Case Note & Summary
The petitioner, Indosheel Mould Limited, a company based in Coimbatore, imported Mercedes-Benz Engine Oil from Sinopec Lubricant (Singapore) Pte Ltd through Shanfari and Partners, Oman. The customs authorities alleged undervaluation, seized two consignments, and imposed conditions for provisional release. The petitioner filed a writ petition under Article 226 of the Constitution before the Bombay High Court challenging the investigation, seizure, and release conditions. The imports were made under a framework contract between Daimler AG and Sinopec Lubricant Company Limited dated January 26, 2018, and a Tri-Partite Agreement executed in November 2017 among Sinopec Lubricant, Salalah Overseas Company LLC (later Shanfari and Partners LLC), and the petitioner. The supply chain was Sinopec to Salalah/Shanfari to petitioner to Mercedes-Benz India Private Limited. The first consignment arrived under Bill of Entry No.7801383 dated June 1, 2020, and was held for alleged mis-declaration of value. A second consignment arrived under Bill of Entry No.9094841 dated October 7, 2020. Both consignments were seized but allowed to be warehoused under Section 49 of the Customs Act, 1962. The petitioner sought provisional release; on November 11, 2020, the Assistant Commissioner of Customs granted provisional release subject to execution of a bond for Rs.6.7 Crores and a bank guarantee of Rs.2 Crores. The petitioner did not avail this due to steep conditions. Summons were issued and replied to. The core issues were whether the transaction value could be rejected based on the MRP label disparity; whether the import fell under the proviso to Rule 3(2) of Customs Valuation Rules, 2007, due to related party and restricted sale; whether the seizure and investigation were contrary to law; and whether the provisional release conditions were arbitrary. The respondents argued that the petitioner paid customs duty on a nominal price compared to MRP, that the import was from related parties, and that the restriction on sale to Mercedes-Benz India Private Limited brought the case under the proviso to Rule 3(2). The petitioner countered that customs duty is payable only on transaction value, that the MRP label cannot be compared, that there was no allegation of paying more than the contracted value, and that the brand premium belonged to Mercedes-Benz India Private Limited after import with GST discharged at sale. The petitioner also argued that the conditions for provisional release were steep and unjustified. The excerpt of the judgment provided ends before the court's analysis and final decision. The available text sets out the parties' contentions and the procedural history but does not include the court's reasoning or operative order. The final decision is not mentioned in the provided text. The matter was heard on October 27, 2021, and judgment was delivered on October 29, 2021.
Headnote
A) Customs Law - Valuation of Imported Goods - Transaction Value vs MRP - Customs Act, 1962; Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, Rule 3(2) proviso - The dispute concerned whether customs authorities could reject the declared transaction value of imported Mercedes-Benz Engine Oil based on disparity with MRP label and alleged related party import with restricted sale. The petitioner contended that duty is payable on transaction value and MRP cannot be compared, while respondents relied on the proviso to Rule 3(2) covering related party imports. The excerpt did not contain the final ruling on this issue. (Paras 1-8)
B) Customs Law - Seizure and Provisional Release - Section 49 Customs Act, 1962 - Goods seized but warehoused; provisional release granted subject to bond of Rs.6.7 Crores and bank guarantee of Rs.2 Crores. Petitioner challenged these conditions as steep and unjustified, and sought unconditional release without bank guarantee. The excerpt did not record the court's decision on relief. (Paras 4-5)
C) Constitutional Law - Writ Jurisdiction - Article 226 Constitution of India - Petition sought protection from unjustified investigation, vacation of seizure, release of goods, and closure of investigation into alleged undervaluation. The High Court's jurisdiction was invoked to scrutinize the customs authorities' actions. The excerpt ended before the court's analysis and final order. (Paras 1, 6)
Issue of Consideration
Whether customs authorities were justified in investigating alleged undervaluation and seizing consignments of imported engine oil based on difference between declared transaction value and MRP; whether provisional release conditions requiring Rs.6.7 Crores bond and Rs.2 Crores bank guarantee were arbitrary; whether transaction value should be accepted when no allegation of extra payment.
Law Points
- Customs duty is required to be discharged on transaction value alone
- MRP value cannot be compared with transaction value
- proviso to Rule 3(2) of Customs Valuation Rules covers import from related parties and restriction on sale
- Section 49 Customs Act allows warehousing of seized goods
- Article 226 Constitution writ jurisdiction against customs investigation
Case Details
2021 LawText (BOM) (10) 31
Writ Petition No.5593 of 2021
Dipankar Datta, CJ, M.S. Karnik, J
Prasannan S. Namboodiri, Virendra Pandey, Steve J. Pulikkoden, P.S. Jetly, J.B. Mishra
Union of India, Commissioner of Customs Nhava Sheva-V, Commissioner of Customs Nhava Sheva-I, Deputy/Assistant Commissioner of Customs SIIB (Import) Nhava Sheva-V
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Nature of Litigation
Writ petition under Article 226 of Constitution of India challenging customs investigation, seizure, and conditions for provisional release of imported goods.
