Customs, Excise and Gold Tribunal - Delhi
A.N. Gupta And Co. vs Collector Of Customs on 30 April, 1991
Equivalent citations: 1994(69)ELT58(TRI-DEL)
ORDER S.V. Maruthi, Member (J)
1. This is an appeal against the order-in-original No. S8/221/90-SIB-56/90, dated 14-9-1990, enhancing the value of goods from 72,687 CIF to 4,24,416 and imposing a penalty of Rs. 20,000/-. The Collector permitted the appellants to redeem the goods on payment of redemption fine of Rs. 50,000/-.
2. The appellants on 30-8-1989 requested the supplier M/s. China National Electronics Import & Export Corpn., Ghangzhou, China for supply of price list for halogen lamps. On 18-9-1989, the supplier furnished the lowest quotation on the ground that the appellants did not require quality certificate and that there will be no replacement guarantee. In pursuance of the above quotation, the appellants placed an order on 3-10-1989, for 5000 pcs. of Cool Beam Type 12V 50W 38 and 10,000 pcs. of Tubular Type 220/240-1000W halogen lamps. On 21-10-1989, the supplier forwarded Sales Contract. On 30-12-1989, the appellants opened a letter of credit of US $ 4,160 in favour of the supplier through the Corporation Bank. On 23-2-1990, the appellants raised an Invoice No. 9004028B. On 14-3-1990, the goods were shipped. On 10-4-1990, the Bill of Entry was filed.
3. On 14-6-1990, a show cause notice was issued proposing to enhance the value of goods to 4,01,854 on the basis of two documents, viz. Price Lists of M/s. Profit Gain Development Co. Ltd. and the Price Lists of M/s. Chinatrack Development Ltd. and a telex reply to the inquiry made by the Department by the supplier. In the show cause notice, it is also proposed to confiscate the goods Under Section 111(d) and (m) of the Customs Act. It is also proposed to levy a penalty Under Section 112 of the Act. On receipt of their reply and on hearing the appellants' counsel, the Collector adjudicated the matter and passed the impugned order. The Collector while enhancing the value held as follows:
"I find that the Department has got an offer for sale of such goods as are the subject matter of this case for delivery at about the same time and the same place of importation in the course of international trade. The quoted price no doubt was also the sole consideration for the officer. Against this price, the importers have fixed a price which is purported to be the transaction value under Rule 4 which is abnormally low, therefore, not acceptable. As Rule 4 is ruled out, Rules 5 & 6 are also not applicable as imports of identical and similar goods have not been noticed by this department. As the cost of transport and insurance and associated cost incurred within India are also not ascertainable Rule 7 is also not applied. Therefore, I proceed to determine value of the imported goods under Rule 8 consistent with the principles and general provisions of Valuation Rules and Section 14(1) of Customs Act, 1962.
I consider the submissions of the importers to the extent that the price can be negotiated further based on the price offered by them. I also consider the fact that the importers have placed their indent as early as in December 1989 whereas the Department has obtained the quotation in May 1990. This time lag may also have influence on the price. Considering the same, I am inclined to allow a price concessions of 30% on the price offered to the department. After allowing such concessions, the price works out to US $ 0.85/pc. FOB, and US $ 1.54/pc. FOB for Items 1 & 2 above. Accordingly, I fix values US $ 0.85/pc. FOB, and US $ 1.54/pc. FOB for lamps 1 & 2 referred above, earlier under Rule 8 which is consistent with the general provisions of valuation rules and Section 14(1) of Customs Act, 1962."
4. A reading of the Collector's order disclosed that the Collector has not relied upon the price list of M/s. Profit Gain Development Company Ltd. and the price list of M/s. Chinatrack Development Ltd. but relied upon a telex reply to the inquiry made by them and determined the assessable value under Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.
5. Before considering whether the method adopted by the Collector in enhancing the value it is necessary to examine the position obtaining under the Customs Act, 1962 and the rules made therein. Section 14(1) provides for valuation of goods for purposes of assessment. According to which, for purposes of Customs Tariff Act or any other law for the time being in force....
