REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APELLATE JURISDICTION

CIVIL APPEAL NO. 5011 OF 2019

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 33602 OF 2017)

CENTURY METAL RECYCLING PVT.

LTD. AND ANOTHER ….. APPELLANT(S)

VERSUS

UNION OF INDIA AND OTHERS ….. RESPONDENT(S)

J U D G M E N T

SANJIV KHANNA, J.

Leave granted.

2.Impugned order dated 12

th

September, 2017 passed by the Division

Bench of the High Court of Judicature at Allahabad dismisses Writ

Petition Tax No.307 of 2017 filed by the appellants, namely M/s

Century Metal Recycling Pvt. Ltd. and Gauri Shankar Agarwala, inter

alia, on the grounds that the High Court would not exercise

extraordinary jurisdiction under Article 226 of the Constitution of

India as the matter relates to the valuation of imported aluminium

scrap which could be assailed in a statutory appeal and it would not

be appropriate for the writ court to decide whether the appellant had

or had not agreed to valuation by the customs authorities.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 1 of 30

3.The appellant Company is stated to be engaged in the manufacture

of aluminium alloys, for which they regularly import aluminium waste

as a raw material for self-consumption. Imported scrap, it is

accepted, falls under different code names as per specifications of

the Institute of Recycling Industry. The grievance raised by the

appellants is that the 2

nd

respondent i.e. the Principal Commissioner

of Customs, Noida Customs Commissionerate and its Officers

almost uniformly do not clear the consignments as per the declared

transaction value in the bill of entry but insist that the appellants write

a letter agreeing to pay customs duty as per the valuation by the

customs authorities and compel them to forego their right to

provisional assessment under Section 18 of the Customs Act, 1962

(‘the Act’, for short). The appellants, coerced and intimated, have no

option but to give in and issue a letter of consent agreeing to

assessment/valuation by the customs authorities to avoid delay in

clearance, levy of demurrage, ground rent and container detention

charges, etc. It is also alleged that the respondents without

observing and contrary to the mandate of Section 14 of the Act

discard the declared transactional value and recompute the

consignment value in view of the Valuation Alert dated 1

st

December,

2016 issued by the Central Board of Excise and Customs (‘the

Board’, for short).

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 2 of 30

4.At the outset, we would record that the appellants had given up

prayers (a) and (b) before the High Court as is recorded in the

impugned order and we are, therefore, primarily to confine our

decision to prayer (c) of the Writ Petition which reads as under:

“In the aforesaid facts and circumstances of the

petitioner respectfully prays that this Hon’ble Court may

be graciously pleased to:

(c) Issue a suitable writ, order or direction in the nature

of MANDAMUS commanding the Assessing Officer

that Respondent No.2 and his subordinate officers to

make assessment of aluminium scrap being imported

by the petitioner on the basis of the declared

transaction value in accordance with statutory

provisions under Section 14 & 17(1) of the Customs

Act, and in case of non-acceptance, to allow

Provisional Assessment thereof under Section 18 of

the Customs Act in accordance with Circular No.38

dated 22.08.2016 (Annexure-5)”

We would for the reasons stated also examine validity of the

adjudication order dated 7

th

April, 2017.

5.We are not inclined to remit the appellant to an alternative remedy by

way of statutory appeal under Section 128 of the Act for the reason

that the impugned order dated 7

th

April, 2017 in Assessment

No.12/AC/CUS/2017 cannot be sustained in view of the decision of

this Court in Commissioner of Central Excise and Service Tax,

Noida v. M/s Sanjivini Non-Ferrous Trading Pvt. Ltd.

1

, the latter

being the sister concern of the first appellant in this case. Further,

1

Civil Appeal Nos. 18300-18305 of 2017 decided on December 10, 2018

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 3 of 30

having heard learned counsel for the parties, we would like to clarify

the legal position and therefore in the facts of this case would

exercise our discretion to entertain this appeal despite the alternative

remedy.

6.We would begin by reproducing Section 14 of the Act and Rules 3

and 12 of the Customs Valuation (Determination of Value of Imported

Goods) Rules, 2007 (‘the 2007 Rules’, for short) which read as

under:

“S ection 14: Valuation of Goods.

