Customs, Excise and Gold Tribunal - Delhi
Steel Tube Products vs Collector Of Customs on 27 April, 1989
Equivalent citations: 1989(25)ECR261(TRI.-DELHI), 1989(44)ELT97(TRI-DEL)
ORDER V.P. Gulati, Member (T)
1. This is an appeal against the order of Collector of Customs, Cochin. Brief facts of the case are that the appellants sought clearance of 103 coils of galvanised steel declaring the same as defective coils with a declared weight 379.85 MT. The value for assessment purposes declared for the same was Rs. 10,04,550.22 P. The goods were imported from Japan while the invoice covering the goods is from a party in London. The licence under which the goods were sought to be cleared is an REP licence issued in the name of one M/s Ganpathy Exports Limited, Calcutta and the same was transferred in the name of M/s National Engineering Works, Bhopal with an endorsement under para 148 of the Import Policy. The import by the appellants was under the letter of authority issued in their favour by M/s National Engineering Works, Bhopal. A doubt was entertained by the Cochin Customs authorities regarding the licence and the enquiries of the said authorities revealed that some action was contemplated against M/s National Engineering Works for obtaining the endorsement in respect of para 148 of Import Policy with the list of permissible items allowed under the licence fraudulently and the licensing authorities requested the customs authorities not to release the goods. The licensing authorities issued a show cause notice to M/s National Engineering Works on 24-4-1985 and the licence was later suspended by an order by the Joint Chief Controller of Imports & Exports, Bombay vide his letter dated 9-9-1985.
2. Further, the goods were examined and arranged to be tested to ascertain their quality, namely, whether the same were of prime quality or seconds as claimed. From the test result, the authorities came to the tentative conclusion that the goods were of prime quality. A test weighment of the ten coils was done and the weight was found to be higher than that of declared and the weight of the consignment was arrived at on the basis of weight of the ten coils as above on a pro rata basis and found to be in excess of that declared in the bill of entry and as shown in the invoice to the extent of 539.85 M.T. The authorities also questioned the appellants about the declaration that the coils imported were defective and appellants produced a test certificate purported to be in respect of the goods from the suppliers of the goods in Japan. In the certificate the goods were described as 'Second Grade' due to occurrence of off-gauge and bungling of zinc coating visible on surface. The Customs authorities got the goods tested by the Cochin Shipyard, Ernakulam who after test have described the samples as having fairly uniform coating and thickness and that the galvanising was satisfactory.
3. The authorities, replying on this test report, considered the coils imported to be of prime quality. They did not, in view of this, accept the value of the goods and prima facie, felt that the value was low and relying on a recorded price for the prime sheets as ranging from US $ 500 - 550 per MT worked out the value of the goods as Rs. 27,71,130.35 P. and undervaluation of over Rs. 17 lakh involving a duty of Rs. 23,47,030.12 P. was indicated.
4. The appellants, by the issue of a show cause notice, were charged that the violation of Section 111(d) & 111(m) of CA62 and provisions of Section 112 of Customs Act, 1962 were also invoked. The Collector after giving the appellants an opportunity of personal hearing, held the goods to be liable to confiscation under Section 111(d) and 111(m) and allowed the goods to be redeemed on payment of a fine of Rs. 2 lakhs. He fixed the redemption fine low for the reason that the goods had already incurred heavy demurrage. A penalty of Rs. 1 lakh was also imposed on the appellants. The learned advocate for the appellants opening his arguments drew our attention to the various relevant dates in the proceedings before the lower authorities and the dates on which the licence, the letter of authority were issued and the dates relating to the placing of the order for the goods etc. He stated that the licence against which the goods were imported is dated 2-2-1985 and the letter of authority in favour of the appellants was issued on 2-4-1985 after the licence had been endorsed in favour of another party. He stated that the appellants received an offer from the supplier on 14-3-1985 and the same was accepted by the appellants on 30-3-1985. He stated that the goods were originally bound for Mangalore but the same except for 10 coils could be unloaded only at Cochin and the appellants filed the necessary bill of entry for the same on 30th July, 1985. The sample for test was drawn and the test report for the same was furnished by the Cochin Shipyard on 26-8-1985. He pleaded that the licence against which the letter of authority had been issued was suspended vide JCCI's order dated 9-9-1985 and a show cause notice for the suspension of the licence was issued on 24-4-1985. The goods were surveyed on 24-4-1985 by an independent surveyor. The learned advocate advanced arguments on the following four aspects involved in the case -
(i) the validity of the licence for covering the goods;
(ii) regarding the quality of the goods i.e. whether they were of prime quality or second quality;
(iii) valuation of the goods;
(iv) the excess quantity found.
