Know thy Judge

 

“The Court should not under the guise of preventing the abuse of power be itself guilty of usurping power.”

– Justice Hemant Gupta,

Nitin Pathak v. State of M.P., 2017 SCC OnLine MP 1824


Excerpts from Judgments authored by Justice Hemant Gupta


Arvind Singh v. State of Maharashtra, 2020 SCC OnLine SC 400; While allowing the appeal in part against death sentence awarded by the Nagpur Bench of Bombay High Court, the Court observed,

“What is required to be examined is whether there is a possibility of rehabilitation and whether it is the rarest of the rare case where the collective conscience of the community is so shocked that it will expect the holders of judicial power to inflict death penalty irrespective of their personal opinion as regards desirability or otherwise of retaining death penalty. The manner of commission of murder when committed in an extremely brutal, grotesque, diabolical, revolting or dastardly manner are aggravating factors.”

Laxmibai v. Collector, Nanded and Ors., 2020 SCC OnLine SC 187; Hearing an appeal against the order of the High Court dismissing writ petition against an order of disqualification on account of non-submission of election expenses within the period prescribed, it was held,

“The purity and transparency in election process does not give unbridled and arbitrary power to the Election Commission to pass any whimsical order without examining the nature of default. The extent of period of disqualification has to be in proportion to the default. The Election Commission has to keep in mind that by such process, an election of duly elected candidate representing collective will of the voters of the constituency is being set at naught.”

Ram Sewak Mishra v. State of M.P., 2017 SCC OnLine MP 1546; Deciding on the validity of an executive action wherein no adequate opportunity of hearing was provided to a Government employee charged under Prevention of Corruption Act, 1988, Justice Gupta noted,

The rule of audi alteram partem is the rule of the law without which law would be lifeless, absurd, stultifying, self-defeating or plainly contrary to the common sense of the situation. The principle holds good irrespective of whether the power conferred on a statutory body or Tribunal is administrative or quasi-judicial. The concept of natural justice can neither be put in a straitjacket nor is it a general rule of universal application. Whether or not the application of the principles of natural justice in a given case has been excluded, wholly or in part, in the exercise of statutory power, depends upon the language and basic scheme of the provision conferring the power, the nature of the power, the purpose for which it is conferred and the effect of the exercise of that power. The procedural precondition of fair hearing, however minimal, even post-decisional, has relevance to administrative and judicial gentlemanliness.

N.K. Janu v. Lakshmi Chandra, 2019 SCC OnLine SC 518; While making significant observation with respect to the power of Court to summon public officers, it was said,

“The summoning of officers to the court to attend proceedings, impinges upon the functioning of the officers and eventually it is the public at large who suffer on account of their absence from the duties assigned to them. The practice of summoning officers to court is not proper and does not serve the purpose of administration of justice in view of the separation of powers of the Executive and the Judiciary. If an order is not legal, the Courts have ample jurisdiction to set aside such order and to issue such directions as may be warranted in the facts of the case.Read More

State of Bihar v. Sachindra Narayan, (2019) 3 SCC 803; In an appeal against the order of a Division Bench at Patna High Court, mandating the State authorities to give financial assistance on the ground of legitimate expectation, the Court observed,

“(…)legitimate expectation is one of the grounds of judicial review but unless a legal obligation exists, there cannot be any legitimate expectation. The legitimate expectation is not a wish or a desire or a hope, therefore, it cannot be claimed or demanded as a right. The payment of pension in the past will not confer an enforceable right in favour of the Institute or its employees.


Significant Judgments that Justice Gupta has been a part of


 Dr. Jaishri Laxmanrao Patil v. Chief Minister, 2020 SCC OnLine SC 727; A full judge bench of L. Nageswara Rao, Hemant Gupta and S.Ravindra Bhat, JJ., while referring the Constitution (102nd Amendment) Act, 2018 to a larger bench, held,

The social, educational and economic backwardness of a community, existence of quantifiable data relating to inadequacy of representation of the community in public services and deprivation of the benefits flowing from reservations to the community are not exceptional circumstances for providing reservations in excess of 50 per cent.”

The Bench further directed that the admissions to educational institutions and appointments to public services/posts under the government, shall be made irrespective to the reservations provided under, Maharashtra State Reservation (of seats for admission in Educational Institutions in the State and for appointments in the Public Services and posts under the State) for Socially and Educationally Backward Classes (SEBC) Act, 2018. Read More

Union of India v. Exide Industries Limited and Another, (2020) 5 SCC 274; A full judge bench of A.M. Khanwilkar, Hemant Gupta, Dinesh Maheshwari, JJ., deciding on the validity of clause (f) to Section 43-B Income Tax Act, 1961, held,

