REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APELLATE JURISDICTION

CIVIL APPEAL NO. 5011 OF 2019 (ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 33602 OF 2017)

CENTURY METAL RECYCLING PVT. LTD. AND ANOTHER …..            APPELLANT(S)

VERSUS

UNION OF INDIA AND OTHERS …..        RESPONDENT(S)

J U D G M E N T

SANJIV KHANNA, J.

Leave granted.

2. Impugned order dated 12th September, 2017 passed by the Division

Bench of the High Court of Judicature at Allahabad dismisses Writ

Petition  Tax  No.307  of  2017  filed  by  the  appellants,  namely  M/s

Century Metal Recycling Pvt. Ltd. and Gauri Shankar Agarwala, inter

alia,  on  the  grounds  that  the  High  Court  would  not  exercise

extraordinary  jurisdiction  under  Article  226  of  the  Constitution  of

India as the matter relates to the valuation of imported aluminium

scrap which could be assailed in a statutory appeal and it would not

be appropriate for the writ court to decide whether the appellant had

or had not agreed to valuation by the customs authorities. Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 1 of 30

3. The appellant Company is stated to be engaged in the manufacture

of aluminium alloys, for which they regularly import aluminium waste

as  a  raw  material  for  self-consumption.  Imported  scrap,  it  is

accepted, falls under different code names as per specifications of

the  Institute  of  Recycling  Industry.  The  grievance  raised  by  the

appellants is that the 2nd respondent i.e. the Principal Commissioner

of  Customs,  Noida  Customs  Commissionerate  and  its  Officers

almost uniformly do not clear the consignments as per the declared

transaction value in the bill of entry but insist that the appellants write

a letter agreeing to pay customs duty as per the valuation by the

customs  authorities  and  compel  them  to  forego  their  right  to

provisional assessment under Section 18 of the Customs Act, 1962

(‘the Act’, for short). The appellants, coerced and intimated, have no

option  but  to  give  in  and  issue  a  letter  of  consent  agreeing  to

assessment/valuation by the customs authorities to avoid delay in

clearance, levy of demurrage, ground rent and container detention

charges,  etc.  It  is  also  alleged  that  the  respondents  without

observing  and  contrary  to  the  mandate  of  Section  14  of  the  Act

discard  the  declared  transactional  value  and  recompute  the

consignment value in view of the Valuation Alert dated 1st December,

2016  issued  by  the  Central  Board  of  Excise  and  Customs  (‘the

Board’, for short).

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 2 of 30

4. At  the  outset,  we would  record  that  the  appellants  had given up

prayers  (a)  and  (b)  before  the  High  Court  as  is  recorded  in  the

impugned  order  and  we  are,  therefore,  primarily  to  confine  our

decision to prayer (c) of the Writ Petition which reads as under:

“In  the  aforesaid  facts  and  circumstances  of  the petitioner respectfully prays that this Hon’ble Court may be graciously pleased to:

(c)  Issue a suitable writ, order or direction in the nature of  MANDAMUS  commanding  the  Assessing  Officer that Respondent No.2 and his subordinate officers to make assessment of aluminium scrap being imported by  the  petitioner  on  the  basis  of  the  declared transaction  value  in  accordance  with  statutory provisions under Section 14 & 17(1) of  the Customs Act,  and  in  case  of  non-acceptance,  to  allow Provisional  Assessment  thereof  under  Section  18  of the  Customs  Act  in  accordance  with  Circular  No.38 dated 22.08.2016 (Annexure-5)”

We  would  for  the  reasons  stated  also  examine  validity  of  the

adjudication order dated 7th April, 2017.

5. We are not inclined to remit the appellant to an alternative remedy by

way of statutory appeal under Section 128 of the Act for the reason

that  the  impugned  order  dated  7th April,  2017  in  Assessment

No.12/AC/CUS/2017 cannot be sustained in view of the decision of

this Court in  Commissioner of Central Excise and Service Tax,

Noida v. M/s Sanjivini Non-Ferrous Trading Pvt. Ltd.1, the latter

being the sister concern of the first appellant in this case. Further,

1 Civil Appeal Nos. 18300-18305 of 2017 decided on December 10, 2018 Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 3 of 30

having heard learned counsel for the parties, we would like to clarify

the  legal  position  and  therefore  in  the  facts  of  this  case  would

exercise our discretion to entertain this appeal despite the alternative

remedy.

6. We would begin by reproducing Section 14 of the Act and Rules 3

and 12 of the Customs Valuation (Determination of Value of Imported

Goods)  Rules,  2007  (‘the  2007  Rules’,  for  short)  which  read  as

under:

“S  ection 14: Valuation of Goods.

