M/S. GIRA ENTERPRISES AND ANR.versusCOMMISSIONER OF CUSTOMS, AHMEDABAD

                   (2014] 14 S.C.R. 727


           M/S. GIRAENTERPRISESANDANR.                         A
                             v.
     COMMISSIONER OF CUSTOMS, AHMEDABAD
            (Civil Appeal Nos. 433-434 of 2004)
                    AUGUST 21, 2014                            B
       [ J. CHELAMESWAR AND A. K. SIKRI, JJ.]
      Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988-Rules 4 and 5-determination of value
of imported goods - Import of consignments by assessee -       C
Value thereof declared by the assessee as US $5001- PMT
- On verification, the chemical name of the imported goods
was found to be 'Cyanuric Chloride' as known in the
International market- The Revenue, relying on a computer
printout, assessed the value of the imported goods at US $
                                                               0
1860/PMT by resorting to rule 5- Demand of differential duty
-Propriety of-Held: In a given case, ifthe Revenue notices
identical goods have been imported by other importers in
comparable transactions at a different rate (normally higher
rate) then Revenue is enabled by Rules 5 to reject the
valuation made by the importer and determine the ''price       E
actually paid or payable" by the importer - In the present
case, in absence of any material produced by Revenue in
proof of the alleged comparable imports at a higher value,
 the assessment order is not sustainable -Alleged computer
print-out is not proof of existence of comparable imports -    F
Even if contents of the print-out are assumed to be true, a
reasonable opportunity is required to be given to ascertain·
whether the transaction evidenced by computer print-out are
comparable to the transaction of the appellant.
                                                               G
       Words and Phrases - 'Transaction value' - Meaning
of, in the context of customs valuation.
     CIVILAPPELLATE JURISDICTION: Civil Appeal Nos.
433-434 of2006.
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                           727
728         SUPREME COURT REPORTS                    [2014] 14 S.C.R.

                                              I
A           From the judgment and order dated 23.08.2005 passed
      by the Customs, Excise and:§wvice Tax Appellate Tribunal,
      West Zonal Bench at Mumbaiih Appeal No. C/791 & 792/03-
      Mum.
            S. K. Bagaria, Sr. Adv., Sonu Bhatnagar, K. Ajit Singh,
B     Srinivas Vijay Kumar, Udit Jain and Praveen Kumar, Advs. for
      the Appellants.
           K. Radhakrishnan, Sr.Adv., K. Swami, Ms. Sunita Rani
      Singh and B. Krishna Prasad,Advs. forthe Respondent.
c           The following Order of the Court was passed :
                                 ORDER
       1. These are statutory appeals filed under Section
  130(E) of the Customs Act, 1962 from the judgment and order
  dated 23.8.2005, passed by the Customs, Excise and Service
D Tax Appellate Tribunal, West Zonal Bench at Mumbai in Appeal
  No. C/791 & 792/03/Mum.
             2. The appellants imported two consignments of"2-4-6
      Tricloro 1-3-5 Triazine"aggregating 74.10 MT from China under.
E     two Bills of Entry, the cost of which is declared by the appellants
      to be SG $ 750/- PMT equivalent to US$ 5001- PMT. The goods
      were provisionally assessed and allowed clearance on
      17.9.1994.
            3. Subsequently, a show cause notice dated 25.9.2000
 F    came to be issued to the appellants by the Commissioner of
      Customs, Gujarat atAhmedabad calling upon the appellants
      to show cause why certain action indicated therein cannot be
      taken against the appellants. The relevant portion of the show
      cause notice is as follows:-
G                "Therefore, Mis. Gira Enterprises, Ahmedabad are
            hereby called upon to show cause to the Commissioner
            of Customs, Ahmedabad as to why:
           (I) the provisionally assessed Bills of Entry (as per
           Annexure 'Pl) should not be finalised after taking in value
H          ofUS$1860.00PMTCIF.
 MIS. GIRAENTERPRISESANDANR. v. COMMISSIONER                          729
            OF CUSTOMS, AHMEDABAD

