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TMI Blog2025 (3) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... five years). He confirmed demand of differential duty in respect of the remaining seven horses under Section 28(1) of the Customs Act, 1962 [Customs Act] invoking extended period of limitation. He also ordered recovery of interest under section 28AB of Customs Act and held the horses to be liable to confiscation under section 111 of the Customs Act and imposed a redemption fine under section 125 of the Customs Act. He also imposed penalty on Doaba under section 114A of the Customs Act and on Shri Singh under section 112 of the Customs Act. 3. Doaba is a stud farm and it imported thoroughbred horses during the relevant period which were assessed as per the declared values and cleared. Later, receiving information, the Directorate General of Revenue Intelligence [DRI] started investigation and found that thoroughbred horses and their pedigrees are well documented. The horses imported by Doaba were from Ireland where they had been auctioned a short time before their import. The prices at which each of them was sold at the auction was available on the internet. The prices indicated in the invoices submitted by Doaba and declared in its Bills of Entry were just a fraction of the prices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then assessed on a different value determined through other methods prescribed in the 1988 Rules. 11. As per Rule 3 of the 1988 Rules, the value of the imported goods shall be, subject to Rules 9 and 10A, the transaction value. It further provides that if the value cannot be determined as above, it shall be determined sequentially through Rules 5 to 8. Rule 3 reads as follows: "3. Determination of the method of valuation. - For the purpose of these rules, - (i) subject to rules 9 and 10A, the value of imported goods shall be the transaction value; (ii) if the value cannot be determined under the provisions of Clause (i) above the value shall be determined by proceeding sequentially through rules 5 to 8 of these rules." 12. Rule 9 provides for addition of certain costs and services to the transaction value. If this Rule is applied along with Rule 3, the costs and services have to be added to the transaction value and that shall be the assessable value. In other words, the transaction value gets modified if Rule 9 is applied. Rule 9 is not relevant for this appeal. 13. Rule 10A provides for rejection of the transaction value under certain circumstances if the proper officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order (as was proposed in the SCN). It has been specifically recorded in paragraph 7.4 of the SCN that the value of the horses in the case cannot be determined under Rules 4,5,6,7 and 7A and therefore, it must be determined under Rule 8. This Rule reads as follows: "8. Residual method. (1) Subject to the provisions of rule 3 of these rules, where the value of imported goods cannot be determined under the provisions of any of the proceeding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of Section 14 of the Customs Act, 1962, and on the basis of data available in India. (2) No value shall be determined under the provisions of this rule on the basis of (i) the selling price in India of the goods produced in India; (ii) a system which provides for the acceptance for customs purpose of the highest of the two alternative values; (iii) the price of the goods in the domestic market of the country of exportation; (iiia) the cost of production other than computed values which have been determined for identical or similar goods in accordance with the provision of rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was followed by the Supreme Court in J K Steel Ltd. vs. Union of India [1978 (2) ELT J 355 (SC)]. 23. We have considered the submissions by both sides on the question of determination of value under Rule 8 of the 1988 Rules which specifically prohibits determination of value based on the price of the goods in the domestic market of the country of export. 24. It may not be out of place to mention here that the 1988 Rules were subsequently replaced by Customs (Determination of Value of Imported Goods Rules), 1997 [1997 Rules], Rule 9 of which is the residual method of determination of the value. This Rule also stipulates that the valuation cannot be on the basis of the value of the goods in the domestic market of the country of export. It reads as follows: "9. Residual method.- (1) Subject to the provisions of rule 3, where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and on the basis of data available in India; Provided that the value so determined shall not exceed the price at which such or like go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for identical or similar goods in accordance with the provisions of Article 6; (e) the price of the goods for export to a country other than the country of importation; (f) minimum customs values; or (g) arbitrary or fictitious values. 3. If the importer so requests, the importer shall be informed in writing of the customs value determined under the provisions of this Article and the method used to determine such value." 26. Thus, in determination of value of the imported goods through the residual method, the explicit prohibition on basing it on the domestic price in the country of export is as per an international agreement. It is part of Rule 8 of the 1988 Rules and also its successor Rule 9 of the 1997 Rules. In the impugned order, after rejecting the transaction value under Rule 10A of the 1988 Rules, it was re-determined under Rule 8 of 1988 Rules as per the auction prices of those horses in Ireland with some adjustments. 27. The submission of the learned counsel for the appellant is that the value cannot be determined under Rule 8 based on the domestic price of the goods in the exporting country by virtue of Rule 8(2)(iii). The submission of the learned authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X
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