“To hold a provision as violative of the Constitution on account of failure of the legislature to state the Objects and Reasons would amount to an indirect scrutiny of the motives of the legislature behind the enactment. Such a course of action, in our view, is unwarranted. The raison d’être behind this self-imposed restriction is because of the fundamental reason that different organs of the State do not scrutinise each other’s wisdom in the exercise of their duties. In other words, the time-tested principle of checks and balances does not empower the Court to question the motives or wisdom of the legislature, except in circumstances when the same is demonstrated from the enacted law.” Read More

Amit Kumar Roy v. Union of India, (2019) 7 SCC 369; A division bench of D.Y. Chandrachud and Hemant Gupta, JJ., adjudicating upon the interplay of Article 19(1)(g) and the statutory restrictions on members of Indian Airforce, said,

“A person who has been enrolled as a member of the Air Force does not have an unqualified right to depart from service at his or her will during the term of engagement. Such a construction, as urged on behalf of the appellant, will seriously impinge upon manning levels and operational preparedness of the Armed Forces.Read More


*Editorial Assistant, EBC Publishing Pvt. Ltd. 

Hot Off The PressNews

Bar Council of India

The General Council of the Bar Council of India, as a last and final opportunity, has resolved to extend the last date for submission of the details of every practicing Advocate of the country sought as per the requirement of the e-Committee of the Supreme Court of India till 15-11-2020.

Further, the Council made it clear that no further extensions shall be granted and any Advocate or Bar Association who/which does not cooperate in this endeavor shall be dealt with firmly.

The State Bar Councils are also required to ensure the strict compliance of the above-stated.


Bar Council of India

[Letter dt. 29-09-2020]

Legislation UpdatesNotifications

Ministry of Law and Justice

Central Authority nominates Justice Rohinton Fali Nariman, Judge Supreme Court of India as Chairman of the Supreme Court Legal Services Committee with immediate effect.


Ministry of Law and Justice

[Notification dt. 03-09-2020]


About Justice Rohinton Nariman:

Date of Birth:13.08.1956

School: Cathedral School, Mumbai (High 1st Division, ISC)

College:

  • Shri Ram College of Commerce-B.Com
  • Faculty of Law, Delhi – L.L.B. (1st Class-2nd in the University)
  • Harvard Law School-L.L.M. (Thesis on affirmative action: a comparison between India and US constitutional law)

Profession:

Senior Counsel, Supreme Court of India.
Was made Senior Counsel by the Chief Justice of India.  Justice Venkatachalaiah amended the rules in order to make him a Senior Counsel at the young age of 37 against the mandatory 45.  Has practiced Maritime Law in New York at Haight, Gardener, Poor and Havens for 1 year.  Has practiced law for the last 35 years.  Has over 500 Reported Supreme Court Judgments to his credit.  Expert in Comparative Constitutional Law and Civil Law.

Governing Board: Gujarat Law School, Ahmedabad.

Mediation Committee: Member, Supreme Court of India.

Lectured at:

  • The Delhi Law School, University of Delhi.
  • The Bar Council of India at the Supreme Court of India.
  • Gave the keynote address at the K.L. Misra Lecture on SPIRITUALITY AND LAW along with the Chief Justice of India and other Supreme Court Judges in Allahabad in 2004.
  • Member of the Delegation from the Supreme Court of India to the Supreme Court of the United States of America, 2002.
  • Gave a talk at IIC Delhi 2007 on Beethoven.

Specializing in Comparative Religious Studies:

  • Ordained Priest from Bandra Agiary.
  • Lectured in New York to the Zoroastrian Federation.
  • Gave the SEARCH lecture at the IIC, Delhi in 200.
  • Gave religious talks at Philadelphia in 2005.
  • Gave two lectures in Ahmedabad at the invitation of the Ahmedabad Parsi Panchayat in 2003.
  • Held fortnightly Gatha classes for two years in Delhi.
  • Delivered the Annual K.R. Cama Lecture at K.R. Cama Institute, Mumbai on “Through the Looking Glass”.
  • Zoroastrianism in other faiths on 11.11.2006.
  • Solicitor General of India from July 27, 2011 to February 4, 2013.
  • Elevated as Judge, Supreme Court of India on 7th July, 2014.

Image Credits: DNA India

Hot Off The PressNews

Pollution Under Control Certificate at the time of renewal of motor insurance mandatory

Insurance Regulatory and Development Authority of India has advised all General Insurance Companies to comply with the directions issued by the Supreme Court of India in W.P. (Civil) 13029 of 1985, M.C. Mehta v. Union of India.

Central Pollution Control Board (CPCB) has raised concerns regarding the status of compliance of the above directions of the Supreme Court of India in the National Capital Region of Delhi (Delhi-NCR).

IRDAI asks General Insurance Companies to ensure that the above directions of the Supreme Court of India are scrupulously followed with a special focus on compliance in the National Capital Region of Delhi (Delhi–NCR).

