Supreme Court of India
MIS. SIDDACHALAM EXPORTS PRIVATE LTD.versusCOMMISSIONER OF CENTRAL EXCISE DELHI-ILL
- Citation
- 2011 INSC 255
- Decided
- 1 April 2011
- Disposal
- Appeal(s) allowed
- Bench
- D K JAIN
Holding
The revenue must establish the incorrectness of the export value and must follow the statutory valuation hierarchy of Rules 4 to 8; the lower authorities erred in bypassing this procedure, so their orders were set aside.
Summary
The exporter, Mis Siddachalam Exports Pvt. Ltd., claimed a duty drawback on garments exported at declared FOB values of Rs. 390‑417 per piece, but the customs authorities alleged the values were inflated and seized the goods. A market valuation report from M/s Skipper International, later retracted, was used by the revenue to reduce the drawback, leading to a show‑cause notice and penalty under Section 114. The Commissioner initially dropped the proceedings, but the CESTAT reversed that decision, upheld the reduction of drawback and imposed penalties. The exporter appealed to the Supreme Court, arguing that the revenue failed to discharge its burden of proving mis‑declaration and that the valuation procedure under Section 14(1) and Rules 4‑8 of the 1988 Customs Valuation Rules was not followed. The Court held that the burden of proving an incorrect export value lies on the revenue, that valuation must follow the sequential procedure of Rules 4 to 8, and that both the Commissioner and CESTAT erred by relying on an improper market enquiry. Consequently, the Supreme Court set aside the orders of the Commissioner and CESTAT and remitted the matter to the adjudicating authority for fresh consideration in accordance with the proper valuation procedure.
Issues considered
- The burden of proof for alleged mis‑declaration of export value under the Customs Act.
- Whether the revenue correctly applied the valuation procedure prescribed in Section 14(1) and Rules 4‑8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.
- Whether a market enquiry can be used as a last resort in valuation when contemporaneous export data is unavailable.
- Whether the CESTAT's findings were perverse or contrary to law, justifying Supreme Court interference.
Legislation cited
- Customs Act, 1962s. 108, s. 110, s. 114, s. 130E(b), s. 14(1), s. 2(33), s. 2(41)
- Customs Valuation (Determination of Price of Imported Goods) Rules, 1988s. Rule 4, s. Rule 5, s. Rule 6, s. Rule 7, s. Rule 8
Subjects
customs valuationduty drawbackmis‑declaration of export valueburden of proofSection 14Rules 4‑8market enquiryCESTATappeal under Section 130E(b)transaction value
Judgment
• (2011] 4 S.C.R. 695
MIS. SIDDACHALAM EXPORTS PRIVATE LTD. A
v.
COMMISSIONER OF CENTRAL EXCISE DELHI-Ill
(Civil Appeal No. 810 of 2007)
APRIL 1, 2011
B
[D.K. JAIN AND H.L. DATTU, JJ.]
Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988: rr. 4 to 8 - Valuation of goods -
Allegation that value of goods entered for exportation was C
wrongly declared and thereby undue drawback amounts
claimed by exporter - Department sought for market opinion
regarding the value of goods - Held: The procedure
prescribed u/s. 14(1) of Customs Act and particularized in r.4
has to be adopted to determine the value or goods entered D
for exports - Ordinarily, the price received by the exporter in
the ordinary course of business is to be taken to be
transaction value for determination of Value of goods under
export, in absence of any special circumstances indicated ul ·
s. 14(1) and r 4(2) - The initial burden to establish that the E
value mentioned by the exporter in the bill of export or the
shipping bill, as the case may be, is incorrect, lies on the
Department - Therefore, once the transaction value ulr.4 is
rejected, the value must be determined by sequentially
proceeding through rr 5 to 8- In the instant case, neither the F
adjudicating authority nor the CESTAT dealt with the matter
as per the procedure prescribed under the Act - At the
threshold, instead of first determining the value of the goods
on the basis of contemporaneous exports of identical goods,
the Department erroneously resorted to a market enquiry ""."
Matter remitted to adjudicating authority for consideration G
afresh - Customs Act, 1962 - ss. 14(1 }, and 114.
Customs Act, 1962: s. 130E(b) -Scope of - Discussed.
