Customs, Excise and Gold Tribunal - Delhi
Vellore Roller Flour Mills Pvt. Ltd. vs Collector Of Customs on 3 April, 1991
Equivalent citations: 1991(56)ELT659(TRI-DEL)
ORDER N.K. Bajpai, Member (T)
1. These two appeals involve consideration of the same question in respect of the appellants, and, were heard together. They are, therefore, proposed to be disposed of by a common order.
2. The appellants in this case had imported a consignment of six items of Flour Milling Machinery invoiced at unit prices for a total value of Rs. 6,13,536/- CIF from the German Democratic Republic, against a specific capital goods import licence. The proforma invoice for these goods issued in May, 1979 showed CIF value to be Rs. 8,08,435.00. The import licence dated 2-4-1980 was also issued for a total CIF value of the same amount. Subsequent to this, the appellants negotiated with the representatives of the manufacturing suppliers who visited India for reduction in price on the ground that similar machineries of Polish and Russian origin were available at lower prices. The suppliers' representative accordingly agreed to reduce the prices and revise the contract. The total value of the contract for eight different items of machinery was reduced from Rs. 8,08,435 (CIF) to Rs. 6,72,456 (CIF). A contract was accordingly signed on 25th April, 1980. When the appellants declared the value of their goods, on the basis of the invoice, the Assistant Collector did not accept it on the ground that the price of these goods in a Price List dated 12th February, 1979, which was in possession of the authorities, was higher. The appellants' explanation was that a deduction of 20% on account of trade discount was given to them on the Price List of 1979 and the reduced price should therefore, be accepted for purposes of assessment. Since the appellants did not want to delay clearance of the goods, they agreed to pay duty on the higher price and subsequently requested the Assistant Collector to issue a speaking order rejecting the invoice price and that is how these proceedings began.
3. The Assistant Collector has recorded the following reasons for not accepting the invoice price : -
"I have carefully examined the importers' submissions. I find that, according to the Price List in the group, no discount is given to any importers and hence, I am unable to accept parties' contention. The goods in the present case are found to be under-valued to the tune of 25.97% i.e., to the extent of Rs. 1,59,335.00. ... I accordingly order that the invoice be loaded by 25.97% for the purpose of assessment as well as licence debit."
4. When the matter went up in appeal, the Collector of Customs (Appeals), Bombay recorded the following order, while rejecting the appeal: -
"I have gone through the records of the case. The point for consideration in this appeal is whether the price list submitted by the appellants to the Assistant Collector should have been accepted by him particularly when the price list showed a special discount of 20%. The appellants appeared before me for personal hearing and contended that there was in fact no discount in this case, but the price was reduced by the foreign suppliers and the indentors by 20%, since similar flour milling machinery made in other East European countries were being offered at the reduced price. In other words, the appellants emphasised the point that the price charged by the E. German suppliers was reduced to the extent of 20% because of negotiations between them (i.e., the importers and the suppliers and their Indenting agents). A further point was also submitted at the time of appeal as well as at the time of hearing to the effect that the suppliers of the goods being a department of the German Democratic Republic, there was no scope for any manipulation as far as reduction of the price was concerned and therefore, reduced price can be taken to be a price as is available to any importer in the course of international trade.
"2. I have given due consideration to these submissions. I find that prima facie the price list of the suppliers mentions 25% as a special discount. But, however, since the suppliers are a department of German Democratic Republic and such discount is open to all, the supplier being a State Agency, the reduced price can be taken as a price which is available to all in the course of international trade. In fact, there is indication to the effect that M/s. King Flour Unit, Trichy also imported flour milling machinery by 'Meyenberg' vide Bill of Entry No. 14/198 and 605/93, dated 31-12-1980 and 31-5-1981 from GDR which were cleared through Madras Customs, where the reduced discount of 20% on 1979 price list was offered. These Bs/E could not be submitted by the appellants either along with the appeal petition or at the time of personal hearing. However the fact remains that there is evidence to suggest that such discount is offered to all. This ought to have been taken into consideration by the Assistant Collector. As against this, a point can be raised that if in fact the GDR had reduced the price by 20% on the basis of negotiations, then they could have issued a reduced price list with a reduction of 20% after the negotiations were completed, to their Indenting Agents, but there is no evidence to the effect that the agency in GDR had in fact reduced the price by 20%. There is only a letter from M/s. S.K. Ram & Company, Indenting agents to the effect that a discount of 25% had been allowed on 1979 price list by their principals. This should have been corroborated by a letter from the supplying agency in the GDR which has not been submitted. In view of this, I am of the opinion that in the absence of any documentary evidence from GDR supplying agency, acceptance of 20% discount on the price list of 1979 for the imported flour milling machinery will not be realistic and will be based purely on presumption. Therefore, the AC's loading of the invoice value by 25% is in order and I do not find any reason to interfere with it."
