Legal principle

A Standing Order issued under Section 151A must be read only as flexible guidelines and cannot bind the independent quasi-judicial Assessing Authority, and once transaction value is validly rejected, value must be determined under the Customs Valuation Rules with contemporaneous imports as the best guide, recourse to foreign journals like PLATT's Weekly Report being permissible only in their absence and subject to the department proving the correctness of the price on the facts of each case.

Court decision

The Supreme Court agreed with the High Court that the Standing Order must be read down as instructions or guidelines and not as a mandate or command binding in each case of assessment, and that paragraph 7 on classification of mixed waste is likewise only a guideline; it held that once transaction value is rejected on valid grounds, valuation must proceed under the Customs Valuation Rules on the basis of contemporaneous imports, though reference to foreign journals like PLATT's is not irrelevant in their absence. The appeals were dismissed with no order as to costs, in favour of the Union of India.

Facts

M/s Varsha Plastics Pvt. Ltd. imported a consignment of LDPE/HDPE mix granules/powder (floor sweeping) from the USA in July 2000, invoiced at US $4,151.25 and declared freely importable under para 5.1 of the EXIM Policy 1997-2000. Examination revealed some goods mis-declared in value and some mis-declared in description, value and quality. The Additional Commissioner of Customs, Kandla, by order dated 29.11.2000, rejected the invoice price as unrealistically low, enhanced the value for assessment, ordered confiscation with a redemption option on payment of fine, and imposed a personal penalty of Rs 2,50,000 on the firm and its directors. Instead of filing a statutory appeal, the importers moved the Gujarat High Court challenging the constitutional validity of Section 151A of the Customs Act, 1962 and the legality of Standing Order No. 7493/99 issued by the Chief Commissioner of Customs, Mumbai on valuation of plastic items; the High Court upheld Section 151A and read down the Standing Order as flexible guidelines, and the importers appealed to the Supreme Court.

Key provisions

• Section 151A, Customs Act, 1962 — Instructions to officers of customs