      (iO The differential dufy of Rs. 31,53,833/-(as per Annexure    A
      'A') should not be recovered under Section 18(2) read
      with Section 28(2) of the Customs Act, 1962.
      (iii) The ·goods which are liable for confiscation under
      Section 111(m) of the Customs Act, 1962 should not be
      confiscated and why fine in lieu of confiscation should         B
      not be imposed as goods has already been cleared
      provisionally against Bond for test and value verification.
      (iv) Penalty should not be imposed on M/s. Gira
      Enterprises, Ahmedabad under Section 114A/112(a) of             C
      the Customs Act, 1962 .
     . (v) Interest under Section 28AB of the Customs Act, 1962
       should not be recovered."
       4. It is also stated in the show cause notice that the goods
imported by the appellants were subjected to a test in the            D
Central Excise & Customs Laboratory, Baroda. According to
the show cause notice, the chemical name of the goods was
verified and it was found to be "Cyanuric Chloride" as known
in the International market. It is further stated in the show cause
notice that on the basis of certain information obtained through      E
a computer print out from the Customs House, Mumbai, the
Commissioner of Customs, Gujarat noticed that a large
number of Cyanuric Chloride(100) import transactions
(between the months of June 1994 to November 1994) took
place and the cost of the unit price in each ·one of those imports    F
was US$ 1950/- PMT(CIF) as against the value declared by
the appellants of US$ 5001- PMT.
      5. The appellants filed a detailed reply dated 11.12.2000
wherein they disputed their liability to make any further payment
as indicated in the show cause notice. The appellants also G
took a specific stand that a copy of the computer print out which
formed the basis of show cause notice had not been supplied
to the appellants.

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730         SUPREME COURT REPORTS                  [2014] 14 S.C.R.


A            6. Eventually, the concerned Assistant Commissioner
      finalised the assessment by valuing the imported goods at US
      $ 1860/- PMT by an order dated 31.3.2001.
           7. Aggrieved by the same, the appellants herein carried
      the matter in an appeal to the Commissioner of
B     Customs(Appeals). By an order dated 8.8.2001, the said
      appeal was allowed wherein the appellate authority recorded
      "the method of determination of the assessable value as per,
      Rule 5 lacks specific evidence, therefore, the same is not legal
      and proper".
c          8. Revenue carried the matter in further appeal before the
      Customs, Excise and Gold (Control) Appellate Tribunal. By an
      order dated 15.2.2002, the said Tribunal remitted the matter
      back to the Commissioner (Appeals). On such remittance,
      the Commissioner (Appeals) upheld the order of the Assistant
0     Commissioner confirming the enhancement of the value at US
      $ 1860 PMT CIF. Again, the matter was carried by the
      appellants to the Customs, Excise and Service Tax Tribun.al
      unsuccessfully. By an order dated 23.. 8.2005, which was
      impugned in the instant appeal, the appeal of the appellant~·
E     herein was dismissed by the Tribunal.
         9. It is argued on behalf of the appellant that the
  assessment and demand of the customs duty on the basis of
  the valuation of the goods at a price much higher than what
F was declared by the appellant to be the price paid by the
  appellant is without any basis in law, without any legally
  admissible evidence and opposed to the principles of natur03I
  justice as the only material relied upon by the Revenue i.e. copy
  of the alleged printout was not supplied to the appellant.
  Therefore, the appellant had no means of knowing as to
G whether any imports of comparable nature were made at the
  relevant point of time.
            10. On the other hand it is argued by the Revenue that
      the impugned order calls for no interference.
 H
 M/S. GIRAENTERPRISESANDANR. v. COMMISSIONER                          731
            OF CUSTOMS, AHMEDABAD

