Challenge in this appeal, by the revenue, under Section 130E(b) of the Customs Act, 1962 (for short “the Act”) is to the order dated 10th December 2004 passed by the Customs, Excise and Service Tax Appellate Tribunal, (for short “the Tribunal”) whereby the appeal preferred by the respondent has been allowed holding that the assessable value declared by the respondent in the bill of entry should be accepted for the purpose of valuation in terms of Section 14 of the Act.
COMMISSIONER OF CUSTOMS (GEN), MUMBAI VERSUS ABDULLA KOYLOTH
IN THE SUPREME COURT OF
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1608 of 2005
COMMISSIONER OF CUSTOMS (GEN), MUMBAI — APPELLANT
ABDULLA KOYLOTH — RESPONDENT
J U D G M E N T
D.K. JAIN, J.:
1. Challenge in this appeal, by the revenue, under Section 130E(b) of the Customs Act, 1962 (for short “the Act”) is to the order dated 10th December 2004 passed by the Customs, Excise and Service Tax Appellate Tribunal, (for short “the Tribunal”) whereby the appeal preferred by the respondent has been allowed holding that the assessable value declared by the respondent in the bill of entry should be accepted for the purpose of valuation in terms of Section 14 of the Act.
2. M/s. IPCO Enterprise, Thane, a proprietorship concern of the respondent imported a consignment of assorted consumer goods ranging from glass ware, hair dryers etc. to gas filled cylinders and refrigerant-22 gas (R-22). The bill of entry for the said goods was filed on 3rd May 2002, by M/s Vegha Shipping & Transport Pvt. Ltd. on behalf of M/s. IPCO Enterprise, whereby the total assessable value of the goods was declared at ` 6,75, 796.90/- with duty liability of ` 3,86,352/-.
3. On an examination of the bill of entry, invoice dated
5. Due to large number of discrepancies found in the bill of entry, and the fact that the import of R-22 gas filled cylinders required actual user license, the goods were seized on 4th July 2002.
6. On 26th August 2002, the respondent wrote a letter to the Central Intelligence Unit whereby he stated that he had accepted the wholesale prices found out by the department by market survey, and that the case be finalized and settled at the earliest. Thereafter, duty liability was calculated in terms of Rule 6A and 7(1) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (for short “the 1988 Rules”) as it was observed that Rules 3(i) and 4 were not applicable due to mis-declaration, and Rule 5 and 6 could not be invoked as there were no contemporaneous imports of similar or identical goods.
8. Vide his order dated
9. Being aggrieved by the said order of the Commissioner, the respondent carried the matter in appeal before the Tribunal. As aforementioned, the Tribunal allowed the appeal of the importer in relation to the assessable value and confiscation of the imported glassware, inter alia, observing thus:
“4. After going through the impugned order, we find that the Commissioner has rejected the invoice value on the sole ground that majority of the goods were declared with their generic description only without disclosing any brand name or make, etc. He has also gone on the reason that the glass items were found to be in excess quantity than the declared one. However, we find that the invoice as also the packing list was annexed with the bill of entry and the consignments in any case were of assorted items from different countries. As such, it cannot be said that there is mis-declaration as regards description of the goods. As regard, variation in quantity of glass items, the appellant have submitted that they had declared the number of sets instead of number of pieces. ……………………………… ………………………………….
The explanations tendered by the importer are plausible, and no case be made for rejecting the invoice value in the absence of any importation or evidence to reflect upon the flow back of money by the importer to the supplier…..……………………… …………
6. We are of the view that in the absence of any evidence to show that the invoice value was not correct and further in the absence of contemporaneous imports of identical goods, the value declared by the appellant should be accepted as transaction value and not to be rejected.” In relation to the confiscation of the R-22 gas filled cylinders, the Tribunal held that the confiscation of the said goods was justified on the ground that the said goods had to be imported against an actual user license, which the respondent did not possess. The Tribunal also deleted the penalty levied on the respondent on the ground that since the value enhancement had not been upheld by it, there was no cause for imposition of penalty.
10. Hence, the present appeal.
11. Mr. K. Swami, learned counsel appearing for the revenue, while assailing the order of the Tribunal, strenuously urged that since the respondent had made mis-declarations in the bill of entry in relation to quantity, country of origin and value of the goods, the transaction value had to be rejected in terms of Section 14(1) of the Act and Rule 4(2) of the 1988 Rules. Learned counsel further contended that in the absence of contemporaneous imports of identical or similar goods, Rule 7 of 1988 Rules would apply. Commending us to the decision of the Tribunal in Prasant Glass Works P. Ltd Vs. Collector of Customs1, Calcutta which attained finality because of dismissal of assessee’s appeal by this Court in Prasant Glass Works P. Ltd Vs. Collector of Customs.2, wherein it was held that in a case where the invoice value shown is inadequate, incomplete or erroneous, then such invoice and the price declared therein will carry little weight, and the department is not required to show that the invoice price is defective and cannot be accepted.