(1) For the purposes of the Customs Tariff Act, 1975

(51 of 1975), or any other law for the time being in

force, the value of the imported goods and export

goods shall be the transaction value of such goods,

that is to say, the price actually paid or payable for the

goods when sold for export to India for delivery at the

time and place of importation, or as the case may be,

for export from India for delivery at the time and place

of exportation, where the buyer and seller of the goods

are not related and price is the sole consideration for

the sale subject to such other conditions as may be

specified in the rules made in this behalf:

Provided that such transaction value in the case of

imported goods shall include, in addition to the price as

aforesaid, any amount paid or payable for costs and

services, including commissions and brokerage,

engineering, design work, royalties and licence fees,

costs of transportation to the place of importation,

insurance, loading, unloading and handling charges to

the extent and in the manner specified in the rules

made in this behalf:

Provided further that the rules made in this behalf may

provide for, —

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 4 of 30

(i) the circumstances in which the buyer and the seller

shall be deemed to be related;

(ii) the manner of determination of value in respect of

goods when there is no sale, or the buyer and the

seller are related, or price is not the sole consideration

for the sale or in any other case;

(iii) the manner of acceptance or rejection of value

declared by the importer or exporter, as the case may

be, where the proper officer has reason to doubt the

truth or accuracy of such value, and determination of

value for the purposes of this section:

Provided also that such price shall be calculated with

reference to the rate of exchange as in force on the

date on which a bill of entry is presented under section

46, or a shipping bill of export, as the case may be, is

presented under section 50.

(2) Notwithstanding anything contained in sub-section

(1), if the Board is satisfied that it is necessary or

expedient so to do, it may, by notification in the Official

Gazette, fix tariff values for any class of imported

goods or export goods, having regard to the trend of

value of such or like goods, and where any such tariff

values are fixed, the duty shall be chargeable with

reference to such tariff value.

Explanation. —For the purposes of this section—

(a) “rate of exchange” means the rate of exchange—

(i) determined by the Board, or

(ii) ascertained in such manner as the Board may

direct, for the conversion of Indian currency into

foreign currency or foreign currency into Indian

currency;

(b) “foreign currency” and “Indian currency” have the

meanings respectively assigned to them in clause (m)

and clause (q) of section 2 of the Foreign Exchange

Management Act, 1999 (42 of 1999).

xx xx xx

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 5 of 30

RULES

Rule 3. Determination of the method valuation:

(1) Subject to rule 12, the value of imported goods shall

be the transaction value adjusted in accordance with

provisions of rule 10;

(2) Value of imported goods under sub-rule (1) shall be

accepted:

Provided that –

(a) there are no restrictions as to the disposition or use

of the goods by the buyer other than restrictions which-

(i) are imposed or required by law or by the public

authorities in India; or

(ii) limit the geographical area in which the goods

may be resold; or

(iii) do not substantially affect the value of the

goods;

(b) the sale or price is not subject to some condition or

consideration for which a value cannot be determined

in respect of the goods being valued;

(c) no part of the proceeds of any subsequent resale,

disposal or use of the goods by the buyer will accrue

directly or indirectly to the seller, unless an appropriate

adjustment can be made in accordance with the

provisions of rule 10 of these rules; and

(d) the buyer and seller are not related, or where the

buyer and seller are related, that transaction value is

acceptable for customs purposes under the provisions

of sub-rule (3) below.

(3) (a) Where the buyer and seller are related, the

transaction value shall be accepted provided that the

examination of the circumstances of the sale of the

imported goods indicate that the relationship did not

influence the price.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 6 of 30

(b) In a sale between related persons, the transaction

value shall be accepted, whenever the importer

demonstrates that the declared value of the goods

being valued, closely approximates to one of the

following values ascertained at or about the same time.

(i) the transaction value of identical goods, or of

similar goods, in sales to unrelated buyers in India;

(ii) the deductive value for identical goods or similar

goods;

(iii) the computed value for identical goods or

similar goods:

Provided that in applying the values used for

comparison, due account shall be taken of

demonstrated difference in commercial levels, quantity

levels, adjustments in accordance with the provisions

of rule 10 and cost incurred by the seller in sales in

which he and the buyer are not related;

(c) substitute values shall not be established under the

provisions of clause (b) of this sub-rule.

(4) if the value cannot be determined under the

provisions of sub-rule (1), the value shall be

determined by proceeding sequentially through rule 4

to 9.

xx xx xx

Rule 12. Rejection of declared value:

(1) When the proper officer has reason to doubt the

truth or accuracy of the value declared in relation to

any imported goods, he may ask the importer of such

goods to furnish further information including

documents or other evidence and if, after receiving

such further information, or in the absence of a

response of such importer, the proper officer still has

reasonable doubt about the truth or accuracy of the

value so declared, it shall be deemed that the

transaction value of such imported goods cannot be

determined under the provisions of sub-rule (1) of rule

3.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 7 of 30

(2) At the request of an importer, the proper officer,

shall intimate the importer in writing the grounds for

doubting the truth or accuracy of the value declared in

relation to goods imported by such importer and

provide a reasonable opportunity of being heard,

before taking a final decision under sub-rule (1).