(1)  For the purposes of the Customs Tariff  Act,  1975 (51 of  1975),  or  any other law for  the time being in force,  the  value  of  the  imported  goods  and  export goods shall  be the transaction value of  such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject  to such other conditions as may be specified in the rules made in this behalf:

Provided  that  such  transaction  value  in  the  case  of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services,  including  commissions  and  brokerage, engineering,  design work,  royalties  and licence fees, costs  of  transportation  to  the  place  of  importation, insurance, loading, unloading and handling charges to the  extent  and  in  the  manner  specified  in  the  rules made in this behalf:  

Provided further that the rules made in this behalf may provide for, —

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 4 of 30

(i)  the circumstances in which the buyer and the seller shall be deemed to be related;

(ii)  the manner of determination of value in respect of goods  when  there  is  no  sale,  or  the  buyer  and  the seller are related, or price is not the sole consideration for the sale or in any other case;  

(iii)   the  manner  of  acceptance or  rejection  of  value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section:

Provided also 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 of export, as the case may be, is presented under section 50.

(2)  Notwithstanding anything contained in sub-section (1),  if  the  Board  is  satisfied  that  it  is  necessary  or expedient so to do, it may, by notification in the Official Gazette,  fix  tariff  values  for  any  class  of  imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values  are  fixed,  the  duty  shall  be  chargeable  with reference to such tariff value.  

Explanation. —For the purposes of this section—

(a) “rate of exchange” means the rate of exchange—

(i) determined by the Board, or

(ii)  ascertained in such manner as the Board may direct,  for  the  conversion  of  Indian  currency  into foreign  currency  or  foreign  currency  into  Indian currency;

(b) “foreign currency”  and “Indian currency”  have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).

xx xx xx

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 5 of 30

RULES

Rule 3. Determination of the method valuation:

(1) Subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10;

(2) Value of imported goods under sub-rule (1) 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 some 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 10 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.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 6 of 30

(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 India;

(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 10 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.

(4) if  the  value  cannot  be  determined  under  the provisions  of  sub-rule  (1),  the  value  shall  be determined by proceeding sequentially through rule 4 to 9.

xx xx xx

Rule 12. Rejection of declared value:

(1) When the proper officer has reason to doubt the truth or accuracy of  the value declared in relation to any imported goods, he may ask the importer of such goods  to  furnish  further  information  including documents  or  other  evidence  and  if,  after  receiving such  further  information,  or  in  the  absence  of  a response of such importer, the proper officer still  has reasonable  doubt  about  the  truth  or  accuracy of  the value  so  declared,  it  shall  be  deemed  that  the transaction value of  such imported  goods cannot  be determined under the provisions of sub-rule (1) of rule 3.  

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(2)  At  the request  of  an importer,  the proper officer, shall  intimate the importer  in  writing the grounds for doubting the truth or accuracy of the value declared in relation  to  goods  imported  by  such  importer  and provide  a  reasonable  opportunity  of  being  heard, before taking a final decision under sub-rule (1).

Explanation.  -  (1)  For  the  removal  of  doubts,  it  is hereby declared that: -

(i)  This  rule  by  itself  does not  provide  a method for determination of  value,  it  provides a mechanism and procedure  for  rejection  of  declared  value  in  cases where  there  is  reasonable  doubt  that  the  declared value does not represent the transaction value; where the  declared  value  is  rejected,  the  value  shall  be determined by proceeding sequentially in accordance with rules 4 to 9.

(ii)  The declared  value  shall  be  accepted  where  the proper officer is satisfied about the truth and accuracy of  the  declared  value  after  the  said  enquiry  in consultation with the importers.

(iii)  The proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include –

(a)   the significantly higher value at which identical or  similar  goods  imported  at  or  about  the  same time  in  comparable  quantities  in  a  comparable commercial transaction were assessed;

(b)  the  sale  involves  an  abnormal  discount  or abnormal reduction from the ordinary competitive price;

(c)    the sale involves special discounts limited to exclusive agents;

(d)   the  misdeclaration  of  goods  in  parameters such  as  description,  quality,  quantity,  country  of origin, year of manufacture or production;

(e)    the  non-declaration  of  parameters  such  as brand, grade, specifications that have relevance to value;

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 8 of 30

(f)    the fraudulent or manipulated documents.”

7. Section 14 has to be read with Rule 12 of the 2007 Rules. Rule 12

uses the expression ‘the proper officer has reason to doubt the truth

or accuracy of the value declared in relation to the imported goods’.

This  expression  is  distinctly  different  from  the  words  and

preconditions imposed for rejecting the declared transactional value

under  the  repealed Customs Valuation  (Determination  of  Price  of

Imported Goods) Rules,1988 (‘the 1988 Rules’,  for short)  and the

pre-amended Section 14(1) of the Act which were considered and

interpreted by this  Court  in  Eicher Tractors Limited,  Haryana  v.

