Legal principle

Where the Department fails to establish any Rule 4(2) circumstance, the transaction value declared by the importer cannot be rejected, discounts uniformly available on commercial considerations cannot be denied under section 14, and Rule 7A (Computed Value), which applies to related buyer-seller cases, can be invoked only after the transaction value under Rule 4(1) is first rejected and Rules 5 to 7 are found inapplicable.

Court decision

The Supreme Court allowed the civil appeal, set aside the Tribunal's judgment and confirmed the Commissioner (A)'s order upholding the transaction value; the Department had erred in invoking Rule 7A, and even assuming it applied, the computation under it was erroneous. The companion Civil Appeal No. 4753/2006 was also allowed and the Tribunal's order therein set aside, with no order as to costs.

Facts

The appellant-importer purchased two consignments of Refined Soyabean Oil from M/s United Edible Oils Ltd., Bangladesh, invoiced at a C&F value of Rs. 24.50 per kg. The Department called for a cost break-up, then refused the rates at which the consignments had been assessed (Rs. 27.17 and Rs. 31.96) and fixed the assessable value at Rs. 31.66 per kg based on the Board's tariff value for Crude Soyabean Oil, directing completion of assessment and confiscation under section 111(m). The Commissioner (A) reversed, holding there was no reason to invoke Rule 7A since no Rule 4(2)(c)-(h) circumstance was alleged and nothing showed the discounts were abnormal. On the Department's appeal, the Tribunal by a cryptic order upheld invocation of Rule 7A, leading to this appeal under section 130E.

Key provisions

• Section 14(1), Customs Act, 1962 — Valuation of goods
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 128A(3), Customs Act, 1962 — Procedure in appeal
• Section 130, Customs Act, 1962 —  Appeal to High Court