Rejection of invoice value and application of best judgment valuation of imported goods when there are no contemporaneous imports

In the present case, the appellant was the only importer of the goods in question and there were no contemporaneous imports. The appellant had given justifiable reasons for reduced prices of the same goods from the same importer for the subsequent imports.

The Deputy Commissioner of Customs in his order dated 22^nd March, 2000 opined that the transactional value declared by the importer should be rejected and Rule 5 of the GATT Valuation Rules, 1988 shall be applied ordering to load the value to US$ 18.7 per kg.  It was directed that the bill of entry should be assessed accordingly.

Commissioner (Appeals) has rejected the contention of the appellant that the onus was on the department to show that the invoice price was not genuine and arrived at the conclusion that since the respondent was the only importer of the said goods, they were 'the best person to obtain conclusive proof of downward pricing pattern in the international market'. 

On appeal, tribunal has allowed the contention of the appellant and set aside the order in original. Department has preferred an appeal before the honorable Supreme Court against the CESTAT order. The Apex court in this case (reported in 2008 -TMI - 3595 - SUPREME COURT) has held that:

"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(1A) does not arise. In the absence of such evidence, invoice price has to be accepted as the transaction value. 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. Under- valuation has to be proved. If the charge of under-valuation 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 under-valuation, it must make detailed inquiries, collect material and also adequate evidence." 

(For full text of judgment visit - 2008 -TMI - 3595 - SUPREME COURT)