Read the circular here: PUC Circular 20-08-2020


Insurance Regulatory and Development Authority of India

[Circular dt. 20-08-2020]

Appointments & TransfersNews

Supreme Court Collegium approves the proposal for the elevation of Rajesh Kumar Bhardwaj, Advocate, as Judge of the Punjab & Haryana High Court.


Supreme Court of India

[Collegium Statement dt. 17-08-2020]

Appointments & TransfersNews

Supreme Court Collegium approves the proposal for elevation of the following Advocates, as Judges of the Delhi High Court:

1. Jasmeet Singh,

2. Amit Bansal,

3. Tara Vitasta Ganju,

4. Anish Dayal,

5. Amit Sharma, and

6. Mini Pushkarna.


Supreme Court of India

[Collegium Statement dt. 17-08-2020]

Appointments & TransfersNews

Collegium Statement

Supreme Court Collegium approves the proposal for elevation of the following Judicial Officers, as Judges of the Allahabad High Court:

  • Sanjay Kumar Pachori,
  • Subhash Chandra Sharma,
  • Subhash Chand, and
  • Saroj Yadav.

Supreme Court of India

[Collegium Statement st. 14-08-2020]

Appointments & TransfersNews

Collegium Statement

Supreme Court Collegium approves the proposal for elevation of the following Advocates and Judicial Officers as Judges of the Kerala High Court:

Advocates:

  • Murali Purushothaman,
  • Ziyad Rahman A.A.,

Judicial Officers:

  • Karunakaran Babu, and
  • (Dr.) Kauser Edappagath.

Supreme Court of India

[Collegium Resolution dt. 14-08-2020]

Op EdsOP. ED.

Amid the din against the CAA-NRC combine, a fresh challenge under a seldom employed and much less provocative provision of the Constitution of India has emerged. As per ­­the ostensible remit of Article 131 of the Constitution, the challenge has emerged in the form of Governments of constituent States of the Indian Union challenging the constitutional validity of a lawfully enacted statute by Parliament. In challenging the validity of a law that has sharply divided public and political opinion, the move throws up some interesting questions as to the invocation of such a remedy under the scheme of our federal Constitution.

Ambit of Article 131

Article 131 is in many respects an anathema to the Government’s oft-quoted catchphrase ‘cooperative federalism’. The Constitution Framers were well aware that disputes between the Union and the constituent States is an inevitability for any federal polity and therefore provisioned for either the Government of India or a State Government to by-pass the judicial hierarchy and directly approach the Supreme Court under its original and exclusive jurisdiction. However, the remit of Article 131 is tempered on certain counts and the same assumes great significance vis-à-vis the issue at hand.

A bare perusal of Article 131 manifests that (1) exclusive jurisdiction vests in the Supreme Court of India to the exclusion of any other court, (2) there must exist a ‘dispute’, (3) said dispute must be between either the Government of India i.e. the Central Government and one or more constituent State or States or between two or more of such constituent States of the Union of India, and most importantly (4) the dispute must involve a question of law or a question of fact upon which the extent or the very existence of a legal right is predicated. Two integral constituents of Article 131 i.e. ‘dispute’ and ‘legal right’ must therefore be emphasised.

Maintainability of the Suit

The  Supreme Court, vide its law settling judgments in State of Rajasthan  v. Union of India[1]  as well as State of Jharkhand v. State of Bihar[2] have authoritatively established that ‘dispute’ must involve the assertion and/or vindication of a legal right of the Government of India and/or that of a constituent State of the Union. A caveat in that regard is that a genuine legal right must have been asserted by way of the suit concerned and any issue merely touching upon political concerns would be outrightly rejected by the Supreme Court.

It becomes absolutely fundamental to take into consideration that any invocation of Article 131 must concern itself with the rights, obligations, duties, powers, immunities and liberties only insofar as the parties to the suit are concerned. The Supreme Court has further established, vide the above cited judgments, that an original suit under Article 131 must not and cannot be likened to a civil suit in terms of the Code of Civil Procedure, 1908 (CPC) and therefore in the matter at hand it is not necessary that the plaintiff States must assert the ‘legal right’ unto themselves.

Evidently, Article 131 has been manifested to not be encumbered with any such narrow expositions and a suit thereof would be maintainable so far as it brings into question any dispute centred around the legal or constitutional right asserted by the defendant Government of India not in consonance with such rights and powers asserted by the plaintiff States. However, this is precisely where the plaintiff States’ suit falters for nowhere in the respective plaints, have the States of Kerala as also Rajasthan challenged or brought into question the constitutional power of the Government of India to enact the Citizenship (Amendment) Act, 2019. In fact, vide the respective plaints it has been submitted that by virtue of Article 256, the constituent States of the Union shall be constitutionally obligated and duty bound to implement the provisions of the Amendment Act, 2019 unless the Supreme Court deems it unconstitutional.

