# CENTURY METAL RECYCLING PVT. LTD. AND ANOTHER v. UNION OF INDIA AND OTHERS

- **Citation:** [2019] 8 S.C.R. 639
- **Court:** Supreme Court of India
- **Decided:** 2019-05-17
- **Case number:** Civil Appeal No. 5011 of 2019
- **Bench:** Ranjan Gogoi, Deepak Gupta, Sanjiv Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/century-metal-recycling-pvt-ltd-and-another-v-union-of-india-and-others-34072
- **Pages:** 30

## Headnote

Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007: rr.3, 12 - Appellants had been regularly
importing aluminium waste as a raw material for manufacturing
alluminium alloy - Case of appellants was that respondentsauthorities discarded the declared transactional value and
recomputed the consignment value - Held: As per s.14(1) of the
Customs 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 - r.3(1) states that value of the imported goods shall be the
transaction value adjusted in accordance with the provisions of
r.10 of the 2007 Rules - Sub-rule (2) to r.3 states that value of the
imported goods under sub-rule (1) shall be accepted i.e. accepted
by the customs authorities - 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 subrule (1) of r.3 of the 2007 Rules - As per sub Rule (2) of r.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 r.12 cannot be ignored or
waived - In the instant case, the findings in the order-in-original
was 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 order-in-original
also recorded that the imported goods being aluminium scrap was
not a homogeneous commodity and therefore, cannot be evaluated
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on the basis of the samples or lab testing and that it was very difficult
to find any identical/similar goods imported in India having same
chemical and physical composition - Therefore, the order-in-original
was flawed and contrary to law for it did not give cogent reason in
terms of s.14(1) and r.12 for rejection of the transaction value as
declared in the bill of entry - Customs Act, 1962 - s.14 - Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007
- rr.3 to 12.
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007: r.12 - Rejection of declared value - Essential
requirement - Reasonable doubt of proper officer as to transactional
value - 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 - Proper officer must
ask the importer of such goods, further information which may
include documents or evidence - 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 - When the
proper officer does not have reasonable doubt, the goods are cleared
on the declared value - When the doubt persists, sub-rule (1) to r.3
is not applicable and transaction value is determined in terms of
rr.4 to 9 of the 2007 Rules - The importer has to be given opportunity
of hearing before the proper officer finally decides the transactional
value in terms of rr.4 to 9 of the 2007 Rules.
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 - r.12 - Interpretation of - Held: The choice of
words deployed in r.12 of the 2007 Rules are significant and of
much consequence - The Legislature did not use 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 h