Commissioner  of  Customs,  Mumbai2.   In  fact,  the  judgment  in

Eicher Tractors Limited (supra) had not considered Rule 10-A of

the 1988 Rules enforced with effect from 19th February, 1998 as the

imports  therein  related  to  the  year  1993.  Rule  10-A brought  the

concept of ‘reason to doubt the declared value’ in place of special or

extraordinary circumstances particularised in Rule 4(2) of the 1988

Rules. However, the interpretation given to Section 14(1) in  Eicher

Tractors Limited  (supra) as to the meaning of the word  ‘payable’

used therein would be still applicable.  The word  ‘payable’ used in

Section 14(1) refers to the particular transaction and the payability in

respect of ‘the transaction’.  It refers to the notional value, albeit the

2 (2001) 1 SCC 315 Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 9 of 30

transaction value as declared in the bill  of  entry plus the amount

which has to be added in terms of Rule 10 of the 2007 Rules.

8. This Court in M/s Sanjivini Non-Ferrous Trading Pvt. Ltd. (supra),

while interpreting the provisions of Section 14 and Rules 3, 4 and 12

of the 2007 Rules, had held as under:

“10.  The law, thus is clear.  As per Sections 14(1) and 14(1-A),  the  value  of  any  goods  chargeable  to  ad valorem duty is deemed to be the price as referred to in that provision.  Section 14(1) is a deeming provision as it  talks of ‘deemed value’ of  such goods.  Therefore, normally, the Assessing Officer is supposed to act on the basis of price which is actually paid and treat the same  as  assessable  value/transaction  value  of  the goods.  This, ordinarily, is the course of action which needs to be followed by the Assessing Officer.   This principle  of  arriving  at  transaction  value  to  be  the assessable  value applies.   This  is  also the  effect  of Rule  3(1)  and  Rule  4(1)  of  the  Customs  Valuation Rules,  namely,  the adjudicating authority  is bound to accept price actually paid or payable for goods as the transaction value.  Exceptions are, however, carved out and enumerated in Rule 4(2).  As per that provision, the transaction value mentioned in the Bills  of  Entry can be discarded in case it is found that there are any imports of identical goods or similar goods at a higher price  at  around  the  same time or  if  the  buyers  and sellers are related to each other.   In order to invoke such a provision it  is  incumbent  upon the Assessing Officer to give reasons as to why the transaction value declared in  the Bills  of  Entry  was being rejected;  to establish that the price is not the sole consideration; and to give the reasons supported by material on the basis  of  which  Assessing  Officer  arrives  at  his  own assessable value.”

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The Division Bench has quoted the following sub-para from

Commissioner of Customs, Calcutta v. South India Television

(P) Ltd.3:

“13.  Section  14(1) speaks  of  "deemed  value". Therefore, invoice price can be disputed. However, it is for the Department to prove that  the invoice price is incorrect.  When  there  is  no  evidence  of contemporaneous imports at a higher price, the invoice price is liable to be accepted. The value in the export declaration may be relied upon for ascertainment of the assessable value under the Customs Valuation Rules and not for determining the price at which goods are ordinarily sold at the time and place of importation. This is where the conceptual difference between value and price comes into discussion.”

 9. As per Section 14(1) of the Act, value of the imported goods shall be

the  transactional  value  of  such  goods,  which  means  the  price

actually paid or payable for the goods when sold for export to India

where the buyers and sellers are not related and the price fixed is

the sole consideration for sale. As per the first  proviso to Section

14(1) of the Act, the transactional value for the purpose of customs

duty would include amounts paid or payable as costs and services

like  commission,  brokerage,  engineering,  design  work,  cost  of

transportation, etc.,  as may be specified in the rules made in this

behalf. These amounts are to be added to the declared transactional

value. Accordingly, in terms of Rule 10 of the 2007 Rules, the value

and price of costs and services are added to the price actually paid

3 (2007) 6 SCC 373 Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 11 of 30

or payable for the imported goods for determining the transaction

value.

10. Sub-section  (2)  of  Section  14  is  a  non-obstante provision,  which

applies  notwithstanding  sub-section  (1),  i.e.  when  the  Board  has

issued a notification in the Official Gazette fixing tariff values for any

class of imported or exported goods. The Board has been authorised

to  issue  notifications  under  Section  14(2)  of  the  Act  when  it  is

satisfied that it is necessary or expedient. Thus, whenever tariff has

been fixed vide notification issued by the Board under Section 14(2)

of  the  Act,  then  notwithstanding  the  transactional  value  of  the

imported goods under sub-section (1) to Section 14 of the Act, as

per  sub-section (2)  to  Section  14 of  the Act  the  customs duty  is

payable  as  per  the  tariff  value so fixed.  In  the present  case,  the

Board  has  not  considered it  necessary  and expedient  to  issue  a

notification  under  Section  14(2)  of  the  Act  to  fix  a  tariff  for  the

imported aluminium waste.

