2025 (2) TMI 907 - AT - Customs

Customs authorities cannot re-assess import values without proper enquiry under Section 17(4) and Rule 12

M/s Seafox Impex Versus Commissioner of Customs (Appeals) New Delhi

CESTAT Delhi held that customs authorities cannot re-assess and enhance the value of imported goods without conducting proper enquiry under Section 17(4) ... Valuation of imported goods - redetermination of duty - enhancement of value - Whether the Revenue has rightly re-assessed and enhanced the value of the imported goods without passing any speaking order but based on the fact that the differential duty has voluntarily been paid by the appellant? - HELD THAT:- Once the value is declared in the Bill of Entry filed in terms of Section 46 of Customs Act 1962, the proper officer has to assess the duty and the assessment has to be made in terms of Section 17 of the Customs Act, 1962. The joint reading of 5 sub-sections in the said provision reflects that the importer/exporter initially follow a process of self-assessment of declaration of the transaction value [Section 17(1)]. The proper office is entitled to examine veracity of self declaration that is made [Section 17(2)]. For the purpose, the proper officer is required to call upon the importer or the exporter, as the case may be, to produce further document or information based whereupon the correct duty leviable on the imported/exported goods should be ascertained [Section 17(3)]. In addition to enquiry, as required under Rule 12 of Valuation Rules the enquiry prescribed under Section 17(4) of the Customs Act is required to be conducted by the proper officer to arrive at the reassessed value. It is seen from a perusal of Section 17(4) of the Customs Act that the proper officer can re-assess the duty leviable, after verification, examination or testing of the goods or otherwise if it is found that the self-assessment was not done correctly - where the proper officer is not satisfied and has reasonable doubt about the truth or accuracy of the value so declared. It is deemed that the transactional value of such imported goods cannot be determined under the provision of sub-rule (1) of Rule 3 of the 2007 Rules. Clause (iii) of Explanation to Rule 12 states that the proper officer can on “certain reasons” raise doubts about the truth or accuracy of declared value. The transaction value declared by the importer should form the basis of assessment unless the same is rejected for the reasons set out in Rule 12 of the Customs Valuation Rules. The Customs Valuation Rules outlines the step-by-step methodology to be adopted for re-determination of the assessable value in certain cases. The primary requirement for re-determination of the value is that the transaction value should be rejected for cogent reasons prescribed in the Customs Valuation Rules. If the transaction value is rejected, then the Customs Valuation Rules prescribes the basis for arriving at the assessable value. Conclusion - i) Where the importer confirms his acceptance in writing about the re-assessment arrived at after following the procedure of Section 17(4), it is only in that situation, that the proper officer would stand relieved of the obligation of passing his speaking order in respect of such assessment. The mere waiver will not get covered under the admission as termed by statute in Section 17(5) of the Customs Act. ii) Apparently and admittedly no enquiry as is required under Rule 12 of Valuation Rules has been conducted by the department prior rejecting the said value. Nor any exercise was undertaken as is required under Section 4 of Section 17 of the Customs Act. It is only the NIDB data which was relied upon by the department to reject the value declared in Bills of Entry and to re-assess the value of the goods at a higher price. Confirmation of differential duty is, therefore, held violative of Section 17(4) of Customs Act and of Rule 12 of Customs Valuation Rules and hence is liable to be set aside - appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question considered was whether the Revenue had correctly re-assessed and enhanced the value of imported goods without issuing a speaking order, based on the fact that the differential duty was voluntarily paid by the appellant.2. ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and Precedents:The legal framework revolves around the Customs Act, 1962, particularly Section 14 regarding valuation, Section 17 concerning assessment, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The precedents include judgments from the Hon'ble Supreme Court and High Courts, notably Eicher Tractors Ltd. and Century Metal Recycling (P) Ltd., which emphasize the requirement for a reasonable doubt and procedural adherence in valuation matters.Court's Interpretation and Reasoning:The Tribunal analyzed the statutory scheme of valuation and assessment under the Customs Act. It emphasized that the transaction value declared by the importer should be the basis of assessment unless rejected for valid reasons as per the Customs Valuation Rules. The Tribunal highlighted that a proper officer must form a reasonable doubt based on objective criteria before rejecting the declared value and must communicate these reasons to the importer.Key Evidence and Findings:The Tribunal noted that in the present case, no verification, examination, or testing of goods was conducted by the proper officer to substantiate the reasonable doubt about the declared transaction value. The rejection of the declared value was based solely on NIDB data, without following the procedural requirements under Rule 12 of the Valuation Rules.Application of Law to Facts:The Tribunal applied the legal principles from the Customs Act and relevant case law to the facts, determining that the absence of a speaking order and reliance solely on NIDB data without proper verification or examination was contrary to the statutory requirements. The voluntary payment of differential duty by the appellant did not constitute an acceptance of the reassessed value, as the procedural safeguards were not followed.Treatment of Competing Arguments:The Tribunal considered the appellant's argument that the decision in Hanuman Prasad & Sons had been overturned by the Delhi High Court, which necessitated setting aside the order under challenge. The Revenue's argument that the appellant's voluntary payment constituted acceptance of the reassessment was rejected, as the procedural requirements for reassessment were not met.Conclusions:The Tribunal concluded that the rejection of the declared transaction value and the confirmation of differential duty were violative of Section 17(4) of the Customs Act and Rule 12 of the Customs Valuation Rules. The impugned order was set aside, and the appeals were allowed.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning:The Tribunal cited the Delhi High Court's judgment, emphasizing that the proper officer must document reasons for doubting the declared value, and the importer must be given an opportunity to respond. The absence of such documentation and opportunity renders the reassessment process arbitrary.Core Principles Established:The Tribunal reaffirmed that the transaction value should be the basis for assessment unless rejected for cogent reasons. It underscored the necessity of following procedural safeguards outlined in the Customs Act and Valuation Rules before rejecting a declared value.Final Determinations on Each Issue:The Tribunal determined that the procedural lapses in the reassessment process, including the lack of a speaking order and reliance solely on NIDB data, invalidated the rejection of the declared transaction value. Consequently, the differential duty confirmed by the lower authority was set aside, and the appeals were allowed in favor of the appellant.