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CASE NO.: Appeal (civil)  5843 of 2006

PETITIONER: Commissioner of Customs, Mumbai

RESPONDENT: M/S. J.D. Orgochem Limited

DATE OF JUDGMENT: 10/04/2008

BENCH: S.B. SINHA & V.S. SIRPURKAR

JUDGMENT: J U D G M E N T  REPORTABLE

CIVIL APPEAL NO. 5843 OF 2006

S.B. SINHA, J.

1.      The extent of jurisdiction of the assessing officer to discard the  transactional value disclosed by the importer is the question involved in this  appeal which arises out of a judgment and order dated 24th February, 2006  passed by the Customs, Excise & Service Tax Appellate Tribunal (the  Tribunal), West Zonal Bench at Mumbai. 2.      Respondent herein filed a bill of entry dated 27th October, 1999 for  clearance of "4,5 Dinitro Crysazine".  The said goods fall under Heading  2914.69 and 2914.00 of the Customs Tariff Act, 1975 and Central Excise  Tariff, 1944 respectively.  The unit price of the said goods was declared at  US$ 13.2 per kg.   

3.      Allegedly the respondent had imported the same goods from the same  supplier earlier @ US$ 18.7 per kg.   

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

5.      On an appeal preferred thereagainst by the respondent, the Appellate  Authority being the Commissioner of Customs (Appeals) affirmed the said  findings in terms of his order dated 3rd August, 2000.  By its judgment the  appellate authority rejected the contention of the appellant that the onus was  on the department to show that the invoice price was not genuine and arrived  at the conclusion that since the respondent was the only importer of the said  goods, they were ’the best person to obtain conclusive proof of downward  pricing pattern in the international market’.   

However, on an appeal preferred by the respondent thereagainst, by  reason of the impugned judgment, the Tribunal allowed the same holding :-

"3.     We find that in the present case the appellant is the  only importer of the goods in question and there are no  contemporaneous imports. The appellant has given  justifiable reasons for reduced prices of the same goods  from the same importer for the subsequent imports.  They  have also contended that the future imports have been  done at still lower prices which stands accepted by the

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customers.  As such, we are of the view that in the  absence of any on (sic) justifiable reason to reject the  same and enhance the assessable value."

6.      Mr. Krishna Kumar, learned counsel appearing on behalf of the  appellant would contend that having regard to the fact that the transactions  took place between the same parties to the said bill of entry dated 27th  October, 1999, it is not conceivable that the price of the goods in the  international market had  fluctuated to the aforementioned extent.  Onus of  proof, it was urged, in a case of this nature, would be on the importer only.   Strong reliance in this behalf has been placed on Punjab Processors Pvt. Ltd.   vs.    Collector of Customs : 2003 (157) E.L.T. 625 (S.C.).   

7.      Mr. Tarun Gulati, learned counsel appearing on behalf of the  respondent, on the other hand, would support the impugned judgment.

8.      Before embarking on the question raised by the learned counsel for  the parties, we may notice the relevant statutory provisions.

9.      Section 2(41), Section 14(1) and Section 14(1A) of the Customs Act,  1962, as they stood at the relevant time, read as under :-: "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 the  seller and the buyer have no interest in the business of  each 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.

10.     We also quote hereinbelow the relevant portion of Rule 4 of the  Customs Valuation (Determination of Price of Imported Goods) Rules,  1988, as it stood at the relevant time: "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;

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(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;"

11.     Upon whom the onus of proof lies to establish the transaction value  must be considered having regard to phraseology used in the Act and the  Rules framed thereunder.

12.     Rule 4 of the Rules has a direct nexus with Section 14(1) of the Act.  The term used is "ordinarily".  The said term has been interpreted by this  Court inter alia to mean that there should be an "extra ordinary" or "special"  situation so as to enable the competent authority to opine that the  transactional value declared by the importer should be disbelieved.  It is not  suggested that the Customs Authorities are bound by such declaration. It,  however, has to rely on contemporaneous evidence to show that the invoice  does not reflect the correct value.

