2019 (5) TMI 1152 - SC - Customs

Valuation of imported goods - rejection of declared value - recording in writing the grounds for doubting the truth or accuracy of the value declared and intimation to the importer under Rule 12 (2) - aluminium scrap - inclusion of value of commission, brokerage, engineering, design work, cost of transportation, etc. in declared value - scope of 'reason to believe' - provisional assessment of duty - HELD THAT - Section 18 provides for provisional assessment of duty in cases specified in sub-section (1) of the Section. Clause (c) of sub-section (1) deals with cases where importer or exporter has produced necessary documents and furnished full information for assessment of duty but the proper officer deems it necessary to make further enquiry for assessing the duty. However, Clause (d) is wider and would apply when the importer or exporter does not produce necessary documents or furnish information. In all cases covered under Clauses (a) to (d), the proper officer may direct provisional assessment of the duty leviable on the imported goods. Where duty is assessed provisionally, the importer or exporter has to furnish security as the proper officer deems fit for payment of deficiency, if any, between the duty provisionally paid and the duty finally assessed. On interpreting Section 18 of the Act, it is held that when there is a dispute between the customs authorities and the importer as regards the valuation of the imported goods, on satisfaction of the conditions enumerated in sub-section (1), the authorities should make provisional assessment of customs duty under Section 18 of the Act. 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. 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. Declared valuation can be rejected based upon the evidence which qualifies and meets the criteria of certain reasons . Besides the opinion formed must be reasonable. Reference to foreign journals for the price quoted in exchanges etc., to find out the correct international price of concerned goods would be relevant but reliance can be placed on such material only when the adjudicating authority had conducted enquiries and ascertained details with reference to the goods imported which are identical or similar and certain reasons exists and justifies detailed investigation. - Appeal allowed - decided in favor of appellant. Applicability of decision prospective - HELD THAT - 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.

Summary

Issues Involved:
1. Jurisdiction of the High Court under Article 226 of the Constitution.
2. Valuation of imported aluminium scrap.
3. Right to provisional assessment under Section 18 of the Customs Act, 1962.
4. Rejection of declared transaction value under Section 14 of the Customs Act and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
5. Validity of the adjudication order dated 7th April, 2017.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the High Court under Article 226 of the Constitution:
The High Court dismissed the writ petition on the grounds that it would not exercise extraordinary jurisdiction under Article 226 as the matter related to the valuation of imported aluminium scrap, which could be assailed in a statutory appeal. The Supreme Court, however, decided to entertain the appeal despite the alternative remedy, clarifying the legal position and citing the decision in Commissioner of Central Excise and Service Tax, Noida v. M/s Sanjivini Non-Ferrous Trading Pvt. Ltd.

2. Valuation of imported aluminium scrap:
The appellants argued that the customs authorities uniformly did not clear consignments as per the declared transaction value but insisted on a letter agreeing to pay customs duty as per the customs authorities' valuation. This practice was alleged to be coercive, forcing appellants to forego their right to provisional assessment under Section 18 of the Customs Act. The Supreme Court emphasized that the transaction value should be the price actually paid or payable for the goods when sold for export to India, subject to certain conditions.

3. Right to provisional assessment under Section 18 of the Customs Act, 1962:
The appellants contended that they were compelled to issue a letter of consent agreeing to the customs authorities' valuation to avoid delays and additional charges. The Supreme Court highlighted the significance of Section 18, which allows for provisional assessment when there is a dispute regarding valuation, ensuring quick clearance pending final adjudication. The court held that compelling importers to waive their right to provisional assessment was incorrect.

4. Rejection of declared transaction value under Section 14 of the Customs Act and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007:
The Supreme Court discussed the requirements for rejecting the declared transaction value under Section 14 and Rule 12. It emphasized that the proper officer must have reasonable doubt about the truth or accuracy of the declared value, based on 'certain reasons,' and must communicate these reasons to the importer. The court noted that the proper officer's doubts must be reasonable and based on objective grounds, not mere suspicion.

5. Validity of the adjudication order dated 7th April, 2017:
The Supreme Court found the adjudication order flawed and contrary to law, as it did not provide cogent reasons for rejecting the declared transaction value. The court set aside the order, stating that the proper officer must follow the mandate of Section 14 and Rule 12, including forming and communicating reasons for doubting the declared value. The court also clarified that valuation alerts issued by the Director General of Valuation should guide but not interfere with the assessment authority's discretion.

Conclusion:
The Supreme Court allowed the appeal, quashed the adjudication order dated 7th April, 2017, and emphasized the importance of following statutory provisions and procedures for valuation and provisional assessment. The court highlighted that each case should be examined based on its facts, evidence, and the proper officer's enquiries. The judgment ensures that importers' rights are protected and that customs authorities adhere to legal requirements in valuation matters.