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

VARSHA PLASTICS PVT. LTD. Versus UNION OF INDIA

SC upheld that Section 151A permits the Board to issue guidelines but does not bind the quasi-judicial Assessing Authority, which must independently ... Mis-declaration of imported goods in terms of description, value and quality - rejection of transaction value - challenging the constitutional validity of S. 151A of Customs Act, 1962 - assessable value of imported goods - burden to prove - legality and validity of the Standing Order No. 7493/99 - guidelines and directions for the determination of valuation of plastic items in the light of international prices contained in the foreign finance journals - HELD THAT:- Section 151A of the Act confers upon the Board the power to issue orders, instructions and directions to the authorities for proper administration of the provisions of the Act. The proviso to Section 151A makes it abundantly clear that the Customs Officer who has to make a particular assessment is not bound by such orders or instructions or directions of the Board. An Assessing Authority under the Act being a quasi-judicial authority has to act independently in exercise of his quasi-judicial powers and functions. Section 151A does not in any manner control or affect the independent exercise of quasi-judicial functions by the Assessing Authority. As a matter of fact, it is the case of the Department as well that the impugned Standing Order is not binding; it is just in the nature of guidelines to streamline the functioning of Customs Officers at various field formations. According to the Department, the impugned Standing Order was issued for the smooth functioning of assessment and examination work and to bring about uniformity in the work and it prescribes only pattern of assessment and in no way, interferes with the discretion of the Assessment Authority. In view of the categorical stand of the Department that the impugned Standing Order is just in the nature of guidelines and it does not in any way interfere with the discretion of officers, the impugned Standing Order has to be read and understood accordingly. The valuation of the imported goods where the transaction value in the opinion of Assessing Authority is liable to be rejected because of invoice manipulation or under-invoicing or un-realistic price or mis-declaration in respect of valuation of goods or description or where transaction value of the goods declared is ridiculously low, which of course the Assessing Authority has to justify, he must proceed to determine valuation of goods by following Customs Valuation Rules. Paragraph 7 of the impugned Standing Order which provide as to how classification of mixed waste material like floor sweeping should be made also has to be read only as guidelines to the Assessing Authority. The Assessing Authority in his quasi-judicial function has to take independent view in this regard as well. We do not intend to go into the facts as to whether the Assessing Authority was justified in his findings in respect of imported goods having been mis-declared in terms of value and some of the imported goods mis-declared in terms of description, value and quality as these are the aspects which have to be challenged by filing a statutory appeal. The High Court has already kept these aspects open to be agitated by the appellants before the competent authority under the Act. In the result, we find no merit in these appeals and same are dismissed with no order as to costs. 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.