Section 14 "Valuation of goods for purposes of assessment.
(1) For the purposes of the Customs Tariff Act, 1975 (51 of 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 the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale:
Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50;
(1A) Subject to the provisions of Sub-section (1) the price referred to in that Sub-section in respect of imported good shall be determined in accordance with the rules made in this behalf;"
6. Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 are framed Under Section 156 of the Customs Act. Rule 3 of the Rules provides for determination of the method of valuation. It reads as follows :
"For the purpose of these rules -
(i) The value of imported goods shall be the transaction value;
(ii) if the value cannot be determined under the provisions of Clause (i) above, the value shall be determined by proceedings sequentially through Rules 5 to 8 of these rules."
7. Rule 4 refers to transaction value and according to which, the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India adjusted in accordance with the provisions of Rule 9 of these rules.
8. From the above, it emerges that Section 14 declares the assessable value of imported goods as the deemed price and lays down four conditions viz.
(i) the price at which such or like goods are ordinarily sold or offered for sale at the time and place of importation;
(ii) in the case of international trade;
(iii) the seller and buyer have no interest in the business of each other;
(iv) price is the sole consideration for the sale or for the offer for sale.
As long as the above criteria is satisfied, the price shall be deemed to be the assessable value. Under Sub-section (1) and (1A) of Section 14, the price shall be determined in accordance with the rules made in this behalf. Therefore, the price Under Section 14(1) shall be determined in accordance with the Customs Valuation Rules, 1988 provided the criteria laid down in Section 14(1) are satisfied.
9. Rule 3 provides for the method of valuation and according to which, the transaction value shall be the value of the imported goods. It is only in cases where the value cannot be determined under the provisions of clause (1).... In other words, where the transaction value cannot be accepted, the value shall be determined by proceeding sequentially through Rules 5 to 8 of these rules. Therefore, the transaction value shall be the value of the imported goods and it is subject to Rule 9 of the Rules. The authorities have to accept the transaction value unless there are reasons for rejecting the same and it is only after rejecting the transaction value, the value can be determined by adopting Rules 5 to 8 of the rules.
10. On the facts of this case, the Collector rejected the transaction value on the basis of a telex reply which is an offer for sale of such goods at a higher price from the same supplier.
11. The telex reply obtained by the Department from the supplier reads as follows:
"TUNGSTEN HALOGEN LAMPS (240V. 1000W 190MM) USD 1.21 APC FOB CHINA COOL BEAM HALOGEN REFLECTOR LAMPS (12V. 50W. 38.6x5.31) USD 2.20/PC FOB CHINA"
THANKS FOR YOUR TELEX DATED MAY 15.
I QUOTE U OUR BEST PRICE :
(1) TUNGSTEN HALOGEN LAMP (240V 1000W 190MM) CIF CALCUTTA USD 1.4166/PC (2) COOL BEAM UNSTEN HALOGEN (12V 50W(38) 45MM G X53 CIF CALCUTTA USD 2.408/PC AWAITING FOR YOUR EARLY REPLY B/RGS."
12. Immediately when the appellants were confronted with the telex reply of the supplier, they have written seeking clarification and the letter reads as follows :
"We wish to inform you that the above consignment of Halogen lamps has since arrived at Madras Port.
But we are unable to clear the same as our Customs Authorities are raising objection regarding the prices at which the Halogen Lamps have been invoiced. The Customs Authorities have provided to us a copy of the offer sent by your Macau Deptt. by telex on 15-5-1990 (copy enclosed).
We request you to please confirm whether the enclosed telex has been sent by you. If yes, then we request you to please indicate us the reasons for the difference in price charged to us and that quoted to the A.C. SIB Customs, Madras.
The Customs Deptt. will release our consignment only after satisfying themselves on the basis of your clarification in the above matter.
So we request you to kindly send us your clarification at the earliest".
