Transaction price can be rejected only in exceptional cases

CHATROOM / TNC Rajagopalan

We have imported certain items which are held up by the Customs on the grounds that similar goods are imported at higher price by some other importer. We do not understand what is our fault if somebody else imports at higher price. Can you please clarify.

According to Section 14 of the Customs Act, 1962, the value of the imported goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf.

According to Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, when the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence.

The Explanation no.(iii) to Rule 12 says that the proper officer shall have the powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include the significantly higher value at wich identical or similar goods imported at or about the same time in comparable quantities in a comparable commercial transaction were assessed.

So, the right of the Customs officer to ask you questions cannot be disputed. You must give suitable reply and documents to the officer to satisfy him that the transaction value has to be accepted. Sub-rule 2 to the Rule 12 says that the declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after the said enquiry in consultation with the importers.

In the case of Rashesh & Co. [2008 (227) ELT 573 (Tri.-Mumbai), the Tribunal has held that the transaction price can be rejected only if the exceptional circumstances stipulated in Rule 4(2) of the Valuation Rules are found to be attracted, as held by the Apex Court in Eicher Tractors Ltd v. CC — 2000 (122) E.L.T. 321 (S.C.).

In the present case, the transaction value has been rejected on the ground that the sale was not in the ordinary course of trade under fully competitive conditions and this finding has been arrived at on the ground that other importers were importing the same goods from the same country at around the same point of time at higher prices.

This, however, is not legally permissible, as held by the Tribunal in the case of Mark Auto Industries Ltd. v. CC, New Delhi — 2003 (162) E.L.T. 261 and Devika Trading Pvt. Ltd v. CC, Mumbai - 2004 (167) E.L.T. 75. Transaction value cannot be rejected only on the basis of contemporaneous imports, said the Tribunal.