Important point
Sections 14(1) of the Customs Act and Rule 4 of the Customs Valuation Determination of Price of Imported Goods Rules provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in the provisions.

Headnote:Customs Act, 1962—Sections 14(1), 28AB, 112(a), 113(m)—Customs Valuation Determination of Price of Imported Goods Rules, 1988—Rules 3, 4, 7—Ambit and scope—Determination of transaction value—Phrase ‘the transaction value’ used in Rule 4 is limited to the particular transaction—Assessee was the owner of oil well drilling rigs and drill ships—It entered into a contract with the Oil and Natural Gas Commission in 1999 for lease of a jack up rig to be utilized for oil exploration and exploitation of coast of India—In April 2000, the rig was required by the hirer to enter either Indian territorial waters or areas of exclusive economic zone—On the behalf that such entry would constitute import under the Act, assessee filed a Bill of Entry for the rig, declaring the CIF value of the rig—Show cause notice issued proposing to enhance value of the rig alleging that the value of price was under declared—Commissioner declined to accept the declared value on ground that the buyer and seller of rig were related parties, each of them being subsidiary company of one company—Confirmation of demand for differential duty—Whether the transaction value is to be accepted and, if not, by what method of assessment value of the rig has to be determined.
       Held : Though there is amount of controversy as to whether the Department accepted the declared price as the transaction value, and fixed the higher price because of relationship, it is not necessary to go into that aspect in detail. Suffice it to say that right from the show-cause notice stage same was the stand the Revenue had adopted. In fact, the Tribunal recorded there was agreement on this issue. If there was no agreement as contended by the revenue in the present appeals and if there was wrong recording by the Tribunal, the procedure to be adopted is different. After having agreed on some point as recorded, it is not open to the appellant to turn round or take a plea that the position is different. If really there was no agreement, the only course open to the appellant was to move the Tribunal. (Paras 13 and 14)
       It appeals that the Tribunal kept various requirements of Rules more particularly Rule 4 in view and proceeded to assess and examine the materials brought on record. It placed reliance on the evidence adduced by the assessee with reference to various journals the acceptability and the credibility of which was never questioned by the Revenue. It also referred to the affidavit of experts. (Para 15)
       It is true that the Rules are framed under Section 14(1-A) and are subject to the conditions in Section 14(1). Rule 4 is in fact directly relatable to Section 14(1). Both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularised in Rule 4(2). Rule 4(1) speaks of the transaction value. Utilisation of the definite article indicates that what should be accepted as the value for the purpose of assessment to customs duty is the price actually paid for the particular transaction, unless of course the price is unacceptable for the reasons set out in Rule 4(2). “Payable” in the context of the language of Rule 4(1) must, therefore, be read as referring to “the particular transaction” and payability in respect of the transaction envisages a situation where payment of price may be deferred. That Rule 4 is limited to the transaction in question is also supported by the provisions of the other rules each of which provide for alternate modes of valuation and allow evidence of value of goods other than those under assessment to be the basis of the assessable value. Thus, Rule 5 allows for the transaction value to be determined on the basis of identical goods imported into India at the same time; Rule 6 allows for the transaction value to be determined on the value of similar goods imported into India at the same time as the subject goods. Where there are no contemporaneous imports into India, the value is to be determined under Rule 7 by a process of deduction in the manner provided therein. If this is not possible the value is to be computed under Rule 7-A. When value of the imported goods cannot be determined under any of these provisions, the value is required to be determined under Rule 8 “using reasonable means consistent with the principles and general provisions of these Rules and sub-section (1) of Section 14 of the Customs Act, 1962 and on the basis of data available in India”. If the phrase “the transaction value” used in Rule 4 were not limited to the particular transaction then the other rules which refer to other transactions and data would become redundant. It is only when the transaction value under Rule 4 is rejected, that under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Rules. Conversely, if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent rules. (Paras 17 to 20)
       In the instant case Tribunal has referred to various materials which can by no stretch of imagination be termed irrelevant. The authenticity, credibility or reliability of the data has not been questioned. The inference to be drawn from these materials falls within the domain of factual determination. The conclusions of the Tribunal cannot be termed as perverse or irrational. The evaluation of material facts has been done in the background of applicable statutory provisions and legal principles. (Para 23)

Judgment

Arijit Pasayat, J.—These four appeals by the Revenue have a common matrix in the judgment of Customs Excise & Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (in short ‘the Tribunal’).

