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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 18300-18305 OF 2017

COMMISSIONER OF CENTRAL EXCISE  AND SERVICE TAX, NOIDA .....APPELLANT(S)

VERSUS

M/S. SANJIVANI NON-FERROUS TRADING  PVT. LTD. .....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

The  issue  raised  in  these  appeals  pertains  to  the  transaction

value/assessable value in respect of imported Aluminum Scrap, which

was imported by the respondent herein.  The respondent had imported

various  varieties  of  the  said   Aluminum scrap  during  the  period  27 th

August, 2013 to 29th December, 2014 and filed 843 Bills of Entry along

with  invoices  and  purchase  orders  in  respect  therein  declaring  the

transaction  value  of  the  imported  goods  for  the  purpose  of  paying

custom duty.  The declared value was not accepted by the Assessing

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Officer who found the same to be low.  Accordingly, the said declared

value  was  rejected  and  reassessment  was  done  by  increasing  the

assessable value.   

2) In a writ petition filed by the respondent in the High Court of Allahabad,

on the directions of the High Court directed the Deputy Commissioner of

Customs,  NOIDA passed  a  speaking  order  dated  25th March,  2015,

giving his  reasons to reject  the transaction value as declared by the

respondent and enhancing the same by taking into consideration the

value of imported goods, namely, grades of scrap Aluminum contents

therein as well as quantum of presence of other metals.

3) The assessment order dated 25th March, 2015 passed by the Assessing

Officer  was  challenged  by  filing  appeals  before  the  Commissioner

(Appeals), Central Excise and Customs, NOIDA. All these appeals were

dismissed. Challenging the order of the Commissioner (Appeals),  the

respondent approached the Customs, Excise and Service Tax Appellate

Tribunal  (hereinafter  referred  to  as  the  “Tribunal”).  By  the  impugned

common  judgment  dated  17th January,  2017,  the  appeals  of  the

respondent  were  allowed  thereby  rejecting  the  enhancement  of

assessable value by the Revenue.  It is the said order of the Tribunal,

which is the subject matter of these appeals.   

4) The entire basis of the order of the Tribunal is contained in paragraph 7

of  the  impugned  judgment  and  since  that  paragraph  contains  the

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reasons  which  persuaded the  Tribunal  to  set  aside  the  order  of  the

authorities below, we reproduce this  para  along with paragraph 8 which

disclosed the outcome of the appeals, in entirety.

"7.   Having considered the rival  contentions and on perusal  of record,  we find  that  the Original  Authority  was directed  by  the Hon’ble High Court to pass speaking order on the  enhancement of  assessable  value.   We find that  the Original  Authority  in  its Order-in-Original  dated  25/03/2015  passed  comments  on  the ground of writ petition and did not properly examine the evidence available  with  the  department  required  to  be  examined  for enhancement of assessable value.  Further, we find that as held in the case laws stated above and as provided by Section 14 of Customs Act, 1962, the assessable value has to be arrived at on the basis of  the price which is actually paid and in a case the price is  not  sole  consideration or  if  the buyers  and sellers  are related persons then after establishing that the price is not sole consideration the transaction value can be rejected and taking the other evidences into consideration the assessable value can be arrived at. Such exercise has not been done in these cases on hand.  Therefore, we reject the enhancement of assessable value in respect of the Bills of Entry which are involved in all the appeals being decided and we restore the assessable value as declared by the appellant in said Bills of Entry.

8. In result,  we set aside all  the impugned Orders-in-Appeal and  allow  all  the  appeals.   The  appellant  shall  be  entitled  for consequential relief, if any, in accordance with law.

5) The precise submission of Mr. K. Radhakrishna, learned senior counsel

appearing  for  the  Revenue  was  that  as  per  the  Tribunal  itself,  the

reasons for upsetting the order in original are:   

(a) That he did not properly examine the evidences available with the

Department,  which were required to be examined for  the purpose of

enhancement of assessable value.

(b) As per the provisions of Section 14 of the Customs Act, 1962 and

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the case law in respect thereof, the assessable value has to be arrived

at on the basis of the price which is actually paid and in case the price is

not  the  sole  consideration  or  if  the  buyers  and  sellers  are  related

persons  then  after  establishing  that  the  price  is  not  the  sole

consideration,  the transaction value can be rejected.   However,  such

exercise has not been done in these cases.

