Customs, Excise and Gold Tribunal - Bangalore
Andhra Sugars Ltd. vs Commissioner Of Customs on 22 June, 2005
Equivalent citations: 2005(102)ECC103, 2006(193)ELT68(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. The appellants have challenged the enhancement of the transaction value entered into by the appellants and declared in the Bill of Entry in respect of 500 MTs of Crude Sunflower Oil. The appellants' contention is that the value cannot be enhanced as the value had been fixed in terms of the contract and the international prices had been fluctuating. The value declared by them was in terms of the Contract and international prices and that they have filed the brochure to show the prices to be the same. It is stated by them that the department revised the valuation based on similar imports in the same shipment. It is their contention that the transaction value cannot be rejected as held by the Apex Court in the case of Eicher Tractors Ltd. v. CC, Mumbai, 2000 (122) ELT 321 (SC) unless there are factors as laid down in Rule 4(2) of the Valuation Rules which is absent in the present case. There was no Show Cause Notice issued nor there was an allegation that the contract price has not been given effect to and extra money has been paid to other source. Therefore, the learned Counsel submits that the Eicher Tractor ruling of the Apex Court is required to be accepted in the present case. It is his contention that the Calcutta High Court, in the case of Sneha Traders Private Ltd. v. CC, 1992 (60) ELT 43(Cal.) also held that price as prevalent at the time of contract is required to be accepted and subsequent price increase at or near the time of shipment or importation is irrelevant. He further relies on the Judgment rendered by the Tribunal in the case of Vision Trade Links v. CC, Nagpur, 2004 (169) ELT 151 (Tri.-Del.) wherein also the enhancement valuation was set aside on the ground that no evidence was produced by Revenue to show that transaction value between the parties was influenced by any consideration other than commercial consideration.
2. The learned JDR pointed out that the department can reject the transaction value and can rely on contemporaneous evidence to show that the invoice value is not the correct value and in this context relied on the Apex Court Judgment rendered in the case of Punjab Processors Pvt. Ltd. v. CC, 2003 (157) ELT 625(SC).
3. We have carefully considered the submissions and find from the impugned order that the Commissioner has examined all the factors and has found that there is contemporaneous import of the same item in the same shipment to the different value. He has noted that the appellants are liable to pay duty on the enhanced value of USD 485 MT as per Section 14(1) of the Customs Act read with Rule 6 of the Customs Valuation Rules, 1988. He has noted that even the Supreme Court Judgment, in the case of Eicher Tractors Ltd. (cited supra), has been delivered in the context of amended Section 14 (1A) of the Customs Act and the Customs Valuation Rules. The Commissioner has noted that the said citation supports the stand taken by the department as the import made by the appellants falls within the exceptions contained in Rule 4(2) of the Customs Valuation Rules [to be specific under proviso (b) to Rule 4(2)]. Therefore, he has upheld the re-determination of the assessable value. We find that the Apex Court in the case of Punjab Processors Pvt. Ltd. v. CC has held that Customs authorities while assessing the value of imported goods are not bound by the figure mentioned in the invoice and can rely on contemporaneous evidence to show that the invoice value is not the correct value. In the present case, the Revenue has shown that there was contemporaneous import in the same shipment on a higher value. We find that the learned Counsel relied on the Judgment of the Calcutta High Court in the Sneha Traders, but the Apex Court has not approved of this Judgment in a 3-Member Judgment rendered in the case of Rajkumar Nitting Mills (P) Ltd. v. CC, Bombay, 1998 (98) ELT 292(SC). In this case, there was a contract price but the same was not accepted in view of higher comparable price available for comparison. The facts of this case clearly apply to the case in hand. The findings recorded by the Apex Court in paras 5 to 9 are re-produced below:
"5. The relevant provisions of Section 14 of the Act, as it stood at the relevant time, were as follows:
Section 14. VALUATION OF GOODS FOR PURPOSES OF ASSESSMENT. (1) For the purposes of the Indian Tariff Act, 1934 (32 of 1934), 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--
(a) 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;
(b) Where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this behalf".
6. A perusal of the said provisions contained in Section 14(1)(a) shows that for payment of customs duty the value of the goods is:
(i) the price at which such or like goods are ordinarily sold or offered for sale,
(ii) for delivery at the time and place of importation and exportation as the case may be,
(iii) in the course of international trade,
(iv) where the seller and the buyer have no interest in the business of each other and price is the sole consideration for the sale or offer for sale.
