Customs, Excise and Gold Tribunal - Tamil Nadu
Shalimar Industries Ltd. vs Commissioner Of Customs on 26 August, 1996
Equivalent citations: 1996(88)ELT769(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. These two appeals involve a common issue and, therefore, these are taken up together for disposal by a common order.
2. The learned lower authority has held that the goods, namely polypropylene (yarn grade) & hundai techien (film grade) imported by the appellants have been undervalued. Price declared by the appellants as per the invoice accompanying the goods is US $ 1100 PMT. The learned lower authority has taken note of the contemporaneous imports of the said products imported from the very same manufacturer which had been imported at a higher price of US $ 1280 PMT and has, therefore, held that the appellants' goods had been undervalued and for that reason there has been mis-declaration. He has, therefore, ordered for enhancement of the value for assessment purposes and also proceeded to confiscate the goods and also levied a redemption fine of Rs. 65,000/- and imposed a penalty of Rs. 15,000/-.
2A. The learned Consultant has pleaded that the appellants had not imported the goods directly from the manufacturer but from a dealer in Singapore who had transacted with the manufacturers for purchase in bulk and arranged the supply of the said goods out of the transacted bulk quantity to the individual buyers in India directly from Korea where the manufacturers are located. He pleaded that in terms of Rule 4 of the Valuation Rules, the invoice value of the appellants should have been accepted inasmuch as the price satisfies all the criterion laid down under the said rule. The goods have been imported in the normal course of trade and there is no special relationship between the supplier of the goods and the appellants. He pleaded that the appellants found a way to get the goods at lesser price. In this background, he therefore, pleaded that there was no warrant for enhancing the price for the purpose of assessment. The learned lower authority has not cited any evidence against them. From it, it should be read that there were no mala fides involved. Merely going by the higher value contemporaneously made imports, the appellants' price has been rejected. The very purpose of the provision for acceptance of transaction value as provided for under Rule 4 of the Valuation Rules framed under Section 14 would be defeated if the invoice value has to be rejected merely because there has been an import at higher rates in respect of the same goods. He has pleaded that at the time when the amended provisions of Section 14 providing for value based on the Valuation Rules was introduced instructions vide A.P. DO No. 77/88 were issued that even where there is a higher price the invoice value should not be rejected unless a basis is laid on facts that this price was not acceptable. In this connection, he has cited the judgment of the Hon'ble Supreme Court in the case of Basant Inds. v. Addl. CC, Bombay, reported in 1996 (81) E.L.T. 195 (SC) and referred us to the facts in that case and the observations of the Hon'ble Supreme Court in regard to acceptance of a lower price where contemporaneous imports at a higher rate has been made. Just because the goods have been arranged to be purchased through a trader that by itself would not cast any shadow on the bona fides of the transaction. The transaction value should be accepted even where the goods are not directly imported from a manufacturer and the transaction is arranged through a third party or purchase of the same goods was made through a trader. To satisfy the authorities the appellants had obtained manufacturers invoice for sale of goods by the manufacturer to the trader in Singapore wherein the despatch of the goods to the various parties in India against the bulk order placed by the trader have been shown. The price thereunder for the goods is at the rate of US $ 1060 PMT and US $ 1080 PMT. He has pleaded that the supplies made to the appellants are at the rate of US $ 1100 PMT. He has urged that the transaction between the manufacturers and the traders in Singapore was a genuine transaction and the trader in Singapore has also earned a margin out of this transaction in the bargain by the arrangement of goods through the manufacturer. There is nothing in law to say that this mode of transaction was not permissible or was not acceptable. In this connection, he referred to the Special Bench ruling in the case of Sai Impex v. CC reported in 1992 (62) E.L.T. 616. In that case, there were varying prices at which the particular category of goods had been imported and the transaction by the manufacturer was arranged through a trader in Hongkong and the Tribunal has held that transaction through the trader was acceptable and the prices charged to the appellants/importers reflected the transaction value.
3. The learned DR has pleaded that in terms of Section 14, in case there are contemporaneous prices available for the import of the goods from the same manufacturer in the normal course, the prices of the contemporaneously imported goods should form the basis. More so, when the goods in this case had not been purchased directly from the manufacturer in question. In the present case, these are routed through the trader, the appellants appeared to have manipulated the prices. In any case, Section 14(1) which provides for a deemed price should have precedence over the rules and for that reason Rule 4 will not come into play. In this connection, the learned DR cited the decision in the case of Plast Fab v. CC reported in 1993 (66) E.L.T. 441.