11. The second proviso to Section 14 (1) deals with different situations,

enumerated under the three clauses; (i) when buyers and sellers are

deemed to  be  related;  (ii)  when  there  is  no  sale,  or  buyers  and

sellers are related or the price is not the sole consideration for sale,

etc. and (iii) where the proper officer has reason to doubt the truth or

accuracy of such value. When the conditions specified in the second Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 12 of 30

proviso  are  satisfied,  the  transactional  value  for  the  purpose  of

charging of customs duty is to be made as per rules framed in this

behalf.

12. Rules  3  and  12  of  the  2007  Rules  i.e.  Customs  Valuation

(Determination  of  Value  of  Imported  Goods)  Rules,  2007  were

enacted and enforced with effect from 10th October, 2007 replacing

and superseding the 1988 Rules. Rule 3(1) of the 2007 Rules states

that  value  of  the  imported  goods  shall  be  the  transaction  value

adjusted in accordance with the provisions of Rule 10 of the 2007

Rules  which  Rule,  as  observed  above,  deals  with  the  costs  and

services which are to be added to the price actually paid or payable

for the imported goods for determining the transaction value. Sub-

rule (1) to Rule 3 is however subject to Rule 12 and therefore give

primacy  to  Rule  12  which  we  shall  subsequently  elaborate  and

explain.   Sub-rule (2) to Rule 3 states that  value of  the imported

goods  under  sub-rule  (1)  shall  be  accepted  i.e.  accepted  by  the

customs authorities. The proviso then vide different clauses sets out

the pre-conditions for accepting value of the imported goods. Rule

11 provides for declaration to be given by the importer or his agent

certifying  that  they  had  disclosed full  and accurate  details  of  the

value of the imported goods and any other statement, information

and document including invoice of the manufacturer or producer of

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 13 of 30

the goods where the goods are imported from or through a person

other than the manufacturer of goods, as considered necessary by

the proper officer for valuation of the imported goods.  Sub-rule (2)

states that the declared value shall be accepted where the proper

officer is satisfied about the truth and accuracy of the declared value

after an enquiry in consultation with the importers.  

13. Sub-rule (3) to Rule 3 deals with cases when the buyer and seller

are related. We would not dilate on the said sub-rule for this is not

required for the purpose of the present decision.  As per sub-rule (4),

where the value cannot be determined under sub-rule (1) to Rule 3,

the transaction is to be valued by step wise applying Rules 4 to 9.

Rule 4 deals with transaction value based on identical goods. Rule 5

deals with transaction value based on similar goods.  Rule 6 deals

with the determination of value where the transactional value cannot

be determined under Rules 3, 4 and 5.  Rules 7 and 8 deal with

deductive value and computed value respectively.  Rule 9 prescribes

the residual method for computing the transaction value.  What is

important to note is that Rules 4 to 9 are subject to the provisions of

Rule 3 thereby giving primacy to Rule 3 which in turn gives primacy

to Rule 12 of the 2007 Rules.

14. Rule 12, which as noticed above enjoys primacy and pivotal position,

applies where the proper  officer  has reason to doubt  the truth or Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 14 of 30

accuracy of the value declared for the imported goods. It envisages

a  two-step  verification  and  examination  exercise.  At  the  first

instance, the proper officer must ask and call upon the importer to

furnish  further  information  including  documents  to  justify  the

declared  transactional  value.  The  proper  officer  may  thereafter

accept  the  transactional  value  as  declared.  However,  where  the

proper officer is not satisfied and has reasonable doubt about the

truth or  accuracy of  the value so declared,  it  is  deemed that  the

transactional value of  such imported goods cannot be determined

under  the provision of  sub-rule  (1)  of  Rule  3  of  the 2007 Rules.

Clause-(iii) of Explanation to Rule 12 states that the proper officer

can on ‘certain reasons’ raise doubts about the truth or accuracy of

declared value. ‘Certain reasons’ would include conditions specified

in clauses (a)  to (f)  i.e.  higher value of  identical  similar  goods of

comparable  quantities  in  a  comparable  transaction,  abnormal

discount or abnormal deduction from ordinary competitive  prices,

sales  involving  the  special  prices,  misdeclaration  on  parameters

such  as  description,  quality,  quantity,  country  of  origin,  year  of

manufacture or production, non-declaration of parameters such as

brand  and  grade  etc.  and  fraudulent  or  manipulated  documents.

Grounds  mentioned  in  (a)  to  (f)  however  are  not  exhaustive  of

‘certain reasons’ to raise doubt about the truth or accuracy of the

declared value. Clause (ii)  to Explanation states that the declared Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 15 of 30

value shall be accepted where the proper officer is satisfied about

the  truth  and  accuracy  of  the  declared  value  after  enquiry  in

consultation with the importers.  Clause-(i) to the Explanation states

that Rule 12 does not provide a method of determination of value but

provides  the  procedure  or  mechanism  in  cases  where  declared

value can be rejected when there is  a reasonable doubt  that  the

declared transaction value does not represent the actual transaction

value.   In  such cases  the  transaction  value is  to  be sequentially

determined in accordance with Rules 4 to 9 of the 2007 Rules.

