Customs valuation of secondary goods must be reasoned and evidence-based; arbitrary percentage deductions from prime goods are impermissible.

Declared transaction value cannot be discarded merely because the manufacturer's invoice is not produced; rejection requires a legally sustainable basis and a reasoned finding consistent with customs valuation principles. Where residual valuation applies to secondary goods, their value may be derived from prime-goods prices only through a reasonable, evidence-based deduction reflecting quality, defects, specifications and usability. A fixed or pre-set percentage deduction is impermissible because valuation must remain individualized and supported by technical comparison or expert assessment. The note therefore underscores that customs valuation cannot rest on arbitrary assumptions and must conform to section 14 and the applicable valuation rules.

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Issues: (i) whether the assessing authority could disregard the declared transaction value merely because the manufacturer's invoice was not produced and value the goods by reference to prime-goods imports; (ii) whether, where recourse is taken to the residual valuation method, secondary goods may be valued by reasonable deduction from prime goods and not by a fixed predetermined percentage.

Issue (i): Whether the assessing authority could disregard the declared transaction value merely because the manufacturer's invoice was not produced and value the goods by reference to prime-goods imports.

Analysis: The earlier appellate direction had treated non-production of the manufacturer's invoice as insufficient by itself to reject the transaction value, and that direction was binding on the assessing authority. In any event, rejection of the declared value required a legally sustainable basis, and the valuation approach adopted below proceeded without adequate justification for disbelieving the invoice price. The comparison with prime-goods imports could not, by itself, displace the declared value where the decision-making framework required adherence to the prior appellate findings and a reasoned basis for rejection.

Conclusion: The declared transaction value could not be rejected on the ground relied upon, and this issue is answered in favour of the assessee.

Issue (ii): Whether, where recourse is taken to the residual valuation method, secondary goods may be valued by reasonable deduction from prime goods and not by a fixed predetermined percentage.

Analysis: Secondary goods are inherently of lower value than prime goods, but their value is not uniform and must depend on quality, defects, specifications, and usability. Where identical or similar secondary goods are unavailable, the residual rule permits valuation by reasonable means consistent with the general principles of valuation and the statutory mandate governing customs valuation. That said, the deduction from prime-goods value must be justified on the facts and cannot rest on an arbitrary or pre-set percentage. Technical comparison and expert assessment may be used, but the method must remain reasonable and evidence-based.

Conclusion: Secondary goods may be valued with reference to prime goods only by a reasoned and reasonable deduction, not by a fixed arbitrary percentage; this issue is also answered in favour of the assessee.

Final Conclusion: The valuation adopted below was unsustainable, the impugned order was set aside, and the appeal succeeded.

Ratio Decidendi: When the declared transaction value is not lawfully rejected, or when residual valuation is employed for secondary goods, the assessment must be founded on reasoned and reasonable means consistent with the valuation rules and section 14, and cannot proceed on an arbitrary predetermined deduction from prime-goods prices.

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