It is no one’s case that the validity of a Central legislation cannot be challenged by the Government of a State under Article 131. However, the same has to be tempered by way of the Constitution Bench judgment in State of Rajasthan[3]whereby two conditions were laid out as already exhibited hereinabove. For invoking Article 131 therefore, there has to be a dispute between the legal/constitutional right or authority or power asserted by the defendant vis-à-vis the plaintiff. The constitutional power of the Central Government to enact the Amendment Act, 2019 as per List I (Union List) of the VIIth Schedule having nowhere been challenged, the pre-requisite conditionalities under Article 131 are not satisfied.

In fact, the  Supreme Court, vide its judgment in State of Jharkhand[4]  furthered the abovecited position of law and came to the conclusion that there isn’t any bar to a test of constitutional validity of a statute under the original jurisdiction of the Supreme Court. However, the same has to concern a disputed question of law/fact that impinges, erodes, diminishes or even outrightly strips the legal right asserted by a ‘party to the proceedings’.

Notably, the plaintiff States have predicated the ‘dispute involving questions of law and fact’ on the alleged violation of the fundamental rights of their inhabitants. This is erroneous on two primary grounds; one, the Amendment Act, 2019 does not in any manner deem to take away or abridge the rights of Indian citizens for it is merely an enabling provision to speed up the grant of Indian citizenship for certain religious communities and two, the said averment is grossly dehors the constitutional scheme of our federal polity wherein the constitutional power to regulate affairs pertaining to ‘Citizenship, naturalisation and aliens’, ‘Extradition’ and ‘Admission into, and emigration and expulsion from, India; passports and visas’, vests with Parliament to the absolute exclusion of State Legislatures. Evidently thus, the State Governments are merely manufacturing a ‘dispute’ where none exists as per the scheme of the Constitution of India.

In conclusion, the reader must be apprised of the fact that the question pertaining to invocation of jurisdiction under Article 131 insofar as it concerns a challenge to the constitutional validity of a statute has in fact been referred to a larger Bench of the Supreme Court in light of the apparent conflict between the two judgments in State of Madhya Pradesh v. Union of India[5] and the abovecited State of Jharkhand v. State of Bihar[6]. Regardless, the same doesn’t alter or dilute the ambit and scope of Article 131 as laid out by State of Rajasthan[7]  judgment.


*Authors are practising Advocates in Delhi.

[1] (1977) 3 SCC 592

[2] (2015) 2 SCC 431

[3] State of Rajasthan v. Union of India, (1977) 3 SCC 592

[4] State of Jharkhand v. State of Bihar, (2015) 2 SCC 431

[5] (2011) 12 SCC 268

[6] (2015) 2 SCC 431

[7] State of Rajasthan v. Union of India, (1977) 3 SCC 592

COVID 19Hot Off The PressNews

In view of the Supreme Court of India directions regarding welfare of migrant labourers housed at relief shelters/camps in different parts of country, Union Ministry of Home Affairs (MHA) has written to all States/UTs to take necessary action in compliance of the directions of the Court, while implementing lockdown measures to fight COVID-19 effectively.

The Court directed that adequate medical facilities besides proper arrangements for food, clean drinking water and sanitation be ensured for migrant workers at relief camps/shelters across the country. Further, trained counsellors and/ or community group leaders belonging to all faiths should visit the relief camps/ shelter homes and deal with any consternation that the migrants might be going through.

The Court also observed that the anxiety and fear of the migrants should be understood by the police and other authorities, and that they should deal with the migrants in a humane manner. Further, the State Governments/ UTs should endeavour to engage volunteers along with the police to supervise the welfare activities of the migrants.

The MHA Communication also reiterates the directions given in the Ministry of Health and Family Welfare letter to all States/UTs, on above lines. The Health Ministry has issued detailed guidelines for States/UTs to deal with psychosocial issues among migrants, which has been placed at https://www.mohfw.gov.in/pdf/RevisedPsychosocialissuesofmigrantsCOVID19.pdf


Ministry of Home Affairs

[Press Release dt. 12-04-2020]

[Source: PIB]

Appointments & TransfersNews

The Collegium comprising of Ranjan Gogoi, CJ and S.A Bobde, N.V. Ramana, Arun Mishra and R.F. Nariman, JJ. resolves to recommend that Justice Ujjal Bhuyan, Judge, Gauhati High Court, be transferred, in the interest of better administration of justice, to Bombay High Court.


Collegium Resolution

[Notification dt. 28-08-2019]

Supreme Court of India

 

Appointments & TransfersNews

Collegium comprising of Ranjan Gogoi, CJ and S.A Bobde and N. V. Ramana, JJ. recommends the appointment of Justice L. Narayana Swamy as the Chief Justice of Himachal Pradesh High Court. 

