Customs valuation requires lawful rejection of declared value before sequential rules apply; higher contemporaneous imports alone are insufficient.

Transaction value under the Customs Valuation Rules can be rejected only on legally established grounds of reasonable doubt or recognised exceptions. The declared price for imported sulphuric acid, supported by commercial documents and banking payments, could not be displaced merely because contemporaneous imports showed a higher price, especially where the quantities differed and no cogent material showed undervaluation or fabricated invoices. As the declared value was not lawfully rejected under Section 14 read with Rule 12, sequential resort to Rule 5 was premature. The enhanced customs assessment was therefore set aside and the declared value restored for assessment.

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Issues: (i) Whether the declared transaction value of imported sulphuric acid could be rejected and enhanced on the basis of contemporaneous imports and alleged discrepancies in the contract and quantity; (ii) whether valuation could be shifted to Rule 5 of the Customs Valuation Rules, 2007 without a lawful rejection of the declared value under Section 14 of the Customs Act, 1962 read with Rule 12 of the Customs Valuation Rules, 2007.

Issue (i): Whether the declared transaction value of imported sulphuric acid could be rejected and enhanced on the basis of contemporaneous imports and alleged discrepancies in the contract and quantity.

Analysis: The declared price had been supported by commercial documents and payment through banking channels, and there was no finding that the supplier invoices were fake or fabricated or that the price actually paid was not the declared price. Mere reliance on a contemporaneous import at a higher price was not enough to displace the transaction value, particularly when the imports were of substantially different quantities and no cogent material was recorded to establish undervaluation or absence of genuineness in the declared value. Rule 12 only provides the mechanism for rejecting declared value when reasonable doubt is properly established.

Conclusion: The declared transaction value could not be rejected on the facts recorded, and the enhancement was not sustainable.

Issue (ii): Whether valuation could be shifted to Rule 5 of the Customs Valuation Rules, 2007 without a lawful rejection of the declared value under Section 14 of the Customs Act, 1962 read with Rule 12 of the Customs Valuation Rules, 2007.

Analysis: Sequential valuation under the Customs Valuation Rules becomes available only after the transaction value is lawfully rejected. Since the authorities had not established grounds for rejection of the declared value under Section 14 and Rule 12, recourse to Rule 5 was premature. The transaction value, being determinable under Rule 3(1), had to be accepted in the absence of valid exceptions.

Conclusion: Resort to Rule 5 was impermissible, and the enhanced assessment could not stand.

Final Conclusion: The impugned enhancement of customs value was set aside, and the importer's declared value was restored for assessment.

Ratio Decidendi: Transaction value under the Customs Valuation Rules can be rejected only on legally established grounds of reasonable doubt or other recognised exceptions; absent cogent evidence of undervaluation or falsity, contemporaneous higher imports alone do not justify rejection or sequential revaluation.

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