Legal principle

Under Rule 4(1) read with Rule 3 of the Customs Valuation Rules, 1988, customs authorities are bound to assess duty on the price actually paid or payable for the particular transaction unless it falls within the exceptions in Rule 4(2), and a vendor's price list is only a general quotation which by itself cannot discharge the department's onus of rejecting a commercially justified, uniformly available discount.

Court decision

The Supreme Court allowed the importer's appeal and set aside the Tribunal's order (without costs), holding that the transaction value under Rule 4(1) is the price actually paid or payable for the particular transaction, which the customs authorities are bound to accept unless it falls within the exceptions in Rule 4(2); since no Rule 4(2) exception was alleged and the price list alone did not discharge the department's onus, the Assistant Collector's Rule 8 determination based on the list price was unsustainable and the declared value had to be accepted.

Facts

M/s Eicher Tractors Ltd., manufacturers of tractors and tractor engines, imported 3579 bearings (1989 stock) from its long-standing Japanese vendor M/s NTN Corporation at JY 826 per piece, a 77% discount off the vendor's list price, for clearance at Mumbai. The Assistant Commissioner, doubting that the declared price (only 23% of the list price) was the value for duty, rejected the 77% discount as not 'normal' and determined the value at JY 2507 per piece under Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, taking the list price less the 30% maximum discount permitted under the agency terms. The Commissioner (Appeals) allowed the importer's appeal, but the CEGAT allowed the Revenue's appeal, holding on the basis of Padia Sales Corporation that the ordinary price in the vendor's price list prevailed over the special quoted price. The importer appealed to the Supreme Court.

Key provisions

• Section 14, Customs Act, 1962 — Valuation of goods
• Section 1, Customs Act, 1962 — Short title extent and commencement