been mentioned in the order. It is rather coming
as an admitted fact that few shops in the wholesale market were
visited and the samples which was drawn at the time of examination
of impugned imported goods were shown to the different vendors.
The original Adjudicating Authority in its order has observed that
the imported goods were observed to be of cheaper quality and many
of the shop keepers expressed to not to have similar items with them.
It is only one shop keeper who has similar items, as were imported
vide the impugned Bill of Entry. But there is no evidence brought on
record by the department that the said shop keeper also had imported
the goods. These observations of the Adjudicating Authority are
sufficient for us to hold that the Department has not followed the
statutory procedure nor has produced the cogent evidence while
confirming the allegations of under valuation and while confirming
the differential duty.
21. It appears that the sole ground for the confirmation is the
admission of the authorized representative of the appellant in his
statement dated 20.01.2017. The said statement is perused vide
which the said authorized representative has accepted the reassessed
value and offered to pay differential duty along with the applicable
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fine and penalty. He also opted for not being served with any show
cause notice or the opportunity of personal hearing with the request
to dispose of the case at the earliest. However, we perused that the
statement of said authorized representative was recorded a date prior
also i.e. on 19.01.2017, wherein he had mentioned that the
appellant’s firm is engaged in the business of import of sanitary
goods including the impugned goods, in bulk. The appellant
provided the purchase order only when personally visited to China
after due negotiations and the impugned goods are imported on piece
basis. He also stated that assessment was done per piece based,
hence, the weight found in excess than the declared weight has no
relevance. The excess weight otherwise includes the weight of
packaging boxes and other packaging material also. He specifically
stated that the appellant had declared the correct import value of the
impugned goods. He also stated that the reason for the value as
declared in the impugned bill of entry is that the gods are imported
directly from the manufacture in China, that too in bulk quantity and
pursuant to their personal negotiations with the said manufacture.
Hence, he re-asserted on 19.01.2017 that the rate declared in the bill
of entry are correctly mentioned by them. Appellants therefore have
no reason to be concerned about the actual selling price of the
impugned goods in the retail market. He also conveyed vide the said
statement that their supplier i.e. manufacturer in China is not related
to them except that they have continuous business relations with the
said manufacturers. In the light of this statement, we are not
convenience to accept the statement of the appellant made the very
next day as a cogent admission. We observe that in the original
submissions made on behalf of the appellant, it is mentioned that to
avoid any delay and the demurrage charges, in case the consignment
is held by the Customs Authority, that the appellant opted to pay the
differential amount demanded by them. The voluntary payment
hence cannot be called as admission of the appellant towards alleged
mis-declaration for value from the above discussion. Since it is
apparent that the Department has not followed the statutory
procedure nor there was any mis-declaration of quantity as alleged,
the mere acceptance of the reassessed value and payment thereof
will not be sufficient to confirm the allegations of under valuation.
The burden was still on the Department to prove the allegations
levelled. The said burden has not been discharged.‖
49. The last of the decisions which toed a similar line and which
would merit being noticed is yet another judgment handed down by the
Ahmedabad Bench of the CESTAT in Kunj Bihari Textiles vs. C.C.18
The CESTAT on this occasion took note of the salient principles which
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had come to be identified in an earlier decision in M/s Sedna Impex
India (P) Ltd. vs. C.C.-Mundra19 and held:
―2. The issue in the instant case pertains to import of mix lot of
Polyester Knitted Fabrics. The revenue had sought to revise the
assessable value by rejecting the declared assessable value. It is
noticed that identical issue has been decided by Tribunal in the case
of Sedna Impex India P. Ltd. -2023 (3) TMI 1080 (CESTAT-Ahmd),
wherein Tribunal has observed as follows:
―4.3 The dispute in the present case is regarding the
valuation of the goods imported by the Appellants. The
Assessing Authority re-assessed the imported goods at
values higher than what was declared by the Appellants in
the Bills of Entry. The revenue enhanced value as per NIDB
data. We observed that the transaction value declared by
the importer should form the basis of assessment unless the
same is rejected, for the reasons set out in Rules of the
Customs Valuation Rules. Section 14 of the Customs Act,
1962 read with Customs Valuation Rules makes it
abundantly clear that transaction value in the ordinary
course of commerce is to be taken as the assessable value.
The Customs Valuation Rules outlines the step-by-step
methodology to be adopted for re-determination of the
assessable value in certain cases. The primary requirement
for re-determination of the value is that the transaction
value should be rejected for cogent reasons prescribed in
the Customs Valuation Rules. If the transaction value is
rejected, then the Customs Valuation Rules prescribes the
basis for arriving at the assessable value. However, the
requirement of Section 14 and the Customs Valuation Rules
need to be satisfied for enhancement of value. Nothing is
forthcoming from the record of the case from which the
basis for such re-assessment can be made out. Rejection of
declared value on Bill of Entry is a serious affair and the
same could have been rejected on the basis of cogent
examination of evidences and justifiable reasons. Hon’ble
Supreme Court has in case of Eicher Tractors [(2000) 122
ELT 321 (S.C.)] laid down very categorical as follows…
xxxx xxxx xxxx
4.6 We noticed that in present matter no effort was made by
the adjudicating authority to ascertain quality, quantity,
characteristics of the goods of contemporaneous import. In
the present import without carrying out any test to the fact
that goods of contemporaneous import and the goods in
19
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question in present case are identical or similar,
enhancement of the value is not legal and correct. It is also
observed that other than contemporaneous import data,
there is no other evidence to show that the assessee have
suppressed the value.
4.7 We find that in the present case, the adjudicating
authority enhanced the value as the declared value appears
to be low compared to value available in NIDB data,
otherwise, there is no material available. The Tribunal
consistently observed that the declared value cannot be
enhanced merely on the basis of NIDB data. Tribunal in the
case of Neha Intercontinental Pvt. Ltd. v. Commissioner of
Customs, Goa [(2006) 202 ELT 530 (Tri.-Mum.)] has held
in the absence of rejection of transaction value, invoice
value requires acceptance and when the contemporaneous
import of similar goods is not established, value cannot be
enhanced. In the case of Commissioner of
Customs v. Modern Overseas [(2005) 184 ELT 65 (Tri.-
Del.)] NIDB data was held to be insuffient, in the absence
of clarity about various parameters. List of such decisions
is unending and it is sufficient to say that NIDB data has
been held to be insufficient for enhancement of value, in the
absence of any other independent evidence. Admittedly in
the present cases, there is no such evidence produced by the
Revenue except reference to the NIDB data. In view of the
discussions above, we hold that in the present case, the
enhancement of value on the basis of NIDB data cannot be
accepted.‖
50. The view taken by the CESTAT in the judgments impugned
before us in this set of appeals, however, principally proceeds on the
basis of its decisions in Advanced Scan Support and Vikas Spinners. In
Advanced Scan Support, the CESTAT had taken note of the contention
of the importer that there was no misdeclaration and that the entire case
as set up by the customs authorities was based on material with which
the importer had never been confronted with. While dealing with the
aforesaid challenge, the CESTAT in Advanced Scan Support had held:
―5. We have considered the contentions of both sides. We find that
whatever may be the reasons, the appellant expressly gave its
consent to the value proposed by the Revenue and expressly stated
that it did not want any show-cause notice or personal hearing. Even
the duty was paid without protest. By consenting to enhancement of
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value and thereby voluntarily foregoing the need for a show-cause
notice, the appellant made it unnecessary for the Revenue to
establish the valuation any further as the consented value in effect
becomes the declared transaction value requiring no further
investigation or justification. To allow the appellant to contest the
consented value now is to put the Revenue in an impossible situation
as the goods are no longer available for inspection and the Revenue
rightly did not proceed to further collect and compile all the
evidence/basis into a show-cause notice as doing so, in spite of the
appellant having consented to the enhancement of value and
requested for no show-cause notice, could/ would have invited
allegation of harassment and delay in clearance of goods. When
show-cause notice is expressly foregone and the valuation is
consented, the violation of principles of natural justice cannot be
alleged. In the present case, while value can be challenged but such a
challenge would be of no avail of as with the goods not being
available and the valuation earlier having been consented, the onus
will be on the appellant to establish that the valuation as per his
consent suffered from fatal infirmity and such onus has not been
discharged. Further, valuation of such goods requires their physical
inspection and so reassessment of value in the absence of goods will
not be possible. The case of Eicher Tractors Ltd. v. Commissioner of
Customs (2000) 122 ELT 321 (SC) cited by the appellant is not
relevant here as in that case there was no evidence that the assessee
had consented to enhancement of value.
6. We find that the Customs, Excise and Service Tax Appellate
Tribunal’s judgment in the case of Vikas Spinners v. Commissioner
of Customs (2001) 128 ELT 143 (Trib.-Delhi), dealing with a similar
situation, held as under :
“7. In our view in the present appeal, the question of loading
of the value of the goods cannot at all be legally agitated by
the appellants. Admittedly, the price of the imported goods
declared by them was US $ 0.40 per kg. but the same was
not accepted and loaded to US $ 0.50 per kg. This loading
in the value was done in consultation with Shri Gautam
Sinha, the representative and Special Attorney of the
appellants who even signed an affirmation accepting the
loaded value of the goods on the back of the bill of entry
dated May 7, 1999. After loading of the value, the
appellants produced the special import licence and paid the
duty on the goods accordingly of Rs. 4,22,008 on May 19,
1990. Having once accepted the loaded value of the goods
and paid duty accordingly thereon without any protest or
objection they are legally estopped from taking somersault
and to deny the correctness of the same. There is nothing on
record to suggest that the loaded value was accepted by
them only for the purpose of clearance of the goods and that
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they reserved their right to challenge the same subsequently.
They settled their duty liability once for all and paid the
duty amount on the loaded value of the goods. The ratio of
the law laid down by the apex court in Sounds N. Images
(2000) 117 ELT 538 (SC), is not at all attracted to the case
of the appellants. The benefit of this ratio could be taken by
them only if they had contested the loaded value at the time
when it was done, but not now after having voluntarily
accepted the correctness of loaded value of the goods as
determined in the presence of their representative/special
attorney and paid the duty thereon accordingly.”
(emphasis added)
Similarly, in the case of Guardian Plasticote Ltd. v. Commissioner of
Customs (2008) 223 ELT 605 (Trib.-Kol), has held as under :
“4. The learned advocate also cites the decision of the
Tribunal in the case of Vikas Spinners v. Commissioner of
Customs (2001) 128 ELT 143 (Trib.-Delhi) in support of
his arguments. We find that the said decision clearly holds
that enhanced value once settled and duty having been paid
accordingly without protest, importer is estopped from
challenging the same subsequently. It also holds that
enhanced value uncontested and voluntarily accepted, and
accordingly payment of duty made discharges the burden of
the Department to establish declared value to be incorrect.
In view of the fact that the appellants in this case have not
established that they had lodged any protest and on the
contrary their letter dated April 21, 1999 clearly points to
acceptance of the enhanced value by them, the cited
decision advances the cause of the Department rather than
that of the appellants contrary to the claim by the learned
counsel.”
Thus, the valuation has to be upheld in the present case.
7. However, it is a fact that nothing has been brought out in the
impugned order which shows that the appellant misdeclared the
goods or declared a value which was different from the amount
which was actually paid to the suppliers. The appellant even
submitted a chartered engineer’s certificate from Japan in support of
the valuation. It has also to be noted that although it gave consent to
the valuation and gave up its right for the show cause notice or
personal hearing the fact remains that it was so done to avoid delay
in clearance and accumulation of demurrage charges. Thus, it is
simply a case of valuation dispute devoid of any mens rea on the part
of the appellant. Consequently, it is a case for demand of differential
duty on account of valuation rather than a case warranting
confiscation and/or penalty. As has been held by the Supreme Court
in the case of Handtex v. Commissioner of Customs every change
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made by the assessing officer during the course of assessment
whether relating to rate of duty or value need not lead to an inference
of misdeclaration by the importer.
8. It is also pertinent to note that the appellant never consented for
confiscation and penalty and did not forego its right for a show-cause
notice/personal hearing with regard thereto. Therefore, confiscation
and penalty have to be held to have been ordered in violation of the
principles of natural justice and for that reason also they cannot be
sustained.‖
51. Since the CESTAT in Advanced Scan Support has essentially
followed the reasoning on which Vikas Spinners was based, this would
constitute an appropriate juncture to examine that decision in some
detail. It becomes pertinent to note that the importer in Vikas Spinners
had, apart from questioning the valuation of the goods, also assailed the
confiscation action and the imposition of penalties. Insofar as the issues
pertaining to confiscation are concerned, the same came to be answered
on facts against the importer. Proceeding then to the question of
valuation of goods, the CESTAT in Vikas Spinners significantly found
that the loading in the value as declared by the importer was undertaken
in consultation and with due notice to that entity. It further found on
facts that the Special Attorney of the importer had signed a document
accepting the loaded value of the goods on the BoE itself. It was in the
aforesaid backdrop that the CESTAT had observed as follows:
―7. In our view in the present appeal, the question of loading of the
value of the goods cannot at all be legally agitated by the appellants.
Admittedly, the price of the imported goods declared by them was
US $ 0.40 per Kg. but the same was not accepted and loaded to US $
0.50 per Kg. This loading in the value was done in consultation with
Shri Gautam Sinha, the Representative and Special Attorney of the
appellants who even signed an affirmation accepting the loaded
value of the goods on the back of the Bill of Entry dated 7-5-1999.
After loading of the value, the appellants produced the special import
licence and paid the duty on the goods accordingly of Rs. 4,22,008/-
on 19-5-1990. Having once accepted the loaded value of the goods
and paid duty accordingly thereon without any protest or objection
they are legally estopped from taking somersault and to deny the
correctness of the same. There is nothing on record to suggest that
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the loaded value was accepted by them only for the purpose of
clearance of the goods and that they reserved their right to challenge
the same subsequently. They settled their duty liability once for all
and paid the duty amount on the loaded value of the goods. The ratio
of the law laid down by the Apex Court in Sounds N. Images, (supra)
is not at all attracted to the case of the appellants. The benefit of this
ratio could be taken by them only if they had contested the loaded
value at the time when it was done, but not now after having
voluntarily accepted the correctness of loaded value of the goods as
determined in the presence of their Representative/Special Attorney
and paid the duty thereon accordingly.
8. Similarly the ratio of the law laid down in Kushiram
Beharilal and Globe International Agencies (supra) referred by the
appellants in their written submission is of no avail to them for the
simple reason that there is nothing on the record to show that they
accepted the loaded value only for the purpose of clearance of the
goods and reserved their right to challenge the same at a subsequent
stage. The payment of duty was not made by them under protest on
the loaded value of the goods. Their own Attorney/Representative
agreed to the loaded value of the goods and signed the affirmation on
the back of the Bill of Entry even and that is why no show cause
notice in this regard was issued to them. The show cause notice in
the instant case was issued to them only for the confiscation of the
goods and imposition of penalty on them due to misdeclaration of
nature of goods and import of the same without specific licence.‖
52. Vikas Spinners was thus a case where the BoE as submitted by
the importer had itself acknowledged the loading suggested by the
customs authorities over and above the value of the importer goods as
declared. It was this BoE which ultimately came to be accepted and
formed the primary basis of the import itself. This becomes apparent
from the CESTAT having categorically found that ―There is nothing on
record to suggest that the loaded value was accepted by them only for
the purpose of clearance of the goods and that they reserved their right
to challenge the same subsequently. They settled their duty liability
once for all and paid the duty amount on the loaded value of the
goods.‖ It is thus evident that Vikas Spinners essentially proceeded and
revolved upon its own special facts and in any case was one which was
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concerned with an actual assessment made in the course of examination
of the self-assessed declarations made. The aforesaid decision thereafter
appears to have been followed in Advanced Scan Support based on a
perceived understanding of its implication and de hors what was found
on the facts which obtained therein. Thus, and in our considered
opinion, neither Advanced Scan Support nor Vikas Spinners are liable
to be viewed as authorities for the proposition that a concession made
for the purposes of expeditious clearance of goods would amount to a
waiver or abandonment of a right to contest the reassessment
subsequently.
