Customs valuation and natural justice require disclosed valuation basis; government auction price may not govern assessable value.

Customs valuation under Section 14(1) turns on the ordinary international trade price at the time and place of importation, where buyer and seller are unrelated and price is the sole consideration. Goods bought in a Government auction, especially disposal goods sold in distress conditions, are not treated as sold in the ordinary course of international trade; if that value cannot be ascertained, valuation must proceed under the valuation rules. The text also states that assessment is vitiated where the expert panel report and the basis of valuation are not disclosed to the affected party, because effective rebuttal and a fair hearing require full disclosure of the material used against it.

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Issues: (i) Whether goods purchased in a Government auction could be treated as sold in the ordinary course of international trade for valuation under the customs law; and (ii) whether non-supply of the expert panel report and the absence of effective disclosure of the basis of valuation vitiated the assessment for breach of natural justice.

Issue (i): Whether goods purchased in a Government auction could be treated as sold in the ordinary course of international trade for valuation under the customs law.

Analysis: The value under Section 14(1) of the Customs Act is the deemed value, namely the price at which such or like goods are ordinarily sold in the course of international trade at the time and place of importation where buyer and seller have no interest in each other and price is the sole consideration. A Government auction sale, particularly of disposal goods sold in distress sale conditions, is not a sale in the ordinary course of international trade. On that footing, the invoice price could not be accepted as the assessable value merely because it was genuine. Where the price under Section 14(1) is not ascertainable, valuation has to proceed under the valuation rules.

Conclusion: The auction price was not the correct basis under Section 14(1), and valuation under the rules was permissible.

Issue (ii): Whether non-supply of the expert panel report and the absence of effective disclosure of the basis of valuation vitiated the assessment for breach of natural justice.

Analysis: The assessable value had been fixed on the basis of the expert panel report, but the report itself was not furnished to the appellants and only a gist was reflected in the show cause notice. A mere statement of the values adopted, without disclosure of the basis on which those values were arrived at, did not enable an effective rebuttal. The affected party was therefore denied a fair opportunity to meet the material used against it. This amounted to violation of the principles of natural justice. The appellants' participation in the inspection did not cure the prejudice caused by non-disclosure of the report.

Conclusion: The assessment was vitiated for breach of natural justice and could not be sustained.

Final Conclusion: The valuation order was set aside and the matter was sent back for fresh determination after supplying the expert panel report and affording a reasonable hearing.

Ratio Decidendi: Where customs valuation is based on material not disclosed to the affected party, the assessment is liable to be set aside because effective rebuttal requires disclosure of the basis of the valuation and a reasonable opportunity of hearing.

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