Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs India Photographic Co Ltd. on 29 March, 1990
Equivalent citations: 1990ECR150(TRI.-DELHI), 1990(49)ELT293(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. This appeal arises out of and is directed against the Order-in-appeal No. 3330/88-BCH (S/49-122/87 VL/SVB (BMY) dated 30-8-1988 passed by the Collector of Customs (Appeals), Bombay.
2. Respondents M/s. India Photographic Co. Ltd., Bombay is a Public Limited Company, Kodak Limited, Rochester, U.K. is holding 39.5% equity participation and have two Directors on the Board of Directors of the Indian Company. Previously the Special Valuation Branch of Bombay Customs which took up the question of valuation of goods viz., colour films and colour paper etc., imported by respondent (IPC), decided that all the imports from Kodak Companies should be assessed at invoice value Under Section 14(1) (a) of the Customs Act, 1962 as per its decision No. S/43-137/86 SVB dated 27-8-1981. This decision of S.V.B. accepting the invoice value under Section 14(1)(a) of Customs Act, 1962 was taken up for review. A search was conducted at their premises on 10-7-1985 and certain documents were seized. Based on these seized documents investigations were carried out and a tentative decision was served upon the respondent Company informing them of loading of invoice value of goods imported from Kodak Company by 60% under Rule 8 of Customs Valuation Rules, 1963. The respondents have replied to the above tentative decision inter alia denying all the allegations in the tentative decision and submitting that invoice value was the correct assessable value under Section 14(1)(a) of the Customs Act, 1962 and that there was no justification to load c.i.f./f.o.b. value on any Kodak Products imported by them.
3. The Assistant Collector, Special Valuation Branch, who adjudicated/reviewed the proceedings after considering their detailed replies and clarifications, although dropped several charges which were levelled in the tentative decision as not maintainable but still, however, he passed an order holding that the valuation will have to be considered under Section 14(1)(b) of the Customs Act read with Rule 8 of the Customs Valuation Rules, 1963 and ordering for the loading of goods in various items as follows :-
(1) Motion Picture Films (Positive) : The invoice value of all imports made from Kodak Company Rochester and their associates shall be loaded @ 5%.
(2) Graphic Art Films: The invoice value of all imports made from Kodak Co., Rochester and their associates shall be loaded @ 12.5%.
(3) Camera Films Rolls of all types: The invoice value of all imports made from Kodak Co. Rochester & their associates shall be loaded @ 3%.
(4) Photography Paper: The invoice value of all imports made from Kodak Co. Rochester & their associates shall be loaded @ 7.5%.
(5) Photography Chemical: The invoice value of all imports shall be loaded @ 10%.
(6) Equipment like Mini-Lab, Microfilming equipments, Slide Projector and their spares : The invoice value of all imports made from Kodak Co., Rochester & Microbra Inc., Extex and any other connected parties of M/s. IPC shall be loaded @ 8%.
(7) Motion Picture Films (Negative): Import is canalised through NFDC. IPC imports on behalf of canalising agency. The material is sold to actual user as per the release order issued by NFDC at the rate prescribed by NFDC. No loading is called for. There are no direct imports in this case. IPC do not recover any service charge. In view of this it has been decided to accept invoice value under Rule 8 of Customs Valuation Rules, 1963.
The decision to load their prices for assessment under Section 14(1)(b) of Customs Act, 1962 was based on the following factors :-
(i) Finding out foreign suppliers viz: Kodak in exclusion to others,
(ii) Obtaining quotation/proforma invoice,
(iii) Suggesting a name of a clearing agent,
(iv) Technical guidance by expert staff.
(v) Services to store the material in temperature and humidity control cold rooms on Party's request.
(vi) For equipments services like installation and caliberation.
The Assistant Collector also quoted the service charges being collected by the Respondents. He has come to the conclusion on the basis of the services rendered by the respondents that certain services which can be deemed as pre-import services and hence should form part of the assessable value as they were not reflected in the invoice.
IPC has extensive systems to keep the price-lists upto date on micro-filming Unit. They are also promoting sales and advertising of Kodak products in India. This they are doing in the guise. "A Kodak Affiliated Company". They act as representative of Kodak in India and render so many services on behalf of Kodak. But for IPC's all these services would have to be rendered by Kodak themselves. Thus part of the expenses made by IPC for maintaining establishment rendering pre-import services, advertising, sales promotion are includible in the assessment value.
The price-list available with IPC is only for India and is not the general price-lists for international use. These values are not values and do not include expenses made by IPC. IPC recovers these charges in the guise of service charges. These services charges which are nothing but pre-import services and therefore includible in the assessable value.
