IMPORTANT POINTS
1. It is well settled that the onus to prove under-valuation is on the revenue but once the revenue discharges the burden of proof by producing evidence of contemporaneous imports at a higher price, the onus shifts to the importer to establish that the price indicated in the invoice relied upon by him is correct.
2. A mere suspicion upon the correctness of the invoice produced by an importer is not sufficient to reject it as evidence of the value of imported goods. The doubt held by the officer concerned has to be based on some material evidence and is not to be formed on a mere suspicion or speculation.

Headnote:Customs Act, 1962- Section 14 -Customs Valuation (Determination of Price of Imported Goods) Rules, 1988- Rules 4, 10A -Respondent entered into a contract with foreign suppliers , for import of 500 Metric tons of crude sunflower seed oil –Issuance of show cause notice by adjudicating authority alleging that since when actual shipment took place, after the expiry of the original shipment period, international market price of crude sunflower seed oil had increased drastically, contract price could not be accepted as the ‘transaction value’ in terms of Rule 4 of CVR 1988-If justified- Admittedly contract for supply of crude sunflower seed oil @ US $ 435 CIF/PMT was entered into on 26.06.2001- It could not be performed on time because of which extension of time for shipment was agreed to between the contracting parties- Commodity involved had volatile fluctuations in its price in international market but having delayed shipment, supplier did not increase price of the commodity even after increase in its price in the international market- No allegation of supplier and importer being in collusion-Again no case of revenue that transaction entered into by respondent was not genuine or under-valued- Nor was there a misdescription of goods imported- Subject imports even not fell within any of the situations enumerated in Rule 4(2) of CVR 1988- Hence held that revenue was not justified in rejecting the transaction value declared by respondents- Appeals dismissed. (Paras 13)
        Customs Valuation (Determination of Price of Imported Goods) Rules, 1988- Rules 4, 10A -Respondent entered into a contract with foreign suppliers , for import of 500 Metric tons of crude sunflower seed oil –Issuance of show cause notice by adjudicating authority alleging that since when actual shipment took place, after the expiry of the original shipment period, international market price of crude sunflower seed oil had increased drastically, contract price could not be accepted as the ‘transaction value’ in terms of Rule 4 of CVR 1988-Challenge thereagainst -Contract value was not acceptable to Adjudicating Authority merely because by the time actual shipment took place international price of the oil had increased drastically-No other reason had been ascribed to reject the transaction value under Rule 4(1) except the drastic increase in price of the commodity in the international market and the difference in price in the invoices in relation to the goods imported under contracts entered by the respondents in the month of August 2001- Import instances relied upon by revenue could not be treated as instances indicating contemporaneous value of goods because contracts for supply of the goods in those cases were entered into almost after a month from the date of contract in the present cases, more so, when admittedly there were drastic fluctuations in international price of the commodity involved- Hence held that revenue was not justified in rejecting the transaction value declared by respondents in the invoices submitted by them-Appeals dismissed (Paras 13, 14)
        Customs Valuation (Determination of Price of Imported Goods) Rules, 1988- Rule10A -Scope and ambit of - Before rejecting the transaction value declared by importer as incorrect or unacceptable, revenue has to bring on record cogent material to show that contemporaneous imports, which obviously would include date of contract, time and place of importation, etc., were at a higher price- In such a situation, Rule 10A of CVR 1988 contemplates that where the department has a ‘reason to doubt’ the truth or accuracy of the declared value, it may ask the importer to provide further explanation to the effect that the declared value represents the total amount actually paid or payable for the imported goods- ‘Reason to doubt’ does not mean ‘reason to suspect’- A mere suspicion upon the correctness of the invoice produced by an importer is not sufficient to reject it as evidence of the value of imported goods- The doubt held by the officer concerned has to be based on some material evidence and is not to be formed on a mere suspicion or speculation (Para 11)
       Facts of the Case :
        A. Respondent herein in the instant case entered into a contract with foreign suppliers , for import of 500 Metric tons of crude sunflower seed oil.
        B.A show cause notice was issued by adjudicating authority alleging that since when actual shipment took place, after the expiry of the original shipment period, international market price of crude sunflower seed oil had increased drastically, contract price could not be accepted as the ‘transaction value’ in terms of Rule 4 of CVR 1988.
        C. Issue in consideration in present appeals was whether revenue was justified in rejecting the transaction value declared by respondents in the invoices submitted by them.
       Findings of the Court :
        A. Admittedly contract for supply of crude sunflower seed oil @ US $ 435 CIF/PMT was entered into on 26.06.2001. It could not be performed on time because of which extension of time for shipment was agreed to between the contracting parties. Commodity involved had volatile fluctuations in its price in international market but having delayed shipment, supplier did not increase price of the commodity even after increase in its price in the international market. No allegation of supplier and importer being in collusion.
        B. Again it was no case of revenue that transaction entered into by respondent was not genuine or under-valued. Nor was there a misdescription of goods imported.
        C. Subject imports even not fell within any of the situations enumerated in Rule 4(2) of CVR 1988.
        D. Contract value was not acceptable to Adjudicating Authority merely because by the time actual shipment took place international price of the oil had increased drastically. No other reason had been ascribed to reject the transaction value under Rule 4(1) except the drastic increase in price of the commodity in the international market and the difference in price in the invoices in relation to the goods imported under contracts entered by the respondents in the month of August 2001. Import instances relied upon by revenue could not be treated as instances indicating contemporaneous value of goods because contracts for supply of the goods in those cases were entered into almost after a month from the date of contract in the present cases, more so, when admittedly there were drastic fluctuations in international price of the commodity involved.
        E. Hence held that revenue was not justified in rejecting the transaction value declared by respondents. Appeals were dismissed.

