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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 18300-18305 OF 2017

COMMISSIONER OF CENTRAL EXCISE

AND SERVICE TAX, NOIDA .....APPELLANT(S)

VERSUS

M/S. SANJIVANI NON-FERROUS TRADING

PVT. LTD. .....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

The issue raised in these appeals pertains to the transaction

value/assessable value in respect of imported Aluminum Scrap, which

was imported by the respondent herein. The respondent had imported

various varieties of the said Aluminum scrap during the period 27

th

August, 2013 to 29

th

December, 2014 and filed 843 Bills of Entry along

with invoices and purchase orders in respect therein declaring the

transaction value of the imported goods for the purpose of paying

custom duty. The declared value was not accepted by the Assessing

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Officer who found the same to be low. Accordingly, the said declared

value was rejected and reassessment was done by increasing the

assessable value.

2)In a writ petition filed by the respondent in the High Court of Allahabad,

on the directions of the High Court directed the Deputy Commissioner of

Customs, NOIDA passed a speaking order dated 25

th

March, 2015,

giving his reasons to reject the transaction value as declared by the

respondent and enhancing the same by taking into consideration the

value of imported goods, namely, grades of scrap Aluminum contents

therein as well as quantum of presence of other metals.

3)The assessment order dated 25

th

March, 2015 passed by the Assessing

Officer was challenged by filing appeals before the Commissioner

(Appeals), Central Excise and Customs, NOIDA. All these appeals were

dismissed. Challenging the order of the Commissioner (Appeals), the

respondent approached the Customs, Excise and Service Tax Appellate

Tribunal (hereinafter referred to as the “Tribunal”). By the impugned

common judgment dated 17

th

January, 2017, the appeals of the

respondent were allowed thereby rejecting the enhancement of

assessable value by the Revenue. It is the said order of the Tribunal,

which is the subject matter of these appeals.

4)The entire basis of the order of the Tribunal is contained in paragraph 7

of the impugned judgment and since that paragraph contains the

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reasons which persuaded the Tribunal to set aside the order of the

authorities below, we reproduce this para along with paragraph 8 which

disclosed the outcome of the appeals, in entirety.

"7. Having considered the rival contentions and on perusal of

record, we find that the Original Authority was directed by the

Hon’ble High Court to pass speaking order on the enhancement

of assessable value. We find that the Original Authority in its

Order-in-Original dated 25/03/2015 passed comments on the

ground of writ petition and did not properly examine the evidence

available with the department required to be examined for

enhancement of assessable value. Further, we find that as held

in the case laws stated above and as provided by Section 14 of

Customs Act, 1962, the assessable value has to be arrived at on

the basis of the price which is actually paid and in a case the

price is not sole consideration or if the buyers and sellers are

related persons then after establishing that the price is not sole

consideration the transaction value can be rejected and taking the

other evidences into consideration the assessable value can be

arrived at. Such exercise has not been done in these cases on

hand. Therefore, we reject the enhancement of assessable value

in respect of the Bills of Entry which are involved in all the appeals

being decided and we restore the assessable value as declared

by the appellant in said Bills of Entry.

8.In result, we set aside all the impugned Orders-in-Appeal

and allow all the appeals. The appellant shall be entitled for

consequential relief, if any, in accordance with law.

5)The precise submission of Mr. K. Radhakrishna, learned senior counsel

appearing for the Revenue was that as per the Tribunal itself, the

reasons for upsetting the order in original are:

(a) That he did not properly examine the evidences available with the

Department, which were required to be examined for the purpose of

enhancement of assessable value.

(b)As per the provisions of Section 14 of the Customs Act, 1962 and

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the case law in respect thereof, the assessable value has to be arrived

at on the basis of the price which is actually paid and in case the price is

not the sole consideration or if the buyers and sellers are related

persons then after establishing that the price is not the sole

consideration, the transaction value can be rejected. However, such

exercise has not been done in these cases.

6)It was submitted that if the Original Authority/Assessing Officer had failed

to examine the evidence that was available with the Department and had

not undertaken the exercise regarding price being not the sole

consideration, the Tribunal should have remanded the case back to the

Assessing Officer for examining the material and undertaking that

exercise. To put it otherwise, the entire thrust of the argument of Mr.