Sub-rule  (2)  of  Rule  12  stipulates  that  on  request  of  an

importer, the proper officer shall intimate to the importer in writing the

grounds,  i.e.  the reason for  doubting the truth or accuracy of  the

value declared in relation to the imported goods. Further, the proper

officer shall provide a reasonable opportunity of being heard to the

importer before he makes the valuation in the form of final decision

under sub-rule (1).

15. The  requirements  of  Rule  12,  therefore,  can  be  summarised  as

under:

(a) The proper  officer  should  have reasonable  doubt  as  to  the

transactional  value  on  account  of  truth  or  accuracy  of  the  value

declared in relation to the imported goods.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 16 of 30

(b) Proper  officer  must  ask  the  importer  of  such  goods  further

information which may include documents or evidence;

(c) On receiving such information or in the absence of response

from the importer, the proper officer has to apply his mind and decide

whether or not reasonable doubt as to the truth or accuracy of the

value so declared persists.

(d) When the proper officer does not have reasonable doubt, the

goods are cleared on the declared value.

(e) When  the  doubt  persists,  sub-rule  (1)  to  Rule  3  is  not

applicable and transaction value is determined in terms of Rules 4 to

9 of the 2007 Rules.

(f) The proper officer can raise doubts as to the truth or accuracy

of the declared value on ‘certain reasons’ which could include the

grounds  specified  in  clauses  (a)  to  (f)  in  clause  (iii)  of  the

Explanation.

(g) The proper officer, on a request made by the importer, has to

furnish  and  intimate  to  the  importer  in  writing  the  grounds  for

doubting the truth or accuracy of the value declared in relation to the

imported goods.  Thus, the proper officer has to record reasons in

writing which have to be communicated when requested.

(h) The importer has to be given opportunity of hearing before the

proper officer finally decides the transactional value in terms of Rules

4 to 9 of the 2007 Rules. Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 17 of 30

 16. Proper officer can therefore reject the declared transactional value

based  on  ‘certain  reasons’ to  doubt  the  truth  or  accuracy  of  the

declared value in which event the proper officer is entitled to make

assessment as per Rules 4 to 9 of the 2007 Rules. What is meant by

the expression “grounds for doubting the truth or  accuracy of  the

value declared” has been explained and elucidated in clause (iii) of

Explanation  appended  to  Rule  12  which  sets  out  some  of  the

conditions  when  the  ‘reason  to  doubt’  exists.  The  instances

mentioned in clauses (a) to (f) are not exhaustive but are inclusive

for  there  could  be other  instances  when the  proper  officer  could

reasonably doubt the accuracy or truth of the value declared.   

17. The choice of  words deployed in Rule 12 of  the 2007 Rules are

significant  and  of  much  consequence.  The  Legislature,  we  must

agree,  has  not  used  the  expression  “reason  to  believe”  or

“satisfaction” or such other positive terms as a pre-condition on the

part of the proper officer. The expression “reason to believe” which

would have required the proper officer to refer to facts and figures to

show  existence  of  positive  belief  on  the  undervaluation  or  lower

declaration  of  the  transaction  value.  The  expression  “reason  to

doubt”  as  a  sequitur  would  require  a  different  threshold  and

examination. It cannot be equated with the requirements of positive

reasons to believe, for the word ‘doubt’ refers to un-certainty and

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 18 of 30

irresolution  reflecting  suspicion  and  apprehension.  However,  this

doubt  must  be  reasonable  i.e.  have  a  degree  of  objectivity  and

basis/foundation  for  the  suspicion  must  be  based  on  ‘certain

reasons’.

18. The  expression  ‘proof  beyond  reasonable  doubt’  in  criminal  law

requires the prosecution to establish guilt and secure conviction of

the accused by proving the charge ‘beyond reasonable doubt’.  In

Ramakant Rai Vs. Madan Rai & Ors. (2003) 12 SCC 395 referring

to the expression ‘reasonable doubt’ in criminal law it was held as

under:

“24. Doubts would be called reasonable if they are free from a zest for abstract speculation.  Law cannot afford any  favourite  other  than  the  truth.   To  constitute reasonable  doubt,  it  must  be  free  from  an overemotional response.  Doubts must be actual and substantial  doubts  as  to  the  guilt  of  the  accused persons arising from the evidence, or from the lack of it,  as  opposed  to  mere  vague  apprehensions.   A reasonable doubt is not an imaginary, trivial or a merely possible doubt; but a fair doubt based upon reason and common sense.  It must grow out of the evidence in the case.”

