Natural justice in customs valuation requires a meaningful show cause notice and hearing before rejecting declared value.

Customs valuation cannot be enhanced to the importer's prejudice unless the declared value is first challenged through a meaningful show cause notice and a real opportunity of hearing. A query memo and replies do not substitute for proper natural justice safeguards, especially where the rejection of declared value and freight certificates leads to civil consequences. The assessment was therefore set aside for breach of natural justice, and the matter was remitted for fresh determination after due notice and hearing.

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Issues: Whether the enhancement of assessable value and rejection of the declared value and freight charges without a proper show cause notice and personal hearing violated the principles of natural justice.

Analysis: Assessment of customs value is a quasi-judicial exercise, and when the declared value is proposed to be rejected to the prejudice of the importer, a real and meaningful opportunity to meet the proposed adverse material is mandatory. The record showed that the declared value had earlier been accepted in respect of similar imports, but the Assistant Collector nevertheless rejected the valuation and freight certificates without a speaking basis and without issuing an effective show cause notice. A query memo and replies thereto were held not to be a substitute for a proper notice and personal hearing, particularly where the assessment resulted in civil consequences.

Conclusion: The action of the Assistant Collector was in breach of natural justice and could not stand; the assessee succeeded on this issue.

Final Conclusion: The assessment order was set aside and the matter was sent back for fresh determination after due notice and hearing.

Ratio Decidendi: Where customs valuation is enhanced to the prejudice of the importer, rejection of the declared value must be preceded by a meaningful show cause notice and opportunity of hearing, and a query memo cannot replace those procedural safeguards.

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