4. We have considered the pleas made by both sides. We observe that the question that falls for consideration is whether the price of US $ 1100 PMT at which the appellants had imported the goods through the trader in Singapore can be accepted as a transaction value in preference to the price of US $ 1280 PMT at which some other importers in India have imported the very same goods from the very same manufacturer. We observe that the authorities were right in questioning and entertaining suspicion about the prices at which the appellant had imported the goods when other importers similarly placed had imported similar quantums of the goods directly from the manufacturer at a higher price. The authorities, therefore, rightly questioned the appellants about the acceptability of otherwise of the price at which they had imported the goods. The appellants in this case, it is seen, have offered an explanation which appears to us quite logical and acceptable. It is seen from the evidence produced by the appellants that a trader in Singapore had bulked the various orders for supply of the same goods at a lower price to him. This particular trader asked the manufacturer to despatch the goods directly to the various parties and thereafter, he raised his own invoices collecting his margin under these invoices. There is nothing in law to say that the transaction in this manner which is beneficial to the importer in India was not acceptable. Rule 4 of the Customs Valuation Rules clearly states that where the transaction is at arms length and there are no mala fides shown to be involved and the transaction has been arranged in the normal course of business, the price at which the goods are imported should form the basis for transaction value. The instructions as contained in A.P. DO No. 77/88 (Paras 6 & 8) in this regard is as under :
"6. Once the importer has produced all required information it is necessary for the customs administration to decide on the method of valuation to be adopted and to determine the value. Declared value cannot be rejected without due consideration. The value also cannot be loaded solely because it is lower than the previously accepted customs values. It is here the data base built up by the customs will be of help in identifying possible cases of deliberate or fraudulent undervaluation. In this regard attention is invited to rule 10 of the Valuation Rules regarding the right of the proper officer to satisfy himself as to the truth of accuracy of any statement, information documents or declaration presented for valuation purposes. This would empower the proper officer to cause necessary enquiries or investigations to be made in cases of suspected undervaluation or fraud. Such enquiries/investigations may be conducted on a selective basis either before or after clearance of the goods. If the invoice value are not found acceptable as a result of such investigations, it may be necessary to issue an appealable order giving grounds for rejections. In this regard a copy of advisory opinion on burden of proof recently adopted by the Technical Committee on customs valuation is enclosed for guidance (Annexure II).
We observe that in the context of the new provision in law, the Government itself has issued instructions whereby it is clarified even where there is a higher price on record for the import of similar goods, a basis has to be laid under Section 14 of the Customs Act for rejecting this transaction value. The higher recorded price should not be a sole basis for rejecting the transaction value. The appellants in the present case, have been able to explain how they have been able to get the lower price. This lower price obtained by the appellants is only about 10 to 15% lower than the price at which the other importers had made the imports directly. The appellants have been able to produce evidence by way of the invoices of the manufacturer covering the appellants goods showing a lower price to the trader in Singapore. There is no acceptable reason given in the learned lower authority's order that this piece of evidence could not be accepted, once the appellants have been able to show that this lower price had been obtained by them in the normal course of business when the modalities of transactions also appear to be genuine, in that case, the transaction value has, therefore, to be accepted.
5. The Hon'ble Supreme Court in the case of Basant Inds. cited supra has observed as under :-
"It will, thus, be seen that the price of US $ 1.80 each for 40,000 pieces was fixed after considerable negotiations and was fixed after keeping in view that the importers were old and valued customers. It is not known whether the other importer, namely M/s. Ravi Agricultural Inds. had the same relationship. There is also no reason why the instance pointed out by the importer that the very same commodity had been supplied by another supplier at the same price of US $ 1.80 CIF per piece should have been totally ignored and instead the stray instance of Ravi Agricultural Inds. should have been picked up for the purposes of fixation of price. It is essential to bear in mind the fact that in the business world, considerations of relationship with the customer are also a relevant factor. In the circumstances, we are of the opinion that the department was wrong in revising the price from US $ 1.80 to US $ 2.20 CIF per piece. We, therefore, allow this appeal, set aside the order of the Addl. Collector as well as the Tribunal and discharge the show cause notice. However, there will be no order as to costs."
6. What follows from the above is that there could be bona fide business reasons for which a lower price may be obtained by an importer and for that reason the price as become available to the importer has to be accepted as transaction value for the purpose of assessment. As pleaded before us above, arranging of a transaction through a person other than a manufacturer cannot be reason for rejecting the transaction value. There is nothing unusual for an importer to import the goods from a trader if he gets better terms through a trader as compared to the terms that he can get by directly importing from the manufacturer. In this case, the reason given is that the trader Singapore from whom the appellants have imported the goods was able to bulk the orders and get a lower price. There is nothing unusual in our view in regard to the modalities of the transaction as entered into by the appellants. The same trader it is seen has sold the goods to other importers in India at the same price. Thus we get here two sets of prices. One set of prices relate to the imports by the importers in India directly from the manufacturer and the other set of price is by the imports to India through the trader. Both the prices, in our view are genuine for the purpose of Rule 4 of Customs Valuation Rules read with Section 14 of the Customs Act. Nothing has been brought on record to say as to how the provisions of Section 14 have not been complied with. The case law cited by the revenue above in our view would not be applicable to the facts and circumstances of this case, as the issue before us is covered by the decision of the Hon'ble Supreme Court cited by us supra. In view or the above, we hold that the appellants' prayer has to be allowed. We order accordingly.