695 H
696 SUPREME COURT REPORTS [2011] 4 s c R.
A The case of Revenue was that the appellant-exporter
misdeclared the value of goods entered for exportation
and claimed undue drawback amounts. The authorities
drew samples of the goods and forwarded the same to
one Mis. Skipper for their opinion regarding their market
B value. On 12.3.2003, one 'P' claiming to be an authorized
representative of M/s. Skipper submitted the valuation
letter opining that the goods in question were export
surplus and export rejected garments having poor quality
of fabric and market value of said goods ranged between
c Rs.40 to Rs. 70 per piece. Based on the said report, the
custom authorities arrived at the total value of the
consignments and the admissible drawback of Rs.
3,56,328 as against the claim of Rs. 49,57,536. The
appellant was issued a notice to show cause as to why
the drawback amount should not be reduced/disallowed
0
and penalty under Section 114 of the Customs Act be not
imposed on it. On 7.12.2004, 'P', the authorized signatory
of M/s. Skipper submitted another letter to the
Commissioner (Adjudication Bench) stating that their
earlier letter dated 12.3.2003 should not be relied upon for
E any purpose in as much as the same was prepared by
the Customs authorities, and he was merely asked to
transcribe his signature on the same. It was further stated
that he was neither shown any goods nor any
documents. On 14.12.2004, the exporter replied to the
F show cause notice denying all the allegations contained
therein. The exporter also questioned the authenticity of
the report dated 12.3.2003 submitted by Mis Skipper. The
Commissioner dropped the proceedings against the
exporter, and allowed the drawback as claimed by the
G exporter. The CESTAT allowed the appeal of Revenue
and also levied a penalty of Rs.5 lakh each on the exporter
and its Director respectively. The instant appeal was filed
_challenging the order of the CESTAT.
H
• SIDDACHALAM EXPORTS PVT LTD. v. COMMNR.
OF CENTRAL EXCISE DELHI-II
697
Allowing the appeal and remitting the matter to the A
adjudicating authority, the Court
HELD: 1. It is trite law that the amplitude of an appeal
under Section 130E(b) of the Customs Act, in relation to
the rate of duty of customs or to the value of goods for 8
the purposes of assessment, is very wide but it is equally
well settled that where the CESTAT, a fact finding
authority, has arrived at a finding by taking into
consideration all material and relevant facts and has
applied correct legal principles, the Supreme Court would C
be loathe to interfere with such a finding even when
another view might be possible on same set of facts.
Nevertheless, if it is shown that the conclusion under
challenge is such as could not possibly have been
arrived at by a person duly instructed upon the material
before him i.e. the conclusion is perverse or that the D
CESTAT has failed to apply correct principles of law, the
Supreme Court is competent to substitute its own opinion
for that of the CESTAT. The decisions of both the
authorities below were unsustainable. Neither the
Commissioner nor the CESTAT has examined the issue E
before them in its correct perspective and as per the
procedure contemplated in law for determination of the
value of the goods for exportation. [Paras 14 and 15] [706-
E-H; 707-A-B]
F
Nanya Imports and Exports Enterprises vs.
Commissioner of Customs, Chennai (2006) 4 SCC 765;
Varsha Plastics Private Limited and Anr. vs. Union of India
and Ors. (2009) 3 SCC 365; Mis. Builders'Association of India
VS. State of Kamataka and Ors. (1993) 1 sec 409 - referred G
to.
2. It is settled that the procedure prescribed under
Section 14(1) of the Act and particularized in Rule 4 of the
Customs Valuation (Determination of Price of Imported
Goods) rules, 1988 has to be adopted to determine the H
·' ·;
698 SUPREME COUR r REPORTS [2011] 4 S.C.R.
•
A value of goods entered for exports, irrespective of the fact
whether any duty is leviable or not. It is also trite that
ordinarily, the price received by the exporter in the
ordinary course of business shall be taken to be the
transaction value for d~termination of value of goods
8 under export, in absence of any special circumstances
indicated under Section 14(1) of the Act and Rule 4(2) of
the 1988 Rules. The initial burden to establish that the
value mentioned by the exporter in the bill of export or
the shipping bill, as the case may be, is incorrect, lies on
C the Revenue. Therefore, once the transaction value under
Rule 4 is rejected, the value must be determined by
sequentially proceeding through Rules 5 to 8 of the 1988
Rules. [Para 16] [707-C-E]
Commissioner of Customs (Gen), Mumbai vs. Abdulla
D Koyloth JT 2010 (12) SC 267 - relied on.
