Declared customs value must be rejected under Rule 12 before sequential valuation can lawfully proceed.

Misdeclaration of imported goods was not conclusively established because the record did not clearly show whether the yacht description error was intentional or merely clerical, so the issue required fresh factual examination. Declared customs value cannot be displaced directly under Rule 3(1); the proper officer must first have recorded reasonable doubt, reject the declared value under Rule 12, and then apply the sequential valuation mechanism. Because that rejection procedure was not properly followed, the valuation exercise was legally incomplete and required reconsideration. Both the description issue and the valuation issue were left open for fresh adjudication.

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Issues: (i) Whether the import declaration was liable to be treated as a misdeclaration, and whether the alleged discrepancy in description was established on the evidence; (ii) Whether the declared value could be rejected and the assessable value re-determined directly under Rule 3(1) without first invoking Rule 12 and following the sequential mechanism.

Issue (i): Whether the import declaration was liable to be treated as a misdeclaration, and whether the alleged discrepancy in description was established on the evidence.

Analysis: The dispute turned on whether the yacht description was incorrectly stated in the Bill of Entry and whether the importers had produced documents such as the owner's manual, builder's certificate, and type examination certificate to show the correct model. The record did not contain sufficient proof from either side to conclusively establish whether the discrepancy was intentional misdeclaration or only a clerical or typographical mistake. In the absence of a clear evidentiary foundation, the matter required fresh appreciation of the available material by the adjudicating authority.

Conclusion: The question of misdeclaration was not finally determined and was left for reconsideration on remand.

Issue (ii): Whether the declared value could be rejected and the assessable value re-determined directly under Rule 3(1) without first invoking Rule 12 and following the sequential mechanism.

Analysis: Rule 12 permits rejection of the declared value only when the proper officer has reasonable doubt about its truth or accuracy and, if the declared value is rejected, valuation must proceed sequentially in the manner prescribed by the rules. Rule 3(1) operates subject to Rule 12 and does not authorise direct adoption of an alternative value merely on the basis of a proforma invoice. The adjudicating authority was required to evaluate the evidence and first apply the rejection mechanism before moving to the next valuation stages. Since that process was not properly undertaken, the valuation exercise was legally incomplete.

Conclusion: The re-determination under Rule 3(1) without proper rejection under Rule 12 was unsustainable, and the valuation issue was remanded for fresh decision.

Final Conclusion: The impugned order was set aside and the matter was sent back for fresh adjudication on both misdeclaration and valuation, with all issues kept open.

Ratio Decidendi: Declared import value can be displaced only by following the statutory rejection procedure under Rule 12, and sequential valuation cannot be undertaken directly under Rule 3(1) without first lawfully rejecting the declared value on recorded reasons and evidence.

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