6) It was submitted that if the Original Authority/Assessing Officer had failed

to examine the evidence that was available with the Department and had

not  undertaken  the  exercise  regarding  price  being  not  the  sole

consideration, the Tribunal should have remanded the case back to the

Assessing  Officer  for  examining  the  material  and  undertaking  that

exercise.  To put it otherwise, the entire thrust of the argument of Mr.

Radhakrishna  was  that  appeals  could  not  have  been  allowed

straightaway  by  accepting  the  transaction  value  given  by  the

respondent/assessee and another opportunity should have been given

to the Assessing Authority in this behalf.

7) This  argument  may  seem to  be  attractive,  but  only  when  there  is  a

cursory  look  at  the  aforesaid  observations  of  the  Tribunal  that  the

Assessing  Officer  did  not  examine  the  evidence  available  with  the

Department which was necessitated for such a purpose. However, the

observations of the Tribunal have to be understood in their entirety and

in the context in which these are made.  The Tribunal has categorically

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mentioned that as per the provisions of Section 14 of the Customs Act

and the principles laid down in the case law (which it referred to in the

earlier part of the judgment) interpreting this provision, the assessable

value has to be arrived at on the basis of the price which is actually paid.

It is the basic principle enshrined in the aforesaid provision, i.e., Section

14, which can be culled out from the catena of judgments pronounced by

this Court.   

8) In  Eisher Tractors Ltd.,  Haryana vs.  Commissioner of Customs,

Mumbai1, this Court held as under:

"6. Under the Act customs duty is chargeable on goods. According to Section 14(1) of the Act, the assessment of duty is to be made on the value of the goods. The value may be fixed by the Central Government under Section 14(2). Where the value is not so fixed, the value has to be determined under Section 14(1). The value, according to Section 14(1),  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 — in the course of international trade. The word “ordinarily” necessarily implies the exclusion  of  “extraordinary”  or  “special”  circumstances.  This  is clarified  by  the  last  phrase  in  Section  14  which  describes  an “ordinary” sale as one “where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale …”. Subject to these three conditions laid down in Section 14(1) of time, place and absence of special circumstances, the price of imported goods is to be determined under Section 14(1-A) in accordance with the Rules framed in this behalf.

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9. These  exceptions  are  in  expansion  and  explicatory  of  the special  circumstances in Section 14(1) quoted earlier.  It  follows that  unless the price actually  paid for  the particular  transaction falls within the exceptions, the Customs Authorities are bound to assess the duty on the transaction value.

1(2001) 1 SCC 315

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12. Rule  4(1)  speaks  of the transaction  value.  Utilisation  of  the definite  article  indicates  that  what  should  be  accepted  as  the value for the purpose of assessment to customs duty is the price actually paid for the particular transaction, unless of course the price  is  unacceptable  for  the  reasons  set  out  in  Rule  4(2). “Payable”  in  the  context  of  the  language  of  Rule  4(1)  must, therefore, be read as referring to “theparticular transaction” and payability  in  respect  of the transaction  envisages  a  situation where payment of price may be deferred.

xxx xxx xxx

13. That Rule 4 is limited to the transaction in question is also supported  by  the  provisions  of  the  other  rules  each  of  which provide for  alternate modes of  valuation and allow evidence of value of goods other than those under assessment to be the basis of the assessable value. Thus, Rule 5 allows for the transaction value to be determined on the basis of identical goods imported into India at the same time; Rule 6 allows for the transaction value to be determined on the value of similar goods imported into India at  the  same  time  as  the  subject  goods.  Where  there  are  no contemporaneous imports into India, the value is to be determined under Rule 7 by a process of deduction in the manner provided therein. If this is not possible the value is to be computed under Rule  7-A.  When  value  of  the  imported  goods  cannot  be determined under any of these provisions, the value is required to be determined under Rule 8 “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”.  If  the phrase “the transaction value” used in Rule 4 were not limited to the particular transaction then the other rules which refer to other transactions and data would become redundant.