4. Aggrieved by the Order No. S/43-130/80, dated 29-12-1986 passed by the Assistant Collector of Customs, Special Valuation Bench, the respondents filed an appeal before the Collector of Customs (Appeals), Bombay wherein he allowed the appeal by setting aside the order passed by the Assistant Collector as not sustainable in law. Dissatisfied with this order the Department has come up before us by way of this appeal.
5. We have heard Shri V.K. Sharma, learned S.D.R., for the appellant and Shri B.M. Parikh and Shri D.B. Engineer, learned Senior Advocates, for the respondents.
6. Shri V.K. Sharma, learned S.D.R. appearing for the Department, submitted that contracts entered into by the respondent Company in respect of import of Kodak colour films and colour paper etc. with the buyers in India for rendering services and rendered certain services which can be deemed as pre-import services and same should form part of the assessable value. He said that Assistant Collector was justified in ordering for the loading of goods by adding such pre-import service charges as they were not reflecting in the invoice, nevertheless such charges have to be included in the assessable value. He contended that Collector of Customs (Appeals) has also admitted that certain services rendered by the respondents were pre-import services. Hence they have to be included in the assessable value. He submitted that Collector of Customs (Appeals) erred in observing that respondents have adduced sufficient evidence of direct import by other parties, but no such contemporaneous evidence was placed before the Assistant Collector except proforma invoice of the import by the I.T.D.C. It was also contended by him that in view of the equity share holding by the Kodak in Respondent Company, the respondent designated as Agent on behalf of Kodak and services rendered by him as agent for and on behalf of Kodak Company. But for IPC, all these services would have to be rendered by Kodak themselves.
7. Shri Parikh, learned Advocate appearing for the respondents, submitted that there is no mutuality of interest between IPC and the Suppliers of Kodak Products. This position was admitted by the Assistant Collector who has said in his order that Equity Participation and appointment of Directors by Kodak U.S.A. on the board of directors of IPC does not in any way prove that IPC and Eastman Kodak USA have mutual interest in each other's business. There is no evidence that the said appointed directors have taken decisions to influence the principals in U.S A. He stated that Assistant Collector erred in resorting to Section 14(1)(b) on the ground that nexus is proved in between IPC and Eastman Kodak USA and Kodak (Near East) Inc. Dubai and hence service rendered by the Respondent to the Indian buyers amounted to pre-importation services would have to be included in the assessable value. But neither Section 14(1)(a) prohibits such nexus as Section 14(1)(a) nowhere uses the words 'nexus' nor such service charges have anything to do with the foreign suppliers. The suppliers were not at all party to the agreement nor did the suppliers ever mention to the direct importers either in a communication or even on the proforma invoice that any service charges were payable by them to IPC. He said that these service charges were payable by Indian Porters in Indian Rupees to IPC for the benefit of porter and such charges were not to be included in the assessable value. He said that IPC was never appointed as agents of Kodak in India as accepted by the Assistant Collector in his order. Neither it acted as agent nor rendered any service on behalf of Kodak Suppliers. IPC are not maintaining their establishment for Kodak Suppliers or are not rendering any pre-importation services or sales promotion of Kodak products on behalf of Kodak Suppliers. The establishment expenses for advertising sales promotion etc. done in India by IPC are for their own Organisation in India for the products that they sell in India either after importing the same or after manufacturing the same in India as an independent constituent. In the absence of mutuality of interest and mere holding 39.5% equity shares by Kodak in IPC and representation of two directors in Indian Company, the service rendered by the IPC cannot be considered as pre-importation charges to be included in the assessable value of the imports from Kodak and he relied upon the decision of Collector of Customs, Bombay v. Maruti Udyog Ltd., Gurgaon [1987 (28) ELT 390] in support of his contention.
It was also contended by him that expenses incurred by the respondent Company providing the various types of services alleged to be pre-importation services would be the same for all transactions and there was no justification for loading ranging from 3 to 12% for different products as pre-importation charges even if such alleged service charges were taken as basis for arriving at the loading percentage. Such alleged pre-importation service charges were negligible, small percentage and an insignificant amount will have no bearing to the value of the importation. He emphasised that nowhere it was established that the exporter would have incurred the expenses for the services which are being considered as pre-import services, by the Assistant Collector. Further, he contended that Assistant Collector erred in ordering for loading on imports of Motion Picture Film 16 mm. and Super 8 colour print film positive imports which are also canalised through N.F.D.C. He said that respondent Company has adduced sufficient evidence to prove that such products being imported by others on other makes such as Sakora, Fuji, Mitshubishi etc. were much lower than the c.i.f. value of the Kodak Products imported and this factor was ignored by the Assistant Collector.