Explanation. - (1) For the removal of doubts, it is

hereby declared that: -

(i) This rule by itself does not provide a method for

determination of value, it provides a mechanism and

procedure for rejection of declared value in cases

where there is reasonable doubt that the declared

value does not represent the transaction value; where

the declared value is rejected, the value shall be

determined by proceeding sequentially in accordance

with rules 4 to 9.

(ii) The declared value shall be accepted where the

proper officer is satisfied about the truth and accuracy

of the declared value after the said enquiry in

consultation with the importers.

(iii) The proper officer shall have the powers to raise

doubts on the truth or accuracy of the declared value

based on certain reasons which may include –

(a) the significantly higher value at which identical

or similar goods imported at or about the same

time in comparable quantities in a comparable

commercial transaction were assessed;

(b) the sale involves an abnormal discount or

abnormal reduction from the ordinary competitive

price;

(c) the sale involves special discounts limited to

exclusive agents;

(d) the misdeclaration of goods in parameters

such as description, quality, quantity, country of

origin, year of manufacture or production;

(e) the non-declaration of parameters such as

brand, grade, specifications that have relevance to

value;

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 8 of 30

(f) the fraudulent or manipulated documents.”

7.Section 14 has to be read with Rule 12 of the 2007 Rules. Rule 12

uses the expression ‘the proper officer has reason to doubt the truth

or accuracy of the value declared in relation to the imported goods’.

This expression is distinctly different from the words and

preconditions imposed for rejecting the declared transactional value

under the repealed Customs Valuation (Determination of Price of

Imported Goods) Rules,1988 (‘the 1988 Rules’, for short) and the

pre-amended Section 14(1) of the Act which were considered and

interpreted by this Court in Eicher Tractors Limited, Haryana v.

Commissioner of Customs, Mumbai

2

. In fact, the judgment in

Eicher Tractors Limited (supra) had not considered Rule 10-A of

the 1988 Rules enforced with effect from 19

th

February, 1998 as the

imports therein related to the year 1993. Rule 10-A brought the

concept of ‘reason to doubt the declared value’ in place of special or

extraordinary circumstances particularised in Rule 4(2) of the 1988

Rules. However, the interpretation given to Section 14(1) in Eicher

Tractors Limited (supra) as to the meaning of the word ‘payable’

used therein would be still applicable. The word ‘payable’ used in

Section 14(1) refers to the particular transaction and the payability in

respect of ‘the transaction’. It refers to the notional value, albeit the

2

(2001) 1 SCC 315

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 9 of 30

transaction value as declared in the bill of entry plus the amount

which has to be added in terms of Rule 10 of the 2007 Rules.

8.This Court in M/s Sanjivini Non-Ferrous Trading Pvt. Ltd. (supra),

while interpreting the provisions of Section 14 and Rules 3, 4 and 12

of the 2007 Rules, had held as under:

“10. The law, thus is clear. As per Sections 14(1) and

14(1-A), the value of any goods chargeable to ad

valorem duty is deemed to be the price as referred to in

that provision. Section 14(1) is a deeming provision as

it talks of ‘deemed value’ of such goods. Therefore,

normally, the Assessing Officer is supposed to act on

the basis of price which is actually paid and treat the

same as assessable value/transaction value of the

goods. This, ordinarily, is the course of action which

needs to be followed by the Assessing Officer. This

principle of arriving at transaction value to be the

assessable value applies. This is also the effect of

Rule 3(1) and Rule 4(1) of the Customs Valuation

Rules, namely, the adjudicating authority is bound to

accept price actually paid or payable for goods as the

transaction value. Exceptions are, however, carved out

and enumerated in Rule 4(2). As per that provision,

the transaction value mentioned in the Bills of Entry

can be discarded in case it is found that there are any

imports of identical goods or similar goods at a higher

price at around the same time or if the buyers and

sellers are related to each other. In order to invoke

such a provision it is incumbent upon the Assessing

Officer to give reasons as to why the transaction value

declared in the Bills of Entry was being rejected; to

establish that the price is not the sole consideration;

and to give the reasons supported by material on the

basis of which Assessing Officer arrives at his own

assessable value.”

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 10 of 30

The Division Bench has quoted the following sub-para from

Commissioner of Customs, Calcutta v. South India Television

(P) Ltd.

3

:

“13. Section 14(1) speaks of "deemed value".

Therefore, invoice price can be disputed. However, it is

for the Department to prove that the invoice price is

incorrect. When there is no evidence of

contemporaneous imports at a higher price, the invoice

price is liable to be accepted. The value in the export

declaration may be relied upon for ascertainment of the

assessable value under the Customs Valuation Rules

and not for determining the price at which goods are

ordinarily sold at the time and place of importation. This

is where the conceptual difference between value and

price comes into discussion.”

