By TIOL News Service

NEW DELHI, AUG 27, 2014: THE appellants imported two consignments of "2-4-6 Tricloro 1- 3-5 Triazine" aggregating 74.10 MT from China under two Bills of Entry, the cost of which is declared by the appellants to be USD 500/- PMT. The goods were provisionally assessed and allowed clearance on 17.9.1994.

In the Show Cause Notice issued to the appellant it was stated that the goods imported by the appellants were subjected to a test in the Central Excise & Customs Laboratory, Baroda. According to the show cause notice, the chemical name of the goods was verified and it was found to be "Cyanuric Chloride" as known in the International market. It is further stated in the show cause notice that on the basis of certain information obtained through a computer print out from the Customs House, Mumbai, the Commissioner of Customs, Gujarat noticed that a large number of Cyanuric Chloride( 100) import transactions (between the months of June 1994 to November 1994) took place and the cost of the unit price in each one of those imports was USD 1950/- PMT (CIF) as against the value declared by the appellants of USD 500/- PMT.

Eventually, the concerned Assistant Commissioner finalised the assessment by valuing the imported goods at USD 1860/- PMT by an order dated 31.3.2001.

Eventually the Tribunal dismissed the appeal in the second round and the appellant is before the Supreme Court.

It is argued on behalf of the appellant that the assessment and demand of the customs duty on the basis of the valuation of the goods at a price much higher than what was declared by the appellant to be the price paid by the appellant is without any basis in law, without any legally admissible evidence and opposed to the principles of natural justice as the only material relied upon by the Revenue i.e. copy of the alleged printout was not supplied to the appellant. Therefore, the appellant had no means of knowing as to whether any imports of comparable nature were made at the relevant point of time.

The Supreme Court observed,

It can be seen from Section 14 that the value of the imported goods is "deemed to be the price at which such goods are ordinarily sold, or offered for sale …… ". The Section further stipulates that such price of the imported goods is to be determined in accordance with the rules made in that behalf.

Rule 5 enables the Revenue to determine the value of the imported goods on the basis of the identical imported goods of comparable import transaction. Such a procedure/course of action is authorized notwithstanding the mandate of Rule 4(2) that the transaction value shall be accepted. Obviously, such an alternative mode of valuation is authorized as Rule 4 declares that the transaction value of the imported goods shall be the "price actually paid or payable". Necessarily the rule implies the need of determination of the price actually paid or payable.

It is not necessary that in every case of import the importer declares the price actually paid by him or payable by him. Therefore, if in a given case the Revenue notices identical goods have been imported by other importers in comparable transactions at a different rate (normally higher rate) then Revenue is enabled by Rules 5 to reject the valuation made by the importer and determine the "price actually paid or payable" by the importer.

In the case at hand, the Supreme Court noted that no doubt the revenue claims to have some information based on certain alleged imports made at the Bombay port at the relevant point of time that the import in question took place. According to the revenue, those imports at Bombay were declared and valued at a much higher rate than the value declared by the appellants herein. Therefore, the valuation of the goods imported by the appellant was found unacceptable. Hence, the procedure under Rule 5 was resorted to.

However, the Supreme Court observed that the respondent (revenue) did not supply the information (alleged computer printout) which formed the basis of the conclusion that the appellants herein under-valued the goods imported. In such a situation, the appellants obviously cannot and did not have any opportunity of establishing that the claim of the revenue is unsustainable in law. If the information which formed the basis for the Revenue to reject the appellant's valuation is supplied to the appellants, the appellants perhaps will have an opportunity to dispute the comparability of the import transactions allegedly contained in the computer printout on various counts may not be possible to catalogue.

The Supreme Court noted that the appellants, of course, admit that the goods imported by them are known commercially as 'Cyanuric Chloride' as specified in the show cause. Whether Cyanuric Chloride was imported at the relevant point of time by others in comparable transactions, i.e., is "a sale at the same commercial level and in substantially the same quantity" etc. is a matter to be considered on the examination of the material relied upon by the Revenue. A reasonable opportunity must be given to the appellant to demonstrate (if at all) that the transactions relied upon by the Revenue are not comparable transactions.

The Supreme Court held that in the absence of any material produced by the Revenue in proof of the alleged comparable imports at a higher value, the impugned order which eventually confirmed the original order of assessment by the Assistant Commissioner of Customs dated 31.3.2001 cannot be sustained for two reasons -

(1) the mere existence of an alleged computer printout is not proof of the existence of comparable imports;

(2) assuming such a printout exists and the contents thereof are true, the question still remains whether the transaction evidenced by the said computer printout are comparable to the transaction of the appellant. The appellant will have to be given reasonable opportunity to establish (if he can) that the transactions are not comparable.

The impugned order and the original assessment order are therefore, set aside. However, it will be open to the respondent (revenue) to proceed against the appellants pursuant to the show cause notice dated 25.9.2000 in accordance with law.

(See 2014-TIOL-69-SC-CUS)