Justice L. Narayana Swamy is the senior-most Judge from Karnataka High Court and has been functioning there since his elevation. Having regard to all relevant factors, the Collegium is of the considered view that Justice L. Narayana Swamy is suitable in all respects for being appointed as Chief Justice of the Himachal Pradesh High Court. The Collegium resolves to recommend accordingly.

While making the above recommendation, the Collegium has also taken into consideration the fact that at present there is no Chief Justice of the Karnataka High Court.


[Collegium resolution dt. 28-08-2019]

Supreme Court of India

Appointments & TransfersNews

Supreme Court Collegium comprising of Ranjan Gogoi, CJ and S.A Bobde, N.V. Ramana, Arun Mishra and R.F. Nariman, JJ. recommends the following Chief Justices of 4 High Courts for elevation to the Supreme Court:

1) Justice Krishna Murari – Chief Justice of Punjab and Haryana High Court

2) Justice S Ravindra Bhat – Rajasthan High Court

3) Justice V Ramasubramanian – Himachal Pradesh High Court

4) Justice Hrishikesh Roy – Kerala High Court


Collegium Resolution

[Notification Dt. 30-08-2019]

[Supreme Court of India]

Experts CornerTarun Jain (Tax Practitioner)

Introduction

Ascertaining the valuation for tax purposes is an arduous task. It requires one to traverse the maze of relevant statutory provisions, the detailed rules or regulations which govern the valuation and also account for the judicial observations which have been made interpreting such provisions or otherwise. The same certainly holds true for customs purposes with an added complexity.

In a recent decision in CCE and Service Tax v. Sanjivani Non-Ferrous Trading (P) Ltd.,[1] the Supreme Court has examined the various aspects relating to the customs valuation and enunciated the legal position in vivid detail. The Supreme Court has inter alia set out the limitations of the Customs Officers seeking to enhance the valuation of the imported goods and declared the parameters to be followed for determining the customs valuation particularly when the transaction is between unrelated parties. This decision is examined in this article to cull out the legal position on the subject.

Setting the Context

The valuation for customs purposes is carried out in terms of the stipulations under Section 14 of the Customs Act, 1962. Up to the year 2007, it provided as under;

(1) For the purposes of the Customs Tariff Act, 1975 or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where—

(a) the seller and the buyer have no interest in the business of each other; or

(b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale.…

The Supreme Court consistently interpreted this provision to mean that the actual price of imported goods was irrelevant as the provision involved a deeming fiction in terms of which “the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation” was to be adopted as the valuation for customs purpose. Interpreting this provision the Supreme Court in Rajkumar Knitting Mills (P) Ltd. v. Collector of Customs[2] had made the following observations;

  1.  This means that the value of the goods is to be ascertained on the basis of the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation and exportation in the course of international trade. The relevant date would, therefore, be the date of importation or exportation. Shri Mehta has laid stress on the words “ordinarily sold or offered for sale” and has submitted that in view of these words the date of contract is the relevant date. We are unable to agree. The words “ordinarily sold or offered for sale” have to be read along with the words which precede and the words that follow these words. If thus read these words mean that for the purpose of assessing the value it is necessary to ascertain the price at which the said or like goods are sold or offered for sale for delivery at the time and place of importation and exportation in the course of international trade. The words “ordinarily sold or offered for sale” do not refer to the contract between the supplier and the importer, but to the prevailing price in the market on the date of importation or exportation. We are, therefore, unable to accept the contention urged by Shri Mehta that the Tribunal has committed any error in proceeding on the basis that value has to be assessed according to the price as on the date of importation and not on the basis of the date of contract. (emphasis supplied)

Expanding the appreciation of this provision further, the Supreme Court in its famous case in Ispat Industries Ltd. v. Commr. of Customs[3] has made the following observations signifying (i) the relevance of the deeming fiction in the statutory provision; (ii) its consequences; and (iii) the irrelevance of the actual contract price of the imported goods;

  1.  From a perusal of the above provisions (quoted above), it is evident that the most important provision for the purpose of valuation of the goods for the purpose of assessment is Section 14 of the Customs Act, 1962. Section 14(1), has already been quoted above, and a perusal of the same shows that the value to be determined is a deemed value and not necessarily the actual value of the goods. Thus, Section 14(1) creates a legal fiction. Section 14(1) states that the value of the imported goods shall be the deemed price at which such or like goods are ordinarily sold or offered for sale, for delivery at the time and place of importation in the course of international trade. The word “ordinarily” in Section 14(1) is of great importance. In Section 14(1) we are not to see the actual value of the goods, but the value at which such goods or like goods are ordinarily sold or offered for sale for delivery at the time of import. Similarly, the words “in the course of international trade” are also of great importance. We have to see the value of the goods not for each specific transaction, but the ordinary value which it would have in the course of international trade at the time of its import

