Customs valuation must follow the prescribed sequence before rejecting declared transaction value and substituting an alternative method.

Customs valuation of imported goods must begin with acceptance of the declared transaction value under the Customs Act and Customs Valuation Rules, 1988, unless legally sustainable reasons exist to reject it under the prescribed rule. Only after valid rejection can the authorities move to the alternative valuation method in the statutory sequence. Because no adequate reason for rejecting the declared value was recorded and the mandatory sequence was not followed, the rejection was unsustainable. The declared value was therefore accepted, and the valuation order was set aside with refund of any amount paid.

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Issues: Whether the assessable value of imported machinery could be determined by rejecting the declared transaction value without first following the valuation sequence and recording reasons for rejection under the Customs Valuation Rules, 1988.

Analysis: The valuation of imported goods is governed by Section 14 of the Customs Act, 1962 and the Customs Valuation Rules, 1988. The prescribed method requires acceptance of the transaction value unless exceptional circumstances justify its rejection under Rule 4(2), and only thereafter can valuation proceed to the alternative method under Rule 8. The authorities below did not indicate that the transaction value was rejected for any legally sustainable reason or show compliance with the mandatory sequence under the Rules.

Conclusion: The rejection of the declared value was unsustainable and the Bill of Entry was required to be accepted in favour of the assessee.

Final Conclusion: The appeal succeeded, the valuation order was set aside, and the importer's declared value stood accepted with refund of any amount paid.

Ratio Decidendi: In customs valuation, the declared transaction value cannot be discarded unless the statutory grounds for rejection are first established and the prescribed valuation sequence is followed.

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