9.As per Section 14(1) of the Act, value of the imported goods shall be

the transactional value of such goods, which means the price

actually paid or payable for the goods when sold for export to India

where the buyers and sellers are not related and the price fixed is

the sole consideration for sale. As per the first proviso to Section

14(1) of the Act, the transactional value for the purpose of customs

duty would include amounts paid or payable as costs and services

like commission, brokerage, engineering, design work, cost of

transportation, etc., as may be specified in the rules made in this

behalf. These amounts are to be added to the declared transactional

value. Accordingly, in terms of Rule 10 of the 2007 Rules, the value

and price of costs and services are added to the price actually paid

3

(2007) 6 SCC 373

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 11 of 30

or payable for the imported goods for determining the transaction

value.

10.Sub-section (2) of Section 14 is a non-obstante provision, which

applies notwithstanding sub-section (1), i.e. when the Board has

issued a notification in the Official Gazette fixing tariff values for any

class of imported or exported goods. The Board has been authorised

to issue notifications under Section 14(2) of the Act when it is

satisfied that it is necessary or expedient. Thus, whenever tariff has

been fixed vide notification issued by the Board under Section 14(2)

of the Act, then notwithstanding the transactional value of the

imported goods under sub-section (1) to Section 14 of the Act, as

per sub-section (2) to Section 14 of the Act the customs duty is

payable as per the tariff value so fixed. In the present case, the

Board has not considered it necessary and expedient to issue a

notification under Section 14(2) of the Act to fix a tariff for the

imported aluminium waste.

11.The second proviso to Section 14 (1) deals with different situations,

enumerated under the three clauses; (i) when buyers and sellers are

deemed to be related; (ii) when there is no sale, or buyers and

sellers are related or the price is not the sole consideration for sale,

etc. and (iii) where the proper officer has reason to doubt the truth or

accuracy of such value. When the conditions specified in the second

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 12 of 30

proviso are satisfied, the transactional value for the purpose of

charging of customs duty is to be made as per rules framed in this

behalf.

12.Rules 3 and 12 of the 2007 Rules i.e. Customs Valuation

(Determination of Value of Imported Goods) Rules, 2007 were

enacted and enforced with effect from 10

th

October, 2007 replacing

and superseding the 1988 Rules. Rule 3(1) of the 2007 Rules states

that value of the imported goods shall be the transaction value

adjusted in accordance with the provisions of Rule 10 of the 2007

Rules which Rule, as observed above, deals with the costs and

services which are to be added to the price actually paid or payable

for the imported goods for determining the transaction value. Sub-

rule (1) to Rule 3 is however subject to Rule 12 and therefore give

primacy to Rule 12 which we shall subsequently elaborate and

explain. Sub-rule (2) to Rule 3 states that value of the imported

goods under sub-rule (1) shall be accepted i.e. accepted by the

customs authorities. The proviso then vide different clauses sets out

the pre-conditions for accepting value of the imported goods. Rule

11 provides for declaration to be given by the importer or his agent

certifying that they had disclosed full and accurate details of the

value of the imported goods and any other statement, information

and document including invoice of the manufacturer or producer of

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 13 of 30

the goods where the goods are imported from or through a person

other than the manufacturer of goods, as considered necessary by

the proper officer for valuation of the imported goods. Sub-rule (2)

states that the declared value shall be accepted where the proper

officer is satisfied about the truth and accuracy of the declared value

after an enquiry in consultation with the importers.

13.Sub-rule (3) to Rule 3 deals with cases when the buyer and seller

are related. We would not dilate on the said sub-rule for this is not

required for the purpose of the present decision. As per sub-rule (4),

where the value cannot be determined under sub-rule (1) to Rule 3,

the transaction is to be valued by step wise applying Rules 4 to 9.

Rule 4 deals with transaction value based on identical goods. Rule 5

deals with transaction value based on similar goods. Rule 6 deals

with the determination of value where the transactional value cannot

be determined under Rules 3, 4 and 5. Rules 7 and 8 deal with

deductive value and computed value respectively. Rule 9 prescribes

the residual method for computing the transaction value. What is

important to note is that Rules 4 to 9 are subject to the provisions of

Rule 3 thereby giving primacy to Rule 3 which in turn gives primacy

to Rule 12 of the 2007 Rules.

14.Rule 12, which as noticed above enjoys primacy and pivotal position,

applies where the proper officer has reason to doubt the truth or

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 14 of 30

accuracy of the value declared for the imported goods. It envisages

a two-step verification and examination exercise. At the first

instance, the proper officer must ask and call upon the importer to

furnish further information including documents to justify the

declared transactional value. The proper officer may thereafter

accept the transactional value as declared. However, 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. ‘Certain reasons’ would include conditions specified

in clauses (a) to (f) i.e. higher value of identical similar goods of

comparable quantities in a comparable transaction, abnormal

discount or abnormal deduction from ordinary competitive prices,

sales involving the special prices, misdeclaration on parameters

such as description, quality, quantity, country of origin, year of

manufacture or production, non-declaration of parameters such as

brand and grade etc. and fraudulent or manipulated documents.