3. In the instant case, neither the adjudicating
authority i.e., the Commissioner of Central Excise nor the
CESTAT has dealt with the matter as per the procedure
E prescribed under the Act. At the threshold, instead of first
determining the value of the goods on the basis of
contemporaneous exports of identical goods, the
Revenue erroneously resorted to a market enquiry. If for
any reason, data of contemporaneous exports of identical
F goods was not available, the procedure laid down in
Rules 5 to 8 of the 1988 Rules was required to be
followed and market enquiry could be conducted only as
a last resort. It is evident that no such exercise was
undertaken by the Commissioner and interestingly he,
G acting as an appellate authority, proceeded to test the
evidentiary value of the report submitted by M/s Skipper
International and rejected it on the ground that it does not
depict if the identical garments had ever been purchased
by the said concern. Observing that in the absence of any
other independent evidence relating to market enquiry,
H
• SIDDACHALAM EXPORTS PVT. LTD. v. COMMNR.
OF CENTRAL EXCISE DELHI-Ill
699
there wasno other corroborating evidence to support the A
allega):1on of inflation in FOB value, he dropped the
pro.ceedings initiated by show cause notice. Similarly, it
is manifest from the CESTAT's order that revenue's
appeal was accepted mainly on the ground that report of
M/s Skipper was worthy of credence and the exporter had B
failed to produce any evidence to establish that export
value stated in the shipping bills was the true export
value. Both the said authorities have failed to apply the
correct principles of law and therefore, their orders
cannot be sustained. [Para 19] [709-8-G] c
Om Prakash Bhatia vs. Commissioner of Customs,
Delhi (2003) SSCC 161; Bibhishan vs. State of Maharashtra
(2007) 12 sec 390 - referred to.
Case Law Reference: ·. D
(2006) 4 sec 765 Referred to Para 12
(2009) 3 sec 365 Referred to Para 12
(1993) 1 sec 409 Referred to Para 13
E
JT 2010 (12) SC 267 Relied on Para 16
(2003) 6 sec 161 Referred to Para 17
(2007) 12 sec 390 Referred to Para 18
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 810
of 2007.
From the Judgment & Order dated 14.09.2006 of the
Customs, Excise and Service Tax Appellate Ti:ibunal; New Delhi
in Appeal No. C/893/05. . · G
Ramji Srinivasan, D.P. Mohanty, Somanadri Goud, Zeyaul
Haque (for Parekh & Co.) for the Appellant.
H
700 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A Rashmi Malhotra. Sunita Rani Singh, B.V. Balaram Das
for the Respondent
The Judgment of the Court was delivered by
D.K. JAIN, J.: 1. Challenge in this civil appeal, under
B Section 130-E(b) of the Customs Act, 1962 (for short "the Act"),
is to the judgment and order dated 14th September, 2006
delivered by the Customs, Excise & Service Tax Appellate
Tribunal (for short ''the CESTAT") whereby it allowed the appeal
preferred by the revenue, the respondent herein. Consequently,
C the customs duty drawback (Rs. 49,75,536/-) claimed by the
appellant under the scheme of duty drawback, incorporated in
Chapter X of the Act, read with Customs and Central Excise
Duties Draw-back Rules, 1995 (as amended) got disallowed
on the ground of mis-declaration of value of the goods entered
D for exportation.
2. The facts, material for adjudication of the present
appeal, may be stated thus:
The appellant viz. Mis Siddachalam Exports Pvt. Ltd.,
E (hereinafter referred to as "the exporter") was engaged in the
exports of ready-made garments, engineering goods,
handicrafts, woollen garments, leather goods, etc. On 24th
February, 2003, the exporter filed seven shipping Bills (Nos.J-
903000127-129 and J-903000131-134) for export of goods
F declared as 'ladies tops' valued at Rs. 390/- per piece and
'denim shirts' valued at Rs.417/- per piece consigned to one
Mis Zao Jainyo Overseas, Moscow, Russia at a total FOB
value of Rs.4, 14,63,360/-. The exporter claimed a duty
drawback of Rs.49,75,536/-.
G
3. Based on secret information that the afore-mentioned
goods had been over-valued with the intention of claiming
undue draw-back amounts, customs authorities carried out
100% examination of the consignment on 26th February, 2003;
H
• SIDDACHALAM EXPORTS PVT. LTD. v. COMMNR. · 701
OF CENTRAL EXCISE DELHI-Ill [D.K. JAIN, J.]
drew samples, and forwarded the same to one M/s Skipper A
International for their opinion regarding their market value.
