Recomputation of the consignment value by authorities of imported goods: the burden of proof and enquiry.
An importer filed a writ petition before the High Court against the arbitrary action of the custom authorities, the High Court declined to not to exercise extraordinary jurisdiction under Article 226 of the Constitution of India as the matter relates to the valuation of imported aluminum scrap which could be assailed in a statutory appeal and it would not be appropriate for the writ court to decide whether the appellant had or had not agreed to valuation by the customs authorities.
The grievance raised by the petitioner/appellants is that the 2nd respondent i.e. the Principal Commissioner of Customs, Noida Customs Commissionerate and its Officers almost uniformly do not clear the consignments as per the declared transaction value in the bill of entry but insist that the appellants write a letter agreeing to pay customs duty as per the valuation by the customs authorities and compel them to forego their right to provisional assessment under Section 18 of the Customs Act, 1962 (‘the Act’, for short). The appellants, coerced and intimated, have no option but to give in and issue a letter of consent agreeing to assessment/valuation by the customs authorities to avoid delay in clearance, levy of demurrage, ground rent and container detention charges, etc. It is also alleged that the respondents without observing and contrary to the mandate of Section 14 of the Act discard the declared transactional value and recompute the consignment value in view of the Valuation Alert dated 1st December, 2016 issued by the Central Board of Excise and Customs (‘the Board’, for short).
We are not inclined to remit the appellant to an alternative remedy by way of statutory appeal under Section 128 of the Act for the reason that the impugned order dated 7th April, 2017 in Assessment No.12/AC/CUS/2017 cannot be sustained in view of the decision of this Court in Commissioner of Central Excise and Service Tax, Noida v. M/s Sanjivini Non-Ferrous Trading Pvt. Ltd. 1 , the latter being the sister concern of the first appellant in this case. Further, having heard learned counsel for the parties, we would like to clarify the legal position and therefore in the facts of this case would exercise our discretion to entertain this appeal despite the alternative remedy.
The expression ‘proof beyond reasonable doubt’ in criminal law requires the prosecution to establish guilt and secure conviction of the accused by proving the charge ‘beyond reasonable doubt’. In Ramakant Rai Vs. Madan Rai & Ors. (2003) 12 SCC 395 referring to the expression ‘reasonable doubt’ in criminal law it was held as under:
“24. Doubts would be called reasonable if they are free from a zest for abstract speculation. Law cannot afford any favourite other than the truth. To constitute reasonable doubt, it must be free from an overemotional response. Doubts must be actual and substantial doubts as to the guilt of the accused persons arising from the evidence, or from the lack of it, as opposed to mere vague apprehensions. A reasonable doubt is not an imaginary, trivial or a merely possible doubt; but a fair doubt based upon reason and common sense. It must grow out of the evidence in the case.”
Ramakant Rai Vs. Madan Rai & Ors. (2003) 12 SCC 395
Proof beyond ‘reasonable doubt’ is certainly not the requirement under proviso to Section 14 of the Act and Rule 12 of the 2007 Rules, albeit the above quote draws a distinction between a simple doubt and a doubt which is reasonable. In the context of the proviso to Section 14 read with Rule 12 and clause (iii) of Explanation to the 2007 Rules, the doubt must be reasonable and based on ‘certain reasons’. The proper officer must record ‘certain reasons’ specified in (a) to (f) or similar grounds in writing at the second stage before he proceeds to discard the declared value and decides to determine the same by proceeding sequentially in accordance with Rules 4 to 9 of the 2007 Rules. It refers to a doubt which the proper officer possesses even after the importer has been asked to furnish further information including documents and evidence during the preliminary enquiry to clear his doubt about the truth and accuracy of the value declared. Therefore, 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 the furnishing of documents and evidence as to the accuracy or truth of the value declared. It is only in a case where the doubt of the proper officer persists after conducting an 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 would come into operation and would be applicable. 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. Subjecting imports to a 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.
The significance of Section 18 of the Customs Act, 1962 can be understood in light of the above provisions. Section 18 provides for provisional assessment of duty in cases specified in sub-section (1) of the Section. Clause (c) of sub-section (1) deals with cases where importer or exporter has produced necessary documents and furnished full information for assessment of duty but the proper officer deems it necessary to make further enquiry for assessing the duty. However, Clause (d) is wider and would apply when the importer or exporter does not produce necessary documents or furnish information. In all cases covered under Clauses (a) to (d), the proper officer may direct provisional assessment of the duty leviable on the imported goods. Where duty is assessed provisionally, the importer or exporter has to furnish security as the proper officer deems fit for payment of deficiency, if any, between the duty provisionally paid and the duty finally assessed.
On interpreting Section 18 of the Act, 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. This expedites clearance, pending final adjudication on merits which may take time. This is also the mandate of the Board Circular No.38/2016 dated 22nd August, 2016. 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.
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. 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. Formation of belief and recording of reasons as to reasonable doubt and communication of the reasons when required is the only way and manner in which the proper officer in terms of Rule 12 can proceed to make assessment under Rules 4 to 9 after rejecting the transaction value as declared.
The mandate to record reasons at the second stage of enquiry is not expressly stipulated, albeit it has been read by us by implication in Rule 12. Being conscious that this mandate if applied to past cases would possibly lead to complications and difficulties, we would invoke the doctrine of prospective application with the direction that the past cases will be decided on a case to case basis, depending upon the factual matrix and considerations like whether the importer has asked for ‘certain reasons’, whether the reasons were not communicated, whether ‘certain reasons’ can be deciphered from the assessment/valuation order, whether misdescription or false declaration was apparent, etc.
Valuation Alerts are issued by the Director General of Valuation based on the monitoring of valuation trends of sensitive commodities with a view to take corrective measures. They provide guidance to the field formation in valuation matters. They help ensure uniform practice, smooth functioning and prevent evasion and short payment of duty. However, they should not be construed as interfering with the discretion of the assessment authority who is required to pass an Assessment Order in the given factual matrix. Declared valuation can be rejected based upon the evidence which qualifies and meets the criteria of ‘certain reasons’. Besides the opinion formed must be reasonable. Reference to foreign journals for the price quoted in exchanges etc., to find out the correct international price of concerned goods would be relevant but reliance can be placed on such material only when the adjudicating authority had conducted enquiries and ascertained details with reference to the goods imported which are identical or similar and ‘certain reasons’ exists and justifies detailed investigation. These reasons are to be recorded and if requested disclosed/ communicated to the importer. Valuation alerts could be relied upon for default valuation computation under the Rules.