Proof  beyond  ‘reasonable  doubt’  is  certainly  not  the

requirement under proviso to Section 14 of the Act and Rule 12 of

the 2007 Rules, albeit the above quote draws a distinction between

a simple doubt and a doubt which is reasonable. In the context of the

proviso  to  Section  14  read  with  Rule  12  and  clause  (iii)  of

Explanation to the 2007 Rules, the doubt must be reasonable and Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 19 of 30

based on ‘certain reasons’. The proper officer must record ‘certain

reasons’ specified in (a)  to (f)  or similar  grounds in writing at  the

second stage before he proceeds to discard the declared value and

decides  to  determine  the  same  by  proceeding  sequentially  in

accordance with Rules 4 to 9 of the 2007 Rules.  It refers to a doubt

which the proper officer possesses even after the importer has been

asked  to  furnish  further  information  including  documents  and

evidence during the preliminary enquiry to clear his doubt about the

truth and accuracy of the value declared.  Therefore, there has to be

a preliminary enquiry by the proper officer in which the importer must

be given an opportunity for clarification of the doubts of the officer by

furnishing of documents and evidence as to the accuracy or truth of

the value declared.  It is only in case where the doubt of the proper

officer persists after conducting examination of information including

documents or on account of non-furnishing of information that the

procedure  for  further  investigation  and  determination  of  value  in

terms  of  Rules  4  to  9  would  come into  operation  and  would  be

applicable.  Reasonable doubt will  exist if  the doubt is reasonable

and for ‘certain reasons’ and not fanciful  and absurd.   A doubt to

justify  detailed enquiry  under  the proviso to  Section 14 read with

Rule 12 should not be based on initial apprehension, be imaginary or

a mere perception not founded on reasonable and ‘certain’ material.

It should be based and predicated on grounds and material in the Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 20 of 30

form of ‘certain reasons’ and not mere ipse dixit. Subjecting imports

to detailed enquiry on mere suspicion because one is distrustful and

unsure without reasonable and certain reasons would be contrary to

the scheme and purpose behind the provisions which ensure quick

and expeditious clearance of imported goods.  

19. Section 18 of the Act, reads:

“Section 18. Provisional assessment of duty. —

(1) Notwithstanding anything contained in this Act but without prejudice to the provisions of  Section 46 and Section 50, —

(a) where the importer or exporter is unable to make self-assessment  under  sub-section  (1)  of  Section  17 and makes a request in writing to the proper officer for assessment; or

(b)   where  the  proper  officer  deems it  necessary  to subject  any  imported  goods  or  export  goods  to  any chemical or other test; or

(c)  where the importer or exporter has produced all the necessary documents and furnished full information but the proper officer deems it necessary to make further enquiry; or

(d)  where  necessary  documents  have  not  been produced or  information has not  been furnished and the proper officer deems it necessary to make further enquiry,

the proper officer may direct that the duty leviable on such goods be assessed provisionally if the importer or the  exporter,  as  the  case  may  be,  furnishes  such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed or re-assessed as the case may be, and the duty provisionally assessed.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 21 of 30

(1A)  Where,  pursuant  to  the  provisional  assessment under sub-section (1), if any document or information is required by the proper officer for final assessment, the importer or exporter, as the case may be, shall submit such document or information within such time, and the proper officer shall finalise the provisional assessment within  such  time  and  in  such  manner,  as  may  be prescribed.

(2) When the duty leviable on such goods is assessed finally or  re-assessed  by  the  proper  officer  in accordance with the provisions of this Act, then—

(a) in the case of goods cleared for home consumption or  exportation,  the  amount  paid  shall  be  adjusted against  the  duty finally  assessed  or  re-assessed,  as the case may be and if the amount so paid falls short of, or is in excess of,  the duty finally assessed or re- assessed,  as  the  case  may  be,  the  importer  or  the exporter  of  the goods shall  pay the deficiency or  be entitled to a refund, as the case may be;

(b) in the case of warehoused goods, the proper officer may, where the duty finally assessed or re-assessed, as  the  case  may  be,  is  in  the  excess  of  the  duty provisionally assessed, require the importer to execute a bond,  binding himself  in  a sum equal  to twice the amount of the excess duty.

(3)  The  importer  or  exporter  shall  be  liable  to  pay interest,  on  any  amount  payable  to  the  Central Government,  consequent  to  the  final  assessment order or re-assessment order under sub-section (2), at the  rate  fixed  by  the  Central  Government  under Section 28AA from the first day of the month in which the  duty  is  provisionally  assessed  till  the  date  of payment thereof.

(4) Subject to sub-section (5), if any refundable amount referred  to  in  clause  (a)  of  sub-section  (2)  is  not refunded under  that  sub-section  within  three  months from  the  date  of  assessment  of  duty  finally or  re- assessment of duty, as the case may be, there shall be paid an interest on such unrefunded amount at such rate  fixed  by  the  Central  Government  under  Section 27A till the date of refund of such amount.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 22 of 30

(5) The amount of duty refundable under sub-section (2) and the interest under sub-section (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to—

(a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal use;

(c)  the  duty  and  interest,  if  any,  paid  on  such  duty borne  by  the  buyer,  if  he  had  not  passed  on  the incidence of such duty and interest, if any, paid on such duty to any other person;

(d) the export duty as specified in Section 26;

(e) drawback of duty under Sections 74 and 75.”