       11. Section 12 of the Customs Act, 1962 mandates that          A
duties of customs shall be levied at such rates as may be
specified under the Customs Tariff Act, 1975(51 of 1975), or
any other law for the time being in force, on goods imported
into, or exported from, lndia.Undisputedly, the goods imported
by the appellants are goods which are assessable to Customs           B
Duty under Entry 2942 of the Fifst Schedule of the Customs
Tariff Act, 1975. It is also not in dispute that the duty is an ad
valorem duty. Section 14 of the Customs Act stipulates the
method and manner of the valuation of the goods which are
exigible to duties under the Customs TariffAct and assessable         c
to ad-valorem duty.
      12. Section 14 reads asfollows:-
     "Valuation of goods for purposes of assessment. -
      (1) For the purposes of[the Customs Tariff Act, 1975(51         0
      of 1975)], or any other law for the time being in force
      whereunder a duty of customs is chargeable on
      any goods by reference to their value, the value of
      such goods shall be deemed to be the price at
      which such or like goods are ordinarily sold, or E
      offered for sale, for delivery at the time and place of
      importation of exportation, as the case maybe, in the
      course of international trade, 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 or offer for   F
      sale:
         [Provided 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 or bill of export, as the case may be, is       G
      presented under Section 50;]
         1*
         [1A Subject to the provisions of sub-section (1 ), the
      price referred to in that sub-section in respect of imported
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732          SUPREME COURT REPORTS                         [2014) 14 S.C.R.


A           goods shall be determined in accordance with the rules
            made in this behalf.]
                2 ...
                3... "
B           13. It can be seen from Section 14 that the value of the
      imported goods is "deemed to be the price at which such.
      goods are ordinarily sold, or offered for sale ...... ". The Section
      further stipulates that such price of the imported goods is to
      be determined in accordance with the rules made in that behalf.
C           14. The Government of India made rules known as
      Customs Valuation (Determination of the Price of Imported
      Goods) Rules, 1988. Rule 3(i) 1 stipulates that for the purpose
      of the rules, the value of the imported goods shall be the
      transaction value. Rule 3(ii) 2 provides that where the value of
D     the imported goods cannot be determined under Rule 3(i) then
      the same is to be determined in accordance with the various
      methods of determination (of the value of the goods) provided
      under Rules 5 to 8 sequentially.
           15. The expression "transaction value" is defined under
E     the Rule 2(f) of the Customs Valuation(Determination of Price
      of Imported Goods) Rules, 1988 as follows:-
            2(f) "transaction value" means the value determined in
            accordance with Rule 4 of these rules."
F     16. Rule4(1) stipulates asfollows:-
            "The transaction value of imported goods shall be the
            price actually paid or payable for the goods when
            sold for export to India, adjusted in accordance with
            the provisions of Rule 9."
G
      '3. Determination of the method of valuation - For the purpose of
      these rules-
      (i) the value of imported goods shall be the transaction value.
      2 (ii) if the value cannot be determined under t_he provisions of clause (i)

      above, th11 value shall be determined by proceeding sequentially through
H     Rules 5 to 8 of these Rules.
  M/S. GIRAENTERPRISESANDANR. v. COMMISSIONER                                   733
             OF CUSTOMS, AHMEDABAD

       17. Sub-rule (2) 3 stipulates that the transaction value of              A
 the imported goods shall be accepted subject to the various
 exceptions specified in the said Section, the details of which
 many not be necessary for the present purpose.
       18. In substance, Rule 5 stipulates the next alternative
 procedure for determining the value of the imported goods                      B
 and it reads as follows:-
        5. Transac~ion value of identical goods -
           (1 )(a) Subject to the provisions of Rule 3 of these
           rules, the value of imported goods shall be the                      c
          ·transaction value of identical goods sold for export to
           India and imported at or about the same time as the
           goods being valued.
           (b) in applying this rule, the transaction value of
           identical goods in a sale at the same commercial level D
           and in substantially the same quantity as the goods
           being valued shall be used to determine the value of
           imported goods.
           (c) Where no sale referred to in clause (b) of sub-rule
           (1) of this rule, is found, the transaction value of                 E
 3(2) The transaction value bf imported goods under sub-rule( 1) above 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;     F
 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 same 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      G
  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 9 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.                                          H
734       SUPREME COURT REPORTS                   [2014] 14 S.C.R.