13.     The expression "ordinarily" may mean "normally".  It has been held  by this Court in Kailash Chandra v. Union of India and Krishangopal v. Shri  Prakashchandra and Ors. [(1974) 1 SCC 12], that the said expression must  be understood in the context in which it has been used and, thus,  "Ordinarily" may not mean "solely" or "in the name", and thus, if under no  circumstance an appeal would lie to the Principal District Judge, the Court  would not be subordinate to it.  When in a common parlance the expression "ordinarily" is used, there  may be an option. There may be cases where an exception can be made out.  It is never used in reference to a case where there is no exception. It never  means "primarily".   14.     The assessing authority as also the appellate authority have wrongly  proceeded on the basis that the onus of proof was on the importer.  If that  conclusion is not premised on any legal principle and the revenue having not  brought on records any contemporaneous evidence to the contrary, we are of  the opinion that it cannot be said to have discharged its burden.   15.     Rule 5 provides for determination of the transaction value having  regard to the importation of identical goods 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, however, there are no contemporaneous imports, the value is to be  determined in terms of Rule 7 by a process of deduction as envisaged  therein.  Yet again an alternative mode for determination of the transaction  value has been provided in Rule 7A.  If none of the aforementioned  provisions can be taken recourse to, the authority may determine the  transaction value in terms of Rule 8 of the Rules, using reasonable means  consistent with the principles and general provisions of the rules and sub- section (1) of Section 14 of the Act and on the basis of data available in  India.

16.     Recourse to the aforementioned Rules are to be resorted to if the  transaction value cannot be determined in terms of sub-section (1) of Section  14 of the Act.   

17.     By its letter dated 13th November, 1999 the respondent categorically  informed the Assistant Collector Customs, Mumbai, that in the international  market the raw material prices were declining every day.  Before the said  authority even instances were given in regard to the subsequent transactions  to show that the ’shipper’ had further reduced the prices and they have been  offering the same material @ US$ 13.50 per kg.  Value of the said goods,  according to the respondent, was declining because of fact that there is more  supply and demand is less in the international market.  18.     Yet again the respondent by term of its letter dated 4th January, 2000  (wrongly typed as 4th January, 1999)  assigned a large number of reasons  how they have got the most competitive  offer from the overseas principal as  was explained during personal hearing.  The assessing authority did not  consider the said contentions.  The Appellate Authority dismissed the appeal

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of the respondent, only stating :-

"I find that the appellant’s contention not to consider  their earlier import price for valuation of the impugned  goods and to find out any other contemporary import  price or conduct market survey for valuation has got no  force.  Since they are the only importer of the said goods  they are in a better position to obtain conclusive proof of  downward pricing pattern in the international market.   But instead of making any attempt in this regard they  expect the department to conduct market survey."  

19.     Punjab Processors Pvt. Ltd.  (supra) was an unreasoned order. No  legal principle has been laid down therein.           One of the Hon’ble Judges therein was also a party in Eicher Tractors  Ltd. vs.  Commissioner of Customs, Mumbai  :  2000 (122) E.L.T. 321  (S.C.).  Therein it was held : "14.    It is only when the transaction value under Rule 4  is rejected, then under Rule 3(ii) the value shall be  determined by proceeding sequentially through Rules 5  to 8 of the Rules. Conversely if the transaction value can  be determined under Rule 4(1) and does not fall under  any of the exceptions in Rule 4(2), there is no question of  determining the value under the subsequent Rules." It was observed :- "22. In the case before us, it is not alleged that the  appellant has miss-declared the price actually paid. Nor  was there a mis-description of the goods imported as was  the case in Padia Sales Corporation. 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 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  discount upto 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 any one  else wishing to buy the old stock, there is no reason why  the declared value in question was not accepted under  Rule 4(1)."

20.     The same principle has been reiterated recently in Commissioner of  Customs, Calcutta  vs.  South India Television (P) Ltd. : 2007 (214) E.L.T. 3  (S.C.)  holding :- "       Therefore, the transaction value under Rule 4 must  be the price paid or payable on such goods at the time  and place of importation in the course of international  trade. Section 14 is the deeming provision. It talks of  deemed value. The value is deemed to be the price at  which such goods are ordinarily sold or offered for sale,

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for delivery at the time and place of importation in the  course of international trade 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 or for offer  for sale. Therefore, what has to be seen by the  Department is the value or cost of the imported goods at  the time of importation, i.e., at the time when the goods  reaches the customs barrier. Therefore, the invoice price  is not sacrosanct. 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(1A)  does not arise. In the absence of such evidence, invoice  price has to be accepted as the transaction value. Invoice  is the evidence of value. Casting suspicion on invoice  produced by the importer is not sufficient to reject it as  evidence of value of imported goods. Under- valuation  has to be proved. If the charge of under-valuation cannot  be supported either by evidence or information about  comparable imports, the benefit of doubt must go to the  importer. If the Department wants to allege under- valuation, it must make detailed inquiries, collect  material and also adequate evidence."

In this case the importer in fact relied on contemporaneous imports  from the same supplier, which has not been denied or disputed.

21.     There is, thus, no merit in this appeal.  It fails and is dismissed with  costs.  Counsel fee assessed at Rs.25,000/-.