Legal principle

An adjustment under Rule 5(1)(c) of the Customs Valuation Rules, 1988 can be granted only on 'demonstrated evidence' establishing the reasonableness and accuracy of the adjustment — higher volume of imports per se, or mere commercial practice, is not enough, and an appellate authority should remand rather than make ad hoc adjustments itself.

Court decision

The importer's appeal was dismissed and the revenue's appeal allowed: the Tribunal's order upholding valuation of the CAB under Rule 6 of the 1988 Rules was affirmed, but the Tribunal's direction for a 20% ad hoc adjustment on account of the volume of imports was set aside for want of demonstrated evidence, there being no order as to costs.

Facts

Pernod Ricard India (formerly Seagrams India Pvt. Ltd.), a wholly-owned subsidiary of Seagram Company Ltd., Canada, imported 'Concentrate of Alcoholic Beverages' (CAB) of about 60% strength from M/s Joseph E. Seagram and Sons Ltd., Scotland, a related person, for blending and bottling into whisky brands such as 100 Pipers and Passport. Following a DRI investigation, two show cause notices were issued demanding differential customs duty of about Rs.37.96 crores (January 1995–June 2000) and Rs.12.08 crores (July 2000–May 2001), along with proposed penal action. The Delhi High Court directed that the Section 28 notice be treated as one for finalisation of provisional assessment under Section 18(2), and the Commissioner of Customs confirmed a demand of about Rs.40.37 crores while valuing the CAB under Rule 6 of the Customs Valuation Rules, 1988. After multiple rounds of appeals and remands, the Tribunal upheld valuation under Rule 6 but directed a further ad hoc adjustment of 20% in price differences on account of higher import volumes and lower retail prices of comparable brands, leading to cross-appeals by both importer and revenue under Section 130E.

Key provisions

• Section 130E, Customs Act, 1962 — Appeal to Supreme Court