Grounds mentioned in (a) to (f) however are not exhaustive of

‘certain reasons’ to raise doubt about the truth or accuracy of the

declared value. Clause (ii) to Explanation states that the declared

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 15 of 30

value shall be accepted where the proper officer is satisfied about

the truth and accuracy of the declared value after enquiry in

consultation with the importers. Clause-(i) to the Explanation states

that Rule 12 does not provide a method of determination of value but

provides the procedure or mechanism in cases where declared

value can be rejected when there is a reasonable doubt that the

declared transaction value does not represent the actual transaction

value. In such cases the transaction value is to be sequentially

determined in accordance with Rules 4 to 9 of the 2007 Rules.

Sub-rule (2) of Rule 12 stipulates that on request of an

importer, the proper officer shall intimate to the importer in writing the

grounds, i.e. the reason for doubting the truth or accuracy of the

value declared in relation to the imported goods. Further, the proper

officer shall provide a reasonable opportunity of being heard to the

importer before he makes the valuation in the form of final decision

under sub-rule (1).

15.The requirements of Rule 12, therefore, can be summarised as

under:

(a)The proper officer should have reasonable doubt as to the

transactional value on account of truth or accuracy of the value

declared in relation to the imported goods.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 16 of 30

(b)Proper officer must ask the importer of such goods further

information which may include documents or evidence;

(c)On receiving such information or in the absence of response

from the importer, the proper officer has to apply his mind and decide

whether or not reasonable doubt as to the truth or accuracy of the

value so declared persists.

(d)When the proper officer does not have reasonable doubt, the

goods are cleared on the declared value.

(e)When the doubt persists, sub-rule (1) to Rule 3 is not

applicable and transaction value is determined in terms of Rules 4 to

9 of the 2007 Rules.

(f)The proper officer can raise doubts as to the truth or accuracy

of the declared value on ‘certain reasons’ which could include the

grounds specified in clauses (a) to (f) in clause (iii) of the

Explanation.

(g)The proper officer, on a request made by the importer, has to

furnish and intimate to the importer in writing the grounds for

doubting the truth or accuracy of the value declared in relation to the

imported goods. Thus, the proper officer has to record reasons in

writing which have to be communicated when requested.

(h)The importer has to be given opportunity of hearing before the

proper officer finally decides the transactional value in terms of Rules

4 to 9 of the 2007 Rules.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 17 of 30

16.Proper officer can therefore reject the declared transactional value

based on ‘certain reasons’ to doubt the truth or accuracy of the

declared value in which event the proper officer is entitled to make

assessment as per Rules 4 to 9 of the 2007 Rules. What is meant by

the expression “grounds for doubting the truth or accuracy of the

value declared” has been explained and elucidated in clause (iii) of

Explanation appended to Rule 12 which sets out some of the

conditions when the ‘reason to doubt’ exists. The instances

mentioned in clauses (a) to (f) are not exhaustive but are inclusive

for there could be other instances when the proper officer could

reasonably doubt the accuracy or truth of the value declared.

17.The choice of words deployed in Rule 12 of the 2007 Rules are

significant and of much consequence. The Legislature, we must

agree, has not used the expression “reason to believe” or

“satisfaction” or such other positive terms as a pre-condition on the

part of the proper officer. The expression “reason to believe” which

would have required the proper officer to refer to facts and figures to

show existence of positive belief on the undervaluation or lower

declaration of the transaction value. The expression “reason to

doubt” as a sequitur would require a different threshold and

examination. It cannot be equated with the requirements of positive

reasons to believe, for the word ‘doubt’ refers to un-certainty and

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 18 of 30

irresolution reflecting suspicion and apprehension. However, this

doubt must be reasonable i.e. have a degree of objectivity and

basis/foundation for the suspicion must be based on ‘certain

reasons’.

18.The expression ‘proof beyond reasonable doubt’ in criminal law

requires the prosecution to establish guilt and secure conviction of

the accused by proving the charge ‘beyond reasonable doubt’. In

Ramakant Rai Vs. Madan Rai & Ors. (2003) 12 SCC 395 referring

to the expression ‘reasonable doubt’ in criminal law it was held as

under:

“24. Doubts would be called reasonable if they are free

from a zest for abstract speculation. Law cannot afford

any favourite other than the truth. To constitute

reasonable doubt, it must be free from an

overemotional response. Doubts must be actual and

substantial doubts as to the guilt of the accused

persons arising from the evidence, or from the lack of

it, as opposed to mere vague apprehensions. A

reasonable doubt is not an imaginary, trivial or a merely

possible doubt; but a fair doubt based upon reason and

common sense. It must grow out of the evidence in the

case.”

