2011 (10) TMI 4 - SC - Customs

Supreme Court Upholds Value Declared in Transaction Appeal

The Supreme Court dismissed the revenue's appeals, ruling that rejecting the transaction value declared by the respondents was unjustified. The Court ... Provisional assessment - Demand - Rule 10A of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - It was argued that the contemporary invoices clearly indicated that at the time of actual shipment of the goods, the international market price was much higher and therefore, the transaction value declared by the respondent could not be accepted in terms of Rule 4 of CVR 1988 - Held that:- A mere suspicion upon the correctness of the invoice produced by an importer is not sufficient to reject it as evidence of the value of imported goods - According to Section 14(1), the assessment of duty is to be made on the value of the goods - It is true that the commodity involved had volatile fluctuations in its price in the international market but having delayed the shipment, the supplier did not increase the price of the commodity even after the increase in its price in the international market - No other reason has been ascribed to reject the transaction value under Rule 4(1) except the drastic increase in price of the commodity in the international market and the difference in price in the invoices in relation to the goods imported under contracts entered by the respondents in the month of August 2001 - Decided in favor of the assessee Issues Involved:1. Whether the contract price of imported goods can be rejected based on contemporaneous higher market prices.2. Applicability of Rule 4 and Rule 10A of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (CVR 1988).3. Interpretation of Section 14 of the Customs Act, 1962.4. Validity of the transaction value declared by the importer.Detailed Analysis:1. Rejection of Contract Price Based on Contemporaneous Higher Market Prices:The primary issue revolves around whether the contract price of crude sunflower seed oil, agreed upon in June 2001, could be rejected by the Customs authorities due to an increase in international market prices by the time of actual shipment in August 2001. The Adjudicating Authority issued a demand letter under Rule 10A of CVR 1988, questioning the contract price and suggesting the adoption of contemporary invoice prices for duty determination.2. Applicability of Rule 4 and Rule 10A of CVR 1988:The Tribunal placed reliance on the Supreme Court's decision in Eicher Tractors Ltd. and held that the transaction value must be accepted unless specific exceptions under Rule 4(2) of CVR 1988 apply. The Tribunal found no basis for the demand of differential duty, emphasizing that the transaction value was based on commercial considerations and there was no evidence of the importer paying more than the contracted value. The Supreme Court reiterated that the revenue must provide cogent material evidence to reject the declared transaction value under Rule 4(1) and that mere suspicion is insufficient.3. Interpretation of Section 14 of the Customs Act, 1962:Section 14(1) of the Customs Act, 1962, and Rule 4 of CVR 1988 were interpreted to mean that the price paid or payable in the ordinary course of international trade should be accepted as the transaction value, barring any special circumstances. The Court clarified that 'reason to doubt' under Rule 10A must be based on material evidence rather than mere suspicion.4. Validity of the Transaction Value Declared by the Importer:The Supreme Court found that the revenue failed to demonstrate that the invoice price did not reflect the correct price. The contract for the supply of crude sunflower seed oil was extended mutually without any price increase, despite fluctuations in the international market. The Court noted that there was no allegation of collusion or under-valuation, and the transaction was genuine. The revenue's reliance on contemporaneous imports was dismissed as these imports were based on contracts entered into after the respondent's contract, during a period of volatile price fluctuations.Conclusion:The Supreme Court dismissed the appeals by the revenue, holding that the rejection of the transaction value declared by the respondents was unjustified. The Court emphasized the necessity of cogent evidence to reject the declared value and upheld the Tribunal's decision, which relied on the principles established in Eicher Tractors Ltd. The appeals were dismissed with no order as to costs.