53. The argument of the appellants that NIDB data could not form
the solitary basis to reject declared value also came to be rejected with
the CESTAT observing that once the importer had accepted the
suggested revision, there existed no obligation on the respondents to
undertake any further adjudicatory exercise nor was there any
justification for the CESTAT to rule on any of the other contentions
that were urged before it. Insofar as the determinative value of NIDB
data is concerned, the CESTAT has in Hanuman Prasad & Sons taken
a view which clearly appears to be contrary to a host of precedents
which had held to the contrary and this becomes apparent from the
discussion which ensues.
54. Without unnecessarily burdening this judgment with a reiteration
of what had been held in this regard by a string of past precedents
rendered by different benches of the CESTAT itself, it would be
sufficient to take note of the following decisions. Learned counsels for
the appellants, in light of the question of whether enhancement or re-
appreciation of the ‗declared value’ could proceed merely on the basis
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of the data available on the NIDB, brought to our notice the decision of
the Hyderabad Bench of the CESTAT in Agarwal Foundries (P) Ltd.
vs. Commissioner of Customs20 and where it was succinctly observed
as under:
―6.2) In all these cases, the imported goods are MS Steel (turning
shredded scrap). The Customs Department has taken the view that
the declared import values cannot be relied upon since they are based
on invoices issued by traders and not at the manufacturers of such
scrap. Based on this premise, the declared import values have been
rejected and enhanced to higher level on the basis of purported
contemporary import values found in the NIDB data. This
enhancement is the bone of contention in all these appeals.
6.3) MS Steel (turning shredded scrap) is generated in the course of
manufacture of finished goods eg; machinery. Appellants, right from
the beginning, have been crying hoarse that such scrap is disposed of
by concerned manufacturers to traders and that they have to
necessarily buy such scrap only from the traders at the prevalent
market rate. This assertion has not been disproved or proved
incorrect by Customs.
6.4) Department has also not backed up their allegations that the
manner of purchase of the impugned goods from the traders and not
from manufacturers, is not as per practice normally followed in the
course of international trade in the said item. This being the case, we
are of the opinion that Department cannot reject the invoices issued
by traders the declared import values only for the reason that the
accompanying invoices have not been issued by the manufacturers
themselves. In any case, in our view, it is not as if the manufacturers
concerned have set out or conduct their activities with the sole
intention of manufacturing such ―shredded scrap‖. Obviously the
impugned goods are but shreds and turnings which have emerge
during the manufacture of goods by the concerned manufacturers.
There can be no dispute that these metal shreds and turnings would
not be in very huge quantities vis-‘-vis the actual goods
manufactured. It also appears to reason that the manufacturers would
prefer to dispose of such shredded scrap to the traders instead of
expending time and energy selling them directly worldwide.
6.5) Viewed in this light, the invoices issued by the traders from
countries like Belgium, Malaysia, Singapore etc. cannot be
dismissed peremptorily unless there are justifiable reasons not to
accept the genuineness or authenticity of such invoices. In any case,
the declared values can be rejected only in terms of statutory
20
2018 SCC OnLine CESTAT 1411
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provisions and rules governing valuation of imported goods.
6.6) Be it as it may, in all these cases, enhanced values have been
adopted based on NIDB data only. The appellants have contended
that the contemporary values on which the department intended to
enhance the import values have not been provided to them. We find
merit in these arguments. It is now well settled that NIDB data
cannot be made the basis for enhancement of declared import values.
The case laws relied upon by the appellant fully exemplify this ratio.
6.7) For example, the Tribunal in the case of Commissioner of
Customs, New Delhi v. Nath International as reported at [2013 (289)
ELT 305 (Tri.-Del.)] has laid down the following ratio:
―7. We find that there is no dispute that the customs has
power to reject the transaction value and enhance the
assessable value in terms of Customs Valuation Rules.
However, such rejection of transaction value and
enhancement of assessable value has to be on the basis of
some evidences on record. Contemporaneous imports have
to be considered in reference to quality, quantity and
country of origin with the imports under consideration. It
has been held in a number of decisions that NIDB data
cannot be made the basis for enhancement of value.
Commissioner (Appeals) has relied upon various decisions
of the Tribunal for holding any enhancement in assessment
value, the transaction value to be first rejected based on
legal permissible ground as indicated in the valuation Rules.
He has also referred to Hon’ble Supreme Court decision in
the case of Eicher Tractors Ltd. v. CC, 2000 (122) ELT 321
(S.C) in support of his finding that transaction value cannot
be rejected without clear and cogent evidence produce by
the department with regard to quality, import of origin and
place and time of import.
We find that in their memo of appeal, Revenue has not
advance any such evidences to support their case, inasmuch
as, no evidence of rejection of transaction value stands
produced by the authority, we find no reason to interfere
with the impugned order of Commissioner (Appeals). Mere
reference to Commissioner Mumbai guidelines to enhance
the value of ball bearings, without first assessing the quality
of the goods is not justified. It stands accepted that the ball
bearings were mix and not of uniform sizes. As such,
Revenue’s appeal has no merits‖.
6.8) In the case of Topsia Estates Pvt. Ltd. v. CC (Import-Seaport)
Chennai as reported at [2015 (330) E.L.T 799 (Tri.-Chennai)], the
Tribunal held as under:
―7. After hearing both sides and on perusal of the records,
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we find from the adjudication order that the adjudicating
authority observed that the unit price declared appears to be
very low compared to the contemporaneous import value
available in NIDB data. The appellant imported PU Coated
Fabrics of various thickness and different qualities from
China. It is seen from the Table as reproduced in the
adjudication order that the declared unit price varies from
0.90 MT to 1.60 MT and the value was enhanced from 1.24
per MT to 2.04 per MT. We have also noticed that the
appellant imported the same goods from Kolkata Port also.
The appellant in the written submission before the
Commissioner (Appeals) submitted copies of the various
orders passed by the Commissioner (Appeals) under which
it was accepted. There is no evidence of higher value of
contemporaneous import from same sources. There is no
allegation of mis-declaration of the goods.
6.9) In a recent decision, in Sarda Energy and Minerals Ltd. v. CCE,
Raipur, [2018 (359) E.L.T 262 (Tri.-Del.)], the above ratio was once
again reiterated by Tribunal as follows:
―In this connection, we have perused the provisions of Rule
12, which enables the rejection of declared assessable value.
The said rules provide for proper officer seeking
clarification from the importer to provide further
information to satisfy the correctness of the declared
assessable value. In the present case, the appellants did
submit the invoice, purchase order and supporting contract
documents with reference to the impugned consignments.
Nothing more is required with the importer to further
substantiate the value. In such situation, it is for the
assessing officer to discount the documents with valid
reasons in order to reject the declared value and thereafter to
proceed with the re-assessment, after due enhancement.
Explanation (1)(i)(iii)(a) in Rule 12 appears to be applicable
5 Customs Appeals Nos. 50503- 50504/2017 and 50519-
50520/2017 to the present case. In other words, the
assessing officer having noticed higher value of
contemporaneous import raised the doubt regarding the
correctness of declared value. The legal provisions
mentioned in the Explanation clearly stipulates that the
contemporaneous value should be significantly higher for
identical or similar goods at or about the same time, in a
comparable commercial transaction. We find in the present
case due examination about this crucial aspect has not been
done by the assessing officer and comparison based on the
contemporaneous import is not proper. Further, the
contractual arrangements and invoices should not be
rejected in the absence of any evidence to question their
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authenticity. As submitted by the appellants, NIBD data is a
guidelines and an indicator for the assessing officer and it
cannot be a substitute for assessable value. The assessable
value for imported items has to be invariably arrived at
applying Section 14 read with Customs Valuation Rules,
2007.
7. We also note that the reliance placed by the appellant on
the decision of the Tribunal in the case of Topsia Estates
Pvt. Ltd. v. CC, Chennai, 2015 (330) ELT 799 (Tribunal-
Chennai) is appropriate to the facts of the present case. The
observation of the Tribunal is as below:–
―We find that in the present case, the adjudicating
authority enhanced the value as the declared value
appears to be very low compared to value available in
NIDB data, otherwise, there is no material available. The
Tribunal consistently observed that the declared value
cannot be enhanced merely on the basis of NIDB data. It
is noticed that the value of impugned goods varies
widely on the basis of quality, size, quantity, etc., and it
is contended by the appellant before the lower appellate
authority that the declared value of the same goods were
accepted by the 6 Customs Appeals Nos. 50503-
50504/2017 and 50519-50520/2017 Department at
Kolkata Port. We also find force in the submission of the
learned Advocate that in this particular situation, Rule 9
of the Valuation Rules would not be invoked‖.
8. In view of the discussions and analysis, we find that the
impugned orders cannot be legally sustained. Accordingly,
the same are set aside. The appeals are allowed with
consequential relief‖.
6.10) We find that the above decisions will apply on all fours to the
present appeals before us. We also find merit in the appellant’s
contention that Department has not brought out any other material to
demolish the transaction value and has also not brought any evidence
to prove that the overseas supplier has been paid consideration
higher than the amount indicated in the invoices which have been
paid through bank channels.
7) In the event, we hold that all the impugned orders relating to these
14 appeals cannot sustain and will have to be set aside which we
hereby do. Appeals are therefore allowed with consequential
benefits, if any, as per law.‖
55. Proceeding further, learned counsels for the appellants then cited
for our consideration the judgment handed down by the Ahmedabad
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Bench in Guru Rajendra Metalloys India (P) Ltd. vs. C.C.21. After
noticing the judgments of the Supreme Court in CCE vs. Sanjivani
Non-Ferrous Trading (P) Ltd.22, as well as Century Metal Recycling,
the CESTAT had in that decision observed:
―4.8 As regard the entire reliance of the Revenue that the appellant
has given a consent letter, we find that this Tribunal in the case
of Andrew Telecommunications Pvt. Ltd. (supra) categorically held
as under:
5. The assessing authority places reliance on the price of
the base metal published in bulletin of the London Metal
Exchange and the consent of the importer to adopt that as
the base for re-determination. However, it cannot be lost
sight of that the clearance was ordered to be held up on the
basis of raw material prices in the said bulletin when the
goods under import were manufactured products. The
rationale for the comparatively low prices was claimed to
lie in the supply contracts to which importers had drawn the
attention of the assessing officer who, however, chose to
disregard these. We find that the resort to prices of base
metal to reject the declared price of manufactured goods,
particularly, in the light of an explanation offered and not
disputed is not in accordance with Section 14 of Customs
Act, 1962. Consent at gun-point is no consent and consent
of any sort cannot condone deviation from the law.
4.9 This issue was also decided by a principal bench of this Tribunal
at Delhi in the case of Ankit Electronics wherein the following order
was passed:
Being aggrieved with the order passed by Commissioner
(Appeals), Revenue has filed the present appeal. We
propose to dispose of the stay petition as also appeal by a
common order as a short issue is involved.
2. As per facts on record, the respondents filed thirteen Bills
of Entry on various dates for the clearance of Ferrite
magnet & Ferrite magnet rings declaring the value based
upon the invoices raised by the supplier. The assessing
authority did not agree with the declared value and
enhanced the same. The Bill of Entry was accordingly
assessed.
3. The said assessment was challenged by the respondents
before Commissioner (Appeals), who observed that21
2020 SCC OnLine CESTAT 3871
22
(2019) 2 SCC 378
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inasmuch as the assessing authority has not passed a
speaking order giving reasons for rejection of the declared
price, he set aside the assessment order and directed the
assessing authority to pass speaking order within a period
of 15 days.
4. Being aggrieved with the said order, Revenue has
challenged the same on the ground that value was enhanced
as per instructions of C.B.E. & C. vide Circular No.
91/2003-Cus., dated 14-10-2003 which are as follows:
―at the request of the importer, the proper officer is
required to intimate in writing, the grounds for
doubting the truth the accuracy of the declared
value and provide a reasonable opportunity of being
heard, before taking a final decision. However, it
may not be necessary to issue speaking orders in all
such cases where enhancement of value has been
resorted to with the consent of the importers‖
Accordingly the Revenue has contended that inasmuch as
the appellants cleared the goods on enhanced value, they
were precluded from contesting the same.
5. We however, do not agree with the above contention of
the Revenue. The said circular itself makes it clear that
proper officer is required to intimate in writing the grounds
for enhancing the value and a reasonable opportunity is
required to be given to the importer before the final
decision is taken. It is only in those cases where both the
sides agree to resort to enhancement of value. That no
orders are required to be passed. Merely because the
importer has cleared the goods at enhanced value to save
the demurrage charges or otherwise, by itself, does not
mean that the importer is consenting to enhance the value.
It is right of the importer to contest the enhancement and
fact of clearance of goods, cannot preclude the importer
from exercising the right of appeal. As such, we find no
merit in the Revenue’s appeal.
6. Inasmuch as the Commissioner (Appeals) has remanded
the matter to the original adjudicating authority for
deciding the assessable value of the imported goods, by
following the principles of natural justice, we upheld the
impugned order and direct the original adjudicating
authority to do the needful.
7. Stay petition as also appeal gets disposed of in the above
manner.
4.10 We find that both the lower authorities, they have not accepted
that the prices are based on DGOV circular. However, the
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calculations shown by the Learned consultant, it is clear that the
enhancement of the value is not on the basis of contemporaneous
imports data but clearly on the basis of DGOV circular. This
Tribunal dealing with identical case in the case of Bharathi Rubber
Lining & Allied Services P. Ltd. clearly held that DGOV circular
cannot override the provisions of Valuation Rules. Invoice price is
not sacrosanct but before rejecting the invoice price the department
has to give cogent reasons for such rejection. Assessing Authority
has to examine each and every case on merit for deciding its validity.
He could not form the view to reject all transaction only on the basis
of same general criteria based on DGOV circular. It was, however,
held that if contemporaneous import were not noticed, Rules 5 and 6
of Customs Valuation Rules, 1988 could not be applied, the question
of rejecting the transaction valued under the Rule 10(A) does not
arise at all.
4.11 In the case of Modern Manufacturers (supra) this Tribunal
dealing with identical issue held that enhancement of value of
imported goods based on NIDB data and circular issued by DGOV
without rejecting declared value under Rule 12 of Customs
Valuation Rules, 2007. Redetermination of value based on NIDB
data and DGOV circular is not sustainable. In the present case, no
exercise of rejecting the declared value under Rule 12 and process of
applying valuation rules sequentially were followed. Therefore, the
value declared by the appellant has to be accepted.‖
56. Learned counsels for the appellants thereafter relied on the
decision of the Ahmedabad Bench of the CESTAT and which too had
an occassion to deal with the issue of a perceived concession and its
negative impact on the right of an importer to assail a reassessment
made on the basis of NIDB data in AK Fashions vs. C.C.-Jamnagar
(Prev)23. The Bench after noticing the judgments rendered by different
Benches of the CESTAT including in Commr. of Customs vs. M/s
Hanuman Prasad & Sons24 and which is impugned before us,
Advanced Scan Support, Vikas Spinners and Guardian Plasticote Ltd.
vs. Commr. of Customs (Port)25 ultimately held as follows:
23
Final Order No. A/11104-11106/2023 dated 03 May 2023
24
Final Order No. 51584-51619/2020 dated 20 October 2020
25
2007 SCC OnLine CESTAT 772
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―2.6 Reliance has also been placed on the decision of Tribunal in the
case of Advance Scan Support -2015 (326) ELT 185 (Tri.-Del.),
wherein it has been held that once express consent to the value
proposed by the revenue has given and the appellant has consented
to waive SCN or personal hearing than it is not necessary for
revenue to establish the value any further. Reliance is also been
placed on the decision of Tribunal in the case of M/s. Vikas Spinners
reported at 2001 (128) ELT 143 (Tri.-Del.), wherein following has
been observed:
“In our view in the present appeal, the question of loading
of the appellants. This loading in the value was done in
consultation with Shri Gautam Sinha, the Representative
and Special Attorney of the appellants who even signed an
affirmation accepting the loaded value of the goods on the
back of the Bill of Entry dated 07.05.1999 having once
accepted the loaded value of the goods and paid duty
accordingly thereon without any protest or objection they
are legally stopped from taking somersault and to deny the
correctness of the same. There is nothing on record to
suggest that the loaded value was accepted by them only for
the purpose of clearance of the goods and that they
reserved their right to challenge the same subsequently.