Remedy Sought
Petitioner sought protection from unjustified investigation, vacating seizure of two consignments, unconditional release without bank guarantee of Rs.2 Crores, and closure of investigation into alleged undervaluation.
Filing Reason
Customs authorities alleged undervaluation of imported Mercedes-Benz Engine Oil based on disparity between transaction value and MRP label, leading to seizure and investigation.
Previous Decisions
Provisional release was granted on November 11, 2020, subject to executing bond of Rs.6.7 Crores and furnishing bank guarantee of Rs.2 Crores; petitioner did not avail due to steep conditions. No other prior judicial decision mentioned.
Issues
Whether customs authorities were justified in investigating alleged undervaluation of imported engine oil based on difference between transaction value and MRP label.
Whether the transaction value should be rejected under proviso to Rule 3(2) of Customs Valuation Rules, 2007, because import was from related parties and sale was restricted to Mercedes-Benz India Private Limited.
Whether the conditions for provisional release requiring bond of Rs.6.7 Crores and bank guarantee of Rs.2 Crores were arbitrary and unreasonable.
Whether the seizure and investigation were contrary to Customs Act, 1962, and violated Article 226 protections.
Submissions/Arguments
Petitioner argued that customs duty is required to be discharged on transaction value alone, and that MRP label cannot be relied upon for alleging undervaluation.
Petitioner submitted that no allegation existed of paying more than the contracted value, and brand premium was realised by Mercedes-Benz India Private Limited after import, with GST discharged at sale.
Respondents alleged that the import was at a nominal price compared to MRP, from related parties, and restriction on sale to Mercedes-Benz India Private Limited brought it under proviso to Rule 3(2) of Customs Valuation Rules.
Respondents contended that investigation into undervaluation was justified and seizure/provisional release conditions were lawful.
Ratio Decidendi
Not mentioned (final decision not included in provided text)
Judgment Excerpts
The petitioner-Indoshell Mould Limited invokes the jurisdiction of this Court under Article 226 of the Constitution of India inter alia seeking relief and protection from unjustified investigation being carried out by respondent No.4 into import of Mercedes-Benz Engine Oil on alleged grounds of undervaluation; vacating of the seizure of two consignments of Mercedes-Benz Engine Oil by respondent No.4; unconditional release of the said two consignments of Mercedes-Benz Engine Oil without furnishing bank guarantee of Rs.2 Crores as directed by respondent No.3 and closure of investigation into alleged undervaluation by respondent No.4 against the petitioner.
It is the respondents’ case that the petitioner imported Mercedes-Benz Engine Oil ... by payment of Customs duty on a very nominal price as compared to the price declared on the MRP label affixed on the retail packs, which in turn was supplied by the petitioner to Mercedes-Benz India Private Limited and sold by them at a very high price to authorised service centre/dealer.
As per this letter the petitioner was required to execute a bond equivalent to the re-determined value of Rs.6.7 Crores and furnish security/bank guarantee of Rs.2 Crores towards differential duty, redemption fine and personal penalty that may be levied at the time of adjudication.
Procedural History
The petitioner filed a writ petition under Article 226 of Constitution of India before the Bombay High Court. The first consignment was imported via Bill of Entry No.7801383 dated June 1, 2020, and was held on ground of mis-declaration of value. The matter was referred to respondent No.4 for investigation. During investigation, a second consignment was imported via Bill of Entry No.9094841 dated October 7, 2020. Both consignments were seized but allowed to be warehoused under Section 49 of the Customs Act, 1962. The petitioner sought provisional release, which was granted on November 11, 2020, subject to bond of Rs.6.7 Crores and bank guarantee of Rs.2 Crores, but the petitioner did not avail due to steep conditions. Summons were issued and replied on September 24 and 25, 2020. The matter was heard on October 27, 2021, and judgment was reserved and delivered on October 29, 2021.
Acts & Sections
- Constitution of India: Article 226
- Customs Act, 1962: Section 49
- Customs Valuation (Determination of Value of Imported Goods) Rules, 2007: Rule 3(2) proviso
- Customs Tariff Act, 1975:
- Central Excise Act, 1962:
- Integrated Goods and Services Tax Act, 2017:
