Customs, Excise and Gold Tribunal - Delhi
Nav Bharat Enterprises Pvt. Ltd. vs Collector Of Customs on 31 December, 1987
Equivalent citations: 1988ECR351(TRI.-DELHI), 1988(34)ELT388(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. A common issue is involved in these three appeals. They were, therefore, clubbed together, heard together and hence this common order.
2. The appellants imported some leather tanning machinery from M/s. Investa, Czechoslovakia and M/s. Turner, U.K. for setting up a project in India. They had obtained a proforma invoice from Investa on 30-5-1975. However, because of some delay involved in making arrangement with the financial institutions and licencing authorities, the appellants could open the L/C with Investa only on 29-8-1975. In between, Investa had brought out a new price list on 1-8-1975 according to which the prices of their machinery had more than doubled. The appellants say that Investa agreed to supply their machinery as per the old price list of 15-11-1974, as per the proforma invoice dated 30-5-1975. In the case of imports from U.K. the appellants obtained the proforma invoice from Turner on 11-7-1973. But they could open the Letter of Credit only on 3-9-1975. In between, Turner had increased their prices by about 40%. Here also, the appellants plead that Turner agreed to adhere to the old prices of 1973. The appellants argued that there was no mala-fides or out of the way dealings in their case. They had negotiated with M/s. Investa and M/s. Turner and both of them had agreed to adhere to the old prices quoted in the proforma invoices. The appellants stress that their dealings were fair and at arm's length and that is why the authorities have not chosen to take any penal action for confiscation of the goods or for imposition of penalty under Section 111(m) read with Section 112 of the Customs Act, 1962.
3. The learned representative of the department stated that the concept of value under Section 14 was a deemed value and not necessarily the invoice value of a particular importer. He reiterated the arguments of the lower authorities according to which the ruling prices as per the price lists in force on the date of opening of letters of credit had been taken as the basis of assessment of customs duty.
4. On careful consideration, we find that Section 14 of the Customs Act, 1962 required the goods to be valued at the prices 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...". According to this provision, the price has to have a nexus with the time of importation; it should also be the price charged ordinarily in the course of international trade. Thus, if a particular importer, may be because of bonafide efforts on his part, is able to negotiate an exceptionally low price, which is not availabie to other importers at the relevant time, such exceptional prices cannot form the basis of assessment under Section 14. The contract for import in these cases became firm only when the letters of credit were opened on 28-9-1975 and 3-9-1975. As on these dates, M/s. Investa and Turner had already increased their prices by 40% to more than 100%. Any other importer wanting to contract purchase of the machineries from them at about that time could not have got the prices in force in 1973 and 1974. Those prices had become totally obsolete by August/September, 1975. The authorities have not alleged any mens-rea on the part of the appellants. It may be that they were able to negotiate a lower price with the foreign supplier but the point is that the lower price obtained by them was not the price ordinarily quoted in the course of international trade during August/September, 1975. Their exceptionally low prices, thus, do not meet the test of Section 14 of the Customs Act, 1962.
5. We find further that the foreign supplier's own documents on record also show that prices of 1973 and 1974 were not firm prices. In the case of Turner, U.K., the proforma invoice stated that it was valid only for a period of six months. It further added : "all our prices are to be considered as approximate only, the prices to be charged on completion being our standard prices ruling at the date of delivery". Similarly condition No. 17 on the back of Investa, Czechoslovakia's order confirmation dated 20-12-1975 stated that if there was a substantial increase in prices "over 5%", the prices agreed upon would be amended accordingly. If in spite of all these conditions, the appellants were able to extract a lower price from the two suppliers, the exceptional and extraordinary treatment obtained by them cannot form the basis of assessment under Section 14 of the Act. In this Section, we are concerned with the prices ordinarily charged in the course of international trade.
6. In the circumstances, we uphold the value as assessed by the lower authorities and dismiss the three appeals. (Pronounced in open Court).