7. This means that the value of the goods is to be ascertained on the basis of the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation and exportation in the course of international trade. The relevant date would, therefore, be the date of importation or exportation. Shri Mehta has laid stress on the words "ordinarily sold or offered for sale" and has submitted that in view of these words the date of contract is the relevant date. We are unable to agree. The words "ordinarily sold or offered for sale" have to be read alongwith the words which precede and the words that follow these words. If thus read these words mean that for the purpose of assessing the value it is necessary to ascertain the price at which the said or like goods are sold or offered for sale for delivery at the time and place is importation and exportation in the cases of international trade. The words "ordinarily sold or offered for sale" do not refer to the contract between the supplier and the importer, but to the prevailing price in the market on the date of importation or exportation. We are, therefore, unable to accept the contention urged by Shri Mehta that the Tribunal has committed any error in proceeding on the basis that value has to be assessed according to the price as on the date of importation and not on the basis of the date of contract.
8. Shri Mehta has placed reliance on the decision of the Calcutta High Court in Sneha Traders (Pvt.) Ltd. v. Collector of Customs, 1992 (60) ELT 43 (Cal.) wherein the learned Judges have expressed the view that assessable value has to be determined on the basis of the international market price at the time of entering into the contract and the delay in shipment on the part of the supplier cannot have any effect on determination of the assessing value. We find it difficult to agree with the said view of the Calcutta High Court. We are of the view that the contract between the supplier and the importer may have a bearing in governing the inter se relationship between the supplier and the importer but in so far as assessment of the value for the purpose of levy of customs duty under Section 14 of the Act is concerned, what is necessary is to determine the value of the goods as on the date of importation or exportation. 9. In the present case, the value of the goods has been assessed on the basis of price paid by M/s. Hibotex Pvt. Ltd. in respect of similar goods which were imported from the same supplier at about the same item as import of goods by the appellant. The date of shipment of the goods imported by M/s. Hibotex Pvt. Ltd. was June 25, 1988 and the date of arrival of the goods was August 4, 1988 while in respect of the goods imported by the appellant the date of shipment was June 18, 1988 and the date of arrival was July 26, 1988. There was a difference of about a week only between the dates of shipment and dates of arrival of goods in the said imports. The price of the goods imported by M/s. Hibotex Pvt. Ltd. could, therefore, provide the basis for assessing the value of the goods imported by the appellant. The price of the goods imported by M/s. Hibotex Pvt. Ltd. was 7,00,000. Japanese Yen per se. Having regard to the fact that the appellants had contracted for a larger quantity, the Additional Collector has allowed quantity discount of 1,00,000 Japanese Yen per se on the basis of the letter of suppliers dated September 7, 1988 and he assessed the value of the goods at 6,00,000 Japanese Yen per se. The said assessment has been upheld by the Tribunal. We do not find any infirmity in the said approach of the Additional Collector. In the circumstances, we do not find any merit in the appeal and the same is accordingly dismissed. There shall be no order as to costs."
We find that the above ratio of the Judgment clearly applies to the facts of this case. Respectfully following the ratio thereof, we do not find any merit in this appeal and the same is rejected.
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(S.L. Peeran) Member (J)
4. I have gone through the order of the learned Member (Judicial) and I am not able to persuade myself to agree with him on the following grounds:
5. The learned Member has relied on the decision of the Hon'ble Supreme Court of India in the Raj Kumar Knitting Mills (P) Ltd. v. CC, Bombay, 1998 (98) ELT 292 (SC) wherein it was held that contract between buyer and seller may have a bearing in governing inter se relationship between the two but the relevant date for determination of value for assessment of Customs Duty is the date of importation or exportation and not the date of contract. A careful reading of the Supreme Court Judgment would indicate that in the above case, the vessel arrived at the Indian port on July 26, 1988. On that date, the law which was prevailing with regard to valuation, was based on the deemed value concept and not on the transaction value. W.e.f. 16.8.1988, the concept of transaction value was introduced in the Customs enactments. In the scheme of Customs Valuation, we have to follow the Valuation Rules. Normally, as per Rule 3 of the Customs Valuation Rules, 1988, the value of imported goods shall be the transaction value. The transaction value can be rejected only when the case falls under anyone of the instances spelt out in Rule 4(2) of the Customs Valuation Rules, 1938. The learned Judicial Member has stated that according to the Commissioner (Appeals), the present case falls under Rule 4(2)(b). According to the above mentioned Rule, the transaction value shall be accepted provided that the sale does not involve any abnormal discount or reduction from the ordinary competitive price. The Commissioner (Appeals)'s view does not appear to be correct. The facts of the case indicate that the appellant entered into contract with Singapore party for the supply of 1000 MTs. of Sunflower Crude Oil (Edible Grade) at 428USD per MT CIF Kakinada on 19.6.2001 with a condition that the supply is to be made by July 2001. The foreign supplier defaults. Thereafter, on 31st July 2001, the parties agree for extending the time for delivery till September 2001. On 10.8.2001, the first consignment of 500 MT's was cleared by Bill of Entry at 428 USD per MT. On 29.9.2001, the last consignment of 500 MT was sought to be cleared at the same rate. Since in the same vessel, another consignment of identical goods were supplied at 485 USD per MT, the Revenue initiated action against the appellant for differential duty on the ground that there is a contemporaneous value at 485 USD per MT.
