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Issues: (i) Whether the rejection of the declared transaction value and enhancement of assessable value on the basis of a market enquiry was sustainable; (ii) Whether the valuation was required to be determined sequentially under the Customs Valuation Rules, 1988, by considering contemporaneous import data and other reliable evidence.
Issue (i): Whether the rejection of the declared transaction value and enhancement of assessable value on the basis of a market enquiry was sustainable.
Analysis: The assessable value was enhanced substantially on the strength of a market enquiry, an export price and a proforma invoice, but the importer was not associated with the enquiry and a copy of the report was not supplied. The order also did not rest on corroborative material of sufficient reliability. In valuation disputes, rejection of declared value must be supported by cogent material, and a bare market survey without transparency or supporting evidence is not a sound basis for enhancement.
Conclusion: The rejection of the transaction value on the basis adopted by the department was not sustainable.
Issue (ii): Whether the valuation was required to be determined sequentially under the Customs Valuation Rules, 1988, by considering contemporaneous import data and other reliable evidence.
Analysis: Once the declared value was rejected, the authority was obliged to proceed in the statutory sequence prescribed by the valuation rules and to examine contemporaneous imports, comparable bills of entry, and other objective sources before resorting to a residual method. The order did not satisfactorily explain why those materials were discarded, nor why the residual rule was invoked. The reliance on an export price for an imported product and on a proforma invoice, without examining quality, quantity, or comparable import data, was held to be legally unsound.
Conclusion: The valuation was not made in accordance with the mandatory sequential scheme and therefore could not be sustained.
Final Conclusion: The impugned valuation and consequential demands were set aside, and the appeal succeeded in full.
Ratio Decidendi: Where declared value is rejected, customs valuation must be redetermined on the basis of reliable evidence in the statutory sequence, and a market enquiry lacking importer participation or corroboration cannot by itself justify enhancement.
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