2016 (1) TMI 323 - SC - Customs

Valuation of import of soda ash light - declared price was lower than invoice price since the market price was down drastically - Held that - It is clear from the above that in the show cause notice itself the Department had accepted the fact that there was slump in the international market insofar as import of soda ash light is concerned. However we find that the mistake which was committed by the Commissioner was to straightaway refer to the aforesaid Rules in order to arrive at the transaction value. This could be permissible only if the case had been covered by the provisions under sub-section (1A) of Section 14 of the Customs Act 1962. Sub-section (1A) makes it clear that resort to the Rules is subject to the provisions of sub-Section (1) of Section 14. As per sub-Section (1) of Section 14 the value of the goods which are imported are to be fixed at the price on which such or like goods are ordinarily sold or offered for sale. Further the said valuation has to be done at the time of delivery and place of importation or exportation. Thus we are of the view that in the present case the provisions of sub-section (1) of Section 14 are clearly attracted and there was no necessity of invoking the rules. The documents clearly show the prevailing market rate of the goods in question in international market at the relevant period. On that basis if the value of the goods was declared at USD 120 per M.T. by the respondent/importer this was perfectly justified and in consonance with the provisions of the Section 14(1) of the Act. - Decided in favor of assessee.

Summary

Issues:
Customs valuation of imported goods based on declared value versus prevailing market rate.

Analysis:
The case involved the import of soda ash light by the respondent from a Chinese company, declaring a value of USD 120 per metric tonne C&F. The appellant issued a show cause notice challenging the declared value and proposing USD 153.50 per MT for assessment. The respondent argued that the market price had decreased since the import due to a slump in prices, supported by documents. The Assistant Commissioner upheld the higher value, citing Customs Valuation Rules. The respondent appealed, with the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) eventually accepting the declared value of USD 120 per MT as appropriate.

The show cause notice acknowledged the international market slump affecting soda ash light prices post-import. However, the Commissioner erred by immediately resorting to Customs Valuation Rules without considering Section 14(1) of the Customs Act, which mandates valuing goods based on prevailing market rates at the time and place of importation. The respondent submitted documents showing market prices ranging from $124 to $129 per MT, supporting their declared value of $120 per MT. The Commissioner's failure to consider this evidence led to the erroneous valuation.

The Supreme Court concluded that the Commissioner's reliance on Customs Valuation Rules without considering Section 14(1) was unwarranted. The declared value of USD 120 per MT by the respondent aligned with prevailing market rates at the time of importation, as evidenced by submitted documents. The appeal was dismissed, and any excess duty paid by the respondent was to be refunded in accordance with the law.