2. The factual background leading to the dispute as noted by the Tribunal in essence is as follows :

Pride Foramer (the respondent No. 2 in Civil Appeal Nos. 808-810 of 2004 and sole respondent in Civil Appeal No. 811 of 2004) (hereinafter referred to as the “assessee”) was the owner of oil well drilling rigs and drill ships which it leased out to parties engaged in oil exploration or exploitation. It entered into a contract with the Oil & Natural Gas Commission (in short `ONGC’) in January 1999 for lease to the latter of a jack-up rig of 300 ft depth to be utilized for oil exploration and exploitation off the coast of India. The assessee was not originally owner of the rig, and in order to comply with the terms of the contract, purchased in March 1999 the rig Pride Pennsylvania from Pride Global Limited, a company registered in the British Virgina Islands at a price of US $ 17 millions. The rig was being deployed for off sea exploration in accordance with the directions of the hirer, i.e. ONGC, and did not initially enter either Indian territorial waters or any areas of the exclusive economic zone designated under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 to which the provisions of the Customs Act, 1962 (hereinafter referred to as `the Act’) have been made applicable. In April 2000, the rig was required by the hirer to enter one of such designated areas. On the belief that such entry would constitute import under the Act, assessee filed a Bill of Entry in May 2000 for the rig, declaring the C.I.F. value of the rig to be Rs. 783,439,838. The Bill of Entry was accompanied by an invoice showing details of the value of fixed and loose equipment, spares and consumables on the rig for a total C.I.F. value of U.S. $ 17,682.690. The invoice was issued by the project office in Mumbai of the assessee and signed by Jean Paul Rabier, its manager in India (the respondent No. 3 in Civil Appeal Nos. 808-810 of 2004). The rig was permitted to be cleared on payment of duty at the declared value.

3. Subsequently investigation by the department led it to conclude that the value of price was under declared and that the true value of the rig ought to be Rs. 1966,950,295. The rig was placed under seizure in September 2001 and ordered to be released provisionally by the Bombay High Court after securing guarantees and deposits. Notice was issued proposing to enhance the value of the rig as stated above, proposing its confiscation under clause (m) of Section 111 of the Act on the ground that its value was misdeclared. Penalty was also proposed on the importer, Rabier and Bureau Veritas, a marine inspection agency, (respondent No. 1 in Civil Appeal Nos. 808-810 of 2004) whose Singapore office had issued two reports in 1999 and 2000 certifying the value of the rig. The show-cause notice alleged that the values certified by it were improper. After considering the cause shown and hearing the parties, the Commissioner of Customs (Import) Mumbai (in short the ‘Commission’) passed the order which was impugned before the Tribunal. He held the value of the rig to be Rs. 1451,893,375 (equivalent to US $ 32.78 million) and demanded differential duty of about Rs. 29.45 crores. He ordered confiscation of the rig with an option to redeem it on payment of fine of Rs. 5 crores, demanded interest on the differential duty, imposed penalties equal to the duty on the company, Rs. 2 lakhs on Jean Paul Rabier and Rs. 2 lakhs on Bureau Veritas.

4. After confirmation of duty he directed appropriation of Rs. 10 crores against the same. Payment of interest @ 24% under Section 28 AB of the Act was demanded from July 2000. Penalty of Rs. 29,45,19,057 was imposed and separate penalties under Section 112(a) of the Act were

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2005 Supreme(SC) 249

Cases Referred (5)