13. In reply to their letter, the supplier wrote as follows :
"We are sorry to know from your letter dated June 28, 1990 that the above consignment of Halogen Lamps is detained. We confirm that our Deptt. No. 4B have not sent the telex to your Custom Deptt. But it has been sent by our another Deptt. which looks after Macau Territory. As explained vide our letter dated September 18, 1989 our offer to you was for uncertified lamps and without replacement guarantee. As regards quotation to Govt. Departments we have to ensure that each lamp is duly tested and certified. Hence the difference in price at which goods were sold to you and the price quoted to your Govt. Deptt.
Also as it happens that certain agents approach us for procuring sizable order from Govt. Deptt. subject to a commission. In such cases the higher rates are quoted to accommodate the agents.
Further our's is a Govt. Corpn. and our prices are determined on various factors such as explained above as well as from country to country to promote the sale of our products. It is further confirmed that we have received full payment of US $ 4,160 - only against the above mentioned shipment under L/C No. G/LC/0025/89.
We hope our above clarification will satisfy your Custom Deptt. the reason for the difference in prices quoted by us to your Custom Deptt. and the rates at which the goods were supplied to you."
From the above it follows that the telex reply indicating higher prices was loaded with replacement guarantee and commission payable to the agents and their's is a Govt. Corporation, and their prices are determined on various factors and differ from the country to country to promote sale of their produce. It was also explained that the goods sold to the appellants are not duly tested and certified. Hence, the difference in price.
14. We may now compare the nature of the goods imported by the appellants with the goods referred to in the telex reply. The goods imported by the appellants are not supported by quality certificate and there is no replacement guarantee. In other words, if the appellants place an order for the import of 4000 Halogen lamps and out of which 1000 are destroyed or damaged during transit, then the importer cannot ask for replacement and he is paying the value of 4000 lamps for the import of 3000 lamps. He is taking a risk. Secondly, there is no quality certificate accompanying the goods which means the quality may be either inferior or superior. In the import by the appellants, a risk is involved. Whereas in the telex reply it is categorically stated that the price quoted in the said reply is loaded with replacement guarantee, which means if 1000 lamps are destroyed during the transit, the importer is entitled to ask the supplier to send another 1000 Halogen lamps. In other words, the importer is paying the value of 4000 lamps for the import of 4000 lamps and there is no loss involved. It is also stated that the price referred to in the reply relates to goods where the quality is tested and certified and loaded with commission of agents. From the above, it is clear that there is a material difference in the conditions of sale between the goods imported and the goods referred to in the telex. Therefore, the telex reply cannot be treated as the price of such goods within the meaning of Section 14(1). The reliance placed by the Collector in the telex reply is misplaced and misconceived. Since the telex reply cannot be relied upon, there is no other evidence to reject the invoice price.
15. Further, the correspondence commencing from 30-8-1989 and ending with the contract dated 21-10-1989 evidences that the contract was entered into in the usual and ordinary course of business. Since the allegation of under-valuation is based only on the supplier's reply to the telex sent by the Deptt. and since the supplier himself has explained the circumstances for fixing the price at which the goods are supplied and since the circumstances are reasonable for supplying the goods at that particular rate, there is no justification for enhancing the value by adopting the prices mentioned in the supplier's reply to the telex listed by the Deptt. and determining the value under Rule 8 of the Valuation Rules.
16. We may also point out that under Rule 3(ii) of the Customs Valuation Rules, 1989, it is specifically provided that if the value cannot be determined under the provisions of clause (i), the value shall be determined by proceeding sequentially through Rules 5 to 8 of the rules. In other words, Rule 3 provides that the value of imported goods shall be the transaction value and the transaction value under Rule 4 is defined as the value of the price actually paid or payable for the goods when sold for export to India. Since the Department failed to prove under-valuation, the value has to be determined by following Rule 4 of the rules. In view of Rule 3(ii), the Department cannot jump over to Rule 8 without exhausting Rule 4. It is only in cases where the value of imported goods cannot be determined by the transaction value, under Rule 4 the authorities are entitled to proceed to determine the value under Rules 5 to 8, that too sequentially.
17. We, therefore, allow the appeal and set aside the order of the Collector and direct him to determine the assessable value on the basis of the transaction value.