4. On 27th February, 2003, Mr. Sanjeev Jain, director of
the exporter company was also examined, and in his statement
recorded under Section 108 of the Act he stated that the goods B
covered by the shipping bills were not manufactured by his
company, but were supplied by one Mr. Gupta. Payments to
Mr. Gupta in respect of the goods were made through cheques.
He, however, did not remember the address or contact number
of Mr. Gupta. Mr. Jain also stated that the goods covered by
the seven shipping bills were purchased @ Rs.150/- to Rs.350/ C
- per piece, however, he had not seen the invoices for the
same.
5. Vide letter dated 5th March, 2003, the exporter
requested for provisional release of the goods on execution of D
bond and bank gtJarantee. On 12th March, 2003, one Pankaj.
claiming to be an authorised representative of the said M/s
Skipper International submitted his valuation letter, opining that
samples of 'ladies tops' and 'denim shirts' were export surplus
and export rejected garments having poor quality of fabric and E
stitching, and the market value of the .said goods ranged
between Rs. 40/- to Rs. 70/- per piece. Based on the said
report, the customs authorities formed the opinion that the total
value of the consignments was Rs. 56,04,000/- as against the
declared FOB value of Rs. 4, 14,63,360/- and the admissible F
drawback should be Rs.3,56,328/- as against the claim of
Rs.49,57,536/-. The consignments in question were seized
under Section 110 of the Act. However, subsequently the goods
were released provisionally on execution of bond and bank
guarantee by the exporter. G
6. On 11th September, 2003, Assistant Commissioner of
Customs (SllB}, ICD, Tughlakabad, New Delhi issued a show
cause notice to the exporter, inter-alia, alleging that the FOB
value of the goods covered under the seven shipping bills had
been grossly mis-declared by artificially inflating it, thereby H
702 SUPREMi= COURT REPORTS (2011] 4 S.C.R.
•
A rendering them liable for confiscation under Sections 113(d)
and/or (i) of the Act. The exporter was asked to show cause
as to why the draw back on goods covered under shipping Bills
No. J903000134 and J903000129 dated 24th February, 2003
should not be reduced to Rs. 3,56,328/-; draw back amounting
B to Rs. 29,90,280/- on goods covered under the remaining
shipping bills should not be disallowed, and penalty under
Section 114 of the Act should not be imposed on the exporter.
7. On 7th December, 2004, the said Pankaj, authorised
C signatory of M/s Skipper International submitted another letter
to the Commissioner (Adjudication Bench) stating that their
earlier letter dated 12th March, 2003 should not be relied upon
for any purpose in as much as the same was prepared by the
Customs authorities, and he was merely asked to transcribe
his signature on the same. It was further stated that he was
D neither shown any goods nor any documents.
8. On 14th December, 2004, the exporter replied to the
show cause notice denying all the allegations contained therein.
The exporter also questioned the authenticity of the report dated
E 12th March, 2003 submitted by M/s Skipper International.
9. The Commissioner of Central Excise, Delhi-Ill
adjudicated on said show cause notice vide Order-in-Original
dated 31st January, 2005. Relying on the decisions of the
CESTAT, wherein the market enquiries conducted by the
F revenue in the absence of and without notice to the exporter
had been held to be invalid, the Commissioner dropped the
proceedings against the exporter, and allowed the draw back
as claimed by the exporter. The Commissioner held as follows:
G "In the light of above decisions of Hon'ble Tribunal, I find
that the enquiry conducted from M/s Skipper International,
in the absence of and without any notice to the exporter
company or its Director, cannot be assigned any evidential
weightage as it does not depict if the identical garments
H had ever been purchased by Mis Skipper International for
• SIDDACHALAM EXPORTS PVT. LTD. v. COMMNR. · 703
OF CENTRAL EXCISE. Of:LHl-111 [D.K. JAIN, J.]
the given prices. So, being the evidence and the relevant· A
law, it has to be held that there had been indeed no
market enquiry to establish the present market value.
Further, Mr. Pankaj, authorized signatory of M/s Skipper
International, has retracted his statement he made in his
certificate dated 12.03.2003 by which he had given B
present market value of the samples shown to him.