They settled their duty liability once for all and paid the
duty amount on the loaded value of the goods. The ratio of
the law laid down by the Apex Court in Sounds N. Images.
(supra) is not at all attracted to the case of the appellants.
The benefit of this ratio could be taken by them only if they
had contested the loaded value at the time when it was
done, but not now after having voluntarily accepted the
correctness of loaded value of the goods as determined in
the presence of their Representative/ Special Attorney and
paid the duty thereon according.”
* Reliance was also placed on the decision of Tribunal in the case of
M/s. Gandian Plasticote Ltd.- 2008 (223) ELT 605 (tri.-Kol.)
wherein following has been observed:
“The learned Advocate also cited the decision of the
Tribunal in the case of M/s Vikas Spinners V. CC., Lucknow
2001 (128) ELT. 143 (Tri-Del) in support of his arguments.
We find that the said decision clearly holds that enhanced
value once settled and duty having been paid accordingly
without protest, importer is stopped from challenging the
same subsequently. It also hold that enhanced value
uncontested and voluntarily accepted, and accordingly
payment of duty made discharges the burden the
department to establish declared value to be incorrect. In
view of the fact that the Appellants in this case have not
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established that they had loaded any protest and as per
systems report clearly points to acceptance of the enhanced
value by them, the cited decision advances the cause of the
department rather than that of the Appellants contrary to
the claim by the learned Counsel.”
2.7. In the instant case, we notice that the appellant has replied to
the query of the Assessing officer in following terms:
―Value declared as per transaction price u/s 14(1) of
Customs Act 1962. You may load the value as per CVR
2007 on the basis of contemporaneous import of
identical/similar goods at your port. We agree to assess the
value as per group practice to save from demurrage and
detention charges.‖
From the above declaration it is apparent that the revised valuation
has been accepted under duress just in order to save detention
charge. It cannot be treated as a voluntary consent. In this
circumstances the right of appellant challenge the assessment cannot
be disputed. It is seen that the case law relied by the Commissioner
(Appeal) in the impugned order is only in respect of cases where
there was voluntary acceptance of the enhancements of value. The
said case laws cannot be applied to the facts of the case where there
is apparent protest. From the impugned order, it is noticed that it has
not examined the contemporaneous NIDB data, but relies solely on
various letters of different authorities, like directorate of valuation,
DRI or DC (SIIB). Such reports cannot be any basis of rejection of
declared value in terms of rule 12 of the Customs Valuation Rules,
2007. The rejection can only be done on the basis of data of
contemporaneous imports.‖
57. In view of the above, learned counsels for the appellants
contended that the respondent’s decision to enhance the declared values
lacked proper substantiation and relied exclusively on data from the
NIDB and which was insufficient to justify such enhancement.
Consequently, they sought the setting aside of the enhancement of the
declared values as it did not meet the standards of fairness or adequate
reasoning required in valuation matters.
IV. EVALUATION OF THE COURT
A. Declared values and the power of reappraisal
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58. Before we proceed to analyse Section 17 of the Act and its
application to the appeals before us, it would be pertinent to preface the
discussion by acknowledging the statutory position as it exists. An
entity intending to import goods is firstly required to self-assess the
duty which would be leviable. This obliges the importer to comply with
the prescriptions set out in Section 46 of the Act. As that provision
stands in its present avatar, the importer of any goods is required to
electronically present on the customs automated system, the BoE for
the consideration of the proper officer. The BoE is to include all
particulars required in terms of the provisions made in the Act and
corresponding rules. In addition to the presentation of a BoE, the
importer is also statutorily obliged to submit a declaration as to the
truthfulness of the contents of such BoE and in support thereof produce
before the proper officer the invoice and other documents relating to the
imported goods as may be prescribed. In terms of sub-section (4A) of
Section 46, the importer who presents a BoE is to ensure that the said
document is accurate and complete in respect of the information
disclosed therein, the authenticity and validity of documents filed in
support thereof and the import itself being compliant with any
restriction or prohibition imposed in relation to those goods by law.
59. Upon the proper officer being satisfied that the goods entered for
home consumption are not prohibited and import duty has been paid, it
would pass an order permitting clearance of those goods for home
consumption. This flows from a reading of Section 47 of the Act. In
terms of Sections 48 and 49, an importer is also entitled to warehouse
the imported goods after the same have been unloaded at a customs
station or even transhipped within 30 days therefrom. The goods can
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thereafter remain in the warehouse pending clearance for removal.
60. Undisputedly, a self-assessed BoE which is submitted by an
importer, if accepted and endorsed by the proper officer, would be
deemed to have been duly assessed. This clearly flows from the manner
in which the word ‗assessment’ has been defined in Section 2(2) of the
Act and is in any case, an issue that is no longer res integra, bearing in
mind the decision of the Supreme Court rendered in the matter of ITC
Ltd. vs. CCE26 and where it was observed:
―29. The first question for consideration is whether in the case of
self-assessment without passing a speaking order, it can be termed to
be an order of self-assessment. It was urged on behalf of the assesses
that there is no application of mind and merely an endorsement is
made by the authorities concerned on the bill of entry which cannot
be said to be an order much less a speaking order.
xxxx xxxx xxxx
31. It is apparent from the aforesaid discussion that the endorsement
made on the bill of entry is an order of assessment. It cannot be said
that there is no order of assessment passed in such a case. When
there is no lis, speaking order is not required to be passed in ―across
the counter affair‖.
32. Coming to the procedure of assessment of duty as prevailed
before the amendment of the Act prior to the amendment made in
Section 17(1) by the Finance Act of 2011, the imported goods or
exported goods were required to be examined and tested by the
proper officer. After such examination, he had to make an assessment
of the duty, if any, leviable on these goods. Under sub-section (3) of
Section 17, the proper officer was authorised to require the importer,
exporter or any other person to produce any contract, broker’s note or
any other document as specified in the proviso and to furnish any
required information. Notwithstanding that the statements made in
the bill of entry relating thereto and the documents produced and the
information furnished under sub-section (3); but if it was found
subsequently on examination or testing of the goods or otherwise
that any statement in such bill of entry or document or any
information so furnished was not true, he could have proceeded to
reassess the duty. Where the assessment done under sub-section (2)
is contrary to the claim of the importer or exporter regarding
valuation of the goods, classification, exemption or concession,26
(2019) 17 SCC 46
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speaking order shall be passed within 15 days from the date of
assessment of the bill of entry or the shipping bill as the case may be
as provided in Section 17(5).
33. Under the provisions of Section 17 as amended by the Finance
Act of 2011, Section 17(1) has provided to self-assess the duty, if
any, leviable on such goods by importer or exporter, as the case may
be. Self-assessment is an assessment as per the amended definition
of Section 2(2). It is further provided that proper officer may verify
the self-assessment of such goods, and for this purpose, examine or
test any imported goods or exported goods or such part thereof as
may be necessary. The power to verify self-assessment lies with the
proper officer and for that purpose under Section 17(3), he may
require the importer, exporter or any other person to produce such
document and furnish such information, etc. If the proper officer on
verification has found on examination or testing of the goods or as
part thereof or otherwise that the self-assessment is not done
correctly, the proper officer may, without prejudice to any other
action which may be taken under the Act, may proceed to reassess
the duty leviable on such goods. Section 17(5) of the Act as amended
provides that where reassessment done under Section 17(4) is
contrary to the assessment done by the importer or exporter
regarding the matters specified therein, the proper officer has to pass
a speaking order on the reassessment, within 15 days from the date
of reassessment of the bill of entry or the shipping bill, as the case
may be. The Explanation to amended Section 17 has clarified that
import or export before the amendment by the Finance Act, 2011
shall be governed by the unamended provisions of Section 17.
xxxx xxxx xxxx
43. As the order of self-assessment is nonetheless an assessment
order passed under the Act, obviously it would be appealable by any
person aggrieved thereby. The expression ―Any person‖ is of wider
amplitude. The Revenue, as well as the assessee, can also prefer an
appeal aggrieved by an order of assessment. It is not only the order
of reassessment which is appealable but the provisions of Section
128 make appealable any decision or order under the Act including
that of self-assessment. The order of self-assessment is an order of
assessment as per Section 2(2), as such, it is appealable in case any
person is aggrieved by it. There is a specific provision made in
Section 17 to pass a reasoned/speaking order in the situation in case
on verification, self-assessment is not found to be satisfactory, an
order of reassessment has to be passed under Section 17(4). Section
128 has not provided for an appeal against a speaking order but
against ―any order‖ which is of wide amplitude. The reasoning
employed by the High Court is that since there is no lis, no speaking
order is passed, as such an appeal would not lie, is not sustainable in
law, is contrary to what has been held by this Court
in Escorts [Escorts Ltd. v. Union of India, 1994 Supp (3) SCC 86] .
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44. The provisions under Section 27 cannot be invoked in the
absence of amendment or modification having been made in the bill
of entry on the basis of which self-assessment has been made. In
other words, the order of self-assessment is required to be followed
unless modified before the claim for refund is entertained under
Section 27. The refund proceedings are in the nature of execution for
refunding amount. It is not assessment or reassessment proceedings
at all. Apart from that, there are other conditions which are to be
satisfied for claiming exemption, as provided in the exemption
notification. Existence of those exigencies is also to be proved which
cannot be adjudicated within the scope of provisions as to refund.
While processing a refund application, reassessment is not permitted
nor conditions of exemption can be adjudicated. Reassessment is
permitted only under Sections 17(3), (4) and (5) of the amended
provisions. Similar was the position prior to the amendment. It will
virtually amount to an order of assessment or reassessment in case
the Assistant Commissioner or Deputy Commissioner of Customs
while dealing with refund application is permitted to adjudicate upon
the entire issue which cannot be done in the ken of the refund
provisions under Section 27. In Hero Cycles Ltd. v. Union of
India [Hero Cycles Ltd. v. Union of India, 2009 SCC OnLine Bom
801 : (2009) 240 ELT 490 (Bom)] though the High Court interfered
to direct the entertainment of refund application of the duty paid
under the mistake of law. However, it was observed that amendment
to the original order of assessment is necessary as the relief for a
refund of claim is not available as held by this Court in Priya Blue
Industries Ltd. [Priya Blue Industries Ltd. v. Commr. of Customs,
(2005) 10 SCC 433 : (2004) 172 ELT 145]‖
61. By virtue of sub-section (2) of Section 17, the proper officer is
empowered to verify the disclosures made and embodied in the BoE
and for that purpose also entitled to examine or test any imported
goods. In terms of the Proviso which came to be inserted in Section
17(2) by the Finance Act, 2018, the selection of cases for verification
can be accomplished on the basis of risk evaluation criteria that may
have been adopted. Section 17(3) then postulates that the proper officer
for purposes of verification is statutorily empowered to require the
importer to produce such further document or information which may
be appropriate and germane to the issue of duty liable to be paid on the
imported goods. It is only when the proper officer in the course of
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verification, examination or testing of goods comes to form the opinion
that the self-assessment was not done correctly that the power to
reassess duty is triggered. Sub-section (5) of Section 17 then proceeds
further to stipulate that where a reassessment undertaken in terms
contemplated under sub-section (4) is at variance with the self-
assessment undertaken by the importer, unless such a reassessment is
accepted by the importer in writing, the proper officer would be obliged
to pass a speaking order in support of the reassessment.
62. Prior to the amendments that were made in Section 17 by the
Finance Act, 2018, the proper officer also stood conferred under sub-
section (6) with the authority to undertake an audit with respect to the
assessment of duty on imported goods even in a case where a
reassessment may not have been undertaken or a speaking order not
passed. Sub-section (6), however, came to be deleted by Finance Act,
2018 and which also introduced a power of audit independently and
which now stands encompassed in Section 99A of the Act. Of critical
significance are sub-sections (4) and (5) of Section 17 and which we
propose to notice hereinafter.
63. As we read sub-section (4), it is manifest that before the proper
officer commences the process of reassessment, it must come to form
an opinion that basis the verification, examination or testing of goods
mentioned in the self-assessed declarations as submitted by the
importer, are incorrect. It is only on the formation of that opinion that it
proceeds to reassess the duty leviable on the imported goods. It is thus
evident that before the procedure as contemplated under sub-section (5)
is undergone, the proper officer would have come to form a prima facie
opinion that the self-assessed declaration is incorrect. It is this
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preliminary formation of opinion that forms the basis for the process of
reassessment being commenced. The reasons for reassessment as well
as the opinion formed under sub-section (4) thus constitutes the
foundation for further action that may be taken by the proper officer
under sub-section (5). The formation of opinion contemplated under
Section 17(4), however, is neither unguided nor left totally unregulated.
64. That formation of opinion is guided by the 2007 Rules. Rule 3
postulates that the value of imported goods shall be the transaction
value adjusted in accordance with Rule 10. In terms of Rule 3(2), the
value of imported goods as declared is liable to be accepted subject to
the Proviso and which regulates the exercise of power by the proper
officer. Rule 3(3) then deals with contingencies where the buyer and
seller are related parties. Here too, that rule prescribes that a transaction
value shall be accepted subject to examination of the circumstances
surrounding the sale of the imported goods being found not to have
been influenced by the relationship of parties. This underlying principle
in respect of sale between related parties is then further amplified by
clause (b) of Rule 3(3) and which states that the transaction value shall
be accepted in cases where the importer is able to demonstrate that the
declared value of the goods ―closely approximates to‖ the transaction
value, the deductive value or the computed value of identical or similar
goods.
65. The subject of transaction value is then regulated by Rules 4 and
5. The 2007 Rules also provision for contingencies where the value of
imported goods cannot be determined under the provisions of Rules 3,
4 and 5 under Rule 6. If the proper officer thus comes to the conclusion
that the transaction value of imported goods is not determinable under
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the aforenoted provisions, it stands empowered to firstly invoke Rule 7
and which is concerned with deductive value and failing even that
method being applicable, to proceed further in terms of Rule 8 and
which deals with computed value. Rule 9 enshrines the residual
method, and which would be triggered in case the value of imported
goods is found to be incapable of being determined in accordance with
the methods prescribed by the preceding rules.
66. However, of significance is the prefatory part of Rule 3 and
which commences by using the phrase ―Subject to rule 12…‖. It is Rule
12 which thus becomes the pivotal provision in the scheme of
reassessment, and which regulates the power vested in the proper
officer to reject declared value. Rule 12 throws light on the
contingencies and situations in which the proper officer would be
justified in rejecting the value of imported articles as declared. It
provides in unequivocal terms that an exercise of reassessment would
be predicated upon the proper officer having reasonable doubt as to the
truthfulness or accuracy of the value as declared in relation to the
imported goods. The sine qua non for commencement of reassessment,
therefore, is the existence of reasonable doubt as to the declaration as
made by the importer. What we seek to emphasise is that it is the
formation of this opinion that forms the bedrock for the proper officer
treading down the path constructed by Section 17(4) of the Act.
67. In terms of Rule 12, upon the proper officer having formed a
reasonable doubt with respect to the truthfulness and accuracy of the
declarations made, it would call upon the importer to furnish such
further information, documentation and evidence in support of the
declaration as made. It is only if, after receipt of such information, the
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proper officer still harbours a reasonable doubt about the truthfulness or
accuracy of the value declarations made that it would come to hold that
the transaction value cannot be determined in terms envisaged by Rule
3. The doubt which lingers and clouds the declaration made by the
importer even after the submission of further documentation and
evidence and consideration thereof triggers a deeming fiction
incorporated in Rule 12(1) and which bids us to assume that upon
formation of that opinion, the transaction value is liable to be rejected
and despite the importance conferred thereon by Rule 3, the proper
officer then undertaking a determination of the duty leviable.
68. Of equal significance are the provisions contained in Rule 12(2).
As is manifest from a reading of that provision, the proper officer is
liable, at the request of the importer, to intimate them in writing the
grounds on the basis of which it had come to doubt the truthfulness or
accuracy of the declarations as made. It also obliges the proper officer
to provide a reasonable opportunity for the importer to be heard as well
as to represent before a final decision is taken in terms of Rule 12(1).
