Supreme Court of India
COMMISSIONER OF CUSTOMS, MUMBAIversusM/S. J.D. ORGOCHEM LIMITED
- Citation
- 2008 INSC 477
- Decided
- 10 April 2008
- Disposal
- Dismissed
- Bench
- S B SINHA
Holding
The transaction value declared by the importer must be accepted unless the revenue produces contemporaneous evidence to the contrary; the onus of proof rests on the revenue, not the importer.
Summary
The Commissioner of Customs appealed against the judgment of the Customs, Excise & Service Tax Appellate Tribunal which had accepted M/s JD Orgochem Ltd.'s declared transaction value of US$13.2 per kg for imported dinitro crysazine, despite an earlier import at US$18.7 per kg. The assessing authority had rejected the declared value and applied Rule 5 of the Valuation Rules, raising the assessable value. The Supreme Court held that the onus of proving that the declared price is not the true transaction value lies on the revenue, which must produce contemporaneous evidence; the authority cannot shift this burden to the importer. The Court emphasized that the transaction value under Rule 4 is to be accepted unless the department can substantiate a deviation, and that the appellant’s reliance on contemporaneous imports and market price decline was sufficient. Consequently, the appeal was dismissed as having no merit.
Issues considered
- The onus of proof for rejecting the transaction value under the Customs Act and Valuation Rules lies on the revenue or the importer.
- Whether the assessing authority may discard the importer’s declared transactional value without contemporaneous evidence.
- Whether Rules 5‑8 of the Customs Valuation Rules are applicable when the transaction value under Rule 4 is contested.
Legislation cited
- Central Excise Tariff Act, 1944
- Customs Tariff Act, 1975
- Customs Valuation (Determination of Price of Imported Goods) Rules, 1988s. Rule 4, s. Rule 5, s. Rule 6, s. Rule 7, s. Rule 8
Subjects
customs valuationtransaction valueonus of proofCustoms Actvaluation rulesimport dutymarket price fluctuationcontemporaneous imports
Judgment
(2008] 6 S.C.R. 200
. ~
A COMMISSIONER OF CUSTOMS, MUMBAI
v.
M/S. J.D. ORGOCHEM LIMITED
(Civil Appeal No. 5843 of 2006)
APRIL 10, 2008
B
(S.B. SINHA AND V.S. SIRPURKAR, JJ.) •
Customs Act, 1960; Ss.2(41), 14(1) and (1A)!Customs
Valuation Determination of Price of Imported Goods) Rules,
c 1988; rr4 to 8: I
Transactional value of imported goods - Levy of
Customs duty - Dinitro Crysazine falling under Heading
2914.69 of 1975 Act and 2914.00 of 1944 Act - Assessee
importing the goods in question at lesser price than the price
D paid in earlier transaction - Transactional value of goods, as
declared by the assessee, was rejected by the assessing
authority - Affirmed by Appellate authority - Reversed by
tribunal - Correctnes.:; of- Held: Correct-Assessing authority
as also appellate authority wrongly proceeded on the basis
E that onus of proof was on importer - Revenue did not furnish
any contemporaneous evidence to the contrary - Assessee
categorically informed the assessing authority by furnishing
reasons about declining the price of the goods in question in
the international market - Assessing Authority declined to
F consider the same - Assessee relied on contemporaneous .. '
imports from the same supplier which has not been denied!
disputed by the authorities - Thus, appeal lacks merit -
Customs Tariff Act, 1975 - Central Excise Tariff Act, 1944.
The question which arose for determination in this
G appeal was about the extent of jurisdiction of the
assessing authority to discard the transactional value of
the imported goods as disclosed by the importer/ .
assessee.
H 200
COMMISSIONER OF CUSTOMS, MUMBAI v. M/S. JD. 201
ORGOCHEM LIMITED
Revenue contended that having regard to ,the fact A
that the transactions took place between the same parties
to the said bill of entry, it is not conceivable that the price
of the goods in the international market had fluctuated to
the extent mentioned; and that onus of proof, in a case of
this nature, would be on the importer only. B
Dismi~sing the appeal, the Court
HELD: 1.1 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 c
conclusion is not premised on any legal principle and the
revenue having not brought on records any
contemporaneous evidence to the contrary it cannot be
said to have discharged its burden. (Para - 14) [206-E]
1.2 Recourse to the Rules 5 to 8 of the Customs D
Valuation (Determination of Price of Imported Goods)
Rules are to be resorted to if the transaction value cannot
be determined in terms of sub-section (1) of Section 14 of
the Customs Act. (Para - 16) [207 -8]
2.1 The assessee categorically informed the E
assessing authority 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
1 • further reduced the prices of the goods in question. Value F
of the said goods, according to the respondent, was
declining because of the fact that ~here is more supply
and demand is less in the international market. Yet again
the assessee by term of another letter assigned a large
number of reasons how they have got the most G
competitive offer from the overseas principal as was
explained during personal hearing. The assessing
authority did not consider the said contentions and
dismissed the appeal. (Paras - 17 & 18) [207-8, C, D, E]
