2009 (2) TMI 40 - SC - Customs

Mis-declaration of imported goods in terms of description, value and quality rejection of transaction value - challenging the constitutional validity of S. 151A of Customs Act, 1962 - legality and validity of the Standing Order issued by the Chief Commissioner of Customs in light of Platt s weekly report with regard to valuation - burden is on revenue to prove mis-declaration of goods to determine the value, reference to foreign journals indicating international prices is not unreasonable

Issues Involved:
1. Constitutional validity of Section 151A of The Customs Act, 1962.
2. Legality and validity of Standing Order No. 7493/99 issued by the Chief Commissioner of Customs, Mumbai.
3. Determination of assessable value of imported goods.
4. Application of transaction value versus reference to foreign journals for valuation.
5. Mis-declaration of imported goods.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 151A of The Customs Act, 1962:
The appellants challenged the constitutional validity of Section 151A of the Act. The High Court of Gujarat found no merit in this challenge. Section 151A empowers the Board to issue orders, instructions, and directions to officers of Customs for uniformity in the classification of goods or with respect to the levy of duty. The proviso ensures that such orders do not require officers to make a particular assessment or dispose of a case in a specific manner, nor interfere with the discretion of the Commissioner of Customs (Appeals). The Supreme Court agreed with the High Court's interpretation that Section 151A does not control or affect the independent exercise of quasi-judicial functions by the Assessing Authority.

2. Legality and Validity of Standing Order No. 7493/99:
The appellants questioned the legality and validity of the Standing Order No. 7493/99, which provided guidelines for the valuation of plastic items. The High Court read down the Standing Order, interpreting it as flexible guidelines rather than a rigid mandate. The Supreme Court concurred, emphasizing that the Standing Order should be seen as an assistance tool in the quasi-judicial process of determining value for customs duty. The Court noted the Department's stance that the Standing Order was not binding but served to streamline customs operations and maintain uniformity.

3. Determination of Assessable Value of Imported Goods:
The appellants argued that the transaction value, i.e., the price actually paid for imported materials, should be the assessable value. They relied on the precedent set by Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai. The Supreme Court reiterated that Section 14 of the Act and Rule 4 of the Customs Valuation Rules mandate the acceptance of the transaction value unless specific exceptions apply. The Court acknowledged that in cases of invoice manipulation, under-invoicing, or mis-declaration, the transaction value could be rejected, and the value should be determined sequentially through Rules 5 to 8 of the Customs Valuation Rules.

4. Application of Transaction Value versus Reference to Foreign Journals for Valuation:
The Standing Order directed assessing authorities to use prices from sources like PLATT's Weekly Report if the transaction value was discarded. The Supreme Court held that once the transaction value is rejected on valid grounds, the Customs Authority must follow the Customs Valuation Rules to determine the value of goods. In the absence of evidence of contemporaneous import, reference to reputed foreign journals could be appropriate to ascertain the correct international price, provided the Department justifies its use.

5. Mis-declaration of Imported Goods:
The case involved the import of goods declared as freely importable under the EXIM Policy 1997-2000, which were later found to be mis-declared in terms of value, description, and quality. The Additional Commissioner of Customs enhanced the value for assessment, ordered confiscation, and imposed penalties. The Supreme Court noted that mis-declaration affects the acceptability of declared value and emphasized the burden on Customs Authorities to prove mis-declaration. The Court did not delve into the factual correctness of the mis-declaration findings, leaving it to be addressed through statutory appeal mechanisms.

Conclusion:
The Supreme Court dismissed the appeals, upholding the High Court's interpretation of Section 151A and the Standing Order as guidelines rather than binding mandates. The Court affirmed the principles of transaction value determination and allowed the use of foreign journals for valuation in the absence of contemporaneous import evidence. The appeals were dismissed with no order as to costs.

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