Thus, it is evident that before the legal fiction kicks into play and as
envisaged in Rule 12(1), there would be in existence a record of the
reasons which would have weighed upon the proper officer to come to
the conclusion that the value declarations as made by the importer are
incorrect.
69. A conjoint reading of Section 17(4) alongside Rule 12 thus
reinforces our conclusion that reasons in support of the formation of
opinion that the self-assessment declarations are incorrect must exist
and stand duly recorded. Before one would proceed to evaluate the
portend of Section 17(5), it would be expected that the basis for
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rejecting the transaction value as declared is informed by cogent
reasons which support the formation of opinion. The statute has
incorporated salutary provisions of guidance even in this respect and
has thus ensured that even this discretion which is placed in the hands
of the proper officer is not left unguided or unregulated. This becomes
further evident from the Explanation which stands inserted in Rule
12(2) and which in clause (i) in mandatory terms places the proper
officer on caution and requires it to bear in mind that Rule 12 is not
liable to be construed as embodying a method for determination of
value but laying in place the mechanism and procedure for rejection of
declarations made in cases where it were to reasonably doubt and form
the opinion that the value as declared does not represent the accurate
transaction value.
70. The proper officer is further cautioned by virtue of clause (ii) of
the Explanation when it provides that the declared value shall be
accepted and a final decision in respect of assessment taken only after
the completion of an inquiry undertaken by the proper officer in
consultation with the importer. Clause (iii) thereafter spells out the
factors which would be pertinent and germane for the customs authority
raising a doubt with respect to the truthfulness and accuracy of the
declarations made. Those factors are the following:
―(a) the significantly higher value at which identical or similar goods
imported at or about the same time in comparable quantities in a
comparable commercial transaction were assessed;
(b) the sale involves an abnormal discount or abnormal reduction
from the ordinary competitive price;
(c) the sale involves special discounts limited to exclusive agents;
(d) the misdeclaration of goods in parameters such as description,
quality, quantity, country of origin, year of manufacture or
production;
(e) the non declaration of parameters such as brand, grade,
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specifications that have relevance to value;
(f) the fraudulent or manipulated documents.‖
71. On an overall consideration of the statutory scheme governing
the valuation of imports and reassessment, it becomes clear that the
reasonable doubt which is spoken of in Rule 12 is indelibly connected
to the aspect of the valuation of imported goods and the identification
of the transaction value which is spoken of in Section 14. Section 14
introduces a deeming fiction when it provides that the value of the
imported goods ―shall be the transaction value‖ and which is ordained
to be the price actually paid or is payable for the goods when sold. The
2007 Rules themselves owe their genesis to the identification of
transaction value and which subject is principally regulated by Section
14 of the Act.
72. As was noticed by us in the preceding paragraphs and becomes
evident from our understanding of the statutory scheme, the doubt that
may be harboured by the proper officer is not left to its whims or
caprices. The reasonable doubt which could be harboured would have
to necessarily be informed by the factors enumerated in sub-clauses (a)
to (f) as spelt out in the Explanation to Rule 12(2) and could also
include such other factors which may be considered as germane and
relevant for the purposes of identifying the correctness and accuracy of
the declared value. A reading of sub-clauses (a) to (f) sheds light on the
factors which could be said to be relevant and may weigh upon the
proper officer to raise a doubt as to the declared value. The factors so
enumerated are themselves hinged on empirical standards and
circumstances and which thus undoubtedly convince us to hold that the
doubt with respect to truth and accuracy of declared value cannot be the
outcome of an uncanalised or capricious exercise of power.
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73. A combined reading of Section 17 alongside Rule 12 would
establish that the enquiry by the proper officer is essentially two-tiered.
The first stage comprises of the proper officer forming the opinion that
the declared value is liable to be reviewed, basis reasonable doubt being
harboured with respect to its truthfulness or accuracy. Upon arriving at
that preliminary conclusion, the proper officer is obliged to convey
their opinion to the importer and elicit further information and
documents to aid and assist it in the adjudicatory process. It is at this
stage that the importer is entitled to call upon the proper officer to
provide the grounds for doubting the declared value in writing so as to
enable it to respond. The obligation to supply the reasons and to
provide a reasonable opportunity of representation to the importer is
clearly mandatory in light of the language employed by Rule 12(2) and
which uses the phrase ―…before taking a final decision under sub-rule
(1)‖. If the doubt persists even after consideration of the response as
submitted by the importer or where it fails to respond to the notice
issued, the proper officer would proceed to record its decision that the
value of the goods cannot be determined in accordance with Rule 3(1).
This constitutes the second tier of the adjudicatory process. Thus, it is
evident that it is only after the response of the importer has been
considered and the proper officer finds no justification to deviate from
the initial opinion which was formed that the process of determination
of the true transactional value would commence. This is in light of Rule
12(1) providing that if the proper officer ―still has reasonable doubt
about the truth or accuracy of the value so declared‖ and the deeming
fiction of valuation under Rule 3(1) coming into play.
74. Both Section 17 as well as Rule 12, in our considered opinion,
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are liable to be interpreted as mandatorily requiring the reasons in
support of the ―reason to doubt‖ existing on the record of the proper
officer. Construed in any other manner would lead to arbitrary
consequences since it could result in the proper officer not even
documenting the grounds on which it came to doubt the declared value
in the first instance. Reasons, as is well settled, are a harbinger of the
constitutional requirement of fairness which must imbue every
decision-making process. This obligation, indisputably, flows from the
overarching requirements of Article 14 of the Constitution itself. The
consent or concession of the importer and on which much emphasis
was laid by the respondents cannot possibly be construed as relieving
the proper officer from documenting the reasons which formed the
basis for it doubting the declared value. The statutory provisions, if
interpreted in any other manner, would lead to pernicious consequences
with it becoming well neigh impossible to adjudge whether the decision
of the proper officer was fair, reasonable and valid in law. It would also
deprive courts of the power to effectively discharge their constitutional
obligation of judicial review itself. The consequence of accepting the
line as canvassed by the respondents in this respect would not only
result in it being possible for the proper officer to conjure up any
ground in support of its original decision to reject the declared value
subsequently, but it would also permanently deprive the importer of the
right to question and challenge that decision.
75. The imperative of reasons being recorded in support of the doubt
with respect to declared value and the same being communicated to the
importer were aspects on which due emphasis was laid by the Supreme
Court in Century Metal Recycling as is evident from a reading of para
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25 of the report. In fact, the Supreme Court pertinently observed that
the aforenoted mandate of Rule 12(2) cannot be ―ignored or waived‖.
The statutory obligations flowing from Rule 12 in this regard were re-
emphasized by the Supreme Court in that decision when their
Lordships observed that the same would constitute the only manner in
which the proper officer could proceed to make an assessment under
Rules 4 to 9.The interplay between Sections 14 and 17, and the 2007
Rules was lucidly explained by the Supreme Court in Century Metal
Recycling and where the Supreme Court was faced with a somewhat
similar situation of an appellant who alleged that they had been coerced
and intimidated into submitting a letter of consent conceding to the
assessment and valuation exercise undertaken by the customs
authorities compelled by the delay being caused in the clearance of
imported articles and the continued levy of demurrage, warehousing
charges and other liabilities. After noticing the language in which Rule
12 stood couched, the Supreme Court in Century Metal Recycling
observed that while the expression ―reason to doubt‖ may not be akin
to a ―reason to believe‖ or a subjective satisfaction being arrived at, it
would clearly have to be reasonable and thus the doubt formed would
have to be informed by a degree of objectivity.
76. The Supreme Court held that reasonable doubt on the basis of the
factors enumerated in the Explanation to Rule 12(2) and sub-clauses (a)
to (f) thereof, though not exhaustive, would shed light on the factors
which the statute considers to be pertinent for the formation of a doubt
with respect to the declared value. It then proceeded to observe that in
terms of Rule 12(2), it would be incumbent upon the proper officer to
intimate the importer, when requested, the grounds on the basis of
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which it had a reason to doubt the truth or accuracy of the declared
value of the imported goods in writing. It more significantly held that
the doubt that may be harboured cannot be based on factors which are
based merely on perception and not founded on material existing on the
record of the proper officer. It further pertinently observed that
reasonable doubt cannot be equated to mere suspicion or distrust with
respect to the value as declared.
77. For the purposes of evaluating the challenge which stands raised
in this batch and the submissions which were advanced before us, of
critical significance is the observation of the Supreme Court when it
held that the aforenoted mandate of Rule 12(2) can neither be ignored
nor waived. The Supreme Court thus found that upon such a request
being made, a statutory obligation stands cast on the proper officer to
intimate the importer in writing the grounds on which the doubt is
founded. It also held that although in terms of Rule 12, while there may
not be a statutory mandate to record reasons at the second stage of the
enquiry, the same must necessarily be read into those statutory
provisions. Importantly, it also deprecated the insistence of customs
authorities compelling importers to ―disclaim and forego‖ the statutory
right which the Act confers.
78. The key takeaways from the decision in Century Metal Recycling
would thus be the reasonable doubt being based on empirical and
legally justifiable factors illustratively spelt out in Rule 12, the mandate
to record reasons in support of the formation of that opinion and the
mandatory requirement of communicating that material to the importer
upon request. This becomes evident from a reading of the following
passages of Century Metal Recycling:
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―14. Rule 12, which as noticed above enjoys primacy and pivotal
position, applies where the proper officer has reason to doubt the
truth or accuracy of the value declared for the imported goods. It
envisages a two-step verification and examination exercise. At the
first instance, the proper officer must ask and call upon the importer
to furnish further information including documents to justify the
declared transactional value. The proper officer may thereafter
accept the transactional value as declared. However, where the
proper officer is not satisfied and has reasonable doubt about the
truth or accuracy of the value so declared, it is deemed that the
transactional value of such imported goods cannot be determined
under the provision of sub-rule (1) of Rule 3 of the 2007 Rules.
Clause (iii) of Explanation to Rule 12 states that the proper officer
can on ―certain reasons‖ raise doubts about the truth or accuracy of
declared value. ―Certain reasons‖ would include conditions specified
in clauses (a) to (f) i.e. higher value of identical similar goods of
comparable quantities in a comparable transaction, abnormal
discount or abnormal deduction from ordinary competitive prices,
sales involving the special prices, misdeclaration on parameters such
as description, quality, quantity, country of origin, year of
manufacture or production, non-declaration of parameters such as
brand and grade, etc. and fraudulent or manipulated documents.
Grounds mentioned in (a) to (f) however are not exhaustive of
―certain reasons‖ to raise doubt about the truth or accuracy of the
declared value. Clause (ii) to Explanation states that the declared
value shall be accepted where the proper officer is satisfied about the
truth and accuracy of the declared value after enquiry in consultation
with the importers. Clause (i) to the Explanation states that Rule 12
does not provide a method of determination of value but provides the
procedure or mechanism in cases where declared value can be
rejected when there is a reasonable doubt that the declared
transaction value does not represent the actual transaction value. In
such cases the transaction value is to be sequentially determined in
accordance with Rules 4 to 9 of the 2007 Rules.
15. 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).
16. The requirements of Rule 12, therefore, can be summarised as
under:
16.1. 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.
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16.2. Proper officer must ask the importer of such goods further
information which may include documents or evidence.
16.3. 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.
16.4. When the proper officer does not have reasonable doubt, the
goods are cleared on the declared value.
16.5. 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.
16.6. 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 sub-clauses (a) to (f) in clause (iii) of the
Explanation.
16.7. 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.
16.8. 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.
17. 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
the Explanation appended to Rule 12 which sets out some of the
conditions when the ―reason to doubt‖ exists. The instances
mentioned in sub-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.
18. 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 precondition 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 uncertainty and
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irresolution reflecting suspicion and apprehension. However, this
doubt must be reasonable i.e. have a degree of objectivity and
basis/foundation for the suspicion must be based on ―certain
reasons‖.
19. The expression ―proof beyond reasonable doubt‖ in criminal law
requires the prosecution to establish guilt and secure conviction of
the accused by proving the charge ―beyond reasonable doubt‖.
In Ramakant Rai v. Madan Rai [Ramakant Rai v. Madan Rai, (2003)
12 SCC 395 : 2004 SCC (Cri) Supp 445] referring to the expression
―reasonable doubt‖ in criminal law it was held as under : (SCC p.
405, para 24)
―24. Doubts would be called reasonable if they are free from a zest
for abstract speculation. Law cannot afford any favourite other than
the truth. To constitute reasonable doubt, it must be free from an
overemotional response. Doubts must be actual and substantial
doubts as to the guilt of the accused persons arising from the
evidence, or from the lack of it, as opposed to mere vague
apprehensions. A reasonable doubt is not an imaginary, trivial or a
merely possible doubt; but a fair doubt based upon reason and
common sense. It must grow out of the evidence in the case.‖
20. Proof beyond ―reasonable doubt‖ is certainly not the requirement
under the 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 the Explanation to
the 2007 Rules, the doubt must be reasonable and based on ―certain
reasons‖. The proper officer must record ―certain reasons‖ specified
in sub-clauses (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
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perception not founded on reasonable and ―certain‖ material. It
should be based and predicated on grounds and material in the form
of ―certain reasons‖ and not mere ipse dixit. Subjecting imports to
detailed enquiry on mere suspicion because one is distrustful and
unsure without reasonable and certain reasons would be contrary to
the scheme and purpose behind the provisions which ensure quick
and expeditious clearance of imported goods.
xxxx xxxx xxxx
25. 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.
26. 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.
xxxx xxxx xxxx
28. 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
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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 Sanjivani Non-Ferrous
Trading (P) Ltd. [CCE v. Sanjivani Non-Ferrous Trading (P) Ltd.,
(2019) 2 SCC 378] 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.
29. 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 7-4-2017 can be sustained and
upheld. It is set aside and quashed.
30. 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 goods concerned 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 reason‖
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 Plastics (P) Ltd. v. Union
of India [Varsha Plastics (P) Ltd. v. Union of India, (2009) 3 SCC
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365] .]‖
79. The statutory scheme which emerges from the aforesaid
discussion could be summarised in the following words. Although the
procedure for verification and ascertainment of the correctness of the
declared value has been lucidly explained by the Supreme Court in
Century Metal Recycling, we would for purposes of clarity break down
that process in order to highlight the sequential steps which are
contemplated thereunder. Undisputedly, Section 17(2) empowers the
proper officer to verify the entries made in the self-assessed
declarations. For the purposes of undertaking that verification exercise,
the proper officer by virtue of sub-section (3) of Section 17 stands
statutorily enabled to require the importer or any other person to
produce documents and information so as to ascertain the correctness of
the declarations made. It is only after the completion of that verification
process and when the proper officer comes to conclude that the self-
assessment has not been done correctly that it would proceed to
reassess the duty leviable on the imported goods. This clearly flows
from a perusal of Section 17(4) of the Act.
80. The provisions contained in Rule 12(1) are in essence an
amalgam of the procedure prescribed and stipulated in sub-sections (3)
and (4) of Section 17. Rule 12(1) amplifies the position to the extent of
providing that it is only where a reasonable doubt continues to linger
even after consideration of the information that may have been obtained
from the importer or exporter in terms of sub-section (3) of section 17
that it would be deemed that the transaction value of those goods
cannot be determined in accordance with the provisions of Rule 3(1).
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81. Section 17(5) then proceeds further and constitutes the next
fundamental step which the statute constructs in respect of
reassessment. Shorn of unnecessary details, it prescribes that where the
reassessment done under Section 17(4) is at variance with the self-
assessment of the importer, the proper officer would proceed to pass a
speaking order in support of such reassessment. A combined reading of
sub-sections (4) and (5) of Section 17 thus leads one to the irresistible
conclusion that a reassessment, provisional or preliminary, would
already exist and would have been formulated prior to sub-section (5)
getting triggered.