                        *                      *                      *

  1.  If we read Rule 9(2) of the Rules independently without considering it along with Section 14 of the Act, then of course the submission of the learned counsel for the revenue could be sustained. However, in our opinion, Rule 9(2) has to be read along with Section 14 and it cannot be read independently. As already stated above, Section 14 creates a legal fiction and we have to see the ordinary value of the imported goods in the course of international trade at the place and time of import. This means that specific cases of import should be ignored. In fact, it is for this reason that Rules 4, 5 and 6 of the Rules have been promulgated. The actual price paid for the goods can only be taken into consideration provided the sale is in the ordinary course of trade under fully competitive conditions and the other provisions of Rule 4 are satisfied. (emphasis supplied)

Both the review petition and the curative petition[4] of the Government of India against this judgment in Ispat Industries[5] having been dismissed, the provision was amended by the Finance Act, 2007 to substitute a new provision for customs valuation altogether.

The new customs valuation provision[6] states as under:

(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf.…                                                                   (emphasis supplied)

Thus clearly, as a reading by way of contrast, the provision providing for “deemed value” was substituted to provide for “transaction value” as the basis for carrying out customs valuation. It was the interpretation of this provision which was undertaken by the Supreme Court in Sanjivani[7].

Dispute Before the Supreme Court and its Decision in Sanjivani

In Sanjivani,[8] the party concerned imported various consignments of aluminium waste and scrap across a period of more than one year. The valuation of these imported goods was made on the basis of the “transaction value” i.e. on the basis of the amount paid by the party to the overseas seller. This value was rejected by the Customs Officer and the customs value was reassessed many times over the originally assessed value. This reassessment order was set aside by the High Court in writ petition filed by Sanjivani[9] directing the officer concerned to pass a speaking order.

In the second round of reassessment, the officer concerned again enhanced the customs valuation of the imported goods. This reassessment was sustained by the departmental appellate authority. Thereafter the appeal was filed before the Appellate Tribunal before whom it was inter alia contended that:

  1.  … the price of each variety of aluminium scrap depends on the negotiation between the buyer and the seller and that the price is fixed on the basis of the marked condition, demand and supply, content of aluminium and the expected recovery of aluminium from such scrap.[10]

The Appellate Tribunal accepted the appeal and observed inter alia as under to set aside the outcome of reassessment:

  1.  … Further, we find that as held in the case laws stated above and as provided by Section 14 of the Customs Act, 1962, the assessable value has to be arrived at on the basis of the price which is actually paid and in a case the price is not sole consideration or if the buyers and sellers are related persons then after establishing that the price is not sole consideration the transaction value can be rejected and taking the other evidences into consideration the assessable value can be arrived at. Such exercise has not been done in these cases on hand. Therefore, we reject the enhancement of assessable value in respect of the bills of entry which are involved in all the appeals being decided and we restore the assessable value as declared by the appellant in said bills of entry.[11]

Being aggrieved by the order of the Appellate Tribunal, the Customs Department approached the Supreme Court by way of statutory appeals. Before the Supreme Court the principal contention of the Customs Department was that the statutory provision provided for the transaction value as the basis for customs valuation and therefore it was necessary that all evidences and corroborating material establishing the transaction value was closely examined.

The Customs Department thus found fault with the action of the Appellate Tribunal contending to the effect before the Supreme Court that:

  1.  … if the original authority/assessing officer had failed to examine the evidence that was available with the Department and had not undertaken the exercise regarding price being not the sole consideration, the Tribunal should have remanded the case back to the assessing officer for examining the material and undertaking that exercise. To put it otherwise, … appeals could not have been allowed straightaway by accepting the transaction value given by the respondent-assessee and another opportunity should have been given to the assessing authority in this behalf.[12]

The Supreme Court, however, did not accede to the submissions of the Customs Department. In its view the Appellate Tribunal was right that “the assessable value has to be arrived at on the basis of the price which is actually paid” and thus “the assessing officer is supposed to act on the basis of price which is actually paid and treat the same as assessable value/transaction value of the goods”. The Supreme Court extensively referred to its earlier decisions on the subject[13] to affirm the view adopted by the Appellate Tribunal and dismiss the appeal of the Customs Department.

Critical Analysis of the Supreme Court’s Decision

A number of facets in the Supreme Court’s decision require a critical evaluation. These are discussed in this section.

Firstly, the decision does not seem to factor that there was an amendment in the year 2007 in which the entire provision relating to customs valuation was substituted a new scheme for valuation was provided for. Thereby instead of the “deemed value’’ concept the “transaction value” concept was introduced. Thus, reference to the earlier decisions of the Supreme Court may not have been apposite to delineate the contours of the customs valuation provision as it currently exists.