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22. In the case before us, it is not alleged that the appellant has misdeclared  the  price  actually  paid.  Nor  was  there  a misdescription of the goods imported as was the case in Padia Sales  Corpn. [1993  Supp  (4)  SCC  57]  It  is  also  not  the respondent's case that the particular import fell within any of the situations enumerated in Rule 4(2). No reason has been given by the Assistant Collector for rejecting the transaction value under Rule 4(1) except the price list of vendor. In doing so, the Assistant Collector not only ignored Rule 4(2) but also acted on the basis of the vendor's price list as if a price list is invariably proof of the

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transaction value. This was erroneous and could not be a reason by  itself  to  reject  the  transaction  value.  A  discount  is  a commercially-acceptable measure which may be resorted to by a vendor for a variety of reasons including stock clearance. A price list is really no more than a general quotation. It does not preclude discounts on the listed price. In fact, a discount is calculated with reference to the price list. Admittedly in this case a discount up to 30% was allowable in ordinary circumstances by the Indian agent itself. There was the additional factor that the stock in question was old and it was a one-time sale of 5-year-old stock. When a discount is permissible commercially, and there is nothing to show that  the  same  would  not  have  been  offered  to  anyone  else wishing to buy the old stock, there is no reason why the declared value in question was not accepted under Rule 4(1).”

9) To  the  same  effect,  are  other  judgments,  reiterating  the  aforesaid

principle,  such as,  Commissioner  of  Customs,  Calcutta  vs.  South

India  Television  (P)  Ltd.2,  Chaudhary  Ship  Breakers  vs.

Commissioner  of  Customs,  Ahmedabad3 and  Commissioner  of

Customs, Vishakhapatnam vs. Aggarwal Industries Ltd.4.

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

2(2007) 6 SCC 373 3(2010) 10 SCC 576 4(2012) 1 SCC 186

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value to be the assessable value applies. That 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 the Assessing Officer arrives at his own

assessable value.

11) In  South India Television (P) Ltd., the Court explained as to how the

value  is  derived  from  the  price  and  under  what  circumstances  the

deemed  value  mentioned  in  Section  14(1)  can  be  departed  with.

Following  discussion  in  the  said  judgment  needs  to  be  quoted

hereunder:

"10. We do not find any merit in this civil appeal for the following reasons. Value is derived from the price. Value is the function of the price. This is the conceptual meaning of value. Under Section 2(41), “value” is defined to mean value determined in accordance with Section 14(1) of the Act. Section 14 of the Customs Act, 1962 is the sole repository of  law governing valuation of  goods. The Customs Valuation Rules, 1988 have been framed only in respect

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of imported goods. There are no rules governing the valuation of export goods. That must be done based on Section 14 itself. In the present  case,  the Department  has charged the respondent importer alleging misdeclaration regarding the price. There is no allegation of misdeclaration in the context of the description of the goods.  In the present  case,  the allegation is  of  underinvoicing. The charge of underinvoicing has to be supported by evidence of prices  of  contemporaneous  imports  of  like  goods.  It  is  for  the Department  to  prove  that  the  apparent  is  not  the  real.  Under Section 2(41) of the Customs Act, the word “value” is defined in relation to any goods to mean the value determined in accordance with the provisions of Section 14(1). The value to be declared in the bill of entry is the value referred to above and not merely the invoice price.

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12.  However,  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(1-A) 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. Undervaluation has  to  be  proved.  If  the  charge  of  undervaluation  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 undervaluation, it must make detailed inquiries,  collect  material  and  also  adequate  evidence.  When undervaluation  is  alleged,  the  Department  has  to  prove  it  by evidence or  information about  comparable imports.  For proving undervaluation, if  the Department relies on declaration made in the exporting country, it  has to show how such declaration was procured. We may clarify that strict rules of evidence do not apply to  adjudication  proceedings.  They  apply  strictly  to  the  courts' proceedings. However, even in adjudication proceedings, the AO has to examine the probative value of the documents on which reliance is placed by the Department in support of its allegation of undervaluation. Once the Department discharges the burden of proof  to  the  above  extent  by  producing  evidence  of contemporaneous imports at higher price, the onus shifts to the importer  to establish that  the invoice relied on by him is  valid.

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Therefore, the charge of underinvoicing has to be supported by evidence of prices of contemporaneous imports of like goods.

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.”