82. It is also important to bear in mind that Rule 12(2) is essentially
concerned with the first limb of the reassessment exercise and is
connected with Section 17(4). This would clearly appeal to reason since
the information or documentation that may be elicited from the
importer would have to be concerned with the reasonable doubt which
the proper officer harbours and thus obliged to communicate to the
importer upon request the grounds on the basis of which it doubts the
truthfulness or accuracy of the value declared. It is also pertinent to
note that sub-section (4) of Section 17 is prefaced by the use of the
expression ―Where it is found on verification, examination or
testing…‖. It is this verification exercise which would necessarily entail
the importer being provided a reasonable opportunity to be heard before
a final decision is taken. It is perhaps in the aforesaid light that Century
Metal Recycling observed that neither the opportunity of questioning an
opinion with respect to reassessment as formed nor an opportunity of
hearing can be waived. In fact, it held that the aforesaid procedure
would clearly be mandatory.
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B. Exploring the concepts of abandonment and waiver
83. That then takes us to the concession which the importer could
tender and which would require us to identify the subject in respect of
which that concession may be made. When we examine this aspect on
the anvil of Section 17(5), it becomes apparent that the statute speaks of
the concession being with reference to the reassessment made under
Section 17(4). It thus proceeds to provide that in a case where the
importer confirms his acceptance of the reassessment in writing, the
proper officer would stand relieved of the obligation of passing a
speaking order in respect of such reassessment. In all other cases and
where the reassessment is not acceded to, the proper officer is obliged
to pass a speaking order. Thus, the waiver or concession is at best
confined to the speaking order which the proper officer is obliged to
frame in affirmation of the provisional opinion that it may have formed
under Section 17(4).
84. We find ourselves unable to construe Rule 12(2) as
contemplating any concession or waiver at least in explicit terms. All
that Rule 12(2) stipulates is that the proper officer would intimate to the
importer the grounds for doubting the declared value at its request. It is
in the aforesaid context that we would thus have to adjudge whether the
CESTAT was correct in holding that the exchange of communications
amounted to a waiver or abandonment not just of the right to question
and assail the reassessment but to impugn it in further proceedings in
accordance with the procedure prescribed under the Act.
85. In our considered opinion, the perceived concession made in
respect of the opinion harboured by the proper officer cannot possibly
be interpreted or construed as detracting from or depriving the importer
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of the right to question the decision of the proper officer in accordance
with law. The right to question the correctness of the decision of the
proper officer, be it with respect to the formation of opinion or even on
merits, is one which is protected by statute. The question, which as a
sequitur, arises is whether that right itself can be said to have been
abandoned.
86. Way back in 1952, the Supreme Court in Sha Mulchand & Co.
Ltd. vs. Jawahar Mills Ltd.27 explained the concepts of abandonment
and waiver succinctly in the following terms:
―12. The appeal court, it will be observed, reversed the decision of
the trial Judge and decided the appeal against the Company on two
grounds only, namely, (1) that the Company had by the conduct of
its two members abandoned its right to challenge the forfeiture; and
(2) that the form of the order could not be supported as one validly
made under Section 38 of the Companies Act. The learned Attorney
General, appearing in support of this appeal, has assailed the
soundness of both these grounds. The learned Attorney General
contends, not without considerable force, that having, in agreement
with the trial court, held that no plea of acquiescence, waiver or
estoppel had been established in this case, the appeal court should
not have allowed the Mills to raise the question of abandonment of
right by the Company, inasmuch as no such plea of abandonment
had been raised either in the Mills’ affidavit in opposition to the
Company’s application or in the Mills, grounds of appeal before the
High Court. Apart from this, the appeal court permitted the Mills to
make out a plea of abandonment of right by the Company as distinct
from the pleas of waiver, acquiescence and estoppel and sought to
derive support for this new plea from the well-known cases
of Prendergast v. Turton [Prendergast v. Turton, (1841) 1 Y & C Ch
Cas 98 : 62 ER 807] , Clarke & Chapman v. Hart [Clarke &
Chapman v. Hart, (1858) 6 HL Cas 633 : 10 ER 1443]
and Jones v. North Vancouver Land & Improvement
Co. [Jones v. North Vancouver Land & Improvement Co., 1910 AC
317 (PC)] A perusal of the relevant facts set out in the several reports
and the respective judgments in the above cases will clearly indicate
that apart from the fact that some of them related to collieries which
were treated on a special footing, those cases were really cases
relating to waiver or acquiescence or estoppel. Indeed in Clarke
case [Clarke & Chapman v. Hart, (1858) 6 HL Cas 633 : 10 ER
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1443] while Lord Chelmsford referred to the decision in Prendergast
case [Prendergast v. Turton, (1841) 1 Y & C Ch Cas 98 : 62 ER
807] as a case of abandonment of right, Lord Wensleydale read it as
an instance of acquiescence and estoppel. Unilateral act or conduct
of a person, that is to say act or conduct of one person which is not
relied upon by another person to his detriment, is nothing more than
mere waiver, acquiescence or laches, while act or conduct of a
person amounting to an abandonment of his right and inducing
another person to change his position to his detriment certainly raises
the bar of estoppel. Therefore, it is not intelligible how, having held
that no plea of waiver, acquiescence or estoppel had been established
in this case, the appeal court could, nevertheless, proceed to give
relief to the Mills on the plea of abandonment by the Company of its
rights. If the facts on record were not sufficient to sustain the plea of
waiver, acquiescence or estoppel, as held by both the courts, we are
unable to see how a plea of abandonment of right which is an
aggravated form of waiver, acquiescence or laches and akin to
estoppel could be sustained on the self-same facts. Further, whatever
be the effect of mere waiver, acquiescence or laches on the part of a
person on his claim to equitable remedy to enforce his rights under
an executory contract, it is quite clear, on the authorities, that mere
waiver, acquiescence or laches which does not amount to an
abandonment of his right or to an estoppel against him cannot
disentitle that person from claiming relief in equity in respect of his
executed and not merely executory interest. (See per Lord
Chelmsford in Clarke case [Clarke & Chapman v. Hart, (1858) 6
HL Cas 633 : 10 ER 1443] at p. 657.) Indeed, it has been held
in Garden Gully United Quartz Mining Co. v. McLister [Garden
Gully United Quartz Mining Co. v. McLister, (1875) 1 AC 39 (PC)]
that mere laches does not disentitle the holder of shares to equitable
relief against an invalid declaration of forfeiture. Sir Barnes Peacock
in delivering the judgment of the Privy Council observed at AC pp.
56-57 as follows:
―There is no evidence sufficient to induce their Lordships to
hold that the conduct of the plaintiff did amount to an
abandonment of his shares, or of his interest therein, or estop
him from averring that he continued to be the proprietor of
them. There certainly is no evidence to justify such a
conclusion with regard to his conduct subsequent to the
advertisement of 30-5-1869. In this case, as in that
of Prendergast v. Turton [Prendergast v. Turton, (1841) 1 Y
& C Ch Cas 98 : 62 ER 807] , the plaintiff’s interest was
executed. In other words, he had a legal interest in his shares,
and did not require a declaration of trust or the assistance of a
court of equity to create in him an interest in them. Mere
laches would not, therefore, disentitle him to equitable relief
: Clarke & Chapman v. Hart [Clarke & Chapman v. Hart,
(1858) 6 HL Cas 633 : 10 ER 1443] . It was upon the ground
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of abandonment, and not upon that of mere laches,
that Prendergast v. Turton [Prendergast v. Turton, (1841) 1 Y
& C Ch Cas 98 : 62 ER 807] was decided.‖
13. Two things are thus clear, namely, (1) that abandonment of right
is much more than mere waiver, acquiescence or laches and is
something akin to estoppel if not estoppel itself; and (2) that mere
waiver, acquiescence or laches which is short of abandonment of
right or estoppel does not disentitle the holder of shares who has a
vested interest in the shares from challenging the validity of the
purported forfeiture of those shares. In view of the decision of the
courts below that no case of waiver, acquiescence, laches or estoppel
has been established in this case it is impossible to hold that the
principles deducible from the judicial decisions relied upon by the
appeal court have disentitled the Company to relief in this case. The
matter does not rest even here. Assuming, but not conceding, that the
principle of piercing the veil of corporate personality referred to
in Smith, Stone & Knight Ltd. v. Birmingham Corpn. [Smith, Stone
& Knight Ltd. v. Birmingham Corpn., (1939) 4 All ER 116 (KB)]
can at all be applied to the facts of the present case so as to enable
the Court to impute the acts or conduct of Govindaraju Chettiar and
Sundara Ayyar to the Company, we have yet to inquire whether
those acts or conduct do establish such abandonment of rights as
would, according to the decisions, disentitle the plaintiff from
questioning the validity of the purported declaration of forfeiture.
There can be no question that the abandonment, if any, must be
inferred from acts or conduct of the Company as such or, on the
above principles, of its two members subsequent to the date of the
forfeiture, for it is the right to challenge the forfeiture that is said to
have been abandoned. In order to give rise to an estoppel against the
Company, such acts or conduct amounting to abandonment must be
anterior to the Mills’ changing its position to its detriment. The
resolution for forfeiture was passed on 5-9-1941. The five thousand
forfeited shares were allotted to 14 persons on 16-11-1941, and it is
such allotment that made it impossible for the Mills to give them
back to the Company. In order, therefore, to sustain a plea of
abandonment of right or estoppel, it must be shown that the
Company or either of its two members had done some act and/or had
been guilty of some conduct between 5-9-1941 and 16-11-1941. No
such act or conduct during such period has been or can be pointed
out. On being pressed advocate for the Mills refers us to the conduct
of Sundara Ayyar in opposing OP No. 10 of 1942 filed by the Mills
and OP No. 11 of 1942 by the Income Tax Authorities for restoring
the Company to the register of companies and it is submitted that
such conduct indicates that Sundara Ayyar had accepted the validity
of the forfeiture. This was long after the Mills had reallotted the
forfeited shares. Further, a perusal of Para 9 of the affidavit in
opposition filed by Sundara Ayyar in OP No. 10 of 1942 will clearly
show that he not only did not accept the forfeiture as valid but
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actually repudiated such forfeiture as wholly beyond the competence
of the Board of Directors of the Mills. The reason for opposing the
restoration of the Company may well have been that Sundara Ayyar
desired, at all cost, to avoid his eventual personal liability as a
shareholder and Director of the Company. In any case, Sundara
Ayyar did make it clear that he challenged the validity of the
purported forfeiture of shares by the Mills and in this respect this
case falls clearly within the decision in Clarke case [Clarke &
Chapman v. Hart, (1858) 6 HL Cas 633 : 10 ER 1443] relied upon
by the appeal court. The only other conduct of Sundara Ayyar relied
on by the learned advocate for the Mills in support of the appeal
court’s decision on this point is that Sundara Ayyar proceeded with
his suit against Palaniappa Chettiar even after his suit as well as his
appeal had been dismissed as against the Mills. In that suit Sundara
Ayyar sued the Mills as well as Govindaraju Chettiar and the
Official Receiver of Salem representing the latter’s estate and
Palaniappa Chettiar. In the plaint itself the validity of the forfeiture
was challenged. The claim against Palaniappa Chettiar was in the
alternative and it was founded on the agreement of 30-6-1939. The
suit was dismissed as against the Mills only on the technical ground
that Sundara Ayyar had no locus standi to maintain the suit. The
contention of the Company that the forfeiture was invalid and the
claim for rectification of the share register of the Mills by restoring
the name of the Company cannot possibly have been affected by this
decision. Sundara Ayyar’s claim against Palaniappa Chettiar was
based on the agreement of 1939 and it was formulated as an
alternative personal claim. In view of the clear allegation in the
plaint that the forfeiture was invalid and not binding on the
Company, the continuation of the suit by Sundara Ayyar to enforce
his personal claim against Palaniappa Chettiar cannot be regarded as
an abandonment by Sundara Ayyar of the right of the Company. It
must not be overlooked that the Company stood dissolved on that
date and Sundara Ayyar had no authority to do anything on behalf of
the Company. In our opinion, there is no evidence of abandonment
of the Company’s right to challenge the validity of the purported
forfeiture.‖
87. In Sha Mulchand & Co., the Supreme Court was essentially
called upon to answer the question of whether the conduct of two
members of the company could be viewed as an abandonment of its
right to challenge the forfeiture of shares. Ruling on that question, the
Supreme Court explained that abandonment must and would have to be
more than mere waiver, acquiescence, or laches. It proceeded further to
significantly observe that a mere waiver, acquiescence, or laches which
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falls short of abandonment of the right itself would not disentitle the
aggrieved party to question the forfeiture.
88. In a concurring opinion which was penned by Vivian Bose J., the
concept of waiver was explained as follows:
―22. In the first place, waiver and abandonment are in their primary
context unilateral acts. Waiver is the intentional relinquishment of a
right or privilege. Abandonment is the voluntary giving up of one’s
rights and privileges or interest in property with the intention of never
claiming them again. But except where statutory or other limitations
intervene, unilateral acts never in themselves effect a change in legal
status because it is fundamental that a man cannot by his unilateral
action affect the rights and interests of another except on the basis of
statutory or other authority. Rights and obligations are normally
intertwined and a man cannot by abandonment per se of his rights and
interests thereby rid himself of his own obligations or impose them on
another. Thus, there can be no abandonment of a tenancy except on
statutory grounds (as, for example, in the Central Provinces Tenancy
Act, 1920) unless there is acceptance, express or implied, by the other
side. It may, for example in a case of tenancy, be to the landlord’s
interest to keep the tenancy alive; and so also in the case of shares of a
company. It may be to the interests of the company and the general
body of shareholders to refrain from forfeiture if, for example, the
value of unpaid calls exceeds the market value of the shares. Such a
position was envisaged in Garden Gully United Quartz Mining
Co. v. McLister [Garden Gully United Quartz Mining Co. v. McLister,
(1875) 1 AC 39 at p. 57 (PC)] . So also with waiver. A long catena of
illustrative cases will be found collected in B.B. Mitra’s Indian
Limitation Act, 13th Edn., pp. 447 and 448.‖
89. The question of abandonment arose for consideration again
before a Constitution Bench of the Supreme Court in Bhau Ram vs.
Baij Nath Singh28. The issue itself arose in light of the stand of the
respondents that the appellants upon withdrawing the pre-emption price
would be deemed to have accepted the decree and thus being deprived
of the right to assail or question the same. While answering that
question, the Supreme Court pertinently observed as follows:
28 1961 SCC OnLine SC 292
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―4. The view taken in the other cases proceeds on similar reasoning.
But what has to be noted is that in all these cases the benefit conferred
by the order was something apart from the merits of the claim
involved in these cases. What we are called upon to decide is whether
the appellant by withdrawing the pre-emption price can be said to
have adopted the decree from which he had already preferred an
appeal. The appellant did not seek to execute the decree, and indeed
the decree did not confer a right upon him to sue out execution at all.
