Customs Act: Assessable Value Has To Be Determined On The Basis Of The Price Declared In The Bills Of Entry: SC [Read Judgment]

“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.”

The Supreme Court has held that normally assessable value for the purpose of Customs Tax Act has to be arrived at on the basis of the price declared in the Bills of Entry.

The bench comprising Justice AK Sikri and Justice S Abdul Nazeer observed that 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.

In this case (Commissioner of Central Excise and Service Tax, Noida vs. Sanjivani Non-Ferrous Trading Pvt.Ltd.), the authority had rejected the declared value in the Bills of Entry and reassessment was done by increasing the assessable value. The tribunal had set aside the reassessment and the Revenue had approached the apex court.

Referring to the relevant provisions of the Customs Act, the bench said: “The law, thus, is clear. As per Sections 14(1) and 14(1-A), the value of any goods chargeable to ad valorem duty is deemed to be the price as referred to in that provision. 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.”

The court also explained when such a declared value can be discarded. It observed: “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.”

Dismissing the appeal, the court added: “The normal rule was that the assessable value has to be arrived at on the basis of the price which was actually paid, and that was mentioned in the Bills of Entry. The Tribunal has clearly mentioned that 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. Since there is no such exercise done by the Assessing Authority to reject the price declared in the Bills of Entry, Order-in-Original was, therefore, clearly erroneous.”