Proof beyond ‘reasonable doubt’ is certainly not the

requirement under proviso to Section 14 of the Act and Rule 12 of

the 2007 Rules, albeit the above quote draws a distinction between

a simple doubt and a doubt which is reasonable. In the context of the

proviso to Section 14 read with Rule 12 and clause (iii) of

Explanation to the 2007 Rules, the doubt must be reasonable and

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 19 of 30

based on ‘certain reasons’. The proper officer must record ‘certain

reasons’ specified in (a) to (f) or similar grounds in writing at the

second stage before he proceeds to discard the declared value and

decides to determine the same by proceeding sequentially in

accordance with Rules 4 to 9 of the 2007 Rules. It refers to a doubt

which the proper officer possesses even after the importer has been

asked to furnish further information including documents and

evidence during the preliminary enquiry to clear his doubt about the

truth and accuracy of the value declared. Therefore, there has to be

a preliminary enquiry by the proper officer in which the importer must

be given an opportunity for clarification of the doubts of the officer by

furnishing of documents and evidence as to the accuracy or truth of

the value declared. It is only in case where the doubt of the proper

officer persists after conducting examination of information including

documents or on account of non-furnishing of information that the

procedure for further investigation and determination of value in

terms of Rules 4 to 9 would come into operation and would be

applicable. Reasonable doubt will exist if the doubt is reasonable

and for ‘certain reasons’ and not fanciful and absurd. A doubt to

justify detailed enquiry under the proviso to Section 14 read with

Rule 12 should not be based on initial apprehension, be imaginary or

a mere perception not founded on reasonable and ‘certain’ material.

It should be based and predicated on grounds and material in the

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 20 of 30

form of ‘certain reasons’ and not mere ipse dixit. Subjecting imports

to detailed enquiry on mere suspicion because one is distrustful and

unsure without reasonable and certain reasons would be contrary to

the scheme and purpose behind the provisions which ensure quick

and expeditious clearance of imported goods.

19.Section 18 of the Act, reads:

“Section 18. Provisional assessment of duty. —

(1) Notwithstanding anything contained in this Act but

without prejudice to the provisions of Section 46 and

Section 50, —

(a)where the importer or exporter is unable to make

self-assessment under sub-section (1) of Section 17

and makes a request in writing to the proper officer for

assessment; or

(b) where the proper officer deems it necessary to

subject any imported goods or export goods to any

chemical or other test; or

(c) where the importer or exporter has produced all the

necessary documents and furnished full information but

the proper officer deems it necessary to make further

enquiry; or

(d) where necessary documents have not been

produced or information has not been furnished and

the proper officer deems it necessary to make further

enquiry,

the proper officer may direct that the duty leviable on

such goods be assessed provisionally if the importer or

the exporter, as the case may be, furnishes such

security as the proper officer deems fit for the payment

of the deficiency, if any, between the duty as may be

finally assessed or re-assessed as the case may be,

and the duty provisionally assessed.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 21 of 30

(1A) Where, pursuant to the provisional assessment

under sub-section (1), if any document or information is

required by the proper officer for final assessment, the

importer or exporter, as the case may be, shall submit

such document or information within such time, and the

proper officer shall finalise the provisional assessment

within such time and in such manner, as may be

prescribed.

(2) When the duty leviable on such goods is assessed

finally or re-assessed by the proper officer in

accordance with the provisions of this Act, then—

(a) in the case of goods cleared for home consumption

or exportation, the amount paid shall be adjusted

against the duty finally assessed or re-assessed, as

the case may be and if the amount so paid falls short

of, or is in excess of, the duty finally assessed or re-

assessed, as the case may be, the importer or the

exporter of the goods shall pay the deficiency or be

entitled to a refund, as the case may be;

(b) in the case of warehoused goods, the proper officer

may, where the duty finally assessed or re-assessed,

as the case may be, is in the excess of the duty

provisionally assessed, require the importer to execute

a bond, binding himself in a sum equal to twice the

amount of the excess duty.

(3) The importer or exporter shall be liable to pay

interest, on any amount payable to the Central

Government, consequent to the final assessment

order or re-assessment order under sub-section (2), at

the rate fixed by the Central Government under

Section 28AA from the first day of the month in which

the duty is provisionally assessed till the date of

payment thereof.

