REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 2700 OF 2006

M/s. Radhey Shyam Ratanlal & Anr.      ..…Appellants

Versus

Commnr. of Customs (Adjudication), Mumbai     .….Respondent

JUDGMENT

Dr. Mukundakam Sharma, J.

1. The present Civil Appeal is filed by the appellant under Section  

130E of  the  Customs Act,  1962.    The  appeal  is  directed  against  the  

impugned judgment  and order  dated 8.3.2006 passed by the  Customs,  

Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter ‘the  

Tribunal’  whereby  and  whereunder  the  adjudication  order  dated  

31.12.2003  passed  by  the  Commissioner  of  Customs  (Adjudication),  

Mumbai  was  upheld  and  whereby  the  Tribunal  dismissed  both  the  

appeals preferred by the appellants holding that the appellant was fully  

aware  and  was  made  known  about  the  materials  placed  before  the  

authority  and  he  had  full  opportunity  to  deal  with  the  documents  

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submitted  by  the  witness.   The  Tribunal  upheld  and  confirmed  the  

reasoning and the conclusions of the Commissioner for passing the order  

dated 31.12.2003.   By the aforesaid order passed by the Tribunal, a fine  

of Rs. 5 lacs in lieu of confiscation of the goods and penalty of Rs. 10  

lacs was imposed on the appellant firm, and also a penalty of Rs. 5 lacs  

imposed  on  Ratanlal under  the  provision  of  Section  112(a)  of  the  

Customs Act imposed by the Commissioner of Customs (Adjudication)  

was upheld.

2. The entire  proceeding arises  out  of  a  contract  of  importation of  

cloves of the bulk quantity of 300 MTs at US Dollars 2600 PMT CIF,  

Mumbai. It was alleged that the appellants herein entered into a contract  

with M/s. Ketan Trading Company, Singapore on 23.11.2000 for import  

of  cloves.  The  goods  were  described  as  ‘cloves-Zanzibar/Indonesia’  

meaning  thereby  cloves  of  Zanzibar/Indonesian  origin  of  the  bulk  

quantity of 300 MTs at US Dollars 2600 PMT CIF Mumbai.

3. The aforesaid contract dated 23.11.2000 for the above-mentioned  

quantity of cloves was registered with the Customs Department by the  

appellants  in  the  course  of  which  three  bills  of  entry  were  filed  by  

appellants for clearance of part shipment declaring the contract price as  

the invoice price.

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Again, for further imports seven more bills of entry were filed by  

the appellants in terms of the direction of the respondent. The appellants  

paid the price at the enhanced price.

4. The Customs House initiated an investigation into the import of  

cloves  included  in  all  ten  bills  of  entry.    The  Customs  Department  

alleged that during the investigation, it  was revealed that the aforesaid  

goods were invoiced by M/s. Ketan Trading Co., Singapore at Unit Price  

of  US  Dollars  2600  PMT  CIF,  Mumbai  although  the  prevailing  

international price of cloves during the relevant period (in the month of  

January-February, 2001) was around US Dollars 5500 which reached to  

US Dollars 6500 PMT by the end of February and beginning of March,  

2001 and that the cloves were not traded at a price less than US Dollars  

4200  PMT during  the  year  2000  except  in  the  beginning  of  January,  

2000.

5. It was also alleged that in order to avoid deterioration of goods, the  

appellants as directed by the Department, deposited the amount towards  

enhanced price. The Bill of Entry was provisionally assessed and out of  

charge order under Section 47 of the Act was passed. After that the goods  

were stored in a warehouse at Vashi in its general section.

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6. It was further alleged that the imports made by M/s. Spices Trading  

Corporation of India established that cloves of Indonesian and Comoros  

origin were shipped from Singapore at the rate of US Dollars 5500 PMT  

(CIF) to Nhava Bills of Entry dated 10.5.2001 and 8.5.2001.    The case  

of the Customs is also that Bulletin of Spices Market published by the  

trade information services of Spices Board of the Ministry of Commerce  

and Industry,  Government  of  India  indicated  that  the  prices  of  cloves  

were  ranging  from  US  Dollars  4490  to  US  Dollars  6010  between  

17.11.2000 to 23.2.2001.

