Customs, Excise and Gold Tribunal - Bangalore
Hewlett Packard (I) Pvt. Ltd. vs Commissioner Of Cus. on 20 July, 2006
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against the Order-in-Appeal No. 14/2004-Cus., dated 20-1-2004 passed by the Commissioner of Customs (Appeals), Bangalore.
2. The appellants filed a Bill of Entry for clearance of 8 nos. of Cisco 2620XM Router and declared the value of Rs. 199879.43. Since the value declared was substantially lower than the recorded price of the same item imported during more or less the same period, the appellants were asked to furnish catalogue of the item. The appellants gave reasons for the lower price. After examining the issue, the lower authority rejected the Transaction Value of the imported goods. He fixed the value of the imported goods at Rs. 1,03,039/- per unit. The appellants were aggrieved with the decision of the lower authority. Hence, they appealed to the Commissioner (Appeals). The Commissioner (Appeals) upheld the Order-in-Original and passed the impugned order. The appellants challenge the findings of the Commissioner (Appeals).
3. Shri B. Anil Kumar, the learned Advocate, appeared for the appellants and Shri K. Sambi Reddy, the learned JDR, for the Revenue.
4. The learned Advocate urged the following points :
(i) The Commissioner (Appeals) has given a decision contrary to his own findings. In para 4 of the impugned order, the Commissioner (Appeals) has accepted the submission of the appellant that third party imports should not be considered since the appellants were Gold Certified Partners. In spite of giving such a finding, the Commissioner (Appeals) concurs with the order of the Adjudicating Authority and upholds the Transaction Value in terms of Rule 10A read with Rule 5 of the Customs Valuation Rules, 1988 which would mean that the value of the imported goods is to be enhanced to Rs. 1,03,039/-
(ii) The differential demand was proposed on the basis of contemporaneous imports by third party and not on the imports made by the appellants themselves. The Bill of Entry relied on by the Adjudicating Authority for enhancing the price was not provided to the appellants. This fact has been taken note of by the Commissioner (Appeals).
(iii) In terms of Rule 3 of the Customs Valuation Rules 1988, the value of imported goods for the purpose of assessment shall always be the Transaction Value subject to the provisions of Rule 9 and 10A. If and only if the Transaction Value cannot be determined, recourse to Rules 5 to 8 can be had. Since in the present case, the price at which the goods have been imported by the appellants duly satisfy the requirements of Transaction Value, recourse to Rules 5 to 8 is not possible.
(iv) In terms of Rule 4(2), the Transaction Value of imported goods can be discarded only in the circumstances mentioned therein.
(v) Revenue has proceeded on the basis that there were other contemporaneous imports made. But, there is no evidence to show that the appellants had any interest in CISCO, the supplier. The appellants have produced the manufacturer's documents to show that their price and the price declared in the invoice are the same and not in variance. Revenue has not discharged its burden to prove as to which of the conditions specified in Rule 4(2) was not satisfied so as to reject the Transaction Value.
(vi) Apex Court's decision in the case of Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai is relied on.
(vii) In the present case, all conditions in Rule 4(2) are satisfied. It is not the case of the department that the sale is not in the ordinary course of time; that it involves abnormal discount; that it involves special discount limited to exclusive agents; that no quantifiable data exists with regard to adjustments required to be made; that there are any restrictions as to the disposition or use of the goods; that the sale price is subject to some condition or consideration for which a value cannot be determined in respect of goods being valued; that any part of the proceeds of any subsequent re-sale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller; and that the buyer and the seller or related. Thus, none of the prerequisites for ruling out the applicability of Rule 4(2) is satisfied in the present case and, therefore, the lower authorities ought not to have rejected the Transaction Value.
(viii)The Apex Court, in the case of Basant Industries v. Additional Collector of Customs, Bombay , has held that the relationship between the supplier and the importer has to be kept in mind because it is a matter of common knowledge that a price which is offered by a supplier to an old customer may be different from a price which the same supplier offers to a totally new customer. In the present case, the appellants have a global contract whereunder they purchase various CISCO products for supplying to their customers throughout the world and they are considered as Gold Certified Partner for CISCO. Therefore, the discount enjoyed by the appellants is quite normal.