8. He strenously argued that the price charged in all the three categories (a) by IPC for their own material, (b) by IPC as L.A. holder on behalf of others and (c) by third parties and invoices made by Kodak (Inc.) Dubai are factory rolling prices or as per price list fixed by Principal Eastman Kodak USA. In other words, there are no two sets of prices. The service agreements/contracts were not entered into with all the buyers/importers in India. He said that several imports by third porter like ONGC, ITDC and others who booked direct orders with foreign suppliers with no intervention of IPC and the prices charged to them were the same that were charged to IPC. He submitted that entire evidence of direct import by independent parties and copies of the invoices whose service charges were not charged in many cases were produced before the Assistant Collector and he drew our attention to the acknowledgement for having received and submitted that some samples of evidence were produced before the Collector of Appeals. He said that all the aspects have been dealt in detail by the Collector of Appeals and he rightly set aside the order of the Assistant Collector.
9. In rejoinder, Sri Sharma submitted that respondents acted as designated agent in India on behalf of Kodak and rendered the service as representative of the Kodak Company. He said that in view of contradictory finding about the aspect of Agency and evidence of direct imports were not considered by the Assistant Collector, he requested that matter may be remanded for fresh consideration.
10. We have given our anxious consideration to the arguments advanced on both the sides. We do not find any justification in remanding the matter as requested by the learned Departmental Representative. We are not finding any contradiction either on aspect of Agency or on the issue that Assistant Collector has not considered the evidence of direct imports adduced by the party. On perusal of the records it can be seen that entire evidence was placed before him and it is presumed that he has considered all the aspects which were before him though it was not mentioned in the order. Accordingly) we have proceeded to decide the issue on merits.
11. The point to be considered in the present appeal is whether Department was justified in ordering for loading of invoice value of goods imported from Kodak Company on the ground that services rendered by the respondent Company were pre-importation charges and resorting to Section 14(1)(b) of the Customs Act in determining the valuation.
12. To rule out valuation under Section 14(1)(a) of the Act, the seller and the buyer should have 'interest in the business of each other'. One sided interest is, therefore, not enough; there has to be a mutuality of interest and IPC is right in pleading that such mutuality of interest did not exist. This fact was admitted by the Assistant Collector. But, however, he has proceeded to load the invoice value by resorting to Section 14(1)(b) on the ground that there was some 'nexus' between IPC and the foreign suppliers. He has come to such conclusion based on the circumstantial evidence according to him that IPC has rendered (i) certain services to the Indian buyers, (ii) has extensive system & in keeping up the price list up-to-date on microfilming Unit and (iii) incurring expenditure on promoting sales and advertising of Kodak Products in India. As regards services rendered by IPC, he himself has come to the conclusion that certain services can be deemed as pre-import services and hence should form part of the invoice value and others were deemed to be post-import services and will not become the part of the assessable value.
The above findings or inferences arrived at by the Assistant Collector may be sufficient constituent factors while determining the quantification of valuation. When it was proved that goods were under-valued or price shown in the invoice value was not the real value, but they themselves will not become proof of under-valuation. It is the primary duty of the Department to prove that the goods are under-valued with sufficient evidence and then it may proceed to determine the value either as deemed value under Section 14(1)(a) of the Act or quantifying the value under best judgment assessment by resorting to Section 14(1)(b) of the Customs Act read with Custom Valuation Rules, 1963.
13. It is well settled principle of law that burden squarely lies on the Department to prove under-valuation. In the present case the Department has not discharged that burden. It has proceeded to determine the value on inferences without proving that goods are undervalued. In the absence of the mutuality of interest/and relationship between the importer and the foreign supplier, it is not just and reasonable to enhance the invoice value and to quantify the amount by resorting to Section 14(1)(b) of the Act without sufficient evidence in discarding the invoice value. There is no evidence to show that respondents acted as Agent to the foreign supplier and nowhere it was established that exporter would have incurred the expenses for the services which are being considered as pre-import service. Under these circumstances, the Department was not justified in ordering for loading the invoice value based on such pre-importation charges. The Department ought to make out a case for under-valuation with sufficient evidence and to prove that value shown in the invoice was not the real value. This charge of under-invoicing has to be supported by evidence of prices of contemporaneous imports of like kind goods. The Department has not brought any such contemporaneous evidence on record. On the other hand, the respondent has placed sufficient evidence to show that several other imports by third parties including Govt. of India Undertaking i.e., I.T.D.C. for the same price which was charged to IPC without its intervention. When there is sufficient evidence to show that independent imports are existing and price in respect of these imports are available, the Department was not justified in resorting to Section 14(1)(b) read with Valuation Rules in determining the value of the imported goods. In the view we have taken, we hold that price shown in the invoice was the correct value at which the goods were ordinarily sold or offered for sale.
14. In the result we uphold the impugned order and dismiss the appeal.