JUDGMENT

D.K. Jain, J.:

1. This batch of appeals arises out of final orders dated 4th August, 2005 in Appeal No. C/139-140/02; C/209/02; C/288/03; C/291-93/03; C/299/03; C/243/02; C/264/02 & C/313/03; 5th August, 2005 in Appeal No. C/265/03, 22nd June 2005 in Appeal No. C/213/02 and 29th December, 2006 in Appeal No. C/300/03 passed by the Customs, Excise & Service Tax Appellant Tribunal South Zonal Bench, Bangalore (for short “the Tribunal”). By the impugned orders, the Tribunal has allowed the appeals preferred by the respondents-importers.

2. Since all the appeals involve a common question of law, these are being disposed of by this common judgment. However, in order to appreciate the controversy, the facts emerging from C.A. No. 2521 of 2006, which was treated as the lead case, are being adverted to. These are as follows:

On 26th June 2001, the respondent entered into a contract with foreign suppliers viz: M/s Wilmar Trading Pvt. Ltd., Singapore, for import of 500 Metric tons of crude sunflower seed oil at the rate of US $ 435 CIF/Metric ton. Under the contract, the consignment was to be shipped in the month of July 2001 but as the mutually agreed time for shipment was extended to ‘Mid August 2001’ vide Addendum dated 31st July 2001, the goods were actually shipped on 5th August 2001. On filing of the bill of entry, the goods were assessed provisionally, pending verification of contemporary price, the original documents and the test report from the government chemical examiner.

3. On verification of the documents filed, the Adjudicating Authority noticed certain discrepancies in the shipment period. Accordingly, on 5th October 2001, he issued a demand letter to the respondent under Rule 10A of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (for short “CVR 1988”) to show cause as to why the contract price be not rejected and the Customs duty be not determined by adopting contemporary invoice price on which other importers had entered into contract for supply of the same item either with the same supplier or other suppliers in the same country. Since the imputation in the show cause notice has a material bearing on the determination of the issue involved, the relevant portion of the notice is extracted below:

“As per the condition incorporated in the contract dated 26.6.2001, the goods are to be shipped during the month of July 2001. Whereas the goods were shipped after expiry of the Shipment period i.e. on 5.8.01. By the time of actual shipment i.e. during August 2001, the international market prices of the Crude Sunflower Seed Oil (Edible Grade) have increased drastically. Hence, the contract price is not acceptable in terms of Section 14(1) read with Rule 4 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.”

4. In short, the case of the revenue was that when actual shipment took place, after the expiry of the original shipment period, the international market price of crude sunflower seed oil had increased drastically, and, therefore, the contract price could not be accepted as the ‘transaction value’ in terms of Rule 4 of CVR 1988.

5. In response, the plea of the respondent was that the contract envisaged extension of time for shipment but the exporter was bound to supply the oil at the agreed price despite delay of one month in shipment and further that in the absence of any evidence to show that they had paid or agreed to pay an extra price to the exporter for the consignment, the transaction value had to be the invoice price. However, the said plea did not find favour with the Adjudicating Authority. Accordingly, he confirmed the demand indicated in the demand letter and ordered the respondent to pay the differential amount of duty. Respondent’s first appeal to the Commissioner (Appeals) was unsuccessful.

6. Being dissatisfied with the order of the Commissioner (Appeals), the respondent took the matter in further appeal to the Tribunal. As aforestated, by the imp

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2011 Supreme(SC) 1018

Cases Referred (3)

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