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Challenge to fixation of exchange rate by Central Government under Customs Act. Analysis: The appellant imported a consignment of acrylonitrile and filed the Bill of Entry with Customs authorities at Kandla. The price in the Bill of Entry reflected the true value of the consignment. The exchange rate notified by the Reserve Bank of India was Rs. 25.95 per U.S. dollar on 29th April, 1992, when the appellant filed the entry. However, the Central Government, under Section 14(3) of the Customs Act, fixed the rate at Rs. 31.44 per U.S. dollar on 27th March, 1992, affecting the calculation of customs duty based on the rupee equivalent of the price paid by the appellant. The appellant challenged the notification dated 27th March, 1992, contending that the fixation of the exchange rate was arbitrary. The High Court dismissed the writ petition, stating that in the absence of other material, it could not be held that the Central Government's rate was arbitrary. However, the Court observed that the Reserve Bank of India's rate of Rs. 25.95 was the accepted rate for foreign exchange transactions, and any deviation must be justified with good reasons. The Supreme Court found that the Central Government did not provide reasons for fixing the rate at Rs. 31.44, which was significantly higher than the Reserve Bank of India's rate. As a result, the Court held that the rate fixed by the notification was arbitrary due to the lack of justification or material supporting the deviation. Despite refraining from striking down the notification due to time lapse and complications, the Court directed that the value of the consignment for the appellant should be calculated at the Reserve Bank of India's exchange rate of Rs. 25.95 per U.S. dollar, which was the actual amount paid by the appellant. Consequently, the appeal was allowed, the challenged order was set aside, and the bank guarantee furnished by the appellant at the higher exchange rate was discharged.
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