The significance of Section 18 of the Act can be understood in

light  of  the  above  provisions.  Section  18  provides  for  provisional

assessment  of  duty  in  cases  specified  in  sub-section  (1)  of  the

Section.  Clause  (c)  of  sub-section  (1)  deals  with  cases  where

importer  or  exporter  has  produced  necessary  documents  and

furnished  full  information  for  assessment  of  duty  but  the  proper

officer deems it necessary to make further enquiry for assessing the

duty.  However,  Clause  (d)  is  wider  and  would  apply  when  the

importer  or  exporter  does  not  produce  necessary  documents  or

furnish information. In all cases covered under Clauses (a) to (d), the

proper officer may direct provisional assessment of the duty leviable

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 23 of 30

on the imported goods. Where duty is assessed provisionally,  the

importer  or  exporter  has  to  furnish  security  as  the  proper  officer

deems  fit  for  payment  of  deficiency,  if  any,  between  the  duty

provisionally paid and the duty finally assessed.  

On interpreting Section 18 of the Act, it is held that when there

is a dispute between the customs authorities and the importer as

regards the valuation of the imported goods, on satisfaction of the

conditions  enumerated  in  sub-section  (1),  the  authorities  should

make provisional assessment of customs duty under Section 18 of

the  Act.  This  expedites  clearance,  pending  final  adjudication  on

merits which may take time. This is also the mandate of the Board

Circular  No.38/2016 dated 22nd August,  2016.  Any insistence and

compulsion by the authorities that the importer should disclaim and

forgo his statutory right under Section 18 of the Act would not be

correct. Neither would it be right to reject the valuation as declared

by the importer without reasonable doubt for certain reasons.  

20. We  would  ex  facie  for  the  reasons  recorded  below  reject  the

contention of the respondents predicated on the letter of appellants

dated 6th March, 2017 that the appellants did not seek provisional

assessment of the bill of entry and had accepted and paid duty on

the valuation done by the customs authorities. This letter exposits

the  predicament  faced  by  the  appellants  as  it  states  that  the

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 24 of 30

appellants were in urgent requirement and wanted clearance of the

goods.  Pertinently, the appellants had earlier written several letters,

including communications dated 22nd December, 2016 and 4th March,

2017  requesting  for  clearance  of  the  imported  consignment  of

aluminium  scrap  on  the  declared  transaction  value  pointing  out

therein that  on account of  delay in the clearance of  the imported

consignments,  the  appellants  and  its  sister  concern  had  been

compelled  to  pay  excess  duty  of  over  Rs.25  crores  from August

2013 onwards.  It  is  unfortunate and has to  be accepted that  the

respondent  authorities had compelled and forced the appellant  to

furnish the letter dated 6th March, 2017 thereby waiving of its right to

provisional assessment and accepting valuation in terms of Rules 4

to 10.

As  per  sub  Rule  (2)  of  Rule  12,  the  proper  officer  when

required  must  intimate  to  the  importer  in  writing  the  grounds  for

doubting  the  truth  or  accuracy  of  the  value  declared.   The  said

mandate of sub-Rule (2) of Rule 12 cannot be ignored or waived.

Formation of opinion regarding reasonable doubt as to the truth or

accuracy of the valuation and communication of the said grounds to

the importer is mandatory, subterfuge to by-pass and circumvent the

statutory  mandate  is  unacceptable.   Formation  of  belief  and

recording of reasons as to reasonable doubt and communication of

the reasons when required is the only way and manner in which the Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 25 of 30

proper officer in terms of Rule 12 can proceed to make assessment

under Rules 4 to 9 after rejecting the transaction value as declared.

21. The mandate to record reasons at the second stage of enquiry is not

expressly stipulated,  albeit it has been read by us by implication in

Rule 12. Being conscious that this mandate if applied to past cases

would  possibly  lead  to  complications  and  difficulties,  we  would

invoke the doctrine of prospective application with the direction that

the past cases will be decided on a case to case basis, depending

upon the factual matrix and considerations like whether the importer

has  asked  for  ‘certain  reasons’,  whether  the  reasons  were  not

communicated,  whether  ‘certain  reasons’ can be deciphered from

the  assessment/valuation  order,  whether  misdescription  or  false

declaration was apparent, etc.

