In a significant development in the customs valuation dispute case, the Supreme Court of India has issued a landmark judgment concerning the rights of importers. The case, which involves M/s Century Metal Recycling Pvt. Ltd. and Gauri Shankar Agarwala, highlights the importance of procedural fairness and adherence to customs valuation rules. This judgment is poised to have far-reaching implications for importers’ rights and the assessment process in the customs domain.
Facts
- Imported scrap was accepted by the Institute of Recycling Industry.
- The scrap falls under different code names as per specifications of the Institute of Recycling Industry.
- Impugned order of the High Court dismissed Writ Petition Tax No. 307 of 2017 filed by M/s Century Metal Recycling Pvt. Ltd. and Gauri Shankar Agarwala.
- High Court declined to exercise extraordinary jurisdiction under Article 226 of the Constitution on grounds of appeal options being available for the matter of imported aluminium scrap valuation.
- Appellant Company engaged in aluminium alloys manufacturing and imports aluminium waste as raw material for self-consumption.
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Arguments
- The Principal Commissioner of Customs, Noida Customs Commissionerate and its officers are alleged to discard the grievance raised by the appellants without observing the mandate of Section 14 of the Customs Act, 1962.
- The appellants raise a grievance that the respondents consistently do not clear consignments based on declared transaction value, but compel the appellants to agree to customs valuation and forego their right to provisional assessment under Section 18 of the Act.
- The appellants, feeling coerced and intimidated, are left with no choice but to issue a consent letter agreeing to assessment by customs authorities to avoid delays, demurrage charges, ground rent, and container detention charges.
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Analysis
- Section 14(1) and 14(1-A) of the Customs Act provide for deeming the value of any goods chargeable to ad valorem duty to be the price declared in that provision.
- Rule 12 of the 2007 Rules takes precedence and applies when the proper officer doubts the truth or accuracy of the declared value for the imported goods.
- Reasonable doubt must be actual and substantial, free from an overemotional response, based on evidence, and not vague apprehensions.
- Rule 12 requires a two-step verification process where the importer is asked to furnish further information to justify the declared transactional value.
- The proper officer can reject the declaration based on ‘certain reasons’ and must communicate the grounds for doubting the declared value to the importer.
- Past cases will be decided on a case-by-case basis considering factors like whether certain reasons were communicated and if misdescription or false declaration was evident.
- The importer’s right to request ‘certain reasons’ and have them communicated is crucial in the assessment process.
- Valuation Alerts issued by the Directorate General of Valuation monitor trends to prevent evasion and ensure uniform practice.
- The doubt under Rule 12 must be reasonable, based on ‘certain reasons,’ and supported by material for detailed investigation.
- Proper officers must provide an opportunity for the importer to clarify doubts before rejecting the declared value and proceeding with the assessment.
- The legal position has been clarified to highlight the importance of communication, reasonableness, and diligence in customs valuation.
- Rules 4 to 9 of the 2007 Rules provide a stepwise method for determining value when transaction value cannot be established.
- The legal framework emphasizes the importance of reasonable doubt, substantiated reasons, and adherence to valuation rules in customs assessment.
- Rule 3 outlines the method valuation for imported goods, with the value being the transaction value adjusted according to rule 10 provisions.
- Conditions must be met for the value of imported goods to be accepted, such as no significant restrictions on the goods’ use by the buyer, sale price not being subject to indeterminable conditions, and no direct or indirect accrual of proceeds to the seller from subsequent resale, disposal, or use.
- In cases of related buyers and sellers, the transaction value can be accepted if no influence is found in the pricing due to the relationship. Additionally, the declared value must closely approximate values of similar goods in sales to unrelated buyers in India or through other specified methods.
- The proper officer has the authority to raise doubts on the truth or accuracy of declared values based on various reasons, like significantly higher values of similar goods or sales involving related parties.
- Sub-section (2) clarifies that tariff values may be fixed by the Board through notifications for specific imported goods or export goods.
- Section 18 details provisional assessment of duty, outlining scenarios where provisional assessment can be directed, the process for final assessment, adjustments of paid amounts, interest liabilities, and refund procedures.
- Section 14(1) of the Customs Act mentions the concept of ‘deemed value.’
- In the case of Ramakant Rai Vs. Madan Rai & Ors. (2003) 12 SCC 395, the term ‘reasonable doubt’ in criminal law was discussed.
- It was held that doubts can only be considered reasonable if they are based on solid reasoning and not abstract speculation.
- Valuation alerts can be relied upon for default valuation computation under the Rules
- The reasons for rejecting declared transaction value should be recorded and disclosed to the importer if requested
- No general direction has been issued to accept declared transaction value in all cases involving imports of aluminium scrap
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Decision
- The order of Assessment dated 7 April, 2017 has been quashed and set aside.
- A writ of certiorari has been issued.
- No costs have been awarded in this case.
- Each case will be examined individually based on the evidence, material on record, and enquiries conducted by the authorities.
Case Title: CENTURY METAL RECYCLING PVT. LTD. Vs. UNION OF INDIA
Case Number: C.A. No.-005011-005011 / 2019