7. Further  evidence  was  also  collected  indicating  that  as  per  the  

Public Ledger, an international publication of repute, the CIF European  

Port prices of cloves were ranging from US Dollars 4400 to US Dollars  

6300  between  6.11.2000  and  26.3.2001.    It  was  also  indicated  that  

several of the importers admitted that the cloves were imported by them  

at various prices ranging between US Dollars 5050 to US Dollars 5500  

during  the  aforementioned  relevant  period.   During  the  course  of  

investigation, the partner of the appellant was also questioned.   In that  

process,  he  admitted  that  the  original  contract  was  with  M/s.  Ketan  

Trading  Co.,  Singapore  for  supply  of  300  MTs and  it  was  signed  in  

November, 2000 and that he was having only a photocopy of the said  

contract.   He stated that the international market price of cloves in the  

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beginning of 2001 was only US Dollars 2900 to US Dollars 3000 and that  

in  February,  March-April  the  price  went  up  to  US  Dollars  5000  

depending upon the quality.   As regards the invoice bearing No. 624/2K-

01 dated 7.2.2001 issued M/s.  IJIM ASIA in the name of M/s.  Ketan  

Trading Co. showing consignment of 24.538 MTs of cloves at the rate of  

US Dollars 5600, he stated that one consignment was imported by him  

under bill  of entry dated 24.2.2001, which was the same consignment  

mentioned and shown against invoice dated 7.2.2001.    

8. It was also stated that while seeking clearance the quantity declared  

was 23.488 MTs, but on actual examination the consignment was found  

to be in excess by 1.05 MTs confirming the correctness of the quantity  

mentioned as per invoice dated 7.2.2001 i.e. 24.538 MTs.

9. It was therefore submitted by the department that there is foolproof  

evidence  to  suggest  undervaluation  in  the  import  of  cloves  by  the  

appellant with intent to evade customs duty.   A Show Cause Notice was  

issued by the Department on 27.2.2002 to which reply was also received.  

Appellants  requested  for  supply  of  certain  documents.  The  aforesaid  

request was acceded to by the Department and personal hearing was also  

given  to  the  appellants.   The  appellants  also  filed  their  written  

submission.    Thereafter,  an  order  was  passed  on  13.2.2003  by  the  

Commissioner of Customs (Adjudication) holding that the value for the  

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purpose of assessment of the cloves imported under four Bills of Entry  

should be US Dollars 5500 PMT and for the balance six Bills of Entry,  

the value for the assessment of the cloves imported by the Appellants  

should be @US$ 5600 PMT (CIF).

10. Aggrieved by the abovesaid order dated 31.12.2003, the Appellant  

Company preferred an Appeal in the Tribunal on various grounds.

11. Apart  from the  aforesaid  appeal  filed  by  the  appellant,  another  

appeal  No. 169 of 2004 was preferred by the partner  of  the appellant  

Company in  the  same Tribunal.    The Tribunal  heard the  parties  and  

thereafter by an Order dated 8.3.2006 dismissed both the appeals filed by  

the appellant and its partner.    

12. Still  aggrieved,  the  present  appeal  is  filed  by  the  appellant  

challenging the orders passed by the Adjudicating Authority as also by  

the Tribunal.

13. Mr.  Rajiv  Dutta,  the  learned  senior  counsel  appearing  for  the  

appellant  submitted  before  us  that  the  transaction  value  which  the  

appellant could establish by producing relevant documents should have  

been accepted by the respondent.   It was also submitted by him that the  

transaction  value  was  based  on  the  price  agreed  upon  which  was  

contractual  in  nature,  and  therefore,  the  said  price  should  have  been  

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accepted as value of the goods and having not done so, the impugned  

orders are required to be set aside. His further submission was that, the  

Public Ledger or Weekly Bulletin should not have been considered as of  

any evidentiary value in the matter under consideration.

14. The aforesaid submission of the counsel appearing for the appellant  

was  however  refuted  by  the  learned  counsel  appearing  for  the  

Commissioner of Customs.   His submission was that the appellant could  

not produce the original contract said to have been entered into between  

M/s. Ketan Trading Company and the appellant in which the price of the  

goods was allegedly agreed upon at US Dollars 2600 PMT.   He pointed  

out that the document dated 23.11.2000 of M/s. Ketan Trading Co. is not  

a contract and therefore no reliance could and should be placed on the  

said document to arrive at a finding that in fact the appellant had supplied  

the  aforesaid  cloves  for  Ketan  Trading  Company  at  US Dollars  2600  

PMT.   He also submitted that the findings and conclusions arrived at by  

the Commissioner of Customs (Adjudication) as well as by the Tribunal  

are findings of fact and the same should not be interfered with by this  

Court.

15. In  the  light  of  the  aforesaid  submissions  we  have  perused  the  

documents  on  record.   A  perusal  of  the  relevant  documents  would  

indicate that the issue that arises for our consideration is as to how the  

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value of the goods,  in question,  was to be computed.   In other  words  

whether  the  price  of  goods  at  the  time of  computation  should  be  the  

deciding factor  in arriving at  the value of  the goods or  it  is  the price  

agreed upon by the parties.    