The decree merely conferred a right upon the plaintiff-Respondent 1
to deposit the price of pre-emption and upon his doing so, entitled him
to be substituted in the sale deed in place of the vendee. The act of the
appellant in withdrawing the pre-emption price after it was deposited
by the Respondent 1 cannot clearly amount to an adoption by him of
the decree which he had specifically challenged in his appeal.
xxxx xxxx xxxx
7. It seems to us, however, that in the absence of some statutory
provision or of a well-recognised principle of equity, no one can be
deprived of his legal rights including a statutory right of appeal. The
phrase ―approbate and reprobate‖ is borrowed from Scots law where it
is used to express the principle embodied in the English doctrine of
election, namely, that no party can accept and reject the same
instrument (per Scrutton, L.J. in Verschures Creameries Ltd. v. Hull
and Neitherlands Steamship Co. Ltd. [(1921) 2 KB 608] ). The House
of Lords further pointed out in Lissenden v. C.A.V. Bosch,
Ltd. [(1940) AC 412] that the equitable doctrine of election applies
only when an interest is conferred as an act of bounty by some
instrument. In that case they held that the withdrawal by a workman of
the compensation money deposited by the employer could not take
away the statutory right of appeal conferred upon him by the
Workmen’s Compensation Act. Lord Maugham, after pointing out the
limitations of the doctrine of approbate and reprobate observed
towards the conclusion of his speech:
―It certainly cannot be suggested that the receipt of the sum
tendered in any way injured the respondents. Neither estoppel
nor release in the ordinary sense was suggested. Nothing was
less served than the principles either of equity or of justice.‖
(pp. 421-422).
xxxx xxxx xxxx
12. It seems to us that a statutory right of appeal cannot be presumed
to have come to an end because the appellant has in the meantime
abided by or taken advantage of something done by the opponent
under the decree and there is no justification for extending the rule
in Tinkler case [154 English Reports, 1176 : 4 Exch 187] to cases like
the present. In our judgment it must be limited only to those cases
where a person has elected to take a benefit otherwise than on the
merits of the claim in the lis under an order to which benefit he could
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not have been entitled except for the order. Here the appellant, by
withdrawing the pre-emption price has not taken a benefit de hors the
merits. Besides, this is not a case where restitution is impossible or
inequitable. Further, it seems to us that the existence of a choice
between two rights is also one of the conditions necessary for the
applicability of the doctrine of approbate and reprobate. In the case
before us there was no such choice before the appellant, and,
therefore, his act in withdrawing the pre-emption price cannot
preclude him for continuing his appeal. We, therefore, overrule the
preliminary objection. The appeal will now be set down for hearing on
merits. The costs of this hearing will be costs in the appeal.‖
90. In M. Ramnarain (P) Ltd. vs. State Trading Corpn. of India
Ltd.29, a question arose as to whether an application made by a party to
a suit to be accorded the facility of liquidating the decretal amount prior
to judgment being pronounced in instalments would amount to an
abandonment of a right to appeal. The Supreme Court while examining
that issue had taken note of the enunciation of the law in this regard as
it appeared in Halsbury’s Laws of England and would be evident from
the following extracts of that decision:
―10. Mr Nariman does not dispute that though the right of an appeal
is a statutory right enjoyed by a party, the party in an appropriate
case may lose his right of appeal. But he submits that a very strong
case must be made out to establish that a party has forfeited his right
to prefer an appeal. According to Mr Nariman, the right of appeal
may be lost because of any provision of law and also in appropriate
cases, the parties may lose his right of appeal because of his conduct.
Mr Nariman contends that in the instant case, the present appeal is
within time; and the provisions of the Code earlier referred to or the
provisions of any other law do not have the effect of extinguishing
the right of the appellant to prefer an appeal against the decree. Mr
Nariman submits that the facts and circumstances of this case cannot
justifiably lead to the conclusion that the appellant by his conduct
has disentitled himself to file the present appeal against the decree.
He argues that the conduct that can be attributed to the appellant is
that he prayed for instalments, filed an appeal against the order
regarding instalments and he has withdrawn the same. He reiterates
that if the earlier appeal against the order regarding the instalments is
held to be incompetent, the conduct of the appellant in withdrawing
the incompetent appeal is indeed of no consequence. Mr Nariman29 (1983) 3 SCC 75s
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argues that the prayer for instalments is made only on the basis that
if the case of the appellant is not accepted and a decree is passed
against him, the appellant may be granted instalments to pay the
decretal amount and such a prayer when it is not known whether a
decree will at all be passed against the appellant and if so, for what
amount, can never be considered to amount to such conduct as to
disentitle or preclude him from filing an appeal against the decree.
Mr Nariman argues that it cannot be said that in the instant case the
defendant-appellant has elected to exercise one of two alternative
remedies and by virtue of such election he has deprived himself from
exercising the other right, as the defendant-appellant has both the
remedies open to him and no question of election on his part arises.
Mr Nariman submits that in the facts and circumstances of this case
it cannot legitimately be held that the appellant waived his statutory
right to file an appeal against the decree and otherwise became
estopped from exercising his right. In this connection Mr Nariman
has referred to Halsbury’s Laws of England, 4th Edn., Vol. 16, paras
1471, 1472, 1473 and 1474 at pp. 992 to 996 which read as follows:
―1471. Waiver.–Waiver is the abandonment of a right in
such a way that the other party is entitled to plead the
abandonment by way of confession and avoidance if the
right is thereafter asserted, and is either express or implied
from conduct. It may sometimes resemble a form of
election, and sometimes be based on ordinary principles of
estoppel, although, unlike estoppel, waiver must always be
an intentional act with knowledge. A person who is entitled
to rely on a stipulation, existing for his benefit alone, in a
contract or of a statutory provision, may waive it, and allow
the contract or transaction to proceed as though the
stipulation or provision did not exist. Waiver of this kind
depends upon consent, and the fact that the other party has
acted on it is sufficient consideration. Where the waiver is
not express it may be implied from conduct which is
inconsistent with the continuance of the right, without need
for writing or for consideration moving from, or detriment
to, the party, who benefits by the waiver; but mere acts of
indulgence will not amount to waiver; nor can a party
benefit from the waiver unless he has altered his position in
reliance on it. The waiver may be terminated by reasonable
but not necessarily formal notice unless the party who
benefits by the waiver cannot resume his position, or
termination would cause injustice to him. It seems that, in
general, where one party has, by his words or conduct,
made to the other a promise or assurance which was
intended to affect the legal relations between them and to be
acted on accordingly, then, once the other party has taken
him at his word and acted on it, so as to alter his position,
the party who gave the promise or assurance cannot
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afterwards be allowed to revert to the previous legal
relationship as if no such promise or assurance had been
made by him, but he must accept their legal relations
subject to the qualification which he has himself so
introduced, even though it is not supported in point of law
by any consideration.
Where the right is a right of action or an interest in property,
an express waiver depends upon the same consideration as a
release. If it is a mere statement of an intention not to insist
upon the right it is not effectual unless made with
consideration, but where there is consideration the statement
amounts to a promise and operates as a release. Even where
there is no express waiver the person entitled to the right
may so conduct himself that it becomes inequitable to
enforce it (this is sometimes called an implied waiver), but
in such cases the right is lost on the ground either of
estoppel or of acquiescence, whether by itself or
accompanied by delay. Where it is claimed that the decision
of a tribunal is a nullity, a party’s right of action in the High
Court is not waived by appeal to a higher tribunal whose
decision is expressed by Parliament to be final.
1472. Knowledge of rights essential.– For a release or
waiver to be effectual it is essential that the person granting
it should be fully informed as to his rights. Similarly, a
confirmation of an invalid transaction is inoperative unless
the person confirming knows of its invalidity.
1473. Estoppel and acquiescence.– The term
‗acquiescence’ is used where a person refrains from seeking
redress when there is brought to his notice a violation of his
rights of which he did not know at the time, and in that
sense acquiescence is an element in laches. Subject to this, a
person whose rights have been infringed without any
knowledge or assent on his part has vested in him a right or
action which, as a general rule, cannot be delivered without
accord and satisfaction or release under seal.
The term, is, however, properly used where a person having
a right, and seeing another person about to commit it in the
course of committing an act infringing upon the right,
stands by in such a manner as really to induce the person
committing the act, and who might otherwise have
abstained from it, to believe that he assents to its being
committed, a person so standing by cannot afterwards be
heard to complain of the act. In that sense the doctrine of
acquiescence may be defined as quiescence under such
circumstances that assent may be reasonably inferred from
it, and is no more than an instance of the law of estoppel by
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words or conduct, the principle of estoppel by
representation applying both at law and in equity, although
its application to acquiescence is equitable. The estoppel
rests upon the circumstance that the person standing by in
effect makes a misrepresentation as to a fact, namely, his
own title; a mere statement that he intends to do something,
for example, to abandon his right, is not enough.
Furthermore, equitable estoppel is not applied in favour of a
volunteer.
The doctrine of acquiescence operating as an estoppel was
founded on fraud, and for the reason is no less applicable
when the person standing by is a minor. As the estoppel is
raised immediately by the conduct giving rise to it lapse of
time is of no importance, and for the reason the effect of
acquiescence is expressly preserved by statute.
1474. Elements in the estoppel.– When A stands by while
his right is being infringed by B the following
circumstances must as a general rule be present in order that
the estoppel may be raised against A: (1) B must be
mistaken as to his own legal rights; if he is aware that he is
infringing the rights of another, he takes the risk of those
rights being asserted; (2) B must expend money, or do some
act, on the faith of his mistaken belief: otherwise, he does
not suffer by A’s subsequent assertion of his rights; (3)
acquiescence is founded on conduct with a knowledge of
one’s legal rights, and hence A must know of his own rights;
(4) A must know of B’s mistaken belief; with that
knowledge it is inequitable for him to keep silence and
allow B to proceed on his mistake; (5) A must
encourage B in his expenditure of money or other act, either
directly or by abstaining from asserting his legal right. On
the other hand there is no hard and fast rule that ignorance
of a legal right is a bar to acquiescence in a breach of trust,
but the whole of the circumstances must be looked at to see
whether it is just that a complaining beneficiary should
proceed against a trustee.‖‖
91. It proceeded further on facts to hold as under:
―28. It is not in dispute that the defendant-appellant had filed an
affidavit asking for postponement of payment of any money decree
that may be passed and also for payment of the amount in
instalments. The filing of an affidavit on the conclusion of hearing
and before pronouncement of judgment cannot in the facts and
circumstances of this case be considered to amount to such conduct
on the part of the defendant-appellant as to disentitle him to file an
appeal against any decree that may ultimately be passed against him.
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In view of the provisions contained in Order 20 Rule 11(1) of the
Code, the prayer for instalment has necessarily to be made before the
pronouncement of the judgment and the passing of a decree, as the
court after the passing of the decree can grant instalments only with
the consent of the decree-holder in terms of the provisions contained
in Order 20 Rule 11(2) of the Code. Till the very last stage of the
hearing of the suit the defendant-appellant had seriously contested
the claim of the plaintiff-respondent and had in fact pressed for a
counter-claim against the plaintiff-respondent. Before the delivery of
judgment the defendant-appellant could not possibly have known
with any amount of certainty whether any decree against the
defendant-appellant would be passed in the suit, and if so, for what
amount. Under such circumstances it cannot be said that any party
who in view of the provisions contained in Order 20 Rule 11(1)
makes a prayer for postponement of payment of the decretal amount
and asks for payment of the same in instalments makes any
representation that he will accept any decree that may be passed
against him and will not prefer any appeal against the same. A mere
prayer for postponement of payment of the decretal amount or for
payment thereof in instalments on the basis of the provisions
contained in Order 20 Rule 11(1) of the Code at a time when the
decision in the suit is yet to be announced can never be considered to
amount to such conduct of the party as to deprive him of his right to
prefer an appeal against any decree, if ultimately passed, and to
disentitle him from filing an appeal against the decree. It is no doubt
true that after the judgment had been pronounced and the decree had
been passed it was open to the defendant-appellant to file an appeal
against the decree. It may be noted that immediately after the
pronouncement of judgment and the passing of the decree three
separate precipes or requisitions had been filed on behalf of the
defendant-appellant to the Prothonotary and Senior Master of the
Bombay High Court and there was a specific requisition for a
certified copy of the decree when drawn up, apart from requisitions
for a certified copy of the judgment and also for certified copy of the
minutes of the order. The immediate filing of the requisition for the
certified copy of the decree and also of the judgment clearly
manifests the intention of the defendant-appellant to prefer an appeal
against the decree. It is common knowledge that in matters of
litigation the litigant who is not expected to be familiar with the
formalities of law and rules of procedure is generally guided by the
advice of his lawyers. The statement of the lawyers recorded by the
Division Bench in its judgment clearly goes to indicate that the
lawyer had advised filing of the earlier appeal under a mistaken
belief. The act done by the defendant-appellant on the mistaken
advice of a lawyer cannot furnish a proper ground for depriving the
defendant-appellant of his valuable statutory right of preferring an
appeal against the decree. We have already held that the earlier
Appeal No. 36 of 1981 against the provision regarding instalments
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was incompetent and the filing of an incompetent appeal or the
withdrawal of the same does not entail any legal consequences,
prejudicing the right of the defendant-appellant to file a proper
appeal against the decree. The question which still remains to be
considered is whether the act of filing an appeal against the order
regarding instalments and not filing an appeal against the decree,
when it was open to the defendant-appellant to do so, can be
regarded to constitute such conduct on the part of the defendant-
appellant as to disentitle him to maintain the present appeal. The
filing of an incompetent appeal on the mistaken advice of a lawyer
cannot, in our opinion, reflect any such conduct on the part of the
defendant-appellant. An appeal which is not competent is necessarily
bound to fail, and in such a case the proper course for an appellant
would be to file a valid and competent appeal. The filing of an
incompetent appeal and the withdrawal of the same do not prejudice
the right to file a proper appeal and cannot be held to constitute such
conduct on the part of an appellant as to deprive him of his right to
file a valid appeal. The filing of the earlier Appeal No. 36 of 1981
cannot in the facts and circumstances of this case be said to manifest
any intention on the part of the defendant-appellant that he would not
prefer an appeal against the decree and the same does not amount to
any representation that he otherwise accepts the decree. In judging
the conduct of the defendant-appellant to decide whether the
defendant-appellant had abandoned, relinquished or waived his right
of appeal against the decree, all the relevant facts and circumstances
which have a bearing on the question have to be considered. The
facts and circumstances of this case clearly go to indicate that the
defendant-appellant had felt aggrieved by the decree and had not
manifested any intention to accept the same and not to prefer an
appeal against the decree. As we have earlier seen, the defendant-
appellant had not only denied and disputed the case of the plaintiff-
respondent but had also made a counter-claim in the suit against the
plaintiff-respondent. The defendant-appellant had throughout
contested the suit and the claim of the plaintiff-respondent with all
seriousness. Immediately on the pronouncement of judgment the
defendant-appellant clearly manifested its intention of preferring an
appeal against the decree by causing the necessary requisition for the
certified copy of the decree and judgment to be filed. The stakes
involved in the suit of the defendant-appellant were very high and
the judgment and the decree in the suit had gone against the
defendant-appellant. In this background the filing of the earlier
appeal on the mistaken advice of the lawyer cannot in our opinion,
legitimately lead to the conclusion that the defendant-appellant had
abandoned or relinquished his right to prefer the present appeal and
that the defendant-appellant had become disentitled to file the same.
The further fact that the earlier Appeal No. 36 of 1981 was
withdrawn the very next day after the same had been filed at the
stage of admission and the present appeal came to be filed just a
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week after the withdrawal of the earlier appeal clearly establishes
that the defendant-appellant had never intended to relinquish or
abandon its right to file an appeal against the decree. The earlier
Appeal No. 36 of 1981 which was filed on January 20, 1981 and was
withdrawn on January 21, 1981 at the time of admission, could not
possibly have caused any prejudice to the plaintiff-respondent. The
promptitude with which the present appeal was filed just after a
week on January 29, 1981 indicates that the defendant-appellant had
never intended to give up their right of appeal against the decree and
they have acted with all promptness and earnestness on being
properly advised as to the legal position and as to their legal rights.
The filing of the earlier Appeal No. 36 of 1981 in the facts and
circumstances of this case does not amount to any representation or
promise on the part of the defendant-appellant to accept the decree
on merits and not to prefer an appeal from the same. There is also no
question of election on the part of the defendant-appellant in
preferring an appeal against the order regarding the instalment and
not against the decree on merits. It is not a case where a party is
called upon to elect one of two alternative remedies, when by
election of one of two alternative remedies he loses his right to
pursue the other. In the instant case, the defendant-appellant has a
statutory right to prefer an appeal against the decree and any
question of election on his part does not arise.‖
92. As was explained in Halsbury’s Laws of England, waiver is the
abandonment of a right which may be deduced either in light of an
expressed assertion or implied from conduct. Waiver, as explained,
could be implied from conduct if it be found to be inconsistent with the
continuance of the right. However, it was explained that for a release or
waiver to be effective, it would be essential for the person being found
to have conducted himself to that effect, even after having been fully
informed of his rights. The Supreme Court further observed that
abandonment, waiver, or acquiescence cannot be presumed if it were
found that the person whose rights had been infringed had not been
informed of his rights.
93. Tested on the aforesaid precepts, it becomes more than apparent
that the assertion of abandonment and waiver of a right is clearly
misconceived. The tone and tenor of the communications which were
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addressed by the appellants cannot possibly be interpreted or construed
as amounting to a conscious waiver of a right to question the
reassessment further. Not only do those documents appear to be the
submission of a ―without prejudice‖ request tendered in order to
facilitate expeditious clearance of goods, the same cannot possibly be
viewed or interpreted as amounting to an abandonment of the right to
institute an appeal itself.