Radhakrishna was that appeals could not have been allowed

straightaway by accepting the transaction value given by the

respondent/assessee and another opportunity should have been given

to the Assessing Authority in this behalf.

7)This argument may seem to be attractive, but only when there is a

cursory look at the aforesaid observations of the Tribunal that the

Assessing Officer did not examine the evidence available with the

Department which was necessitated for such a purpose. However, the

observations of the Tribunal have to be understood in their entirety and

in the context in which these are made. The Tribunal has categorically

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mentioned that as per the provisions of Section 14 of the Customs Act

and the principles laid down in the case law (which it referred to in the

earlier part of the judgment) interpreting this provision, the assessable

value has to be arrived at on the basis of the price which is actually paid.

It is the basic principle enshrined in the aforesaid provision, i.e., Section

14, which can be culled out from the catena of judgments pronounced by

this Court.

8)In Eisher Tractors Ltd., Haryana vs. Commissioner of Customs,

Mumbai

1

, this Court held as under:

"6. Under the Act customs duty is chargeable on goods. According

to Section 14(1) of the Act, the assessment of duty is to be made

on the value of the goods. The value may be fixed by the Central

Government under Section 14(2). Where the value is not so fixed,

the value has to be determined under Section 14(1). The value,

according to Section 14(1), shall be deemed to be the price at

which such or like goods are ordinarily sold, or offered for sale, for

delivery at the time and place of importation — in the course of

international trade. The word “ordinarily” necessarily implies the

exclusion of “extraordinary” or “special” circumstances. This is

clarified by the last phrase in Section 14 which describes an

“ordinary” sale as one “where the seller and the buyer have no

interest in the business of each other and the price is the sole

consideration for the sale …”. Subject to these three conditions

laid down in Section 14(1) of time, place and absence of special

circumstances, the price of imported goods is to be determined

under Section 14(1-A) in accordance with the Rules framed in this

behalf.

xxxxxxxxx

9. These exceptions are in expansion and explicatory of the

special circumstances in Section 14(1) quoted earlier. It follows

that unless the price actually paid for the particular transaction

falls within the exceptions, the Customs Authorities are bound to

assess the duty on the transaction value.

1(2001) 1 SCC 315

6

xxxxxxxxx

12. Rule 4(1) speaks of the transaction value. Utilisation of the

definite article indicates that what should be accepted as the

value for the purpose of assessment to customs duty is the price

actually paid for the particular transaction, unless of course the

price is unacceptable for the reasons set out in Rule 4(2).

“Payable” in the context of the language of Rule 4(1) must,

therefore, be read as referring to “theparticular transaction” and

payability in respect of the transaction envisages a situation

where payment of price may be deferred.

xxx xxx xxx

13. That Rule 4 is limited to the transaction in question is also

supported by the provisions of the other rules each of which

provide for alternate modes of valuation and allow evidence of

value of goods other than those under assessment to be the basis

of the assessable value. Thus, Rule 5 allows for the transaction

value to be determined on the basis of identical goods imported

into India at the same time; Rule 6 allows for the transaction value

to be determined on the value of similar goods imported into India

at the same time as the subject goods. Where there are no

contemporaneous imports into India, the value is to be determined

under Rule 7 by a process of deduction in the manner provided

therein. If this is not possible the value is to be computed under

Rule 7-A. When value of the imported goods cannot be

determined under any of these provisions, the value is required to

be determined under Rule 8 “using reasonable means consistent

with the principles and general provisions of these Rules and sub-

section (1) of Section 14 of the Customs Act, 1962 and on the

basis of data available in India”. If the phrase “the transaction

value” used in Rule 4 were not limited to the particular transaction

then the other rules which refer to other transactions and data

would become redundant.