16. In  order  to  substantiate  the  claims and the rejection  of  the  said  

claims, reference was made to the provisions of Sections 14(1) (a) of the  

Customs Act, 1962 and Rule 4 and Rule 5 and Rule 10A of the Customs  

Valuation Rules, 1988.

The  said  provisions  being  relevant,  material  part  thereof  are  

extracted herein below.

Section  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 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 of 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  the 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,  

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or a shipping bill or bill of export, as the case may be,  is presented under section 50;  

1(A) 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.

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The relevant Rules are Rules 4, 5 and 10A of the Customs  

Valuation Rules, 1988, which are reproduced hereunder:

Rule  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) the sale is in the ordinary course of trade under fully  competitive conditions;

(b) the sale does not involve any abnormal discount or  reduction  from  the  ordinary  competitive  price;

(c) the sale does not involve special discounts limited  to exclusive agents;

(d) objective and quantifiable data exist with regard to  the  adjustments  required  to  be  made,  under  the  provisions  of  rule  9,  to  the  transaction  value.

(e) 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  

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(ii) limit the geographical area in which the goods may  be resold; or  

(iii) do not substantially affect the value of the goods;

(f) 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;  (g)  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  

(h) 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.

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Rule  5.  Transaction  value  of  identical  goods.  —  (1)(a) Subject to the provisions of Rule 3 of these rules,  the  value  of  imported goods  shall  be the  transaction  value of identical  goods sold for export  to India and  imported at or about the same time as the goods being  valued.  

(b)  In  applying  this  rule,  the  transaction  value  of  identical goods in a sale at the same commercial level  and  in  substantially  the  same  quantity  as  the  goods  being valued shall  be used to determine the value of  imported goods.  

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Rule 10A. 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  

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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 value of such imported goods  cannot be determined under the provisions of sub-rule  (1) of Rule 4.  

(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).

17. The  alleged  transaction  value  claimed  by the  appellant  was  not  

accepted by the respondent mainly on the grounds namely inability to  

produce relevant documents and failure to prove and establish as to at  

what price the imported goods were purchased by the appellant.   The  

same was also not accepted as it is indicated from the comparable rate  

that other persons and firms purchased same goods almost at the same  

relevant time at a higher rate.

18. Counsel appearing for the appellant heavily relied on the document  

dated 23.11.2000 which is a document issued by M/s. Ketan Trading Co.  

The said letter is a certificate issued by M/s. Ketan Trading Company in  

favour of the appellant  confirming that they had sold to the appellant,  

cloves of Zanzibar, Indonesia and Cameroon origin at US Dollars 2600  

PMT CIF, Mumbai of a quantity of about 300 MTs.   A bare perusal of  

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the said document would indicate that the same is not a contract which  

was entered upon between the parties and it is merely a certificate issued  

by M/s. Ketan Trading Co. in favour of the appellant.

19. We have extracted hereinbefore, the relevant part of the provision  

of Section 14 (1) (a) of the Customs Act and the relevant part of Rule 4,  

Rule 5 and Rule 10A of the Customs Valuation Rules. Section 14 of the  

Act relates to valuation of goods for the purpose of assessment and inter  

alia provides that the value of any goods chargeable to duty of customs  

would  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 where the seller and the  

buyer have no interest in the business of each other or one of them has no  

interest in the business of the other and the price is the sole consideration  

for the sale or offer for sale.   By inserting sub-Section (1A) of Section 14  

which  was  inserted  with  effect  from  16.8.1988,  it  was  provided  that  

subject  to  the  provisions  of  sub-Section  (1)  of  Section  14,  the  price  

referred  to  in  the  sub-Section  in  respect  of  imported  goods  would  be  

determined in accordance with the rules made in this behalf.  

20. Further, Rule 4 deals with the transaction value which is required  

to be determined under aforesaid rule.   Under Rule 4 of the Valuation  

Rules, the transaction value of imported goods shall be the price actually  

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paid  or  payable  for  the  goods  when  sold  for  export  to  India.    In  