6. From the above facts, it is clear that the transaction value in respect of the appellant is only 428 USD per MT. If we have to reject the transaction value, the transaction should fall under any one of the instances enumerated in Rule 4(2). In my view, none of the instances enumerated in Rule 4(2) is applicable to the present case. The value of 428 USD per MT has been arrived at purely on commercial considerations based on contracts. The supplier, in order to honour the contract, supplied the goods at the contracted price. There is also no allegation that the appellant paid to the supplier more than the contracted value. Under these circumstances, there are actually no grounds to reject the transaction value. The reliance on Rajkumar Knitting Mills case does not appear to be correct as the same was rendered in the context of the old law. In the landmark Judgment in the case of Eicher Tractors Ltd. v. CC, Mumbai,: 2000 (122) ELT 32 (SC), the Hon'ble Supreme Court has held that in the absence of special circumstances, price of imported goods is to be determined under Section 14(1)(A) in accordance with the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The 'special circumstances' have been statutorily particularlised in Rule 4(2) and in the absence of these exceptions, it is mandatory for Customs to accept the price actually paid or payable for the goods in the particular transaction.
7. In the present case, in my view, there are no 'special circumstances' warranting rejection of the transaction value. Hence, I propose to allow the appeal.
Sd/-
(T.K. Jayaraman) Member (T) Difference of Opinion
8. In view of the differences of opinion, the matter is referred to the Hon'ble President for referring the points of dispute to the third Member to answer:
Whether the appeal is required to be rejected as held by the Member (Judicial) Dr. S.L. Peeran in terms of his order or The appeal is required to be allowed as held by the Member (Technical) Shri T.K. Jayaraman in terms of his order?
Sd/- Sd/- (T.K. Jayaraman) (S.L. Peeran) Member (T) Member (J) P.G. Chacko, Member (J)
9. The relevant facts of the case have already been stated by learned brothers. However, the pertinent facts which are relevant to the issue arising in the case are being mentioned. The appellants entered into a contract with the Singapore party for purchase of 1000 MTs of Crude Sunflower Oil (Edible grade) at US$ 428 per MT CIF Kakinada. The goods had to be supplied by July 2001. But the Singapore party failed to comply with this condition. On 31st July 2001, the parties agreed for extension of the time for supply of the goods up to September 2001. Accordingly, the goods were supplied in two consignments of 500 MTs each before the end of September 2001. The first consignment was cleared at Customs on 10.8.2001 against payment of duty on the value declared in the Bill of Entry viz. US$ 428 per MT. The second (and last) consignment of 500 MTs was also sought to be cleared likewise by the appellants under Bill of Entry dt. 29.9.01. At this stage, the department sought to enhance the assessable value of the goods to USD 485 per MT on the basis of a contemporaneous import. In the vessel which brought the second consignment of crude sunflower oil to the appellants, there was another consignment of 500 MTs of identical goods supplied at the rate of US$ 485 per MT to another importer viz. M/s Priyanka Refineries Pvt. Ltd. It was this import by M/s. Priyanka Refineries Pvt. Ltd. that was adopted as 'contemporaneous import' for the purpose of assessment of the appellants' goods. The issue before me is whether it was open to the department to reject the transaction value of the subject goods and adopt the value of the contemporaneously imported goods.
10. Heard both sides. Ld. counsel for the appellants and Ld. SDR for the Revenue reiterated their respective arguments. Ld. counsel mainly relied on the Supreme Court's judgment in Eicher Tractors Ltd. v. CC Mumbai, 2000 (123) ELT 321 (SC) and submitted that it was not open to the Customs authorities to reject the transaction value solely on the ground that a higher value was available from a contemporaneous import of identical goods. The transaction value could be rejected only in the circumstances specified under Rule 4(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. None of such circumstances had been brought out by the lower authorities. Therefore, according to Ld. counsel, the transaction value of US$ 428 per MT had to be accepted for the purpose of assessment of the subject goods to duty of Customs. Ld. counsel also relied on the Tribunal's decision in the cases of Vision Trade Links v. CC, Nagpur, 2004 (169) ELT 151 (Tri.-Del.) and Spice Communications Ltd. v. CC New Delhi, 2004 (170) ELT 249 (Tri.Del.). He also submitted that the case of Rajkumar Knitting Mills (P) Ltd. v. CC, Bombay, 1998 (98) ELT 292 (SC) relied on by the learned Member (Judicial) of the regular bench was distinguishable on facts from the instant case. It was pointed out that, during the period of dispute in the case of Rajkumar Knitting Mills, the Customs Valuation Rules, 1988 were not in force and that the Supreme Court had rendered its decision having regard to the provisions of the Valuation Rules then prevailing. On the other hand, the Apex Court's decision in the case of Eicher Tractors (supra) was in relation to the Customs Valuation Rules, 1988.