(4) Subject to sub-section (5), if any refundable amount

referred to in clause (a) of sub-section (2) is not

refunded under that sub-section within three months

from the date of assessment of duty finally or re-

assessment of duty, as the case may be, there shall be

paid an interest on such unrefunded amount at such

rate fixed by the Central Government under Section

27A till the date of refund of such amount.

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 22 of 30

(5) The amount of duty refundable under sub-section

(2) and the interest under sub-section (4), if any, shall,

instead of being credited to the Fund, be paid to the

importer or the exporter, as the case may be, if such

amount is relatable to—

(a) the duty and interest, if any, paid on such duty paid

by the importer, or the exporter, as the case may be, if

he had not passed on the incidence of such duty and

interest, if any, paid on such duty to any other person;

(b) the duty and interest, if any, paid on such duty on

imports made by an individual for his personal use;

(c) the duty and interest, if any, paid on such duty

borne by the buyer, if he had not passed on the

incidence of such duty and interest, if any, paid on such

duty to any other person;

(d) the export duty as specified in Section 26;

(e) drawback of duty under Sections 74 and 75.”

The significance of Section 18 of the Act can be understood in

light of the above provisions. Section 18 provides for provisional

assessment of duty in cases specified in sub-section (1) of the

Section. Clause (c) of sub-section (1) deals with cases where

importer or exporter has produced necessary documents and

furnished full information for assessment of duty but the proper

officer deems it necessary to make further enquiry for assessing the

duty. However, Clause (d) is wider and would apply when the

importer or exporter does not produce necessary documents or

furnish information. In all cases covered under Clauses (a) to (d), the

proper officer may direct provisional assessment of the duty leviable

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 23 of 30

on the imported goods. Where duty is assessed provisionally, the

importer or exporter has to furnish security as the proper officer

deems fit for payment of deficiency, if any, between the duty

provisionally paid and the duty finally assessed.

On interpreting Section 18 of the Act, it is held that when there

is a dispute between the customs authorities and the importer as

regards the valuation of the imported goods, on satisfaction of the

conditions enumerated in sub-section (1), the authorities should

make provisional assessment of customs duty under Section 18 of

the Act. This expedites clearance, pending final adjudication on

merits which may take time. This is also the mandate of the Board

Circular No.38/2016 dated 22

nd

August, 2016. Any insistence and

compulsion by the authorities that the importer should disclaim and

forgo his statutory right under Section 18 of the Act would not be

correct. Neither would it be right to reject the valuation as declared

by the importer without reasonable doubt for certain reasons.

20.We would ex facie for the reasons recorded below reject the

contention of the respondents predicated on the letter of appellants

dated 6

th

March, 2017 that the appellants did not seek provisional

assessment of the bill of entry and had accepted and paid duty on

the valuation done by the customs authorities. This letter exposits

the predicament faced by the appellants as it states that the

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 24 of 30

appellants were in urgent requirement and wanted clearance of the

goods. Pertinently, the appellants had earlier written several letters,

including communications dated 22

nd

December, 2016 and 4

th

March,

2017 requesting for clearance of the imported consignment of

aluminium scrap on the declared transaction value pointing out

therein that on account of delay in the clearance of the imported

consignments, the appellants and its sister concern had been

compelled to pay excess duty of over Rs.25 crores from August

2013 onwards. It is unfortunate and has to be accepted that the

respondent authorities had compelled and forced the appellant to

furnish the letter dated 6

th

March, 2017 thereby waiving of its right to

provisional assessment and accepting valuation in terms of Rules 4

to 10.

As per sub Rule (2) of Rule 12, the proper officer when

required must intimate to the importer in writing the grounds for

doubting the truth or accuracy of the value declared. The said

mandate of sub-Rule (2) of Rule 12 cannot be ignored or waived.

Formation of opinion regarding reasonable doubt as to the truth or

accuracy of the valuation and communication of the said grounds to

the importer is mandatory, subterfuge to by-pass and circumvent the

statutory mandate is unacceptable. Formation of belief and

recording of reasons as to reasonable doubt and communication of

the reasons when required is the only way and manner in which the

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 25 of 30

proper officer in terms of Rule 12 can proceed to make assessment

under Rules 4 to 9 after rejecting the transaction value as declared.

21.The mandate to record reasons at the second stage of enquiry is not

expressly stipulated, albeit it has been read by us by implication in

Rule 12. Being conscious that this mandate if applied to past cases

would possibly lead to complications and difficulties, we would

invoke the doctrine of prospective application with the direction that

the past cases will be decided on a case to case basis, depending

upon the factual matrix and considerations like whether the importer

has asked for ‘certain reasons’, whether the reasons were not

communicated, whether ‘certain reasons’ can be deciphered from

the assessment/valuation order, whether misdescription or false

declaration was apparent, etc.

