Customs, Excise and Gold Tribunal - Delhi
Scientific Instrument Co. Ltd. vs Collector Of Customs on 24 February, 1987
Equivalent citations: 1989(41)ELT599(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. In this appeal, the dispute is on determination of assessable value of Scientific Instruments imported by the appellants.
2. On 5.12.1986, the appellants made a preliminary objection stating that the Collector (Appeals) had passed the impugned order without hearing them. However, they added in the same breath that they did not want a remand of the matter, to the Collector (Appeals) but wanted this Tribunal to decide it on merits. Today, when the hearing was resumed, they again stated that they were not pressing the point of not being heard by the Collector (Appeals).
2A. The facts, in brief, are that the appellants were sole distributors of about 20 foreign suppliers of Scientific Instruments, for the whole of India. For this purpose they had entered into agreements with these foreign suppliers. According to these agreements, they were to get discount/commission ranging from 12.5% to 20% on the Instruments imported by them. In terms of agreement, out of the discount/commission, the appellants were to spend money on promoting sales of the products of the foreign suppliers in India, installing the Instruments at the customer's premises, training the customer's staff to handle the Instruments and attend to warranty/after sale service obligations etc. in respect of the Instruments, free of cost to the foreign supplier as well as to the customer. In addition to the imports by the appellants, there were 'quite a large number of imports' of the Instruments from the same supplier by other independent parties in India, such as, various U.N. agencies, various departments and agencies of the Government of India, Ford Foundation, Rockfeller Foundation etc. etc. These other importers got no discount/commission from the foreign supplier. They paid full price for the Instruments imported by them as per the respective foreign supplier's price list. The foreign supplier, however, passed on a portion of the price to the appellants as overriding commission or compensation for the free installation, training, after sale service and warranty obligation to be undertaken by the appellants even in respect of the Instruments imported by others. In the background of these facts, the contention of the appellants is that since they had a special relationship with the foreign suppliers, assessable value of the Instruments imported by them was not ascertainable under Section 14(1)(a) of the Customs Act,1962 and hence the assessable value should be determined under Section 14(1)(b) read with Rule 5(a) of the Customs Valuation Rules,1963. The lower authorities have, on the other hand held that since there were sizeable imports of the Instruments by other independent importers in India, value under Section 14(1)(a) was ascertainable from the prices paid by these other importers and, as such, resort could not be had to Section 14(1)(b) and the Valuation Rules.
3. We have heard both sides at length and have given the matter our earnest consideration. For ready reference, we re-produce below the material portion of Section 14 of the Customs Act -
"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-
(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 :
[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;]
(b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this behalf x x x x x x x x x x x x x x x x x x X X X X X X "
It is quite evident, and even the appellants do not dispute it, that the net price paid by them for their imports was not the sole consideration for the sale because, as per their agreements with the foreign suppliers, they were required to perform various services like advertisement and publicity for the products, their installation and after sale service, training and warranty obligations etc. on behalf of the foreign suppliers. These obligations rightly belong to the foreign manufacturer/supplier because, considering the nature of the products, they were essential to make the products marketable. The appellants performed these services and obligations at their own cost which was in addition to the net price which they paid to the foreign supplier; The foreign supplier got this additional consideration in the shape of services if not in cash. For this reason, the net price paid by the appellants could not be the assessable value in terms of Section 14(1)(a). But that alone would not be a sufficient reason for leaving out Section 14(1)(a) and going to Section 14(1)(b) because in this case there were sizeable import of the same goods by other independent importers. The price which these other independent importers paid fulfilled all the ingredients of Section 14(1)(a). These other importers had not to pay any additional consideration, direct or indirect. When such price under Section 14(1)(a) was available, the statute does not permit resort to Section 14(1)(b) and the Valuation Rules.
4. Both sides cited a lot of case law in support of their respective contentions but we find that none of it was on the point except one case of General Marketing and Manufacturing Company Ltd. - [1987 (27) ELT 344 (Tribunal)] the facts of which alone are somewhat similar to the case before us. Our conclusion in that case was also the same as we have arrived in this case.
5. In the circumstances, we hold that the lower authorities were correct in assessing the imports made by the appellants at the value under Section 14(1)(a) of the Act which was ascertainable and in rejecting the lower price paid by the appellants which was not the sole consideration for the sale. Accordingly, we dismiss the appeal.