In view of this conclusion, and in the absence of any other
independent evidence relating to market enquiry, I fail to
find corroboration from any other independent evidence as C
far as the aspect relating to the present market price and
inflating of FOB value are concerned."
10. Being aggrieved, the Revenue preferred an appeal
before the CESTAT. As afore-mentioned, the CESTAT, vide
the impugned judgment, has allowed the appeal filed by the D
Revenue, observing thus:
"9. We find merit in the appeal of the revenue. The basic
issue in this case was whether the declared export prices
were mis-declarations on account of being over-valuation E
of the goods under export. The second issue was whether
the Present Market Value of the consignments were as
indicated by M/s Skipper International, thereby denying
draw back amount. While the defence of the respondent
is that the export price has been realized, the declared
F
value remains entirely unsubstantiated. The opinion of M/
s Skipper International, who saw the samples is based on
the observation that "these samples of Ladies Tops and
Denims Shirts are export surplus and export rejected
garments having poor Quality of fabric and stitching". There
is no contest raised against the finding regarding poor G
quality of fabric and stitching. It is upon this finding that M/
s. Skipper International reached the conclusion that the
garments were 'export rejects'. The valuation was also on
that basis. Instead of contesting the factual position noted
about the samples, the exporter has chosen to attack the H
704 SUPREME COURT REPORTS (2011] 4 S.C.R. •
A competence of the opinion giver. This is not acceptable
for two reasons. The first is that the quality of stitching and
fabric would be evident to any one familiar with garment
trade and cannot be ruled to be beyond the ken of an
export surplus dealer. There is no rocket science involved
B in as certainly quality of fabric or stitching of a garment.
Therefore, the attack on the opinion giver is entirely
misplaced. It is also because the opinion itself is not flawed.
Secondly, Mis Skipper International was dealing in (sic.)
export surplus garments, therefore, it had expertise in the
c market valuation of such goods. If fabric and stitching are
of poor quality, certainly, the items would not be having the
price of prime quality export garments as declared by the
exporter.
10. Another entirely unacceptable aspect in the appellant's
D conduct is that it has refused to place on record the
material which it should be in possession of to substantiate
the values declared. The appellant is a merchant exporter
and has purchased the garments, valued over ·4 crores
from the market. It is to be expected that the appellant
E would have taken care to place the order for the goods on
competent manufacturers or traders along with proper
specification regarding material, make, and size and those
manufacturers or traders would give the appellant proper
invoices and other documents. Instead of producing such
F evidence, it has chosen to state that procurement is
through one illusory Gupta, whose particulars are not
known to the appellant. Such abnormal vagueness can only
be attributed to an effort to cover up inconvenient facts. It
is well settled that a person in the possession of clinching
G evidence on an issue in dispute cannot hope to succeed
by withholding that evidence. Therefore, the Commissioner
was clearly in error in faulting the revenue for relying upon
the opinion of Mis Skipper International and not carrying
out investigations. on the lines indicated by Shri Jain. The
H particulars supplied by Shri Jain were not reliable at all and
• SIDDACHALAM EXPORTS PVT. LTD. v. COMMNR.
OF CENTRAL EXCISE DELHI-Ill [D.K. JAIN, J.]
7G5
was intended only to mislead. Further, issuance of some A
cheques is no satisfactory evidence about the correct value
of the consignments."
Accordingly, the CESTAT confirmed the reduction of draw back
claim in case of consignments covered by Shipping Bill Nos.
8
J-903000134 and J-903000129 to Rs. 3,26,328/- and denial
of draw back claim amounting to Rs.29,90,280/- in relation to
other consignments as contemplated in the show cause notice
dated 11th September, 2003. The CESTAT also levied a
penalty of Rs. 5 lakhs each on the exporter and its Director, C
Mr. Sanjeev Jain, respectively.
11. Hence, the present appeal by the exporter..
i
12. Mr. Ramji Srinivasan, learned senior coun~el appearing
on behalf of the exporter, while assailing the impugned o
judgment, contended that the Revenue has failed to discharge
the onus placed on it in as much as it has failed to establish
that the exporter had mis-declared the value of the ex;::~.1 11 goods
as was held in Nanya Imports & Exports Enterprises Vs.
