Distress auction valuation for damaged goods: bona fide realised price prevails over non-comparable earlier sales in customs assessment.

In a distress auction of flood-damaged goods cleared from a Special Economic Zone to the Domestic Tariff Area, the realised auction price was accepted for customs assessment because the sale process was bona fide, conducted through tenders, and approved by the insurer. The Department could not show any defect in the auction or any substantive basis to discard the declared value. Earlier sales relied on for comparison were not truly comparable because the goods involved were differently damaged. On that basis, the auction realisation was treated as the appropriate assessable value, and re-determination under the Customs Valuation Rules, 1998 was held unsustainable.

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Issues: Whether the assessable value of damaged goods cleared from a Special Economic Zone to the Domestic Tariff Area could be rejected on the basis of earlier comparable sales and refixed under the Customs Valuation Rules, 1998 despite the auction sale price realised in a distress sale.

Analysis: The goods were damaged by floods and were sold by auction to realise salvage value in association with the insurer. The auction was conducted on a lot basis through tenders, the successful bid was accepted and the insurer approved the procedure and the price realised. The Department did not establish any defect in the sale process or any sufficient basis to discard the realised price. The earlier sales relied on by the Department were not truly comparable because the extent of damage was different. In these circumstances, the auction realisation represented the appropriate cum-value for assessment and there was no justification for revaluation under Rule 6.

Conclusion: The rejection of the declared auction value and the re-determination of assessable value were unsustainable.

Final Conclusion: The appeal succeeded and the assessee's auction-based valuation was accepted for customs assessment.

Ratio Decidendi: In a distress sale of damaged goods, where the auction process is bona fide and the realised price is approved and unchallenged on substantive grounds, the transaction value cannot be discarded merely by reference to earlier non-comparable sales.

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