Secondly, this decision merely confirms the view of the Appellate Tribunal that the transaction value is to be adopted. There can be no two views on this position once the statutory provision itself is cast on such lines. However the decision fails to delineate the factors, the possibility for whose existence is contemplated in the statutory provision itself, whereby the transaction value may be abandoned. Extensive aberrations in the transaction value as contrasted from the value in contemporaneous transactions; intelligence reports and tax analytical solutions hinting at the industry operating on artificial margins, for illustration, are two such factors are fairly regularly employed by the Customs Department in the current dispensation but their relevance has been discussed or enunciated neither by the Appellate Tribunal nor the Supreme Court. These are some crucial ground level issues the relevance of which cannot be underplayed given the massive number of transactions which take place in India’s international trade on a daily basis.

Thirdly, there is no discussion on the depth of the inquiry required to be undertaken by the Customs Officer in order to establish that the transaction value is not reflecting of the correct valuation. Is the inquiry required to merely present prima facie doubts on the transaction value before the burden is shifted upon the party concerned or is the Customs Officer required to go beyond the balance of probabilities test and instead evidentially depict the entire chain of events which may eventually lead to displacement of the transaction value? This is one essentially question which continues to remain unanswered, at least in the context of this decision.

Fourthly, it has been consistently held that the Appellate Tribunal is the last fact-finding authority and to such effect it is conferred with extensive statutory powers[14] to ascertain the correct factual position and decide therein. Thus, assuming that the Appellate Tribunal in this case was correct in not remitting the matter back to the Customs Officer for reconsideration, the decision of the Supreme Court fails to consider that the Appellate Tribunal should in fact have taken upon itself the task of ascertaining the correctness of the prima facie doubts pointed out by the Customs Department to the transaction value in the instant case. It is a different matter to say that there is absolutely no evidence at all and the conclusion of the Customs Officer is based on surmises and conjunctures. However, when there are genuine doubts over the correctness of the transaction value or where the Customs Officer is able to point out the logically acceptable deficiencies in the declarations by the Customs Officer, the legislative obligation of the Appellate Tribunal to ascertain the correct facts cannot be ignored.[15]

Fifthly, the insistence on the contemporaneous values in the decision of the Supreme Court, which is a highlight at multiple parts of the decision, is indeed a confusing reflection. Does it not amount to importing the contours of the statutory provision pre-amendment even though there the legislative intent to such effect does not seem to be manifest. In fact the declaration of the Supreme Court that the value for customs valuation purpose under the amended Section 14 of the Customs Act, 1962 continues to be a “deemed value”[16] appears not to be backed by the statutory scheme as there is no deeming fiction in the current Section 14 unlike the pre-amended Section 14. In any case no reference has been made to the salient features pre and post amendment of the provision so as to highlight the rationale for treating the two provisions alike and with similar consequences.

Conclusion

The decision of the Supreme Court in Sanjivani[17] is perhaps its only decision which adverts to the legislative scheme underlying customs valuation in the context of the current statutory provision. Thus it clearly settles the legal position. Further, the decision is categorical and thus there is no further room for contentions which have already been addressed before the Court in this case. More importantly, the decision is relevant on two counts. Firstly, it highlights the importance of “transaction value” in the customs valuation scheme and transposes it with the concept of “contemporaneous value” in the pre-amended statutory provision. Thus, the Supreme Court has elevated the transaction value, which is essentially a factual inquiry, into a “deemed value” concept, which is pragmatically difficult to reject. Secondly, it enunciates that the burden of displacing the transaction value is on the Customs Department and, the wide powers of the Appellate Tribunal to establish the facts notwithstanding, the Appellate Tribunal would be well within its rights if the Customs Department fails to meaningfully discharge its burden of establishing that the transaction value is not the correct depiction of the real value of the imported goods. In short, the task of the Customs Department is now clearly cut out that it must evidentially demolish the value declared by the importer as the transaction value or give effect to it without demur. Hopefully this decision will lead to reduction in customs valuation disputes given the high level of burden which has been placed on the Customs Department to challenge the transaction value.


  †  BBA LLB (Hons.) (Double Gold Medalist), National Law University, Jodhpur, LLM, London School of Economics, Advocate, Supreme Court of India.

[1]  (2019) 2 SCC 378.

[2]  (1998) 3 SCC 163, 166.

[3]  (2006) 12 SCC 583, 595 & 597.

[4]  Curative Petition (C) Nos. 154-157 in RP (C) No. 557 of 2007 in CA Nos. 5921-5924 of 2004.

[5]  (2006) 12 SCC 583.

[6]  Inserted with effect from 10-10-2007 vide S. 95 of the Finance Act, 2007.

[7]  CCE and Service Tax v. Sanjivani Non-Ferrous Trading (P) Ltd., (2019) 2 SCC 378.