(Emphasis supplied)
5. After filing an appeal against this order to the Tribunal, the appellants moved a Miscellaneous Application for furnishing additional evidence by which they placed on record three letters relating to the valuation of these goods - two of which are from the foreign suppliers and the third is from the local agent. In the letter dated 22nd March, 1984 addressed to the appellants, the foreign supplier has enclosed a letter to the Assistant Collector of Customs, Bombay explaining the circumstances in which pursuant to a discussion with the appellants during the visit of one of their representatives to India, it was decided to allow a discount of 20% on the list price. Thereafter, the appellants opened a Letter of Credit and the goods were imported. It has also been clarified in this letter that a trade discount of 20% was also offered to many other customers. The local agent's letter merely forwards the other two letters of the foreign suppliers.
6. The appellants have taken the following grounds in their appeal: -
(a) The authorities should have taken note of the fact of total absence of import of identical goods from the same country at the same time and place of importation at a price higher than that declared by them;
(b) the authorities failed to appreciate the absence of any interest in the business of each other between the suppliers and the appellants;
(c) the price declared by the appellants is the sole consideration for the sale of the goods;
(d) the authorities have ignored to follow the decision of the Central Board of Excise & Customs in its order-in-appeal No. 176-77 of 7th June, 1978,187-188 of 9th June, 1978, and No. 5 of 9-1-1978, in which invoice prices of imported goods were not accepted and assessment was made on the basis of Export Price List of the suppliers;
(e) there was absence of import of identical goods at prices shown in the Price List relied upon by the authorities;
(f) the authorities failed to appreciate the bona fides of the Appellants to the effect that the prices contracted for and invoiced were negotiated prices between two independent parties in the ordinary course of business as evidenced by contemporaneous correspondence with the office of the Joint Chief Controller of Exports and Imports, Madras;
(g) the authorities failed to appreciate that indication of availability of discount to the extent of 25% on the listed price shown at the end of the manufacturers' price list for 1979 was not special at all, but was in the nature of discounts universally available to all alike arid that at best, the suppliers thereby reserve the right unto themselves to offer the goods at varying prices to different importers according to demand and supply;
(h) that as actual users importing goods for use in their own factory, the appellants had merely acted as businessmen of ordinary common prudence in negotiating for and obtaining a most favourable price and there was no justification to reject the declared price.
7. While arguing the appellants' case, Shri N.C. Sogani, the learned Consultant, stated that the foreign suppliers apparently did not display the discount in the invoice etc., for keeping a "bargaining capacity" with their customers and explained that though a deduction upto 25% was described in the price-list as a "special discount", in fact it was not so. In this connection, he submitted copies of two orders of the Tribunal viz., 309 and 310-1986/A and the one reported in 1983 (12) ELT 362 relating to the imports of Airbus by Indian Airlines. Although in both these cases the discounts were described as "special discounts/special cash assistance", the Tribunal had held that such discounts were not in the nature of special discounts. The learned Consultant contended that a similar description in the Price List of their foreign suppliers should also be interpreted similarly. He also referred to the letter dated 9th March, 1982 from M/s. S.K. Ram & Co., to the Assistant Collector of Customs, Bombay, in which it was specifically mentioned that some kind of discount was given to M/s. King Flour Unit (P) Ltd., Trichy, who had imported flour milling machinery sometime in early 1981.