22.In Commissioner of Customs vs. Prabhu Dayal Prem Chand

4

,

this Court had rejected the plea that the Revenue was justified in

redetermining the value of brass and copper scrap on the basis of

information received from London Metal Exchange on the price of

the said metals on the ground that the importer was not confronted

with any contemporaneous material for enhancing the transaction

value. This Court affirmed the order of the Tribunal in Prabhu Dayal

Prem Chand (supra) and held that the order in original had not

4

2010 (13) SCC 535

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 26 of 30

indicated details of any contemporaneous import or other material in

the form of corroborative material which had necessitated the

enhancement in the transaction valuation.

23.We would now refer to the findings of the order in original in the

present case which observes that the appellants had declared value

of the aluminium scrap as Rs.81.31 per kg, albeit the

contemporaneous import data in the form of different bills of entry

had indicated aluminium scrap values between Rs. 83.26 to Rs.

120.897 per kg. The said portion of the order refers to at least four

bills of entries declaring assessable value of less than Rs. 85 per kg.

Interestingly, the order in original also records that the imported

goods being aluminium scrap was not a homogeneous commodity

and therefore, cannot be evaluated on the basis of the samples or

lab testing. Further, the order holds that it was very difficult to find

any identical/ similar goods imported in India having same chemical

and physical composition and that the values of aluminium scrap

identical/similar to the imported goods in nature and specification

were not available. Without commenting on correctness of the said

statements, we would observe that the aforesaid reasoning for

rejection of the transactional value, would not meet the mandate of

Section 14 and the Rules as elucidated in M/s Sanjivini Non-

Ferrous Trading Pvt. Ltd. (supra) wherein it was held that the

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 27 of 30

transaction value mentioned in the bill of entry should not be

discarded unless there are contrary details of contemporaneous

imports or other material indicating and serving as corroborative

evidence of import at or near the time of import which would justify

rejection of the declared value and enhancement of the price

declared in the bill of entry. We have also elaborated and explained

the legal position with reference to Rule 12 of the 2007 Rules.

24.Therefore, in the facts and circumstances of the present case, it has

to be held that the adjudication order in original is flawed and

contrary to law for it does not give cogent and good reason in terms

of Section 14(1) and Rule 12 for rejection of the transaction value as

declared in the bill of entry. The order in original is not in accordance

with Section 14 and Rules 3 and 12 as the mandate of these

provisions has been ignored. The Assistant Collector has rejected

the transaction value as declared in the bill of entry which, as noticed

above, is clearly and fundamentally erroneous besides being

contradictory. In the aforesaid circumstances, we do not think that

the order in assessment dated 7

th

April, 2017 can be sustained and

upheld. It is set aside and quashed.

25.Before closing, we would observe that the Valuation Alerts, as also

stated by the respondents, are issued by the Director General of

Valuation based on the monitoring of valuation trends of sensitive

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 28 of 30

commodities with a view to take corrective measures. They provide

guidance to the field formation in valuation matters. They help

ensure uniform practice, smooth functioning and prevent evasion

and short payment of duty. However, they should not be construed

as interfering with the discretion of the assessment authority who is

required to pass an Assessment Order in the given factual matrix.

Declared valuation can be rejected based upon the evidence which

qualifies and meets the criteria of ‘certain reasons’. Besides the

opinion formed must be reasonable. Reference to foreign journals

for the price quoted in exchanges etc., to find out the correct

international price of concerned goods would be relevant but

reliance can be placed on such material only when the adjudicating

authority had conducted enquiries and ascertained details with

reference to the goods imported which are identical or similar and

‘certain reasons’ exists and justifies detailed investigation. These

reasons are to be recorded and if requested disclosed/

communicated to the importer. Valuation alerts could be relied upon

for default valuation computation under the Rules. (See Varsha

Plastic Pvt. Ltd. vs. Union of India

5

).

26.We would also like to clarify that we have not issued any general or

omnibus direction that the transaction value declared in the bill of

entries should invariably be accepted in all cases and/or that in all

5

(2009) 3 SCC 365

Civil Appeal arising out of SLP (C) No. 33602 of 2017 Page 29 of 30

cases where imports of aluminium scrap are involved. The matter

has to be examined on a case to case basis, the evidence before the

authorities, the material placed on record and the enquiries

conducted by the adjudicating authorities etc.

27.With the aforesaid clarification, we allow the present appeal and

quash and set aside the order of Assessment dated 7

th

April, 2017 by

issuing a writ of certiorari. In the facts of the case, there shall be no

order as to costs.

...............................CJI

[RANJAN GOGOI]

.................................J.

[DEEPAK GUPTA]

.................................J.

[SANJIV KHANNA]

NEW DELHI;

MAY 17, 2019.

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