Commissioner of Customs, Chennai 1• Learned counsel E
contended that the show cause notice was vitiated as it was
based solely on the opinion. of the said Pankaj, authorised
signatory of M/s Skipper International, who had not even
examined the goods in question. Learned counsel asserted that
the procedure for determining value of goods has to be in terms F
of Sections 2(41) and 14 of the Act, read with Rule 4 of the
Customs Valuation (Determination of Price of Imported Goods)
Rules, 1988 (for short "the 1988 Rules"). Relying on Varsha
Plastics Private Limited & Anr. Vs. Union of India & Ors. 2 ,
learned counsel argued that the 1988 Rules having been
framed to maintain uniformity and certainty in the matter of G
valuation of goods, which is a matter of procedure, these Rules
have to be adhered to strictly. It was also contended that the
1. c2006) 4 sec 765.
2. (2009) 3 sec 365. H
706 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A CESTAT has erred in law in levying penalty on Mr. Sanjeev Jain
who was not even made J:';>arty to the appeal filed by the
Revenue.
13. Per contra, Ms. Rashmi Malhotra, learned counsel
8 appearing on behalf of the Revenue strenuously urged that the
impugned judgment deserves to be affirmed, and the CESTAT
rigbtly did not consilier the effect of retraction by Mis Skipper
International, as the same was not dea1t with by the
Commissioner as well. Learned counsel urged that the exporter
C . cannot be *allowed to urge thi!) ground at this stage, as the
same was not raised by it before the CESTAT. In support of
the contention, decision of this Court in Mis Builders'
Association of India Vs. State of ·Karnataka & Ors 3 • was
pressed into service. According to the·learned counsel, since .
the retraction was tendered after twenty one months of the
D submission of original report, it had lost its efficacy and,
therefore, had no bearing on the authenticity of the report:
'
14. It Ii$ trite law that the amplitude of an appeal under
. Section 130E(b) ofthe Act, in relation to the rate of duty of
E customs or to the value of goods for the purposes of
assessment, is very wide but it is equally well settled that where
the CESTAT, a fact finding authority, has arrived at a finding
. by taking into consideration all material and relevant facts and
has applied correct legal principles, this Court would be loathe
F to interfere with such a finding even when another view might
be possible on same set of.facts. Nevertheless, if It Is shown
that the conclusion under challenge is such as could not possibly
have been arrived· at by a person duly instructed upon the
material before him Le: th~ conclusion is perverse or that the
G CESTAT ·has failed tR, apply correct principles of law, this Court
is eompetent to su"Sstitute its own opinion for that of the
CESTAT. . .
15. Having bestowed our anxious consideration to the facts
H 3. (199311. s.cc 409 ..
• SIDDACHALAM EXPORTS PVT. LTD. v. COMMNR.
OF CENTRAL EXCISE DELHI-Ill [D.K. JAIN, J.]
707
at hand, we are constrained to observe that the decisions of A
both the authorities below are unsustainable. In our opinion,
neither the Commissioner nor the CESTAT has examined the
issue before them in its correct perspective and as per the
procedure contemplated in law for determination of the value
of the goods for exportation. B
16. It is settled that the procedure prescribed under
Section 14( 1) of the Act and particularized in Rule 4 of the 1988
Rules has to be adopted to determine the value of goods
entered for exports, irrespective of the fact whether any duty is
leviable or not. It is also trite that ordinarily, the price received C
by the exporter in the ordinary course of business shall be taken
to be the transaction value for determination of value of goods
under export, in absence of any special circumstances
indicated under Section 14(1) of the Act and Rule 4(2) of the
1988 Rules. The initial burden to establish that the value D
mentioned by the exporter in the bill of export or the shipping
bill, as the case may be, is incorrect lies on the Revenue.
Therefore, once the transaction value under Rule 4 is rejected,
the value must be determined by sequentially proceeding
through Rules 5 to 8 of the 1988 Rules. (See: Commissioner E
of Customs (Gen), Mumbai Vs. Abdulla Koy/oth 4 .)