(ix) The Tribunal, in the case of Iron Master India Pvt. Ltd. v. CC, New Delhi 2002 (150) E.L.T. 599 has held that Transaction Value cannot be rejected solely on the basis of prices at which another importer has imported the same goods. The view of the Tribunal has been maintained by the Apex Court as reported in 2003 (157) E.L.T. A151 (S.C.).
(x) The findings of the lower authorities that the invoice is silent about the discounts offered is not correct. The annexure to the Purchase Order indicates that the discount offered to MTNL was 55%. The appellants had produced a copy of the Agreement they have entered with CISCO which clearly indicates the discount level enjoyed by the appellants. The said Agreement was produced to the Commissioner (Appeals). Although CISCO have an agreement with the appellants, they also have separate Agreements with different Multi National companies like HSBC, General Motors, General Electric, etc. and they give a certain percentage of discount in respect of sales to be made to those parties over and above the discount given to the appellants. The appellants while placing the purchase orders in CISCO indicate the name of the party to whom the goods are to be sold. On this basis, CISCO gives the discount to respective ultimate buyer.
(xi) CISCO has given a Certificate dated 30-9-2003 indicting that the appellants are a Gold Certified System Integrated Partner of CISCO in India and they enjoy a transfer pricing from CISCO, which may be higher than the other certified partners or re-seller and may vary from customer to customer.
(xii) Bill of Entry dated 3-6-2003 relates to import of one Router for resale to M/s. HDFC. The discount given by CISCO is 42%. The concerned Purchase Order dated 7-5-2003 and the correspondence in the form of E-mail would clearly indicate the name of the ultimate consumer as HDFC and it would also indicate the list price of the Router in that case was also USD 2295 but with a discount of 42%. However, in the present case, the goods were meant for MTNL. The appellant persuaded CISCO to give a higher discount to MTNL compared to the normal discount of 42% as MTNL had large number of requirements for networking products. Hence, CISCO offered a discount of 55% to the sales made to MTNL whereas the standard discount of 42% was only offered to HDFC. This is evident from the purchase order as well as the e-mail message between the appellants and the CISCO. Hence, the difference between the price of the Router Imported earlier for HDFC and now for MTNL is in the normal course of business.
(xiii) Rule 10A of the Customs Valuation Rules, 1988, requires an exercise to be undertaken by the authorities in rejecting the Transaction Value. It does not empower the Customs Authorities to arbitrarily reject the Transaction Value.
(xiv) The Board has issued a Circular No. 82/2002-Cus.V dated 3-12-2002 clarifying that lower prices are acceptable in case of sales made as OE parts. The Board has also clarified that to reject the Transaction Value, the onus is on the Department to establish that price is not the sole consideration for the sale/transaction.
(xv) The Adjudicating Authority has ignored the fact that the appellants have been importing CISCO products as OE parts and, therefore, there will be a difference in the prices supplied as OE parts and supply of the same as spare parts. The Circular of the Board cited supra clearly accepts the dual price.
(xvi) The case of the department is based on the imports at 'Mumbai and Chennai. The Adjudication Order has been passed without furnishing any details about these imports and the copies of the documents in respect of these invoices and the Bills of Entry have not been supplied to the appellants. Thus Principles of Natural Justice have been violated. The appellants requested the Deputy Commissioner of Customs, Bangalore to provide the details of imports referred to in the order and the copies of the documents.