94. When we revert to the view expressed by the CESTAT in
CUSAA 126/2022, we find that there is a clear absence of
consideration of the various communications which had been addressed
by the appellant to the customs authorities and which had preceded the
finalization of re-evaluation of declared value. The CESTAT thus
appears to have proceeded on the premise that the importer had all
along agreed to the enhancement of the declared value and raised no
protest. The CESTAT thus appears to have incorrectly proceeded on the
basis that the communications addressed itself implied that the
importers had willingly accepted the value as suggested by the customs
authorities and consequently, the respondents being relieved of
undertaking any adjudication as contemplated under Section 17 of the
Act in light of the abandonment and waiver of the appellant’s right to
challenge the reassessment.
95. The appellants had registered their protest on more than one
occasion and had also sought expeditious clearance of goods subject to
an exercise of provisional reassessment being undertaken. These facts
and circumstances clearly detract from the argument of a conscious
abandonment of the right to question the reassessment or to accept the
re-evaluation exercise undertaken without reservation of a right to
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challenge.
C. Rejection of declared values: Assessing its validity
96. On an overall conspectus of the facts of the present case viewed
alongside the material which has been placed for our consideration, we
find that there was an abject failure on the part of the proper officer to
disclose or communicate the reasons on the basis of which a reasonable
doubt came to be raised with respect to declared value. We were
informed that the formation of reasonable doubt was based on the
contemporaneous import data with which the importer was confronted.
However, and before us, it was conceded that the contemporaneous data
which is spoken of was merely the data as appearing on the NIDB
portal. We had an occasion to notice the host of precedents which had
consistently held that the NIDB data could not on a standalone basis
constitute a valid ground to doubt the declared value. Suffice it to note
that the entire action ultimately rested on the letters submitted by the
appellants seeking expeditious evaluation of the pending BoE in order
to avoid the accruing liability of demurrage and other charges. The
appellants also appear to have addressed a prayer for the goods being
cleared provisionally to avoid the financial burden of detention and
demurrages, subject to the submission of indemnity bonds and bank
guarantees. It was only after all those requests fell on deaf ears that the
appellant submitted a letter consenting to the re-determination of the
value in accordance with what had been proposed by the proper officer.
Of equal significance are some of those communications addressed to
the proper officer in which the importers while consenting to the
proposed reassessment had also conveyed their readiness to pay
customs duty at the enhanced value as suggested ―under protest‖.
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Therefore, these were not cases where the concession was either
unqualified or without reservation of a right to question an assessment
made by the proper officer.
97. By virtue of Section 17(5) of the Act, the proper officer stands
relieved of the obligation to pass a speaking order only in cases where
the importer confirms his acceptance of the reassessment in writing.
However, and as was noted in the preceding parts of this decision, the
different Benches of the CESTAT have consistently taken the position
that letters of consent of the like submitted by the appellants in this
batch cannot be viewed as a complete or abject surrender of the right to
assail or question a reassessment. However, the host of past precedents
rendered on this aspect have come to be overlooked and ignored by the
CESTAT which has merely proceeded to toe the line taken in the
Advanced Scan Support and Vikas Spinners. We have already taken
note of the distinguishing features which inform the aforementioned
two decisions.
98. Therefore, the proper officer could not be said to have been
relieved of its obligation to pass a speaking order in terms of Section
17(5). The process of rejecting the declared value and reassessing the
transaction value is statutorily required to be preceded by the proper
officer having drawn an opinion of why the declared value was not
liable to be accepted before consequently proceeding to reassess the
value. While the said reassessment may not be framed in elaborate
terms, it would necessarily have to be reflective of the reasons which
weighed upon the respondent to form the opinion that the declared
value was not liable to be accepted.
99. Significantly in Commissioner of Customs vs. South India
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Television (P) Ltd.30, the Supreme Court had underscored the fact that
the burden of proving incorrect valuation lies on the Department. It
held that before rejecting the transaction value declared in an invoice,
the Department must provide cogent reasons and evidence. This
includes identifying imports of identical or similar goods at higher
prices around the same time. The Court emphasized that an invoice
serves as evidence of the transaction value and mere suspicion or
allegations of undervaluation are insufficient for rejection. The
Department must, it held, conduct detailed inquiries, gather material
evidence, or present information on comparable imports to substantiate
its claim. If relying on declarations from the exporting country, the
Department must explain how such declarations were obtained and
establish their probative value, even in adjudication proceedings where
strict rules of evidence do not apply. The Supreme Court further
clarified that once the Department provides evidence of
contemporaneous imports at higher prices the burden shifts to the
importer to validate the declared invoice. The Supreme Court thus
highlighted that without adequate evidence or comparable import data,
the declared invoice value must be accepted and the benefit of doubt
should favour the importer. This is evident from the following
principles enunciated in that judgment:
“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.
30
(2007) 6 SCC 373
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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. Therefore, the charge of
underinvoicing has to be supported by evidence of prices of
contemporaneous imports of like goods.‖D. Value enhancement on the basis of NIDB data
100. Insofar as the aspect of whether the enhancement or re-
evaluation of the ‘declared value’ can be based solely on the data
available in the NIDB, in Agarwal Foundries, the Hyderabad Bench of
the CESTAT had held that the customs authorities would be unjustified
in enhancing the declared import values solely on the basis of NIDB
data. It emphasized that transaction values cannot be rejected arbitrarily
and that the authenticity of importer-issued invoices must be accepted
unless discredited on the basis of cogent evidence. The CESTAT
observed:
―6.2) In all these cases, the imported goods are MS Steel (turning
shredded scrap). The Customs Department has taken the view that
the declared import values cannot be relied upon since they are based
on invoices issued by traders and not at the manufacturers of such
scrap. Based on this premise, the declared import values have been
rejected and enhanced to higher level on the basis of purported
contemporary import values found in the NIDB data. This
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enhancement is the bone of contention in all these appeals.
6.3) MS Steel (turning shredded scrap) is generated in the course of
manufacture of finished goods eg; machinery. Appellants, right from
the beginning, have been crying hoarse that such scrap is disposed of
by concerned manufacturers to traders and that they have to
necessarily buy such scrap only from the traders at the prevalent
market rate. This assertion has not been disproved or proved
incorrect by Customs.
6.4) Department has also not backed up their allegations that the
manner of purchase of the impugned goods from the traders and not
from manufacturers, is not as per practice normally followed in the
course of international trade in the said item. This being the case, we
are of the opinion that Department cannot reject the invoices issued
by traders the declared import values only for the reason that the
accompanying invoices have not been issued by the manufacturers
themselves. In any case, in our view, it is not as if the manufacturers
concerned have set out or conduct their activities with the sole
intention of manufacturing such ―shredded scrap‖. Obviously the
impugned goods are but shreds and turnings which have emerge
during the manufacture of goods by the concerned manufacturers.
There can be no dispute that these metal shreds and turnings would
not be in very huge quantities vis-‘-vis the actual goods
manufactured. It also appears to reason that the manufacturers would
prefer to dispose of such shredded scrap to the traders instead of
expending time and energy selling them directly worldwide.
6.5) Viewed in this light, the invoices issued by the traders from
countries like Belgium, Malaysia, Singapore etc. cannot be
dismissed peremptorily unless there are justifiable reasons not to
accept the genuineness or authenticity of such invoices. In any case,
the declared values can be rejected only in terms of statutory
provisions and rules governing valuation of imported goods.
6.6) Be it as it may, in all these cases, enhanced values have been
adopted based on NIDB data only. The appellants have contended
that the contemporary values on which the department intended to
enhance the import values have not been provided to them. We find
merit in these arguments. It is now well settled that NIDB data
cannot be made the basis for enhancement of declared import values.
The case laws relied upon by the appellant fully exemplify this ratio.
6.7) For example, the Tribunal in the case of Commissioner of
Customs, New Delhi v. Nath International as reported at [2013 (289)
ELT 305 (Tri.-Del.)] has laid down the following ratio:
―7. We find that there is no dispute that the customs has
power to reject the transaction value and enhance the
assessable value in terms of Customs Valuation Rules.
However, such rejection of transaction value and
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enhancement of assessable value has to be on the basis of
some evidences on record. Contemporaneous imports have
to be considered in reference to quality, quantity and
country of origin with the imports under consideration. It
has been held in a number of decisions that NIDB data
cannot be made the basis for enhancement of value.
Commissioner (Appeals) has relied upon various decisions
of the Tribunal for holding any enhancement in assessment
value, the transaction value to be first rejected based on
legal permissible ground as indicated in the valuation Rules.
He has also referred to Hon’ble Supreme Court decision in
the case of Eicher Tractors Ltd. v. CC, 2000 (122) ELT 321
(S.C) in support of his finding that transaction value cannot
be rejected without clear and cogent evidence produce by
the department with regard to quality, import of origin and
place and time of import.
We find that in their memo of appeal, Revenue has not
advance any such evidences to support their case, inasmuch
as, no evidence of rejection of transaction value stands
produced by the authority, we find no reason to interfere
with the impugned order of Commissioner (Appeals). Mere
reference to Commissioner Mumbai guidelines to enhance
the value of ball bearings, without first assessing the quality
of the goods is not justified. It stands accepted that the ball
bearings were mix and not of uniform sizes. As such,
Revenue’s appeal has no merits‖.
6.8) In the case of Topsia Estates Pvt. Ltd. v. CC (Import-Seaport)
Chennai as reported at [2015 (330) E.L.T 799 (Tri.-Chennai)], the
Tribunal held as under:
―7. After hearing both sides and on perusal of the records,
we find from the adjudication order that the adjudicating
authority observed that the unit price declared appears to be
very low compared to the contemporaneous import value
available in NIDB data. The appellant imported PU Coated
Fabrics of various thickness and different qualities from
China. It is seen from the Table as reproduced in the
adjudication order that the declared unit price varies from
0.90 MT to 1.60 MT and the value was enhanced from 1.24
per MT to 2.04 per MT. We have also noticed that the
appellant imported the same goods from Kolkata Port also.
The appellant in the written submission before the
Commissioner (Appeals) submitted copies of the various
orders passed by the Commissioner (Appeals) under which
it was accepted. There is no evidence of higher value of
contemporaneous import from same sources. There is no
allegation of mis-declaration of the goods.
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6.9) In a recent decision, in Sarda Energy and Minerals Ltd. v. CCE,
Raipur, [2018 (359) E.L.T 262 (Tri.-Del.)], the above ratio was once
again reiterated by Tribunal as follows:
―In this connection, we have perused the provisions of Rule
12, which enables the rejection of declared assessable value.
The said rules provide for proper officer seeking
clarification from the importer to provide further
information to satisfy the correctness of the declared
assessable value. In the present case, the appellants did
submit the invoice, purchase order and supporting contract
documents with reference to the impugned consignments.
Nothing more is required with the importer to further
substantiate the value. In such situation, it is for the
assessing officer to discount the documents with valid
reasons in order to reject the declared value and thereafter to
proceed with the re-assessment, after due enhancement.
Explanation (1)(i)(iii)(a) in Rule 12 appears to be applicable
5 Customs Appeals Nos. 50503- 50504/2017 and 50519-
50520/2017 to the present case. In other words, the
assessing officer having noticed higher value of
contemporaneous import raised the doubt regarding the
correctness of declared value. The legal provisions
mentioned in the Explanation clearly stipulates that the
contemporaneous value should be significantly higher for
identical or similar goods at or about the same time, in a
comparable commercial transaction. We find in the present
case due examination about this crucial aspect has not been
done by the assessing officer and comparison based on the
contemporaneous import is not proper. Further, the
contractual arrangements and invoices should not be
rejected in the absence of any evidence to question their
authenticity. As submitted by the appellants, NIBD data is a
guidelines and an indicator for the assessing officer and it
cannot be a substitute for assessable value. The assessable
value for imported items has to be invariably arrived at
applying Section 14 read with Customs Valuation Rules,
2007.
7. We also note that the reliance placed by the appellant on
the decision of the Tribunal in the case of Topsia Estates
Pvt. Ltd. v. CC, Chennai, 2015 (330) ELT 799 (Tribunal-
Chennai) is appropriate to the facts of the present case. The
observation of the Tribunal is as below:–
―We find that in the present case, the adjudicating authority
enhanced the value as the declared value appears to be very
low compared to value available in NIDB data, otherwise,
there is no material available. The Tribunal consistently
observed that the declared value cannot be enhanced merely
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on the basis of NIDB data. It is noticed that the value of
impugned goods varies widely on the basis of quality, size,
quantity, etc., and it is contended by the appellant before the
lower appellate authority that the declared value of the same
goods were accepted by the 6 Customs Appeals Nos.
50503-50504/2017 and 50519-50520/2017 Department at
Kolkata Port. We also find force in the submission of the
learned Advocate that in this particular situation, Rule 9 of
the Valuation Rules would not be invoked‖.
8. In view of the discussions and analysis, we find that the
impugned orders cannot be legally sustained. Accordingly,
the same are set aside. The appeals are allowed with
consequential relief‖.
6.10) We find that the above decisions will apply on all fours to the
present appeals before us. We also find merit in the appellant’s
contention that Department has not brought out any other material to
demolish the transaction value and has also not brought any evidence
to prove that the overseas supplier has been paid consideration
higher than the amount indicated in the invoices which have been
paid through bank channels.
7) In the event, we hold that all the impugned orders relating to these
14 appeals cannot sustain and will have to be set aside which we
hereby do. Appeals are therefore allowed with consequential
benefits, if any, as per law.‖
The Supreme Court in Commissioner vs. Agarwal Foundries (P)
Ltd.31 dismissed the appeal of the customs authority holding that it
found no reason to interfere.
101. Similarly, the Ahmedabad Bench of the CESTAT in Sedna Impex
ruled that it would be impermissible in law to make a value
enhancement solely on the basis of NIDB data. The case involved the
rejection of declared values for imported polyester fabrics from China,
with the adjudicating authority re-determining the values based on
NIDB data. Both the Commissioner (Appeals) and the original
authority upheld the enhanced valuation, prompting the appellants to
challenge those decisions. The CESTAT concluded that NIDB data
alone, without supporting evidence or clarity on relevant parameters,
31
2020 (371) ELT A 295 (SC)
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could not form the basis for for re-determining values and set aside the
enhancement. On a consideration of the principles articulated by the
Supreme Court in Eicher Tractors, the CESTAT had held:
―4.3 The dispute in the present case is regarding the valuation of the
goods imported by the Appellants. The Assessing Authority re-
assessed the imported goods at values higher than what was declared
by the Appellants in the Bills of Entry. The revenue enhanced value
as per NIDB data. We observed that the transaction value declared
by the importer should form the basis of assessment unless the same
is rejected, for the reasons set out in Rules of the Customs Valuation
Rules. Section 14 of the Customs Act, 1962 read with Customs
Valuation Rules makes it abundantly clear that transaction value in
the ordinary course of commerce is to be taken as the assessable
value. The Customs Valuation Rules outlines the step-by-step
methodology to be adopted for re-determination of the assessable
value in certain cases. The primary requirement for re-determination
of the value is that the transaction value should be rejected for
cogent reasons prescribed in the Customs Valuation Rules. If the
transaction value is rejected, then the Customs Valuation Rules
prescribes the basis for arriving at the assessable value. However, the
requirement of Section 14 and the Customs Valuation Rules need to
be satisfied for enhancement of value. Nothing is forthcoming from
the record of the case from which the basis for such re-assessment
can be made out. Rejection of declared value on Bill of Entry is a
serious affair and the same could have been rejected on the basis of
cogent examination of evidences and justifiable reasons.
