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Commissioner of Central Excise and Service Tax, Noida Vs. Sanjivani Non-Ferrous Trading Pvt. Ltd. - (Supreme Court) (10 Dec 2018)

Undervaluation has to be proved; if charge of undervaluation cannot be supported either by evidence or information about comparable imports, benefit of doubt must go to importer



The issue raised in present 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 relevant period 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 Officer who found the same to be low. Accordingly, the said declared value was rejected and reassessment was done by increasing the assessable value.

In a writ petition filed by the Respondent in the High Court, on the directions of the High Court directed the Deputy Commissioner of Customs, NOIDA to pass a speaking order dated 25th March, 2015, giving his reasons to reject the transaction value as declared by the Respondent. The assessment order dated 25th March, 2015 passed by the Assessing Officer was challenged by filing appeals before the Commissioner (Appeals). All these appeals were dismissed. Challenging the order of the Commissioner (Appeals), the Respondent approached the Tribunal. By the impugned common judgment, 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 present appeals.

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. 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. Therefore, the charge of under-invoicing has to be supported by evidence of prices of contemporaneous imports of like goods.

Section 14(1) of Customs Act, 1962 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.

The observations of the Tribunal made in the impugned judgment are to be appreciated in the light of the principles of law. 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. 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 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. There is no merit in present appeal. Appeals dismissed.


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