[8]  Facts of this case have been noted on the basis of the order of the Appellate Tribunal, as in Sanjivani Non-Ferrous Trading (P) Ltd. v. CCE & Service Tax, 2017 SCC OnLine CESTAT 495 :  (2017) 7 GSTL 82.

[9]  2017 SCC OnLine CESTAT 495 : (2017) 7 GSTL 82.

[10]  Sanjivani case, 2017 SCC OnLine CESTAT 495 : (2017) 7 GSTL 82.

[11]  Sanjivani case, 2017 SCC OnLine CESTAT 495 : (2017) 7 GSTL 82.

[12]  CCE and Service Tax v. Sanjivani Non-Ferrous Trading (P) Ltd., (2019) 2 SCC 378, 381, contention of the Customs Department, as noted in para 6 of the Supreme Court decision.

[13]  Eicher Tractors Ltd. v. Commr. of Customs, (2001) 1 SCC 315; Commr. of Customs v. South India Television (P) Ltd., (2007) 6 SCC 373; Chaudhary Ship Breakers v. Commr. of Customs, (2010) 10 SCC 576; Commr. of Customs v. Aggarwal Industries Ltd., (2012) 1 SCC 186; Commr. of Customs v. Prabhu Dayal Prem Chand, (2010) 13 SCC 535.

[14]  S. 129-C(7) of the Customs Act, 1962 which include power to undertake “discovery and inspection”, “enforcing the attendance of any person and examining him on oath”, “issuing commissions”, etc.

[15]  It is not out of place to point out that there have been instances in the past to such effect wherein the Appellate Tribunal has been directed by the Supreme Court to evaluate the evidences and determine correct factual position on the valuation of imported goods. For illustration, see SI2 Micro Systems Ltd. v. CCE and Customs, 2016 SCC Online SC 495; Commr. v. Bhagyanagar Metals Ltd., CCE-Hyderabad-II 2016(333) ELT 395 (Tri-LB); Chaudhary Ship Breakers v. Commr. of Customs, (2010) 10 SCC 576.

[16]  Sanjivani case, (2019) 2 SCC 378, para 10 of the Supreme Court decision.

[17]  (2019) 2 SCC 378.

Appointments & TransfersNews

President is pleased to appoint the following Judges as the Judges of the Supreme Court of India:

  • Justice Surya Kant, Chief Justice of the Himachal Pradesh High Court
  • Justice Bhushan Ramkrishna Gavai, Judge of the Bombay High Court
  • Justice Aniruddha Bose, Chief Justice of the Jharkhand High Court
  • Justice Ajjikuttira Somaiah Bopanna, Chief Justice of the Gauhati High Court

[Notification dt. 22-05-2019]

Ministry of Law and Justice

Appointments & TransfersNews

F.No. J-11013/7/2016-Judicial—The President is pleased to re-appoint Shri Atma Ram Nadkarni, Senior Advocate as Additional Solicitor General of India in the Supreme Court of India with effect from 10.05.2019 till 30.06.2020, or until further orders, whichever is earlier.


[Notification dt. 14-05-2019]

Ministry of Law and Justice

 

Legislation UpdatesNotifications

G.S.R. 338(E)—In the Notification F.No. AOR Exam/June/2019 dated 1st April, 2019, Para 1 shall be read as follows:

As existing in Notification F.No. AOR Exam/June/2019 dated 01-04-2019

Corrected

1. Under Rule 5 (i) and (ii) of Order IV, Supreme Court Rules, 2013 and Regulation 2 of the Regulations regarding Advocates-on-Record Examination made thereunder governing the Examination for Advocates-on-Record, it is hereby notified for the information of all concerned that the next Examination for the Advocates-on-Record will be held in the Supreme Court Premises, New Delhi on 3rd, 4th, 7th & 8th June, 2019. 1. Under Rule 5 (i) and (ii) of Order IV, Supreme Court Rules, 2013 and Regulation 2 of the Regulations regarding Advocates-on-Record Examination made thereunder governing the Examination for Advocates-on-Record, it is hereby notified for the information of all concerned that the next Examination for the Advocates-on-Record will be held in the Supreme Court Premises, New Delhi on 10th , 11th , 12th & 13th June, 2019.

Rest of the contents of the above Notification dated 01-04-2019 shall remain unchanged.


[Notification dt. 30-04-2019]

Supreme Court of India

[F.No. AOR Exam/June/2019 (C)]

Legislation UpdatesNotifications

S.O. 1120(E)—In exercise of the powers conferred under Clause (b) of sub-section (2) of Section 3 of the Legal Services Authorities Act, 1987, the President is pleased to nominate Hon’ble Shri Justice S.A. Bobde, Judge, Supreme Court of India, as Executive Chairman, National Legal Services Authority, with effect from 7th March, 2019.

[F. No. A-60011/44/2015-LAP(JUS)]

Ministry of Law and Justice