5. The learned JCDR reiterated the findings of the lower authorities.
6. We have gone through the records of the case carefully. The original authority has rejected the Transaction Value in respect of the impugned goods imported by the appellant vide Bill of Entry dated 24-6-2003 and adopted the value of similar goods imported in Mumbai on 28-5-2003. In his findings, he has stated that the importer has not been able to produce any documentary evidence to satisfactorily prove the difference in the contemporaneous import and price of the goods imported. Further, according to him, the importer has not been able to satisfactorily explain the difference in value of their imports vide Bill of Entry dated 3-6-2003 and the current import, which is approximately 30% lower. Also, "they have failed to produce any contract with the foreign supplier which will effectively explain the difference in value and contemporary imports." The Commissioner (Appeals) has made certain superficial observations and upheld the order of the lower authority. This is seriously challenged by the appellants. Hence, we have gone through the relevant records produced before us and before the lower authorities. The appellants buy various networking devices like routers, switches, etc. required for the IT Industry for integration with the main computer servers for Local Area Network (LAN) and Wide Area Network (WAN) at various customer locations from M/s. CISCO System Inc., USA, who is a leading manufacturer of these products. The appellants are "Gold Certified Partner" for CISCO. They have entered into a Global Contract on May 1, 2002 with CISCO for the supply of various networking products, in terms of which, the appellants are given specific rate of discount. The Agreement is a very elaborate one containing 9 attachments which are as follows :
1. Global Systems Integrator Agreement Terms and Conditions
2. EXHIBIT A: Integrator Profile
3. EXHIBIT B: Discount Schedule
4. EXHIBIT C: Support Exhibit
5. EXHIBIT D: Networked Commerce Attachment
6. EXHIBIT E: EMEA Shipping Terms and Charges
7. EXHIBIT G: Ordering and Shipping Terms
8. EXHIBIT S: Software License Agreement
9. EXHIBIT H: FAR Clauses We find that at Sl. No. 3 in the above list is the Discount Schedule. We find that the appellant, who is an Integrator, is a Gold Certified Partner of CISCO. In the Agreement relating to Discount, it is seen that Integrator's Discount will be set based on the certification level Integrator has been awarded at the time it submits a particular purchase order for products. We also find that when the Integrator's certification level is Gold, the Integrator's discount will be 42%. The appellant has explained why 42% discount was given to HDFC. They have actually produced the corresponding e-mail correspondence, purchase order, etc. indicating 42% discount. They have also explained that MTNL is purchaser of large number of equipments and the appellant had requested the foreign supplier to offer additional discount and it had been agreed by them to offer a discount of 55%. After going through the documents, we are satisfied that the foreign supplier has given 55% discount for impugned goods meant for MTNL. It is also seen that in every purchase order, the ultimate customer who is going to use the equipment is indicated and depending upon the ultimate customer, discounts are offered by CISCO because CISCO has got direct agreements with all the users of their products. We find that the lower authorities have not scrutinized these papers and have rejected the Transaction Value simply on the basis of some other contemporaneous import. They have not understood why such discount has been offered. Further, we find that when the lower authority has relied on certain other imports for fixing the assessable value, the copies of the documents and other details requested by the appellant have not been furnished. We agree with the appellant that this is a clear violation of the Principles of Natural Justice. Further, we find that Rule 10A cannot be arbitrarily applied to reject the Transaction Value. In fact, the circumstances enumerated in Rule 4(2) of the Customs Valuation Rules have not been discussed at all to reject the Transaction Value. In any case, such circumstances do not exist. We also do not find that there is any evidence to show that the appellant and the foreign supplier are related. In fact, the Transaction appears to be on a principal to principal basis and the reasons for giving a higher discount to MTNL has been clearly brought out. Further, the contention of the appellant that the price of the original equipment will generally be lower than the price of the spares has been recognized even by the Board in its Circular dated 3-12-2002. The appellant has stated that they are actually supplying the equipments as original equipments, in any case, they have produced the relevant documents to show that actually 55% discount for the impugned goods had been given by the foreign suppliers keeping in mind that the ultimate user is MTNL. This is very clear from the records produced. In these circumstances, we do not find any merit in the impugned OIA as well as the OIO. Hence, we set aside the impugned order and allow the appeal with consequential relief.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)