xxx xxxxxx

22. In the case before us, it is not alleged that the appellant has

misdeclared the price actually paid. Nor was there a

misdescription of the goods imported as was the case in Padia

Sales Corpn. [1993 Supp (4) SCC 57] It is also not the

respondent's case that the particular import fell within any of the

situations enumerated in Rule 4(2). No reason has been given by

the Assistant Collector for rejecting the transaction value under

Rule 4(1) except the price list of vendor. In doing so, the Assistant

Collector not only ignored Rule 4(2) but also acted on the basis of

the vendor's price list as if a price list is invariably proof of the

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transaction value. This was erroneous and could not be a reason

by itself to reject the transaction value. A discount is a

commercially-acceptable measure which may be resorted to by a

vendor for a variety of reasons including stock clearance. A price

list is really no more than a general quotation. It does not preclude

discounts on the listed price. In fact, a discount is calculated with

reference to the price list. Admittedly in this case a discount up to

30% was allowable in ordinary circumstances by the Indian agent

itself. There was the additional factor that the stock in question

was old and it was a one-time sale of 5-year-old stock. When a

discount is permissible commercially, and there is nothing to show

that the same would not have been offered to anyone else

wishing to buy the old stock, there is no reason why the declared

value in question was not accepted under Rule 4(1).”

9)To the same effect, are other judgments, reiterating the aforesaid

principle, such as, Commissioner of Customs, Calcutta vs. South

India Television (P) Ltd.

2

, Chaudhary Ship Breakers vs.

Commissioner of Customs, Ahmedabad

3

and Commissioner of

Customs, Vishakhapatnam vs. Aggarwal Industries Ltd.

4

.

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

2(2007) 6 SCC 373

3(2010) 10 SCC 576

4(2012) 1 SCC 186

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value to be the assessable value applies. That 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 the Assessing Officer arrives at his own

assessable value.

11)In South India Television (P) Ltd., the Court explained as to how the

value is derived from the price and under what circumstances the

deemed value mentioned in Section 14(1) can be departed with.

Following discussion in the said judgment needs to be quoted

hereunder:

"10. We do not find any merit in this civil appeal for the following

reasons. Value is derived from the price. Value is the function of

the price. This is the conceptual meaning of value. Under Section

2(41), “value” is defined to mean value determined in accordance

with Section 14(1) of the Act. Section 14 of the Customs Act, 1962

is the sole repository of law governing valuation of goods. The

Customs Valuation Rules, 1988 have been framed only in respect

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of imported goods. There are no rules governing the valuation of

export goods. That must be done based on Section 14 itself. In

the present case, the Department has charged the respondent

importer alleging misdeclaration regarding the price. There is no

allegation of misdeclaration in the context of the description of the

goods. In the present case, the allegation is of underinvoicing.

The charge of underinvoicing has to be supported by evidence of

prices of contemporaneous imports of like goods. It is for the

Department to prove that the apparent is not the real. Under

Section 2(41) of the Customs Act, the word “value” is defined in

relation to any goods to mean the value determined in accordance

with the provisions of Section 14(1). The value to be declared in

the bill of entry is the value referred to above and not merely the

invoice price.

xxx xxx xxx

12. However, before rejecting the invoice price the Department

has to give cogent reasons for such rejection. This is because the

invoice price forms the basis of the transaction value. Therefore,

before rejecting the transaction value as incorrect or

unacceptable, the Department has to find out whether there are

any imports of identical goods or similar goods at a higher price at

around the same time. Unless the evidence is gathered in that

regard, the question of importing Section 14(1-A) does not arise.

In the absence of such evidence, invoice price has to be accepted

as the transaction value. Invoice is the evidence of value. Casting

suspicion on invoice produced by the importer is not sufficient to

reject it as evidence of value of imported goods. Undervaluation

has to be proved. If the charge of undervaluation cannot be

supported either by evidence or information about comparable

imports, the benefit of doubt must go to the importer. If the

Department wants to allege undervaluation, it must make detailed

inquiries, collect material and also adequate evidence. When

undervaluation is alleged, the Department has to prove it by

evidence or information about comparable imports. For proving

undervaluation, if the Department relies on declaration made in

the exporting country, it has to show how such declaration was

procured. We may clarify that strict rules of evidence do not apply

to adjudication proceedings. They apply strictly to the courts'

proceedings. However, even in adjudication proceedings, the AO

has to examine the probative value of the documents on which

reliance is placed by the Department in support of its allegation of

undervaluation. Once the Department discharges the burden of

proof to the above extent by producing evidence of

contemporaneous imports at higher price, the onus shifts to the

importer to establish that the invoice relied on by him is valid.

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Therefore, the charge of underinvoicing has to be supported by

evidence of prices of contemporaneous imports of like goods.

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.”