## Text

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CENTURY METAL RECYCLING PVT. LTD. AND ANOTHER
v.
UNION OF INDIA AND OTHERS
(Civil Appeal No. 5011 of 2019)
MAY 17, 2019
[RANJAN GOGOI, CJI, DEEPAK GUPTA AND
SANJIV KHANNA, JJ.]
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007: rr.3, 12 - Appellants had been regularly
importing aluminium waste as a raw material for manufacturing
alluminium alloy - Case of appellants was that respondentsauthorities discarded the declared transactional value and
recomputed the consignment value - Held: As per s.14(1) of the
Customs 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 - r.3(1) states that value of the imported goods shall be the
transaction value adjusted in accordance with the provisions of
r.10 of the 2007 Rules - Sub-rule (2) to r.3 states that value of the
imported goods under sub-rule (1) shall be accepted i.e. accepted
by the customs authorities - 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 subrule (1) of r.3 of the 2007 Rules - As per sub Rule (2) of r.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 r.12 cannot be ignored or
waived - In the instant case, the findings in the order-in-original
was 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 order-in-original
also recorded that the imported goods being aluminium scrap was
not a homogeneous commodity and therefore, cannot be evaluated
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on the basis of the samples or lab testing and that it was very difficult
to find any identical/similar goods imported in India having same
chemical and physical composition - Therefore, the order-in-original
was flawed and contrary to law for it did not give cogent reason in
terms of s.14(1) and r.12 for rejection of the transaction value as
declared in the bill of entry - Customs Act, 1962 - s.14 - Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007
- rr.3 to 12.
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007: r.12 - Rejection of declared value - Essential
requirement - Reasonable doubt of proper officer as to transactional
value - 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 - Proper officer must
ask the importer of such goods, further information which may
include documents or evidence - 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 - When the
proper officer does not have reasonable doubt, the goods are cleared
on the declared value - When the doubt persists, sub-rule (1) to r.3
is not applicable and transaction value is determined in terms of
rr.4 to 9 of the 2007 Rules - The importer has to be given opportunity
of hearing before the proper officer finally decides the transactional
value in terms of rr.4 to 9 of the 2007 Rules.
Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 - r.12 - Interpretation of - Held: The choice of
words deployed in r.12 of the 2007 Rules are significant and of
much consequence - The Legislature did not use 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 irresolution reflecting suspicion and
apprehension.
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Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 - r.18 - Case of appellants that respondentsauthorities discarded the declared transactional value and
recomputed the consignment value by compelling the appellant to
give a letter of consent to assessment/valuation by custom authorities
- Contention of the respondents was predicated on 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 - The
contention is rejected since this letter exposited the predicament
faced by the appellants as it stated that the appellants were in urgent
requirement and wanted clearance of the goods - Appellants had
earlier also written several letters 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 - Therefore, respondent authorities had compelled and forced
the appellant to furnish letter dated 6th March, 2017 thereby waiving
of its right to provisional assessment and accepting valuation in
terms of rr.4 to 10.
Customs Act, 1962: Valuation Alerts - The Valuation Alerts
are issued by the Director General of Valuation based on the
monitoring of valuation trends of sensitive 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
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recorded and if requested disclosed/ communicated to the importer
- Valuation alerts could be relied upon for default valuation
computation under the Rules.
Allowing the appeal, the Court
HELD : 1.1 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 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. 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. [Para 7, 9] [655-G-H; 657-B]
Commissioner of Central Excise and Service Tax, Noida
v. M/s Sanjivini Non-Ferrous Trading Pvt. Ltd. (2019)
2 SCC 378 ; Commissioner of Customs, Calcutta
v. South India Television (P) Ltd. (2007) 6 SCC
373 : [2007] 8 SCR 95 ; Eicher Tractors Limited,
Haryana v. Commissioner of Customs, Mumbai (2001)
1 SCC 315 : [2000] 4 Suppl. SCR 597 - relied on.
1.2 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. In the instant
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. 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 proviso
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are satisfied, the transactional value for the purpose of charging
of customs duty is to be made as per rules framed in this behalf.
[Paras 10, 11] [657-D-H]
2.1 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. 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. 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. 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. [Para 12] [658-A-E]
2.2 Sub-rule (3) to Rule 3 deals with cases when the buyer
and seller are related. 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 and 5 deal
with transaction value based on identical goods and on similar
goods respectively. 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. 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. 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 and the pre-amended Section
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14(1) of the Act. Thus, Rule 12, which enjoys primacy and pivotal
position, applies where the proper officer has reason to doubt
the truth or 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, nondeclaration 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 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
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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). [Paras 7, 13, 14] [655-D-E;
658-F-H; 659-G-H]
3.1 The choice of words deployed in Rule 12 of the 2007
Rules are significant and of much consequence. The Legislature,
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 uncertainty and 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'. [Para 17] [661-B-D]
3.2 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'. Proof beyond 'reasonable doubt' is certainly
not the requirement under proviso to Section 14 of the Act and
Rule 12 of the 2007 Rules. 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 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
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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.
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. 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. [Para 18] [661-G-H;
662-A-E]
Ramakant Rai v. Madan Rai & Ors. (2003) 12 SCC
395 : [2003] 4 Suppl. SCR 17 - relied on.
4. Section 18 of the Act envisages 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. 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 is rejected. This
letter exposits the predicament faced by the appellants as it states
that the appellants were in urgent requirement and wanted
clearance of the goods. The appellants had earlier written several
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letters 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. 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. [Paras 19, 20] [665-B-F]
5. 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 proper officer in terms of Rule 12 can proceed
to make assessment under Rules 4 to 9 after rejecting the
transaction value as declared. The mandate to record reasons at
the second stage of enquiry is not expressly stipulated, albeit it
is read by implication in Rule 12. Being conscious that this
mandate if applied to past cases would possibly lead to
complications and difficulties, the doctrine of prospective
application is invoked 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. [Paras 20, 21] [665-G-H;
666-A-D]
Commissioner of Customs v. Prabhu Dayal Prem Chand
(2010) 13 SCC 535 - relied on.
6. The findings of the order in original in this case was that
the appellants had declared value of the aluminium scrap as
Rs.81.31 per kg, albeit the contemporaneous import data in the
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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. The order in original
also recorded 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 held 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, the aforesaid reasoning for rejection of the
transactional value, would not meet the mandate of Section 14
and the Rules. Wherein it was held that the 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. 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.
[Paras 23, 24] [666-F-H; 667-A-E]
7. The Valuation Alerts are issued by the Director General
of Valuation based on the monitoring of valuation trends of
sensitive commodities with a view to take corrective measures.
They provide guidance to the field formation in valuation matters.
Valuation alerts could be relied upon for default valuation
computation under the Rules. [Para 25] [667-F; 668-B]
Varsha Plastic Pvt. Ltd. v. Union of India (2009) 3 SCC
365 : [2009] 1 SCR 896 - relied on.
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Case Law Reference
(2019) 2 SCC 378
relied on
Para 8
[2000] 4 Suppl. SCR 597
relied on
Para 7
[2007] 8 SCR 95
relied on
Para 8
[2003] 4 Suppl. SCR 17
relied on
Para 18
(2010) 13 SCC 535
relied on
Para 22
[2009] 1 SCR 896
relied on
Para 25
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5011
of 2019.
From the Judgment and Order dated 12.09.2017 of the High Court
of Judicature at Allahabad in Writ Petition Tax No. 307 of 2017.
Ms. Meenakshi Arora, Sr. Adv., Chirag M. Shroff and Ms. Neha
Sangwan, Advs. for the Appellants.
Vikramjit Banerjee, ASG, Ms. Nisha Bagchi, Abhishek, Vikas
Bansal and B. Krishna Prasad, Advs. for the Respondents.
The Judgment of the Court was delivered by
SANJIV KHANNA, J. 1. 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.
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,
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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).
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
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Sanjivini Non-Ferrous Trading Pvt. Ltd.1, the latter being the sister
concern of the first appellant in this case. Further, 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:
"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, 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, -
(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;
1 Civil Appeal Nos. 18300-18305 of 2017 decided on December 10, 2018
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(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).
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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:
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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.
(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;
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(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 subrule (1), the value shall be determined by proceeding sequentially
through rule 4 to 9.
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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.
(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 -
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(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;
(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 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.
2 (2001) 1 SCC 315
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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.