SC: Normally, for ad valorem duty, price declared in Bills of Entry can’t be rejected

The Hon’ble Supreme Court, on 10th December, 2018, in the matter of Commissioner of Central Excise and Service Tax, Noida v. M/S Sanjivani Non-Ferrous Trading Pvt. Ltd. upheld the observations of Customs, Excise and Service Tax Appellate Tribunal as per which “The normal rule is that the assessable value of any goods chargeable to ad valorem duty has to be arrived at on the basis of the price which was actually paid, and that was mentioned in the Bills of Entry. 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.”

The Hon’ble Supreme Court observed that

As per Sections 14(1) and 14(1-A) of the Customs Act, 1962, the value of any goods chargeable to ad valorem duty is deemed to be the price as referred to in that provision. (Para 10)

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. (Para 10)

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. (Para 10)

Copy of judgement: Judgement 10-Dec-2018

-Tushar Kaushik

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