17. In Om Prakash Bhatia Vs. Commissioner of
Customs, Delhi5 , while dealing with a similar case of fraudulent
drawback claim by deliberately over-invoicing ready-made F
garments, this Court rejected the plea of the exporter that
Section 113(d) of the Act was not applicable to the facts of that
case as the goods were not prohibited goods; (ii) the exporter
was required to declare the value of the goods expected to be
received from the overseas purchaser and not the market value G
of such goods in India and (iii) since in that case, no duty was
payable on the export, Section 14 of the Act could not be
applied to determine the value of the goods. It was, inter-alia,
held that the definition of "prohibited goods" in Section 2(33)
of the Act indicates that if the conditions prescribed for import H
708 SUPREME COURT REPORTS (2011] 4 S.C.R. •
A or export of the goods are not complied with, it would be
considered to be "prohibited goods". It was held that for
determining the export value of the goods, it is necessary to
refer to the meaning of the word "value" as defined in Section
2(41) of the Act and the same must be determined in
B accordance with the provisions of sub-section (1) of Section
14 of the Act. The Court observed thus:
" ... For determining the export value of the goods, we have
to refer to the meaning of the word "value" given in Section
2(41) of the Act, which specifically provides that value in
c relation to any goods means the value thereof determined
in accordance with the provisions of sub-section (1) of
Section 14.
D
Section 14 specifically provides that in case of assessing
the value for the purpose of export, value is to be
determined at the price at which such or like goods are
ordinarily sold or offered for sale at the place of exportation
in the course of international trade, where the seller and
E
the buyer have no interest in the business of each other
and the price is the sole consideration for sale. No doubt,
Section 14 would be applicable for determining the value
of the goods for the purpose of tariff or duty of customs
chargeable on the goods. In addition, by reference it Is to
F be resorted to and applied for determining the export value
of the goods as provided under sub-section (41) of
Section 2. This is independent of any question of
assessability of the goods sought to be exported to duty.
Hence, for finding out whether the export value is truly
G stated in the shipping bill, even if no duty is leviable, it can
be referred to for determining the true export value of the
goods sought to be exported."
18. The opinion expressed in Om Prakash Bhatia (supra)
H has been reiterated by this Court in Bibhishan Vs. State of
• SIDDACHALAM EXPORTS PVT. LTD. v. COMMNR. 709
OF CENTRAL EXCISE DELHI-Ill [D.K. JAIN, J.]
Maharashtra 6 . It has been held that the definition of "prohibited A
goods" in the Act is a broad one and the said provision not only
brings within its sweep an import or export of goods which is
subject to any prohibition under the Act, but also any of the law
for the time being in force.
,, B
19. In the present case, as stated above, neither the
adjudicating authority i.e., the Commissioner of Central Excise
nor the CESTAT has dealt with the matter as per the procedure
prescribed under the Act. At the threshold, instead of first
determining the value of the goods on the basis of
contemporaneous exports of identical goods, the Revenue C
erroneously resorted to a market
I
enquiry. If for any reason, data
of contemporaneous exports of identical goods was not
available, the procedure laid down in Rules 5 to 8 of the 1988
Rules was, .i;equired to be followed and market enquiry could
be conducted only as a last resort. It is evident that no such D
exercise was undertaken by the Commissioner and interestingly
he, acting as an appellate authority, proceeded to test the
evidentiary value of the report submitted by M/s Skipper
International and rejected it on the ground that it does not depict
if the identical garments had ever been purchased by the said E
concern. Observing that in the absence of any other independent
evidence relating to market enquiry, there was no other
corroborating evidence to support the allegation of inflation in
FOB value, he dropped the proceedings initiated vide show
cause notice dated 11th September 2003. Similarly, it is F
manifest from the CESTAT's order that revenue's appeal has
been accepted mainly on the ground that report of M/~ Skipper
International was worthy of credence and the exporter had failed
to produce any evidence to establish that export value stated
in the shipping bills was the true export value. In our opinion, G
both the said authorities have failed to apply the correct
principles of law and therefore, their orders cannot be
sustained.
20. Resultantly, for the reasons as enumerated, the appeal H
710 SUPREME COURT REPORTS [2011) 4 S.C.R.
A is allowed; the orders passed by the CESTAT and the
Commissioner are set aside and the matter is remitted back
to the adjudicating authority for fresh consideration in
accordance with law, after affording adequate opportunity of
hearing to the exporter. The entire exer~ise, in terms of this
B order, shall be completed within six months from the date of
receipt of a copy of this judgment. !Qeedless to add that we
have not expressed any opinion on the merits of the opinion
rendered by M/s Skipper International or on the conduct of the
exporter in not adducing any evidence in support of the export
c value stated in the shipping bills in question.
21. In the facts and circumstances of the case, the parties
are left to bear their own costs.
D.G. Appeal allowed.
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