8. Arguing for the Department, Shri Prabhat Kumar, the learned JDR stated that under Section 14 of the Customs Act, 1962, the value for the purpose of assessment was a deemed value arid the invoice price which, in this case, was found to be lower than that given in 1979 price-list was rightly rejected by the authorities. He placed reliance on CEGAT's orders in the following cases: -
(a) Himachal Flour Mills v. Collector of Customs, Bombay (Order No. 1479/90-A dated 12-9-1990)
(b) Bagadi Roller Flour Mills v. Collector of Customs (Order No. 1465-66/90-A dated 18-9-1990)
(c) Aarkeyess Imports Corporation, New Delhi v. Collector of Customs, New Delhi 1988 (12) ETR 112 (Tri.)
(d) Consolidated Coffee Limited 1986 (24) ELT 429
(e) Automotive Enterprises 1985 (22) ELT 283 8A. The learned JDR specifically read out from Para 9 of the order of the Tribunal in the case of Aarkeyess Imports, which is as under : -
"There could have been no better evidence of the price ordinarily charged in the case of the international trade than the manufacturers' price-list for the goods. We ourselves repeatedly pointed out to the appellants. But they did not come out with the Price List. The appellants, on the other hand, placed before us a note prepared by them pointing out that there had been a depreciation in the market. We have to reject their note for three reasons."
9. Shri Prabhat Kumar submitted that the correspondence produced as additional evidence by the appellants should not be accepted or, in the alternative, the matter may be remanded to the Assistant Collector for decision in the light of evidence contained in these letters.
10. Shri N.C. Sogani, the learned Consultant for the appellants, stated in his reply that the 1979 Price List of the suppliers showing the discount had not been disputed by the Department and all that Collector (Appeals) observed in his order was that there should have been a corroboration in the form of a letter from the supplying agency. Since this letter was now available, there was no reason why the appellants' claim in the appeal should not be accepted.
11. We have carefully considered the submissions of both sides and perused the case records. The authorities have rejected the invoice price on the ground that the Price List of 1979 available with them showed a higher price. We observe that copy of this Price List is nowhere on record. On the contrary, the appellants have submitted a copy of their suppliers' Price List dated 5-4-1979 which shows special trade discount upto 25%. While the Assistant Collector did not go into the reasons for rejecting the invoice price, except saying that it was lower than the price in the Price List available with him, Collector (Appeals) rejected the invoice price on the short ground that the letter from the local indenting agent about reduction in price had not been corroborated by the foreign supplier. He held that in the absence of such corroboration, he could not accept the invoice. Since the authorities had doubt about the correctness of the invoice price and there were justifiable reasons for entertaining such doubt because of the higher price shown in the Price List available with them, the right course of action would have been to undertake investigation into the matter by at least asking the appellants to explain the discrepancy instead of rejecting the invoice price straightaway. There is nothing to show from the two impugned orders that any such investigation was undertaken. The appellants' claim is that there is no evidence to show that the bona fides of the invoice price were questionable either because of any special relationship between the importers and their suppliers or because of any additional consideration flowing from the importers; there was, therefore, no reason to reject it.
12. We have also considered several other grounds taken in the appeal. We agree that the authorities have not found any evidence of import of identical goods at a higher price from the same country; nor have they even cited a single case of import of goods at the price shown in the Price List which was in their possession and on which they have placed reliance for rejecting the invoice price. Any evidence on these points would undoubtedly have supported the department's case that it was not obligatory on their part to have accepted the invoice price because, what is stipulated under Section 14(1)(a) is the concept of deemed value, which being the price of like goods in the ordinary course of international trade, could be higher than the invoice price as between the parties.