12) The observations of the Tribunal made in the impugned judgment are to

be  appreciated  in  the  light  of  the  principles  of  law  specified  in  the

aforesaid  judgment,  inasmuch  as  the  Tribunal  has  categorically

remarked  that the normal rule is that assessable value has to be arrived

at on the basis of the price which is actually paid, as provided by Section

14 of the Customs Act and the case law referred to by it (In paragraph 5,

the Tribunal referred to its own judgments which follow the aforesaid

principle laid down by this Court).

13) It  is,  therefore,  rightly  contended  by  Mr.  Dushyant  A.  Dave,  learned

senior counsel appearing for the respondent that the reason given for

setting aside the order  that  the normal  rule was that  the assessable

value has to be arrived at on the basis of the price which was actually

paid, and that was mentioned in the Bills of Entry.  The Tribunal has

clearly mentioned that this declared price could be rejected only with

cogent reasons by undertaking the exercise as to on what basis the

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Assessing  Authority  could  hold  that  the  paid  price  was not  the  sole

consideration of the transaction value.  Since there is no such exercise

done by the Assessing Authority to reject the price declared in the Bills

of Entry, Order-in-Original was, therefore, clearly erroneous.  

14) In  Commissioner of Customs vs. Prabhu Dayal Prem Chand5,  this

Court was confronted with almost same kind of fact situation.  On the

basis of the information received subsequently from the London Metal

Exchange (for short, ‘LME’) to the effect that the price of the two metals,

viz., brass scrap and copper scrap, in LME as on the date of import was

more than the price declared by the respondent, demanded additional

duty amounting to            Rs. 90,248/- and Rs. 1,94,035 respectively,

from the assessee on the said two Bills of Entry.  This order was set

aside by the Tribunal and appeals there against by the Customs were

dismissed by this Court.  The Court noted, while accepting the plea of

the assessee, that they were not confronted with any contemporaneous

material relied upon by the Revenue for enhancing the price declared by

them in the Bills  of Entry.   It  also noted the following remarks of the

Tribunal:

"In the present case as mentioned above, even though there is a reference to contemporaneous import in the order passed by the Deputy  Commissioner  no  material  regarding  such  import  has been placed before us or made available by the appellant at any point of time. Therefore, assessment in this case has to be taken as having been made purely on the basis of LME bulletin without any corroborative evidence of imports at or near that price which

5(2010) 13 SCC 535

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is  not  permissible  under  law.  We,  therefore,  set  aside the impugned order and allow the appeal.”

Dismissing the appeals, this Court observed as follows:

"….It is manifest from the aforeextracted order of the Tribunal that no details of any contemporaneous imports or any other material indicating the price notified by LME had either been referred to by the adjudicating officer in the adjudication order or such material was  placed  before  the  Tribunal  at  the  time  of  hearing  of  the appeal. The learned counsel for the Revenue has not been able to controvert the said observations by the Tribunal. In that view of the matter no fault  can be found with the order passed by the Tribunal setting aside the additional demand created against the assessee.”

15) We, thus, do not find any merit in these appeals and dismiss the same.

.............................................J. (A.K. SIKRI)

.............................................J. (S. ABDUL NAZEER)

NEW DELHI; DECEMBER 10, 2018.

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ITEM No. 1501           Court No. 3               SECTION  IIA (For Judgment)                  

    S U P R E M E   C O U R T   O F   I N D I A                          RECORD OF PROCEEDINGS        

     CIVIL  APPEALS NOS. 18300­18305 OF 2017

                               COMMISSIONER OF CENTRAL EXCISE AND  Appellant(s) SERVICE TAX,  NOIDA  

                       VERSUS

M/S. SANJIVANI NON FERROUS TRADING PVT. LTD.  Respondent(s)

 Date : 10.12.2018   This matter  was called on for pronouncement of

judgment today.

For Appellant(s) Mr. B.Krishna Prasad, Adv.

                        For Respondent(s) Mr. Chirag M.Shroff, Adv.          Ms. Neha Sangwan, Adv.

Ms. Mahima C.Shroff, Adv.

Hon'ble Mr. Justice A.K.Sikri pronounced the

judgment of the Bench comprising His Lordship and

Hon'ble Mr. Justice S.Abdul Nazeer.

The appeals are dismissed   in terms of the

signed reportable judgment.

Pending applications, if any, shall stand

disposed of.

(Shashi Sareen) AR­cum­PS

(Rajinder Kaur) Branch Officer

(Signed reportable judgment is placed on the file)