22. In  Commissioner of Customs vs. Prabhu Dayal Prem Chand4,

this Court had rejected the plea that the Revenue was justified in

redetermining the value of brass and copper scrap on the basis of

information received from London Metal Exchange on the price of

the said metals on the ground that the importer was not confronted

with any contemporaneous material  for  enhancing the transaction

value.  This Court affirmed the order of the Tribunal in Prabhu Dayal

Prem Chand  (supra)  and  held  that  the  order  in  original  had not

4 2010 (13) SCC 535 Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 26 of 30

indicated details of any contemporaneous import or other material in

the  form  of  corroborative  material  which  had  necessitated  the

enhancement in the transaction valuation.

23. We would now refer to the findings of  the order in original  in the

present case which observes that the appellants had declared value

of  the  aluminium  scrap  as  Rs.81.31  per  kg,  albeit the

contemporaneous import data in the form of different bills of entry

had  indicated  aluminium scrap  values  between Rs.  83.26  to  Rs.

120.897 per kg.  The said portion of the order refers to at least four

bills of entries declaring assessable value of less than Rs. 85 per kg.

Interestingly,  the  order  in  original  also  records  that  the  imported

goods being aluminium scrap was not a homogeneous commodity

and therefore, cannot be evaluated on the basis of the samples or

lab testing.  Further, the order holds that it was very difficult to find

any identical/ similar goods imported in India having same chemical

and physical  composition and that  the values of  aluminium scrap

identical/similar  to  the imported goods in  nature and specification

were not available. Without commenting on correctness of the said

statements,  we  would  observe  that  the  aforesaid  reasoning  for

rejection of the transactional value, would not meet the mandate of

Section  14  and  the  Rules  as  elucidated  in  M/s  Sanjivini  Non-

Ferrous  Trading  Pvt.  Ltd.  (supra)  wherein  it  was  held  that  the

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 27 of 30

transaction  value  mentioned  in  the  bill  of  entry  should  not  be

discarded  unless  there  are  contrary  details  of  contemporaneous

imports  or  other  material  indicating  and  serving  as  corroborative

evidence of import at or near the time of import which would justify

rejection  of  the  declared  value  and  enhancement  of  the  price

declared in the bill of entry. We have also elaborated and explained

the legal position with reference to Rule 12 of the 2007 Rules.

24. Therefore, in the facts and circumstances of the present case, it has

to  be  held  that  the  adjudication  order  in  original  is  flawed  and

contrary to law for it does not give cogent and good reason in terms

of Section 14(1) and Rule 12 for rejection of the transaction value as

declared in the bill of entry.  The order in original is not in accordance

with  Section  14  and  Rules  3  and  12  as  the  mandate  of  these

provisions has been ignored. The Assistant Collector has rejected

the transaction value as declared in the bill of entry which, as noticed

above,  is  clearly  and  fundamentally  erroneous  besides  being

contradictory. In the aforesaid circumstances, we do not think that

the order in assessment dated 7th April, 2017 can be sustained and

upheld. It is set aside and quashed.

25. Before closing, we would observe that the Valuation Alerts, as also

stated by the respondents,  are issued by the Director  General  of

Valuation based on the monitoring of valuation trends of  sensitive Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 28 of 30

commodities with a view to take corrective measures.  They provide

guidance  to  the  field  formation  in  valuation  matters.  They  help

ensure  uniform practice,  smooth  functioning  and  prevent  evasion

and short payment of duty. However, they should not be construed

as interfering with the discretion of the assessment authority who is

required to pass an Assessment Order in the given factual matrix.

Declared valuation can be rejected based upon the evidence which

qualifies  and meets the criteria of  ‘certain  reasons’.   Besides the

opinion formed must be reasonable. Reference to foreign journals

for  the  price  quoted  in  exchanges  etc.,  to  find  out  the  correct

international  price  of  concerned  goods  would  be  relevant  but

reliance can be placed on such material only when the adjudicating

authority  had  conducted  enquiries  and  ascertained  details  with

reference to the goods imported which are identical or similar and

‘certain  reasons’ exists  and  justifies  detailed  investigation.  These

reasons  are  to  be  recorded  and  if  requested  disclosed/

communicated to the importer. Valuation alerts could be relied upon

for  default  valuation  computation  under  the  Rules.  (See Varsha

Plastic Pvt. Ltd. vs. Union of India5).

26. We would also like to clarify that we have not issued any general or

omnibus direction that the transaction value declared in the bill  of

entries should invariably be accepted in all cases and/or that in all 5 (2009) 3 SCC 365 Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 29 of 30

cases where imports of aluminium scrap are involved. The matter

has to be examined on a case to case basis, the evidence before the

authorities,  the  material  placed  on  record  and  the  enquiries

conducted by the adjudicating authorities etc.

27. With  the  aforesaid  clarification,  we  allow  the  present  appeal  and

quash and set aside the order of Assessment dated 7th April, 2017 by

issuing a writ of certiorari.  In the facts of the case, there shall be no

order as to costs.

...............................CJI [RANJAN GOGOI]

.................................J. [DEEPAK GUPTA]

.................................J. [SANJIV KHANNA]

NEW DELHI; MAY 17, 2019.

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