13. We now turn to the decisions cited by the teamed JDR in support of his contention that the rejection of the invoice price was justified because of a higher price shown in the Price List available to the Custom House which, under Section 14(1)(a) had to be the deemed value. It was held by the Tribunal in Automotive Enterprises case (supra) that the invoices produced by the appellants were not acceptable on their face value because of a circular letter of the authorised agent and addressed generally to traders and indicating the special nett prices for bearings for India. In the peculiar facts of that case the Tribunal has recorded detailed reasons in paras 11 and 12 of their order, the circumstances under which the invoice price was considered not to be acceptable. It does not appear from the facts recorded in the orders of both the lower authorities in the present case, that they had undertaken any investigation and recorded any reasons for rejecting the invoice price except to say that the Price List available with them showed a higher price. We do not, therefore, think that the decision in Automotive Enterprises case is of any help to the Department for rejecting the invoice price in the present case. In fact, Collector (Appeals) has rejected it merely for want of corroboration.
14. In the Consolidated Coffee case (supra), the Tribunal observed as under in para 5(c) : - -
"the deemed value of imported goods, where duty is to be levied ad valorem is, in terms of Section 14 of the Act, not their actual value, the invoice value or the price at which they are capable of being sold. It is, on the contrary, the price at which such goods are ordinarily sold or offered for sale at the time and place of importation i.e., the market price at the time and place of importation [Cl. (a) of Section 14 of the Act] and where it is not so ascertainable, its nearest equivalent determined in accordance with the Customs Valuation Rules, 1963 [Clause (b) of Section 14 of the Act.]. This was so even in terms of Section 30 of the Sea Customs Act [1978 (2) ELT 260 -Vacuum Oil Company v. Secretary of State - wherein it was laid down that it was the "price current for staple articles, the amount of which, if not a subject of daily publication in the press, is easily ascertainable in appropriate circles"] and no conceptual change had apparently resulted in the provisions as a whole, notwithstanding, perhaps, the intent of doing away with it to bring the provisions more in accord with those of GATT. The price at which goods are ordinarily sold at the time and place of import cannot be anything other than the market price ruling on or about the date of import at the place of import;"
15. We have seen that in the absence of any evidence of even one contemporaneous import of identical goods at the material time and for other reasons discussed by us in this order, it would be difficult to come to the conclusion that the price of such or like goods in the international market was higher warranting rejection of the invoice price.
16. We observe that in both the unreported decisions cited - Himachal Flour Mills as well as Bagadi Roller Flour Mills cases, copies of which have been made available by the JDR, the invoice prices were rejected for two important reasons. During search of the premises of the indenting agents, the Customs authorities had recovered a price list as well as evidence of contemporaneous import of similar goods at higher price and, based on these incriminating documents, they had initiated proceedings for undervaluation of goods against the parties in those cases. No such action was taken in the present case; nor were any proceedings for under-valuation instituted. All that was done was to reject the invoice price straightaway. No investigation was undertaken; no explanation was asked to ascertain why the price shown in the Price List available in the Custom House was higher than the invoice price. The Tribunal has held in both the cases that there was enough circumstantial evidence to justify the enhancement of value and to reject the invoice price. The facts of the present case are different and, in view of what has been seen by us, the ratio of those decisions would not apply to the present case.
17. Aarkeyess case cited by the JDR, in which there is an observation that manufacturers' Price List should be treated to be the best evidence, supports the appellants' case rather than the Department's case. Two Price Lists of manufacturers were available - one with the Customs authorities and the other with the appellants and the circumstances under which discounts were offered and the price in this particular case was reduced have been duly explained in the supplier's letter. We do not, therefore, think that the decision in Aarkeyess case is of any help to the Department. In this view of the matter, we do not see any reason why the invoice price should have been rejected. Having examined all aspects of the matter, we allow the appeal and set aside the impugned order of the lower authorities with consequential relief, if any.
18. In respect of Appeal No. 434/84-A, which also involves the import of flour milling machinery, where the invoice value was rejected, the one distinguishing fact is that Collector (Appeals) has confined his order to setting aside that part of the Assistant Collector's order which related to the debiting of the import licence with the increased value, but has not recorded any finding on the question of rejection of the invoice value. Since, the facts of this appeal are identical to those in Appeal No. 433/84-A our decision in the latter appeal should also apply to the former. Accordingly, the orders of the lower authorities relating to Appeal No. 434/84-A are also set aside and this appeal is also allowed with consequential relief, if any.