2009 (2) TMI 40 - SC - Customs

Section 151A allows issuing guidelines but Assessing Authority retains independent valuation power under Customs Valuation Rules for suspect transactions

SC upheld that Section 151A permits the Board to issue guidelines but does not bind the quasi-judicial Assessing Authority, which must independently ... Valuation of goods for purposes of assessment - transaction value - rejection of transaction value and sequential application of Customs Valuation Rules - instructions to officers of customs - quasi-judicial discretion of the assessing authority - use of contemporaneous import evidence - reference to foreign price publications as indicia of international priceInstructions to officers of customs - quasi-judicial discretion of the assessing authority - Validity and legal effect of Standing Order No.7493/99 issued by the Chief Commissioner of Customs - HELD THAT: - The Court held that Section 151A empowers the Board to issue orders, instructions and directions for uniformity but the proviso prevents issuance of directions that require an officer to make a particular assessment or dispose of a particular case in a particular manner. An Assessing Authority is a quasi judicial authority and must exercise independent discretion in assessment. The impugned Standing Order, when read in the light of the Board's and Department's categorical stand that it is not binding, must be understood as guidelines or flexible instructions to assist uniformity and not as a mandate that fetters the Assessing Authority's adjudicatory function. Consequently the Standing Order does not, on its true construction, interfere with the independent quasi judicial exercise of assessment by the Assessing Authority and is not invalid on that ground. [Paras 18, 20, 22]Standing Order No.7493/99 is to be read as non binding guidelines which do not unlawfully fetter the Assessing Authority's quasi judicial discretion and is not liable to be struck down on that basis.Transaction value - rejection of transaction value and sequential application of Customs Valuation Rules - use of contemporaneous import evidence - reference to foreign price publications as indicia of international price - Permissibility of relying upon PLATT's Price Report or other foreign journals when transaction value is rejected - HELD THAT: - The Court reiterated that Section 14(1) and Rules 3-4 mandate acceptance of transaction value except in specified circumstances; where transaction value is rejected (for example on mis description, invoice manipulation, under invoicing or unrealistically low declared price) valuation must proceed sequentially under the Customs Valuation Rules. While contemporaneous import evidence is the best guide, in the absence of such evidence reference to reputable foreign price publications (such as PLATT's) as indicators of international price is not irrelevant or altogether unreasonable. Whether a particular journal indicates the correct international price in any given case depends on the facts and is for the Department to establish; reliance on such publications does not absolve the Assessing Authority from following the Rules or from justifying rejection of the transaction value. [Paras 13, 14, 15, 16, 21]Assessing Authorities may, after valid rejection of the transaction value and in absence of contemporaneous import evidence, have regard to reputable foreign price publications as indicia of international price, subject to application of the Customs Valuation Rules and proof in each case.Final Conclusion: The appeals are dismissed. The Standing Order No.7493/99 is to be read as non binding guidelines that do not infringe the Assessing Authority's quasi judicial discretion; where transaction value is rejected valuation must follow the Customs Valuation Rules, and in absence of contemporaneous import data reference to reputable foreign price publications may be taken into account subject to factual justification. Issues Involved:1. Constitutional validity of Section 151A of The Customs Act, 1962.2. Legality and validity of Standing Order No. 7493/99 issued by the Chief Commissioner of Customs, Mumbai.3. Determination of assessable value of imported goods.4. Application of transaction value versus reference to foreign journals for valuation.5. Mis-declaration of imported goods.Issue-wise Detailed Analysis:1. Constitutional Validity of Section 151A of The Customs Act, 1962:The appellants challenged the constitutional validity of Section 151A of the Act. The High Court of Gujarat found no merit in this challenge. Section 151A empowers the Board to issue orders, instructions, and directions to officers of Customs for uniformity in the classification of goods or with respect to the levy of duty. The proviso ensures that such orders do not require officers to make a particular assessment or dispose of a case in a specific manner, nor interfere with the discretion of the Commissioner of Customs (Appeals). The Supreme Court agreed with the High Court's interpretation that Section 151A does not control or affect the independent exercise of quasi-judicial functions by the Assessing Authority.2. Legality and Validity of Standing Order No. 7493/99:The appellants questioned the legality and validity of the Standing Order No. 7493/99, which provided guidelines for the valuation of plastic items. The High Court read down the Standing Order, interpreting it as flexible guidelines rather than a rigid mandate. The Supreme Court concurred, emphasizing that the Standing Order should be seen as an assistance tool in the quasi-judicial process of determining value for customs duty. The Court noted the Department's stance that the Standing Order was not binding but served to streamline customs operations and maintain uniformity.3. Determination of Assessable Value of Imported Goods:The appellants argued that the transaction value, i.e., the price actually paid for imported materials, should be the assessable value. They relied on the precedent set by Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai. The Supreme Court reiterated that Section 14 of the Act and Rule 4 of the Customs Valuation Rules mandate the acceptance of the transaction value unless specific exceptions apply. The Court acknowledged that in cases of invoice manipulation, under-invoicing, or mis-declaration, the transaction value could be rejected, and the value should be determined sequentially through Rules 5 to 8 of the Customs Valuation Rules.4. Application of Transaction Value versus Reference to Foreign Journals for Valuation:The Standing Order directed assessing authorities to use prices from sources like PLATT's Weekly Report if the transaction value was discarded. The Supreme Court held that once the transaction value is rejected on valid grounds, the Customs Authority must follow the Customs Valuation Rules to determine the value of goods. In the absence of evidence of contemporaneous import, reference to reputed foreign journals could be appropriate to ascertain the correct international price, provided the Department justifies its use.5. Mis-declaration of Imported Goods:The case involved the import of goods declared as freely importable under the EXIM Policy 1997-2000, which were later found to be mis-declared in terms of value, description, and quality. The Additional Commissioner of Customs enhanced the value for assessment, ordered confiscation, and imposed penalties. The Supreme Court noted that mis-declaration affects the acceptability of declared value and emphasized the burden on Customs Authorities to prove mis-declaration. The Court did not delve into the factual correctness of the mis-declaration findings, leaving it to be addressed through statutory appeal mechanisms.Conclusion:The Supreme Court dismissed the appeals, upholding the High Court's interpretation of Section 151A and the Standing Order as guidelines rather than binding mandates. The Court affirmed the principles of transaction value determination and allowed the use of foreign journals for valuation in the absence of contemporaneous import evidence. The appeals were dismissed with no order as to costs.