ANIL KUMAR ANAND versus COMMISSIONER OF CUSTOMS (PREVENTIVE)

Citation: [2019] 6 S.C.R. 225 · Decided: 22-04-2019 · Supreme Court of India · Bench: SANJAY KISHAN KAUL · Disposal: Appeal(s) allowed

Judgment (excerpt)

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ANIL KUMAR ANAND
v.
COMMISSIONER OF CUSTOMS (PREVENTIVE)
(Civil Appeal No. 3138 of 2018)
APRIL 22, 2019
[SANJAY KISHAN KAUL AND HEMANT GUPTA, JJ.]
Customs Act, 1962 – s.28 – Customs Valuation (Determination
of Value of Imported Goods) Rules, 2007 – rr. 3 to 5, 7 & 9 –
Appellant was a regular importer of electric decorative lightings
and in the process of such imports filed a bill of entry for clearance
of electric decorative lightings – Enquiry was initiated to ascertain
correct value of goods for purposes of customs duty – A show cause
notice was issued u/s. 28 of the Act on grounds that appellant did
not declare the brand of imported goods and he imported goods
from its related party (M/s. ‘IL’ Ltd., United Kingdom), and
undervalued the same with the intention of evading customs duty –
Consequent to which, adverse order was passed against the appellant
by the authorities under r.7 and r. 9 of the Rules – Appellants
contended that the scheme of rules was not correctly understood
and implemented by the competent authority – Held: Even though
the imports were under the brand names ‘Diyas’ and ‘mAntra’, they
were not trademarks of such nature as would make them an exclusive
product and there was some mix up in understanding of a trademark
protection, as the same was compared with ‘patented goods’ –
Further, data was available, which could have been utilised to obtain
the pricing for imports from the United Kingdom, of identical goods
or similar goods – There was a fundamental mistake committed in
the manner of implementation of the statutory Rules – Once the
statutory Rules exist and provide for sequential implementation, the
assessing authority has no option but to proceed in accordance
with those Rules, in that manner – The concerned authority chose
to ignore, in the facts of the case, Rules 3 to 5 and did not proceed
‘sequentially’ – Sub-r.(4) of r.3 provides that there has to be a
sequential implementation of the Rules, i.e. that Rules 3 to 5 would
have to be exhausted first and only in the eventuality of an inability
to apply the rules would the assessing authority proceed to impose
   [2019] 6 S.C.R. 225
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SUPREME COURT REPORTS
[2019] 6 S.C.R.
Rules 7 to 9 – Therefore, matter remitted back to the Principal
Commissioner of Customs to proceed afresh.
Allowing the appeals, the Court
HELD: 1. In substance, there were two grounds for the
show cause notice:
(a) that the appellant, knowingly, did not declare the brand
of imported goods, and undervalued the same with the intent of
evading customs duty;
(b) that the appellant had imported the branded goods from
its related party, and had undervalued the same to evade customs
duty.  [Para 2][229-C-D]
2.  In the context of the Rules, it is the submission of the
appellant that the factual matrix of the present case shows that
the twenty one consignments (including the one directly in
question) were not imported from one source, but three different
sources.  Out of the three different sources, the competent
authority came to the conclusion that the import from United
Kingdom, from M/s. ‘IL’ Limited, is liable to be construed as
import from a related party.  Though this is sought to be disputed
by the appellants, but even assuming that to be correct, it was
contended that there were imports available from two other
sources, from China and Spain.  These suppliers are not found to
be related parties.  Thus, the pricing from these two sources,
with requisite adjustments for the distance or any other parameter,
could always be taken as the transactional value for all
the goods forming part of the twenty one consignments.
[Para 12][235-G-H; 236-A-B]
3.  A further explanation offered on behalf of the appellants,
in respect of the second aspect, i.e., non-declaration of the brand
‘Diyas’ and ‘mAntra’, pertaining to the consignments in question,
was that the brands were not so well-known as to make a difference
to the value.  In fact, for the import from China, the brand ‘Diyas’
had been clearly mentioned. The consignments had been cleared
after physical verification. In effect, the plea was that the
two brands really do not attract any intrinsic market value.
[Para 13][236-C]
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4.  It is a submission that the sequential application of
Rules, thus, required the valuation to be done in accordance with
Rules 3 to 5, before proceeding to the subsequent Rules,
and it is not a case where valuation was not possible under Rules
3 to

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