Hon’ble Supreme Court has in case of Eicher Tractors [2000
(122) E.L.T. 321 (S.C.)] laid down very categorical as follows :
―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 or the buyer have no interest in the business of each
other and the price is the sole consideration for the
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Section 14(1) of time, place and absence of special
circumstances, the price of imported goods is to be
determined under Section 14(1A) in accordance with the
rules framed in this behalf
7. The rules which have been framed are the Customs,
Valuation (Determination of Price of Imported Goods)
Rules, 1988. The rules came into force on 16th August,
1988. Under Rule 3(i) ―the value of imported goods shall be
the transaction value‖. ―Transaction value‖ has been
defined in Rule 2(f) as meaning the value determined in
accordance with Rule 4. Rule 4(1) in turn states : ―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 of these rules.‖
8. Reading Rule 3(i) and Rule 4(1) together, it is clear that a
mandate has been cast on the authorities to accept the price
actually paid or payable for the goods in respect of the
goods under assessment as the transaction value. But the
mandate is not invariable and is subject to certain
exceptions specified in Rule 4(2), namely :- (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).‖
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.
10. The respondent’s submission is that the phrase ―the
transaction value‖ read in conjunction with the word
―payable‖ in Rule 4(1) allows determination of the
ordinary international value of the goods to be ascertained
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on the basis of data other than the price actually paid for
the goods. This, according to the respondent, would be in
keeping with the overriding effect of Section 14(1). We
cannot agree.
11. It is true that the Rules are framed under Section 14(1A)
and are subject to the conditions in Section 14(1). Rule 4 is
in fact directly relatable to Section 14(1). Both Section
14(1) and Rule 4 provid.e that the price paid by an importer
to the vendor in the ordinary course of commerce shall be
taken to be the value in the absence of any of the special
circumstances indicated in Section 14(1) and particularised
in Rule 4(2).
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 ―the particular transaction‖ and payability in respect of
the transaction envisages a situation where payment of
price may be deferred.
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 7A. 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 sub-section (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.
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14. It is only when the transaction value under Rule 4 is
rejected, then under Rule 3(ii) the value shall be determined
by proceeding sequentially through Rules 5 to 8 of the
Rules. Conversely if the transaction value can be
determined under Rule 4(1) and does not fall under any of
the exceptions in Rule 4(2), there is no question of
determining the value under the subsequent Rules.
15. The Assistant Collector in this case determined the
value of the imported goods under Rule 8. The question is
whether he should have determined the transaction value
under Rule 4 at the price actually paid by the appellant for
the 1989 bearings. Naturally, if Rule 4 applies to the facts of
this case, the Assistant Collector’s reasoning under Rule 8
must, by virtue of language of Rule 3(ii), be set aside.
16. The Assistant Collector appears to have proceeded on
the law as it was prior to the 1988 Rules when ‗special
considerations’ on the basis of which a transaction was held
not to be an ordinary sale in the course of international
trade within the meaning of Section 14(1), had not been
statutorily particularised.
17. As to what would constitute such ―special
consideration‖ has been considered in several decisions of
this Court. For example, a special quotation for the
importer singling him out from other importers in India was
held to be a special consideration in Padia Sales
Corporation v. Collector of Customs, Bombay (supra)
justifying the rejection of price paid as the transaction
value. On the other hand in Basant Industries v. Addl.
Collector of Customs, Bombay – 1996 (81) E.L.T. 195
(S.C.), a special quotation for an ―old and valued
customer‖ was upheld as not being a special.
18. The decision in Sharp Business Machines Pvt. Ltd.,
relied upon by the respondent is another case where the
transaction value was rejected. In that case, the importer
had wrongly misdescribed the imported goods and sought to
defraud the Revenue by attempting to surreptitiously import
items prohibited under the import policy. It was found that
there was justification, in the circumstances, for rejecting
the price shown in the invoice. The transaction value having
been rejected, assessment of value was made on the basis of
the price list of the foreign vendor.
19. Both the decisions Padia Sales Corporation and Sharp
Business Machines Pvt. Ltd. were distinguished
subsequently in Mirah Exports Pvt. Ltd. v. Collector of
Customs – 1998 (98) E.L.T. 3. As the facts of this case are
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somewhat similar to the case before us, it is dealt with in
some detail.
20. Mirah Exports Pvt. Ltd. along with other importers had
imported bearings at high rates of discount. The declared
value was rejected by the Customs authorities, on the basis
of the price list of the vendors. This Court set aside the
decision of the respondent authorities accepting the
argument that a discount is a recognised feature of
international trade practice and that as long as those
discounts are uniformly available to all and based on
logical commercial bases, they cannot be denied under
Section 14. It appears from the judgment that a distinction
was drawn between a discounted price special to a
particular customer and discounts available to all
customers.
21. As already noted all these cases dealt with imports made
prior to the coming into force of the Rules in 1988. Now the
‗special considerations’ are detailed statutorily in Rule 4(2).
22. In the case before us, it is not alleged that the appellant
has mis-declared the price actually paid. Nor was there a
misdescription of the goods imported as was the case in
Padia Sales Corporation. 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 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 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 any one else
wishing to buy the old stock, there is no reason why the
declared value in question was not accepted under Rule
4(1).
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23. In the circumstances, production of the price list did not
discharge the onus cast on the Customs authorities to prove
that the value of the 1989 bearings in 1993 as declared by
the appellant was not the ―ordinary‖ sale price of the
bearings imported‖. Similar view has been expressed by the
Apex Court again in case of Tolin Rubbers Pvt. Ltd. [2004
(163) E.L.T. 189 (S.C.)], South India Televisions [2007
(214) E.L.T. 3 (S.C.)], Motor Industries [2009 (244) E.L.T.
4 (S.C.)] etc.
4.4 We find that in the present matter neither the adjudicating
authority nor Commissioner (Appeals), have pointed to such special
circumstances warranting the rejection of the declared transaction
value by the appellant on Bills of Entry. Further, Rule 12 of Customs
Valuation (Determination of Price of Imported Goods) Rules, 2007
reads as below:
xxxx xxxx xxxx
From plain reading of the Rule 12 it is quite evident that the word
―doubt‖ used in the rule has to be based on cogent reasons and
evidences. No cogent evidence or reason has been put forth in the
present case to justify the ―doubt‖ of the assessing officer. Clearly,
for rejection of the transaction value under Rule 12, there has to be a
reasonable ground and it cannot be rejected merely on the ground
that similar goods have been imported at higher value without
examining the applicability of Rule 5 of Customs Valuation Rules,
2007.
4.5 The enhancement of the value done by the Customs department
is only on the basis of value of contemporaneous imports. In this
context we find that the relevant provisions for valuation under
Customs Act are as below:
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007.
Rule 12 – Explanation 1(iii)
The Proper Officer shall have the powers to raise doubts on
the truth or accuracy of the declared value based on certain
reasons which may include –
(a) The significantly higher value at which identical or
similar goods imports at or about the same time in
comparable quantities in a comparable commercial
transaction were assessed;
Rule 5 – Transaction of value of Similar goods :-
(l) Subject to the provisions of Rule 3, the value of imported
goods shall be the transaction value of similar goods sold
for export to India and imported at or about the same time
as the goods being valued Provided that such transaction
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value shall not be the value of the goods provisionally
assessed under Section 18 of the Customs Act, 1962.
(2) The provisions of clauses (b) and (c) of sub-rule (1),
sub-rule (2) and sub-rule (3), of Rule 4 shall, mutatis
mutandis, also apply in respect of similar goods.
From the above provisions, it is clear that if there is any doubt about
the transaction value declared by the assessee, then if at all the value
of contemporaneous import needs to be applied, the value of
identical goods or similar goods should be applied. However, in the
present case though the contemporaneous import goods were relied
upon, but both the adjudicating authority failed to ascertain that
whether the goods of contemporaneous imports is identical or similar
to the goods of the assessee . Appellants have disputed the said
comparable data on the ground that contemporaneous goods
provided by the revenue is for Polyester Knitted Fabrics whereas
goods imported by the appellant are of Mixed lot of Polyester
Knitted Fabric (Rolls of Assorted Colors & Weight), the value of the
above referred type of fabrics is low because the goods are mixed lot
of fabrics of different colours and different weight and quality is not
same as fresh quality polyester knitted fabrics.
4.6 We noticed that in present matter no effort was made by the
adjudicating authority to ascertain quality, quantity, characteristics of
the goods of contemporaneous import. In the present import without
carrying out any test to the fact that goods of contemporaneous
import and the goods in question in present case are identical or
similar, enhancement of the value is not legal and correct. It is also
observed that other than contemporaneous import data, there is no
other evidence to show that the assessee have suppressed the value.
4.7 We find that in the present case, the adjudicating authority
enhanced the value as the declared value appears to be low compared
to value available in NIDB data, otherwise, there is no material
available. The Tribunal consistently observed that the declared value
cannot be enhanced merely on the basis of NIDB data. Tribunal in
the case of Neha Intercontinental Pvt. Ltd. v. Commissioner of
Customs, Goa [2006 (202) E.L.T. 530 (Tri.-Mum.)] has held in the
absence of rejection of transaction value, invoice value requires
acceptance and when the contemporaneous import of similar goods
is not established, value cannot be enhanced. In the case of
Commissioner of Customs v. Modern Overseas [2005 (184) E.L.T.
65 (Tri.-Del.)] NIDB data was held to be insuffient, in the absence of
clarity about various parameters. List of such decisions is unending
and it is sufficient to say that NIDB data has been held to be
insufficient for enhancement of value, in the absence of any other
independent evidence. Admittedly in the present cases, there is no
such evidence produced by the Revenue except reference to the
NIDB data. In view of the discussions above, we hold that in the
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present case, the enhancement of value on the basis of NIDB data
cannot be accepted.‖
102. Again, in HS Chadha vs. Commissioner of Customs32, the
Principal Bench of the CESTAT, New Delhi, held that the declared
value of imported tyres must be accepted as the Revenue had failed to
establish undervaluation. It noted that tyres are freely importable, and
no contemporaneous import data or evidence was provided to justify
discarding the transaction value. Citing the judgments of the Supreme
Court in Sanjivani Non-Ferrous Trading and South India Television,
the Tribunal emphasized that a charge of undervaluation requires proof
of related-party transactions, extra payments, or deviations from
authorized banking channels, none of which were demonstrated.
Additionally, the Bench highlighted the failure to sequentially apply the
2007 Rules in determining the transaction value, as explained by the
Supreme Court in Eicher Tractors. Thus, the redetermination of value
was deemed unsustainable as would be evident from the following
observations which came to be rendered:
―17. Having considered the rival contentions, we find that tyres are
not prohibited item under Exim policy, and can be imported freely.
Further as the tyres are generally required all over the country there
are several importers of identical/similar goods. We find that it is
trite law that since the goods were assessed by proper officer based
on transaction value, onus lies on the Revenue to prove
undervaluation, which it has failed miserably to do so since it did not
show any contemporaneous import data of identical or similar items
or NIDB data to indicate undervaluation and therefore the invoice
value is required be accepted and the transaction value itself and
hence could not have been discarded, as held by various judgements
of the Hon’ble Supreme Court like CCE Vs Sanjivani Non-Ferrous
Trading Pvt Ltd (2019) 2 SCC 378 and CC Vs South India
Television Pvt Ltd (2007) 6 SCC 373. We find that there is no
allegation or finding that the buyer and seller being related or of any
extra payment to the supplier beyond the normal authorized banking32
Final Order Nos. 50063-50066/2020 dated 09 January 2020
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channels and thus undervaluation is not established as held by this
tribunal in Kelvin Infotech Pvt Ltd (supra).
18. We also find that there is no mention regarding which rule of the
Customs Valuation Rules 2007 has been applied to arrive at the
redetermined value and there is also no sequential application of
Rules. We find that it is trite law that there has to be sequential
application of rules to re-determine the value as has been held by the
Hon’ble Apex Court in Eicher Tractors Pvt Ltd vs Commissioner of
Customs Mumbai 2000 (122) ELT 321. Merely based on some
emails, the transaction value cannot be disputed and negated without
any cogent material.‖
103. The Chennai Bench of the Tribunal in M/s Gypsie Impex vs.
Commissioner of Customs33 addressed the limitations besetting the
usage of NIDB data as the sole basis for re-determining transaction
values. It is pertinent to note that Rule 10A of the Customs Valuation
(Determination of Price of Imported Goods) Rules, 198834, as
analysed by the CESTAT in this decision, was similar to Rule 12 of the
2007 Rules. The CESTAT ruled in favour of the appellant, holding that
NIDB data alone would be insufficient for value reassessment without
corroborative evidence or contemporaneous import comparisons. This
decision underscored the importance of comprehensive evidence and
procedural compliance in customs disputes, cautioning against arbitrary
reliance on NIDB data. The CESTAT had on that occasion observed as
follows:
―9. After considering the submissions of both the parties and perusal
of materials on record, we find that the goods imported by the
appellant are, admittedly, not prohibited goods as per Rule 133 read
with Rule 43-A of the Drugs and Cosmetics Rules, 1945 or any other
law for the time being in force. We also find that representative
samples of the imported goods were drawn and the Assistant Drug
Controller has issued No Objection for the release of the said goods.
Further, we find that the lower authorities have re-determined the
value of the impugned goods based on the values declared by other
importers without providing any basis for this decision and relying33
Final Order No. 40131/2024 dated 05 February 2024
34
1988 Rules
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on certain imports which are clearly not contemporaneous in as
much as the Bills of Entry pertaining to those imports were filed
during the period November 2010, whereas the impugned import is
of the year February 2011 and there is no material produced by the
department that amounts over and above the invoice value were paid
with respect to transaction value in question. It has been consistently
held by the Tribunal that NIDB data alone is not sufficient for re-
determination of value. In this regard, we may refer to the decision
of this Tribunal in the case of M/s.Shah B Impex Vs CC (Imports)
Chennai vide Final Order No.40917/2023 dt 12.10.2023 (Customs
Appeal No.40823 of 2014), wherein also the Chennai Bench of the
Tribunal has rejected the re-determination of value simply on the
basis of NIDB data. Therefore, we hold that the enhancing the
transaction value on the basis of NIDB data is not sustainable in law
and hence we set aside the enhancement. As far as the affixation of
M.R.P and R.S.P price on the packages are concerned. We find that
this defect is curable one and would not amount to contravention of
Standards of Weights and Measures (Packaged Commodities) Rules,
1977 as held in the case of ABB Ltd. and High Link Exporters Pvt.
Ltd cited supra by the appellant. 10. As far as violation of the port
restriction is concerned, we find that during the relevant time, the
Tuticorin was not an authorized port for import of the impugned
goods but subsequently, the said port has been authorized for import
of the impugned goods. Therefore, there is a violation with regard to
port restrictions. For that violation, we think it appropriate to impose
a penalty on the appellant under Section 111 (d) of the Customs Act,
1962 amounting to Rs.1,00,000/- (Rupees One lakh only) and drop
all other penalties and fine imposed by the impugned order. The
present appeal is disposed of on above terms.‖
104. It becomes apparent from a reading of these decisions
collectively that the Tribunal has consistently found that a valuation
addition based solely on NIDB data would wholly unwarranted and that
any such reassessment would have to be shored by independent and
cogent evidence. The legal position so articulated would ensure fairness
and transparency in the determination of import values. The body of
precedent noticed above have in unison held that mere reliance on
external data without corroborative evidence or clear justification
would fail to meet the tests and principles underlying the provisions
enshrined in the 1988 Rules and 2007 Rules. They correctly lay
emphasis on the imperatives of a reasoned approach to customs
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valuation and a deviation from declared values being founded on
tangible and justiciable material. A reassessment or rejection of
declared value would thus have to necessarily be established as being
compliant with the aforenoted requirements of pre-eminence. Relieving
the respondents of this obligation would clearly lead to pernicious
consequences.
V. DISPOSITION
105. Accordingly, and for all the aforesaid reasons, we would answer
the question framed in the affirmative and in favour of the importers.
The appeals are consequently allowed and the impugned orders of the
CESTAT set aside. The order of the Commissioner (Appeals) shall in
consequence stand restored.
106. We would also allow CUS.A.C. 1/2023 and set aside the order of
the CESTAT dated 14 February 2023 as well as the order of the
Commissioner (Appeals) dated 01 September 2021. The appeal as
instituted by that appellant before the Commissioner (Appeals) shall
stand restored to be heard and considered afresh and in light of the legal
position as enunciated in the present judgment.
YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
NOVEMBER 27, 2024/neha/RW
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