By TIOL News Service

MUMBAI, JUNE 04, 2013: THE issue involves valuation of goods imported by the Petitioner, a wholly owned subsidiary of Forbo Finanz AG, Switzerland, from their group companies. Since the transactions are between related parties, Special Valuation Branch initiated proceedings against the Petitioner.

A letter was addressed by the Deputy Commissioner of Customs, GATT Valuation Cell to the Petitioner calling upon it to submit relevant documents failing which, it was stated, that the revenue deposit of one percent would be increased to five percent. In response, the Petitioners submitted documents as required. The Deputy Commissioner of Customs passed the impugned order by which the disclosed transaction value was rejected and the value of the imported goods was loaded in terms of the directions contained in the order.

The Petitioner contended that the impugned order has been passed in violation of the principles of natural justice and without complying with the mandatory procedural requirements set out in Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. According to the Petitioners, Rule 12 mandates that when the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, the importer can be called upon to furnish further information. However, on the request of the importer, the proper officer is required to intimate to him in writing the grounds for doubting the truth or accuracy of the value declared in relation to the goods imported and provide a reasonable opportunity of being heard before taking a final decision. In the present case, there was a patent violation of the principles of natural justice because the mandatory requirement of disclosing the grounds for doubting the truth or accuracy of the value declared was not fulfilled and hence, the mere holding of a personal hearing would not comply with the requirement of Rule 12.

After hearing both sides, the High Court held:

The provisions of Rule 12 contain the procedure which the proper officer is required to follow before rejecting the declared value. In the first instance, when the proper officer has reason to doubt the truth or accuracy of the value, he may ask the importer to furnish further information including documents or other evidence. If upon a scrutiny of the information he is satisfied with the transaction value declared, then in such a case the provisions of rule 3(1) would come into operation. On the other hand, if the importer fails to supply information or if the proper officer still has reason to doubt the truth or accuracy of the value declared despite the information, sub rule (2) requires him to intimate the importer in writing of the grounds for doubting the truth or accuracy of the value declared, on the request of the importer. The object of doing so is to enable the importer to have a fair opportunity to meet the grounds of doubt entertained by the proper officer. Rule 12(2) stipulates a requirement of a reasonable opportunity of being heard. Such an opportunity can have meaning only if the importer is apprised of the grounds on the basis of which the transaction value is doubted by the proper officer. In the absence of a disclosure of the grounds on which the doubt is entertained, the importer would not know of the case against him nor would he be in a position to explain why the doubt which the proper officer entertains as to the truth or accuracy of the value is incorrect. Hence, before the proper officer proceeds to reject the declare value, he is under a mandate to furnish the grounds in writing for doubting the truth or accuracy of the value declared by the importer. Thereupon the importer must have a reasonable opportunity of being heard to enable him to urge such submissions as he may desire in writing in regard to the grounds which are set out by the proper officer. That is the scheme.

In the present case, the procedure which is laid down in Rule 12 was not followed. By failing to inform the importer of the grounds of his doubt and of allowing the importer an opportunity of being heard with reference to those grounds, there has been a clear breach of principles of natural justice.

In view of the above, the High Court remanded the matter, but on going through the affidavit filed by the Deputy Commissioner, the High Court held:

We also take serious note of the statement made in the affidavit in reply to the effect that even if this Court would direct the Deputy Commissioner of Customs to issue a notice to show cause, the grounds of the notice would be the same as those contained in the impugned order and that the quasi judicial order which the authority would pass would be the same as the order in original. This is clearly indicative of the fact that the Deputy Commissioner of Customs has a closed mind and treats a compliance with the principles of natural justice as a mere formality. Hence, while we are inclined to set aside the impugned order and remit the matter back for fresh decision after complying with the requirements of Rule 12, we direct the Commissioner of Customs to assign the case to some other officer, other than the officer by whom the impugned order is passed. We record our disapproval of the manner in which the affidavit in reply has been drafted. Counsel for the Revenue, in fact, stated during the hearing that the aforesaid addition was made by the Deputy Commissioner of Customs on his own accord, without reference to Counsel, and even suggested that the offending part may be expunged.

(See 2013-TIOL-458-HC-MUM-CUS)