12. Per contra, Mr. Tarun Gulati, learned counsel appearing for the respondent contended that in light of the decisions of this Court in Eicher Tractors Ltd., Haryana Vs. Commissioner of Customs, 1 1996 (87) E.L.T. 518 (Tri.-Del) 2 1997 (89) E.L.T. A 179 Mumbai3 and Varsha Plastics Private Limited & Anr. Vs. Union of India & Ors.4, the onus lies on the revenue to establish that the transaction value disclosed by the importer is not correct. Learned counsel contended that in the instant case, the revenue having failed to bring on record any material indicating undervaluation in the invoice, the value declared by the importer had to be accepted. While candidly conceding that though there could be some discrepancy in the mode of declaration of the quantity of certain glassware, in as much as the respondent had declared the quantity in sets, whereas the Commissioner had gone by the actual numbers, learned counsel asserted that as such there was no mis-declaration in relation to the assessable value, more so, when the bill of entry was supported by the invoice and the packing list. It was thus, pleaded that there is no merit in this appeal.
13. Thus, the short issue that arises for determination relates to the manner of computing the assessable value of the imported goods. For the sake of ready reference, it would be useful to extract Sections 2(41), 14 (1) (as it stood at the relevant time) and 14(1-A) of the Act, which read as follows: 3 (2001) 1 SCC 315 4 (2009) 3 SCC 365 “2(41) ‘value’, in relation to any goods, means the value thereof determined in accordance with the provisions of sub-section (1) of Section 14;
14. Valuation of goods for purposes of assessment.—(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be— the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where—
(a) the seller and the buyer have no interest in the business of each other; or
(b) one of them has no interest in the business of other, and the price is the sole consideration for the sale or offer for sale: Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50; (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf.”
14. It would be also useful to extract Rules 2(f), 3 and 4 of the 1988 Rules, which provide that: “2(f) “transaction value” means the value determined in accordance with Rule 4 of these rules. 3. Determination of the method of valuation.-For the purpose of these rules –
i. the value of imported goods shall be the transaction value,
ii. if 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. 4. Transaction value.—(1) The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules. (2) The transaction value of imported goods under sub-rule (1) above shall be accepted: Provided that—
(a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which—
(i) are imposed or required by law or by the public authorities in India; or
(ii) limit the geographical area in which the goods may be resold; or
(iii) do not substantially affect the value of the goods;
(b) the sale or price is not subject to same condition or consideration for which a value cannot be determined in respect of the goods being valued;
(c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these rules; and
(d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below.
(3)(a) Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price.
(b) In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time—
(i) the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in
(ii) the deductive value for identical goods or similar goods;
(iii) the computed value for identical goods or similar goods: Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of Rule 9 of these Rules and cost incurred by the seller in sales in which he and the buyer are not related; (c) substitute values shall not be established under the provisions of clause (b) of this sub-rule.”
15. Both Sections 14(1) of the Act (as it existed at the relevant time) and Rule 4 of the 1988 Rules provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the transaction value in the absence of any of the special circumstances indicated in Section 14(1) of the Act and particularized in Rule 4(2) of the 1988 Rules. Therefore, the Customs authorities are bound by the declaration of the importer unless on the basis of some contemporaneous evidence the Revenue is able to demonstrate that the invoice does not reflect the correct value. (See: Commissioner of Customs, Mumbai Vs. J.D. Orgochem Limited5 and Commissioner 5 (2008) 16 SCC 576 of Customs,
16. In Varsha Plastics Private Limited (supra), this Court while dealing with a similar situation where the importer had misdeclared in terms of value, description and quality of the imported goods, had held that: “It has to be kept in mind that once the nature of goods has been misdeclared, the value declared on the imported goods becomes unacceptable. It does not in any way affect the legal position that the burden is on the Customs Authorities to establish the case of misdeclaration of goods or valuation or that the declared price did not reflect the true transaction value.”
17. Similarly, in Collector of Customs, Calcutta Vs. Sanjay Chandiram8, a three judge bench of this Court observed that: “These rules are based on the assumption that the price actually paid or payable for the goods has been genuinely disclosed by the importer. But, if the certificates of origin of the goods have been found to be false, the value declared in the invoices cannot be accepted as genuine.”
18. It is evident from a bare reading of the impugned order that having regard to the factual scenario emerging from the record, the Tribunal has failed to apply the procedure envisaged in Section 14(1) of the Act read with 1988 Rules for determining the value of the imported goods. Having carefully perused the Tribunal’s order, in particular the above-extracted paragraph, we are convinced that the finding of the Tribunal in para 6 (supra) of the impugned order is clearly perverse 8 (1995) 4 SCC 222 and cannot be sustained, particularly in light of the fact that the information collected by the revenue from the market, veracity whereof was not questioned by the respondent, has also not been examined by the Tribunal. Importantly, the Tribunal has also overlooked the statement made by the respondent on
19. In light of the foregoing discussion, we are of the opinion that the Tribunal needs to re-examine the entire matter afresh, particularly in relation to the manner of valuation, redemption fine and penalty. Consequently, the appeal is allowed, and the matter is remitted back to the Tribunal for fresh consideration in accordance with law after affording proper opportunity of hearing to both the parties. 20. There will be no order as to costs.