Legal principle

Valuation norms fixed administratively cannot be mechanically applied irrespective of the genuineness of transaction value; where valuation is not determined as per statutory provisions, it must be set aside and the matter remanded for fresh assessment.

Court decision

The High Court allowed the writ petition, quashed the impugned orders, and remanded the matter to the Assessing Officer for a fresh order of assessment in accordance with law, holding that the Nhava Sheva norms could not be mechanically applied irrespective of the genuineness of transaction value or the value arrived at as per statutory requirements — a decision in favour of the petitioner on the validity of the assessment, though without itself fixing any valuation.

Facts

The petitioner imported zinc ash and zinc skimming for manufacture of fertilizer. In 2006 the department refused clearance at declared value and released the goods on provisional assessment at US$ 1000 per metric tonne, as modified by an interim order of the High Court dated 15.6.2006. After earlier writ proceedings directed finalisation of valuation norms, the Deputy Commissioner of Customs, Ludhiana reported (10.12.2008) that the base price should be 25% of the London Metal Exchange (LME) rate for nil metallic content, but the Commissioner of Customs, Nhava Sheva fixed norms at 40% of LME vide order dated 12.12.2008. On those parameters, final assessment dated 5.2.2009 raised a demand over and above the provisional duty paid; the Commissioner (Appeals) dismissed the appeal (11.1.2010) and the Chief Commissioner upheld the Nhava Sheva parameters (7.5.2010), relying on Rules 12, 3(4) and 9 of the Customs Valuation Rules, 2007.

Key provisions

• Section 18, Customs Act, 1962 — Provisional assessment of duty
• Rule 9, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Residual method
• Section 2(q), The Foreign Exchange Management Act, 1999 — Definitions.
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Section 17(5), Customs Act, 1962 — Assessment of duty