11. Ld. SDR, relying on the Supreme Court's decision in Punjab Processors Pvt. Ltd. v. CC, 2003 (157) ELT 625 (SC), submitted that it was open to the Customs authorities to rely on comtemporaneous evidence to show that the transaction value was not correct. She also endeavoured to draw support from Rajkumar Knitting Mills (supra).
12. After giving careful consideration to the submissions made before me, I find it difficult to persuade myself to endorse the stand taken by the Revenue on the facts of this case. The valuation of the subject goods is governed by the Customs Valuation Rules, 1988. These very rules had fallen for examination by the Apex Court in the case of Eicher Tractors (supra). The Apex Court rejected the Revenue's contention that Rule 4(1) allowed the ordinary international value of the goods to be ascertained on the basis of data other than the price actually paid for the goods. Their lordships, further, held that, in terms of Section 14(1) and Rule 4, the price paid by an importer to the vendor in the ordinary course of trade shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularized under Rule 4(2). The special circumstances particularized under Rule 4(2) were also reproduced in the Apex Court's judgment and the same are as under:
"(a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which--
(i) are imposed or required by law or by the public authorities in India; (ii) limit the geographical area in which the goods may be resold; or (iii) do not substantially affect the value of the goods;
(b) the sale or price is not subject to same condition or consideration for which a value cannot be determined in respect of the goods being valued;
(c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these rules; and
(d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of Sub-rule (3)"
On going through the impugned order of the Commissioner (Appeals), I have not come across any clear finding as to which of the above circumstances existed in relation to the goods imported by the appellants. Though the impugned order says that the subject import falls within the exception contained in Clause (b) above, there is no discussion on the point. In other words, Ld. Commissioner (Appeals) has not established that any of the aforesaid exceptions/special circumstances did exist in relation to the subject import. Consequently, one has got to fall back on the transaction value of the imported goods. This, I think, will be in keeping with Rule 4 read with Section 14 (1) as interpreted by the Apex Court in the case of Richer Tractors (supra). There is no dispute of the fact that the subject goods were supplied to the appellants at a price agreed between them and their supplier. Again, the Revenue has no case that anything in excess of the agreed price was paid or payable by the appellants to their supplier under the contract, nor is it the case of the Revenue that the said price was influenced by any consideration other than commercial. In such circumstances, there is no justification for rejecting the transaction value of the goods. Yet another pertinent point, which is discernible from the facts of the case, is that the unit price of US$ 485 gathered by the department from contemporaneous import was in respect of a total quantity of 500 MTs of crude sunflower oil (Edible grade), whereas the subject matter of the present valuation dispute is a total quantity of 1000 MTs of identical goods. Obviously, the department did not take into account this quantity difference while adopting the unit price of US$ 485 as standard for the purpose of assessment of the subject goods.
13. As rightly pointed out by Ld. counsel, the case of Rajkumar Knitting Mills (supra) is distinguishable inasmuch as, in that case, the question which had arisen before the Apex Court was in relation to the relevant date for determination of value for assessment of Customs duty and it was held that the date of importation, and not the date of contract, was the relevant date for the such purpose. In that case, the price of goods covered by a contemporaneous import was accepted as the basis for determining the assessable value of the goods imported by the assessee. This, however, had nothing to do with the Customs Valuation Rules, 1988 as rightly noted by learned Member (Technical) of the regular bench. There is no parallel between the instant case and the case of Rajkumar Knitting Mills (supra) insofar as the valuation issue is concerned. Hence, in my considered view, the Apex Court's decision in Rajkumar Knitting Mills (supra) is of no aid to the Revenue in the present case. As regards the Supreme Court's judgment in Punjab Processors (supra) cited by Ld. SDR, I note their lordships' observation that, while the Customs authorities, in assessing the value of import, are not bound by the figure mentioned in the invoice, they can rely on contemporaneous evidence to show that the invoice price is not the correct value. In the instant case, it was not the invoice alone but also the contract between the appellants and their supplier that provided the transaction value of the subject goods and the Customs authorities had no reason whatsoever to reject this value. Thus, the Revenue cannot claim effective support from Punjab Processors (supra).
14. For the reasons already noted, I hold that the transaction value of the subject goods requires to be accepted, in this case, for the purpose of assessment to Customs duty. Accordingly, the appeal is allowed.
Registry to take steps for pronouncement of the majority decision.
Majority Order In terms of the majority order, the appeal is allowed.