A            identical goods sold at a different commercial level
             or in different quantities or both, adjusted to take
             account of the difference attributable to commercial
             level or to the quantity or both shall be used, provided
             that such adjustments shall be made on the basis of
B            demonstrated evidence which clearly establishes the
             reasonableness and ac.curacy of the adjustments,
             whether. such adjustment leads to an increase or
           · decrease in the value.
            (2) Where the costs and changes referred to in sub-
c           rule(2) of Rule 9 of these rules are included in the
            transaction value of identical goods, an adjustment
            shall be made, if there are significant differences in
            such costs and charges between the goods being
            valued and the identical goods in question arising from
D           differences in distances and means of transport.
            (3) In applying this rule, if more than one transaction
            value of identical goods is found; the lowest such value
            shall be used to determine the value of imported
            goods."
E
        19. In substance, Rule 5 enables the Revenue to determine
  the value of the imported goods on the basis of the identical
  imported goods of comparable import transaction. Such a
  procedure/course of action is authorized notwithstanding the
F mandate of Rule 4(2). that the transaction value shall be
  accepted. Obviously, such an alternative mode of valuation is
  authorized as Rule 4 declares that the transaction value of the
  imported goods shall be the "price actually paid or payable".
  Necessarily the rule implies the need of determination of the
G price actually paid or payable.
        20 ..It is not necessary that in every case of import the
  importer declares the price actually paid by him or payable by
  him. Therefore, if in a given case the Revenue notices identical
  goods have been imported by other importers in comparable
H transactions at a different rate (normally higher rate) then
 M/S. GIRAENTERPRISESANDANR. v. COMMISSIONER                       735
            OF CUSTOMS, AHMEDABAD

Revenue is enabled by Rules 5 to reject the valuation made by      A
the importer and determine the "price actually paid or payable"
by the importer.
      21. In the case at hand, no doubt the revenue claims to
have some information based on certain alleged imports made
at the Bombay port at the relevant point of time that the import   B
in question took place. According to the revenue, those imports
at Bombay were declared and valued at a much higher rate
than the value declared by the appellants herein. Therefore,
the valuation of the goods imported by the appellant was found
unacceptable. Hence, the procedure under Rule 5 was resorted       C
to.
      22. However, the respondent( revenue) did not supply the
information (alleged computer print out) which formed the basis
of the conclusion that the appellants herein under-valued the
goods imported. In such a situation, the appellants obviously      D
cannot and did not have any opportunity of establishing that
the claim of the revenue is unsustainable in law. If the
information which formed the basis for the Revenue to reject
the appellant's valuation is supplied to the appellants, the
appellants perhaps will have an opportunity to dispute the         E
comparability of the import transactions allegedly contained
in the computer printout on various counts may not be possible
to catalogue.
      23. The appellants, of course, admit that the goods F
imported by them are known commercially as 'Cyanuric
Chloride' as specified in the show cause. Whether Cyanuric
Chloride was imported at the relevant point of time by others
in comparable transactions, i.e., is "a sale at the same
commercial level and in substantially the same quantity" etc. G
is a matter to be considered on the examination of the material
relied upon by the Revenue. A reasonable opportunity must be
given to the appellant to demonstrate (if at all) that the
transactions relied upon by the Revenue are not comparable
transactions.
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736          SUPREME COURT REPORTS               [2014] 14 S.C.R.


A       24. In the absence of any material produced·by the
  Revenue ·in proof of the alleged comparable imports at a higher
  value, the impugned order which eventually confirmed the
  original order of assessment by the Assistant Commissioner
  of Customs dated 31.3.2001 cannot be sustained for two
B reasons - (1) the mere existence of an alleged computer
  printout is not proof of the existence of comparable imports;
  (2) assuming such a printout exists and the contents thereof
  are true, the question still remains whether the transaction
  evidenced by the said computer printout are comparable to
C the transaction of the appellant. The appellant will have to be
  given reasonable opportunity to establish (if he can) that the
  transactions are not comparable.
       25. The impugned order and the original assessment
  order are therefore, set aside. However, it will be open to the
D respondent( revenue) to proceed against the appellants herein
  pursuant to the show cause notice dated 25.9.2000 in
  accordance with law.
            26. The appeals are allowed accordingly.

      Kalpana K. Tripathy                              Appeals allowed.