12)The observations of the Tribunal made in the impugned judgment are to

be appreciated in the light of the principles of law specified in the

aforesaid judgment, inasmuch as the Tribunal has categorically

remarked that the normal rule is that assessable value has to be arrived

at on the basis of the price which is actually paid, as provided by Section

14 of the Customs Act and the case law referred to by it (In paragraph 5,

the Tribunal referred to its own judgments which follow the aforesaid

principle laid down by this Court).

13)It is, therefore, rightly contended by Mr. Dushyant A. Dave, learned

senior counsel appearing for the respondent that the reason given for

setting aside the order that the normal rule was that the assessable

value has to be arrived at on the basis of the price which was actually

paid, and that was mentioned in the Bills of Entry. The Tribunal has

clearly mentioned that this declared price could be rejected only with

cogent reasons by undertaking the exercise as to on what basis the

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Assessing Authority could hold that the paid price was not the sole

consideration of the transaction value. Since there is no such exercise

done by the Assessing Authority to reject the price declared in the Bills

of Entry, Order-in-Original was, therefore, clearly erroneous.

14)In Commissioner of Customs vs. Prabhu Dayal Prem Chand

5

, this

Court was confronted with almost same kind of fact situation. On the

basis of the information received subsequently from the London Metal

Exchange (for short, ‘LME’) to the effect that the price of the two metals,

viz., brass scrap and copper scrap, in LME as on the date of import was

more than the price declared by the respondent, demanded additional

duty amounting to Rs. 90,248/- and Rs. 1,94,035 respectively,

from the assessee on the said two Bills of Entry. This order was set

aside by the Tribunal and appeals there against by the Customs were

dismissed by this Court. The Court noted, while accepting the plea of

the assessee, that they were not confronted with any contemporaneous

material relied upon by the Revenue for enhancing the price declared by

them in the Bills of Entry. It also noted the following remarks of the

Tribunal:

"In the present case as mentioned above, even though there is a

reference to contemporaneous import in the order passed by the

Deputy Commissioner no material regarding such import has

been placed before us or made available by the appellant at any

point of time. Therefore, assessment in this case has to be taken

as having been made purely on the basis of LME bulletin without

any corroborative evidence of imports at or near that price which

5(2010) 13 SCC 535

12

is not permissible under law. We, therefore, set aside the

impugned order and allow the appeal.”

Dismissing the appeals, this Court observed as follows:

"….It is manifest from the aforeextracted order of the Tribunal that

no details of any contemporaneous imports or any other material

indicating the price notified by LME had either been referred to by

the adjudicating officer in the adjudication order or such material

was placed before the Tribunal at the time of hearing of the

appeal. The learned counsel for the Revenue has not been able

to controvert the said observations by the Tribunal. In that view of

the matter no fault can be found with the order passed by the

Tribunal setting aside the additional demand created against the

assessee.”

15)We, thus, do not find any merit in these appeals and dismiss the same.

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

(A.K. SIKRI)

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

(S. ABDUL NAZEER)

NEW DELHI;

DECEMBER 10, 2018.

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ITEM No. 1501           Court No. 3               SECTION  IIA

(For Judgment)

     S U P R E M E   C O U R T   O F   I N D I A

                          RECORD OF PROCEEDINGS

      CIVIL  APPEALS NOS. 18300­18305 OF 2017

COMMISSIONER OF CENTRAL EXCISE AND    Appellant(s)

SERVICE TAX,  NOIDA 

                         VERSUS

M/S. SANJIVANI NON FERROUS TRADING PVT. LTD.   Respondent(s)

Date : 10.12.2018   This matter  was called on for pronouncement of

judgment today.

For Appellant(s) Mr. B.Krishna Prasad, Adv.

For Respondent(s) Mr. Chirag M.Shroff, Adv.

         Ms. Neha Sangwan, Adv.

Ms. Mahima C.Shroff, Adv.

Hon'ble Mr. Justice A.K.Sikri pronounced the

judgment   of   the   Bench   comprising   His   Lordship   and

Hon'ble Mr. Justice S.Abdul Nazeer.

The appeals are dismissed   in terms of the

signed reportable judgment.

Pending   applications,   if   any,   shall   stand

disposed of.

(Shashi Sareen)

AR­cum­PS

(Rajinder Kaur)

Branch Officer

(Signed reportable judgment is placed on the file)