H
202 SUPREME COURT RcPORTS [2008) 6 S.C.R.
A 2.2 In this case the importer in fact relied on
contemporaneous imports from the same supplier, which
has not been denied or disputed. There is, thus, no merit
in the appeal. (Paras - 20 & 21) [210-8, C]
Eicher Tractors Ltd. vs. Commissioner of Customs,
8 Mumbai:2000 (122) E.L.T. 321 (S.C.) and Commissioner of
Customs, Calcutta vs. South India Television (P) Ltd. : 2007
(214) E.L.T. 3 (S.C.) - relied on.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
c 5843 of 2006.
From the Final Order No. A/222/WZB/06.C.ll. (C.S.T.B.)
dated 24.2.2006 of the Customs. Excise and Service Tax
Appellate Tribunal West Zonal Bench at Mumbai in Appeal No.
C/973/00-Mum
D
Krishna Kumar, P. Narasimha and B. Krishna Prasad for
the Appellant.
Tarun Gulatgi, Nitin S. Tambwekar, B.S. Sai, K. Rajeev,
Jaiveer Shergill and Ankit. Goyal for the Respondent.
E The Judgment of the Court was delivered by
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
F 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
G 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
H from the same supplier earlier@ US$ 18.7 per kg.
COMMISSIONER OF CUSTOMS, MUMBAI v. MIS. JD. 203
ORGOCHEM LIMITED [S.S. SINHA, J]
4, The Deputy Commissioner of Customs in his order A
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. B
>
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 c
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'. D
...
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 E
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 F
done at still lower prices which stands accepted by the
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 G
..,,. , 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 H
204 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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. fi25 (S.C.).
7. Mr. Tarun Gulati, learned counsel appearing on behalf
8 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
c 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 :c:
"2(41) "value", in relation to any goods, means the value
D
thereof determined in accordance with the provisions of
S.ub-section (1) of Section 14;
14. Valuation of goods for purposes of assessment.
- (1) For the purposes of the Customs Tariff Act, 1975 (51
E 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 1>hall
be deemed to be the price at which such or like goods are
ordinarily sold, or offered for sale, for delivery at the time
F 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:
G 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.
H
COMMISSIONER OF CUSTOMS, MUMBAI v. M/S. JD. 205
ORGOCHEM LIMITED [S.S. SINHA, J.]
(1A) Subject to the provisions of Sub-section (1 ), the price A
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 B
, 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 c
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 -
D
(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;
E
or
(ii) limit the geographical area in which the goods may be
resold; or
(iii) do not substantially affect the value of the goods; F
.) ).
(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 G
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 H
206 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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
B 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 Kai/ash Chandra v. Union of India
and Krishangopa/ v. Shri Prakashchandra and Ors. [(1974) 1
c sec 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.
D
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".
E 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
F opinion that it cannot be said to have discharged its burden.
·1 s. 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
G 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
H aforementioned provisions can be taken recourse to, the
COMMISSIONER OF CUSTOMS, MUMBAI v. MIS. J.D. 207
ORGOCHEM LIMITED [S.B. SINHA, J.]
authority may determine the transaction value in terms of Rule 8 A
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 B
, 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
c
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
D
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 E
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
of the respondent, only stating :- F
)' >
"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 G
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."
(
' H
208 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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:
B
"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
c 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
D
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
E 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
F 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
G 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
H was a one time sale of 5 year old stock. When a discount
COMMISSIONER OF CUSTOMS, MUMBAI v. MIS. J.D. 209
ORGOCHEM LIMITED [S.B. SINHA, J.]
is permissible commercially, and there is nothing to show A
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 B
• 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 c
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, for delivery
at the time and place of importation in the course of
D
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 E
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 F
_) )
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 G
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 H
210 SUPREME COURT REPORTS [2008] 6 S.C.R.
A 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
B adequate evidence."
In this case the importer in fact relied 011 contemporaneous
imports from the same supplier, which has not been denied or
disputed.
c 21. There is, thus, no merit in this appeal. It fails and is
dismissed with costs. Counsel fee assessed at Rs.25,000/-.
S.K.S. Appeal dismissed.
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