The Hon’ble Supreme Court, on 17thMay 2019, in the matter of Century Metal Recycling Pvt. Ltd. and Anr. v. Union of India and Otherspronounced that from today, it would be mandatory for the assessing officer to record reasons for rejecting the declared transaction value of imported goods before proceeding further.
The Hon’ble Supreme Court observed that:
The word ‘payable’ used in Section 14(1) of the Customs Act, 1962 refers to the particular transaction and the payability in respect of‘the transaction’. It refers to the notional value, albeit the transaction value as declared in the bill of entry plus the amount which has to be added in terms of Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. (Para 7)
Sub-section (2) of Section 14 is a non-obstante provision, which applies notwithstanding sub-section (1), i.e. when the Central Board of Excise and Customs has issued a notification in the Official Gazette fixing tariff values for any class of imported or exported goods.The Board has been authorised to issue notifications under Section 14(2) of the Act when it is satisfied that it is necessary or expedient. Thus, whenever tariff has been fixed vide notification issued by the Board under Section 14(2) of the Act, then notwithstanding the transactional value of the imported goods under sub-section (1) to Section 14 of the Act, as per sub-section (2) to Section 14 of the Act the customs duty is payable as per the tariff value so fixed. (Para 10)
Sub- rule (1) to Rule 3 Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 of the is however subject to Rule 12 and therefore gives primacy to Rule 12. (Para 12)
Clause-(iii) of Explanation to Rule 12 states that the proper officer can on ‘certain reasons’ raise doubts about the truth or accuracy of declared value. ‘Certain reasons’ would include conditions specified in clauses (a) to (f). Grounds mentioned in (a) to (f) are not exhaustive of ‘certain reasons’ to raise doubt about the truth or accuracy of the declared value. However grounds other than those in (a) to (f) should be similar to those mentioned in (a) to (f) (This inference has been drawn on the basis of conjoint reading of Para 14 and Para 18)
(Para 15) The requirements of Rule 12 can be summarised as under:
(a) The proper officer should have reasonable doubt as to the transactional value on account of truth or accuracy of the value declared in relation to the imported goods.
(b) Proper officer must ask the importer of such goods further information which may include documents or evidence;
(c) On receiving such information or in the absence of response from the importer, the proper officer has to apply his mind and decide whether or not reasonable doubt as to the truth or accuracy of the value so declared persists.
(d) When the proper officer does not have reasonable doubt, the goods are cleared on the declared value.
(e) When the doubt persists, sub-rule (1) to Rule 3 is not applicable and transaction value is determined in terms of Rules 4 to 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
(f) The proper officer can raise doubts as to the truth or accuracy of the declared value on ‘certain reasons’ which could include the grounds specified in clauses (a) to (f) in clause (iii) of the Explanation.
(g) The proper officer, on a request made by the importer, has to furnish and intimate to the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to the imported goods. Thus, the proper officer has to record reasons in writing which have to be communicated when requested.
(h) The importer has to be given opportunity of hearing before the proper officer finally decides the transactional value in terms of Rules 4 to 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
The expression “reason to doubt” as a sequitur would require a different threshold and examination than the expression “reason to believe”. It cannot be equated with the requirements of positivereasons to believe, for the word ‘doubt’ refers to un-certainty and irresolution reflecting suspicion and apprehension. However, this doubt must be reasonable i.e. have a degree of objectivity and basis/foundation for the suspicion must be based on ‘certain reasons’. (This inference has been drawn on the basis of Para 17)
There has to be a preliminary enquiry by the proper officer in which the importer must be given an opportunity for clarification of the doubts of the officer by furnishing of documents and evidence as to the accuracy or truth of the value declared. (Para 18)
It is only in case where the doubt of the proper officer persists after conducting examination of information including documents or on account of non-furnishing of information that the procedure for further investigation and determination of value in terms of Rules 4 to 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007would come into operation and would be applicable. (Para 18)
Reasonable doubt will exist if the doubt is reasonable and for ‘certain reasons’ and not fanciful and absurd. A doubt to justify detailed enquiry under the proviso to Section 14 read with Rule 12 should not be based on initial apprehension, be imaginary or a mere perception not founded on reasonable and ‘certain’ material. It should be based and predicated on grounds and material in the form of ‘certain reasons’ and not mere ipse dixit. (Para 18)
Subjecting imports to detailed enquiry on mere suspicion because one is distrustful and unsure without reasonable and certain reasons would be contrary to the scheme and purpose behind the provisions which ensure quick and expeditious clearance of imported goods. (Para 18)
On interpreting Section 18 of the Customs Act, 1962, it is held that when there is a dispute between the customs authorities and the importer as regards the valuation of the imported goods, on satisfaction of the conditions enumerated in sub-section (1), the authorities should make provisional assessment of customs duty under Section 18 of the Act. Any insistence and compulsion by the authorities that the importer should disclaim and forgo his statutory right under Section 18 of the Act would not be correct. Neither would it be right to reject the valuation as declared by the importer without reasonable doubt for certain reasons. (Para 18)
As per sub Rule (2) of Rule 12, the proper officer when required must intimate to the importer in writing the grounds for doubting the truth or accuracy of the value declared. The said mandate of sub-Rule (2) of Rule 12 cannot be ignored or waived. (Para 20)
Formation of opinion regarding reasonable doubt as to the truth or accuracy of the valuation and communication of the said grounds to the importer is mandatory, subterfuge to by-pass and circumvent the statutory mandate is unacceptable. (Para 20)
Copy of judgement: Judgement_17-May-2019