Suspicion no basis for invoice rejection says Supreme Court
October, 20th 2011
The Supreme Court has ruled that the customs department cannot reject the authenticity of the invoice produced by the importers of the consignment on the basis of a mere suspicion. Any doubt about the value of such invoice has to be based on some material evidence and not on a mere suspicion or speculation of the authorities, the apex court said.
"A mere suspicion upon the correctness of the invoice produced by an importer is not sufficient to reject it as evidence of the value of imported goods. The doubt held by the officer concerned has to be based on some material evidence and is not to be formed on a mere suspicion or speculation," said a bench comprising Justice DK Jain and Justice SJ Mukhopadhaya in its judgement.
The court said, "Where the department has a `reason to doubt' the truth or accuracy of the declared value, it may ask the importer to provide further explanation to the effect that the declared value represents the total amount actually paid or payable for the imported goods. Needless to add that 'reason to doubt' does not mean 'reason to suspect'." The onus to prove under-valuation of the invoice rests with the revenue. Once the department discharges the burden of proof by producing evidence of contemporaneous imports at a higher price, the onus shifts to the importer to establish that the price indicated in the invoice relied upon is correct, the apex court said.
The SC further said, "If on the basis of some contemporaneous evidence, the revenue is able to demonstrate that the invoice does not reflect the correct price, it would be justified in rejecting the invoice price and determine the transaction value in accordance with the procedure laid down in CVR, 1988 (Customs Valuation (Determination of Price of Imported Goods) Rules, 1988."
It needs little emphasis that before rejecting the transaction value declared by the importer as incorrect or unacceptable, the revenue has to bring on record cogent material to show that contemporaneous imports, which obviously would include the date of contract, the time and place of importation, etc., were at a higher price", the bench pointed out.
The apex court dismissed appeals of the department against the importers. In one such case, the importer, M/s Aggarwal Industries Ltd in June 2001 had entered into a contract with a foreign suppliers M/s Wilmar Trading, Singapore, for import of 500 tonnes of crude sunflower seed oil at the rate of US $ 435 CIF/Metric ton. Under the contract, the consignment was to be shipped in the month of July 2001 but as the mutually agreed time for shipment was extended to mid August 2001, the goods were actually shipped on Aug 5, 2001.
On verification of the documents filed by the importer, the adjudicating authority noticed certain discrepancies in the shipment period.
Accordingly, the department had issued a demand letter to the assessee importer to show cause as to why the contract price not to be rejected and the Customs duty be not determined by adopting contemporary invoice price on which other importers had entered into contract for supply of the same item either with the same supplier or other suppliers in the same country.