accordance  with  the  provisions  of  Rule  9,  such  transaction  value  is  

required to be accepted subject to the proviso to sub-Rule (2).   But the  

expression  used  in  Section  14  and  Rule  4  clearly  indicates  that  the  

transaction value of imported goods would be accepted as provided by  

sub-Rule (2) of Rule 4 but such value is always subject to the provision  

of sub-Section (1) of Section 14 in view of the opening expression used  

in  sub-Section  (1A)  of  Section  14  which  opens  with  the  expression  

“subject to the provisions of sub-Section (1) of Section 14.” Therefore,  

the provisions of sub-Section (1) of Section 14 would prevail when the  

transaction value required to be determined under Rule 4 does not reflect  

the price at which such or like goods are ordinarily sold or offered for  

sale for delivery at the time and place of importation.   There cannot be  

any dispute with regard to said interpretation that it is the provision which  

will  always  prevail.    In  other  words  the  deemed value contemplated  

under  Section  14(1)  would  prevail  when  the  price  declared  does  not  

reflect the price at which such or like goods are ordinarily sold or offered  

for sale for delivery at the time and place of importation.   Under Rule 5,  

it  is  inter  alia  provided that  the  value of  imported goods shall  be the  

transaction value of identical goods sold for export to India and imported  

on or about the same time, good being valued subject to provisions of  

Rule 3.   It is also provided in the said Rule that in applying the said rule  

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the transaction value of identical goods and sale at the same commercial  

level and substantially of the same quantity, would be used to determine  

the value of the imported goods.

21. We are required to apply the aforesaid provision to the facts and  

circumstances of the present case and when done so it would appear that  

the appellant although claimed a transaction value, but such value could  

not be supported by production of the original contract or the invoices  

relating to procurement of cloves to the appellant under the ten Bills of  

Entry in question.  The said documents were called for and were directed  

to be produced, but same could not be produced.  The alleged contract  

dated 23.11.2000 cannot be termed as a contract between the parties and  

it is merely a certificate issued by M/s. Ketan Trading Co.

22. The  respondent  department  has  also  relied  upon  the  

contemporaneous documents like the Weekly Bulletin of Spices Market  

and also  the  Public  Ledger.    The  Weekly  Bulletin  of  Spices  Market  

published by the Trade Information Services of the Spices Board of the  

Ministry of Commerce and Industry, Government of India indicated that  

the price of Indonesian cloves on 24.11.2000 was US$ 4765 PMT and  

that of Zanzibar cloves was US$ 4650 PMT. Such bulletin also indicates  

that by 23.12.2001 the price of Zanzibar cloves had reached Rs.6100/-  

PMT.    The  Public  Ledger  which  is  also  considered  as  International  

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Publication of Report indicates that the price of cloves in the international  

market on 27.11.2000 was US Dollars 4700 which reached US Dollars  

6300 on 26.3.2001.

23. We are also satisfied with the records produced before us that the  

nature of business of M/s. Ketan Trading Co. is primarily dealing with  

sport goods and not cloves.   There is also a reference of the document on  

record particularly the relevant bill of lading which indicates that cloves  

were imported by the appellants from IJIMASIA Pvt. Ltd. through M/s.  

Ketan Trading Co. at the price of US Dollars 5600 PMT through bill of  

entry dated 7.2.2001.   The value of the said Zanzibar cloves were shown  

as US Dollars 5600 PMT.   It has also come in evidence that 9.5648 MTs  

cloves of Indonesian origin shipped from Singapore imported by M/s.  

Spices  Trading  Corporation  under  bill  of  entry  dated  8.5.2001  were  

bought  at  the  rate  of  US Dollars  5500.    The  said  consignment  was  

shipped on 25.2.2001 as per the bill of lading.   Another consignment of  

9.300 MTs of cloves of Comoros origin was also imported by M/s. Spices  

Trading Corporation at the same unit price.   A table of imports made by  

the appellants in the Bill of Entry in question is placed on record.  The  

evidence therefore which exist on record clearly support the findings and  

the  conclusions  arrived  at  by  the  Commissioner  of  Customs  

(Adjudication),  Mumbai  and  also  by  the  Tribunal.  The  findings  and  

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conclusions cannot be said to be perverse.   They are based on cogent  

reasons  which  are  found to  be  forceful  and  reasonable.   We find  no  

reason and ground to take a different view than what is taken by the said  

two authorities.

24. In  our  considered  opinion,  it  is  conclusively  proved  that  the  

Department correctly imposed proper assessment value on the goods in  

question imported by the appellant.   The said value for the purpose of  

assessment of the goods had been correctly arrived at in accordance with  

the provisions of the Acts and the Rules framed thereunder particularly in  

accordance with Rule 5 of the Valuation Rules.

25. In terms of aforesaid discussion and in the facts and circumstances  

of the case, we find no merit in this appeal which is dismissed with costs.  

Counsel fee assessed at Rs. 25,000/-.

   ………………………..J.                      [S.B. Sinha]

  ...………………………J.         [Dr. Mukundakam Sharma]

New Delhi, May 6, 2009

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