5. The learned advocate pleaded that the licence was issued in the name of Ganpathy Exports Ltd. and the same was transferred to M/s National Engineering Works on 25-3-1985 and a letter of authority was issued in the name of the appellants on 2-4-1985. He pleaded that the transaction for the import of the goods between the supplier and the appellants was concluded by the acceptance of the offer made by the supplier vide their letter dated 14-3-1985 and vide the acceptance letter dated 10-3-1985. He pleaded that at the time of import of the goods, the licence was still valid and suspension order was issued much later. He pleaded that in view of the judgment of the Hon'ble Supreme Court in the case of East India Chemical AIR 1962 SC 1893 and which was followed by the Tribunal in their decisions in the case reported in 1984 (16) E.L.T. 519, the licence should be taken to be covering the goods and valid at the time of import of the goods. He pleaded that even if the show cause notice had been issued for suspension of the licence, the licence remained valid for the clearance of the goods imported by the appellants. The learned Advocate was asked by the Bench whether he had any correspondence leading to the supply of the goods and the correspondence leading to the acceptance of the offer or any other evidence to show that the import was intended to be made against the licence produced or whether there was any letter of credit opened against the licence produced. The learned advocate had no correspondence to produce nor could he show that the transaction was concluded for import against this licence.
6. Regarding the second point i.e. quality of the goods, the learned advocate stated that they had obtained the test report from the suppliers which is dated 13-4-1985 and the same was issued by the Japanese suppliers. It was pointed out to the learned advocate that the test certificate issued is on the letter head of NIPPON KOKAN & KK and the customers name shown thereunder is NAKAMURA Enterprises Co. Ltd. while the invoice for the goods had been raised by a London party M/s Alva Ltd., London and he was asked as to how the test result memo could be connected with the invoice of the goods and also how he could show that the same was connectable with the goods. He stated that the marks and numbers on the certificate related to this consignment. It was pointed out to the learned advocate that at the time when the test would have been carried out, there was no question of marks and numbers in respect of the goods tested being these as the goods were to be supplied by M/s NIPPON KOKAN to M/s Nakamura Enterprises who in turn despatched the goods at the behest of the London party who raised the invoice, at a later date as the test of goods would have been apparently done at the time of manufacture and was the result of quality control check immediately after manufacture. He had no explanation to offer in this regard. He however, pointed out that in this test report of the manufacturers, the goods had been classified as second grade due to off gauge which occurred through rolling miss in the factory and bungled zinc coating on surface. He pleaded that the Department had sent the sample for test to Cochin Shipyard while normally the samples are tested by the Departmental Dy. Chief Chemist. He pointed out that the sample drawn was a small one. He drew our attention to para 29 and 30 of the order-in-original and pleaded that the relivance of the Collector on the opinion of the Cochin Shipyard was misplaced and that he had not appreciated their plea in this regard. He pleaded that the Cochin Shipyard was not a recognised test house for testing of the steel sheets and he pleaded that the test report cited by the Department has no value. He pleaded that the party had also got the goods tested and while the Collector took note of the report he failed to appreciate it properly. In this connection, he drew our attention to para 8 of the reply of the show cause notice. The same for convenience of reference is reproduced below: -
"With regard to the second allegation that the goods are not GP defective steel coils, it is submitted that the documents which have been sent with the consignment - all describe the goods as defective. Over and above the same, the certificate has been issued by the original supplier confirming that the goods are defective. This, therefore, proves that the goods are defective and there is no scope to allege that the goods are either prime or that they are not defective. A copy of the supplier's said certificate has already been furnished and is in your files. A photocopy of the same received by our clients will be shown at the time of the personal hearing. It is also submitted that ISI-2629-1966 does not lay down the reasons to call product as "defective" nor there is any ISI standard specially created with regard to defective goods. It is submitted that it is only the commercial parlance or a report from a metallurgist that could prove and substantiate by giving reasons as to why the goods could be called defective since it is even held by a judgement of CEGAT Delhi that ISI is not a test for classifying the goods but it is the commercial parlance or how the same is known in the market by the people who deal with the same. You have also obtained a report from the Cochin Shipyard about the inspection carried out on the goods in question dated 26-8-1985 for which we state as under".
7. He pleaded that the test report obtained by the Cochin Shipyard does not in any way state whether the goods were of prime quality. Adverting to the valuation, he pleaded that the valuation of the goods was based on a telegram which had no evidential value. He pleaded that no contemporaneous evidence in regard to the value had been adduced by the Department.
8. Regarding the excess weight for which the appellants have been charged, he pleaded that there was no excess weight in respect of the goods when the delivery was taken and for arriving at the total weight of the consignment no acceptable method had been followed.
9. The learned Sr. Departmental Representative for the Department pleaded on the various aspects as above. In regard to the licence produced, he stated that no order as such was placed against the licence for the supply of the goods. He pleaded that the letter of the appellants dated 13-3-1985 was not an acceptance of an order. He pleaded that in this view of the matter, it could not be said that the import had been made against any particular licence or any order was covered by the licence. He pleaded that there was no reference in the invoice to the import licence. He pointed out that the original licence was issued in the name of M/s Ganpathy Exports and the same was endorsed in the name of another party and endorsement was also obtained on the licence for import in terms of para 148 of the Import Trade Control Policy for import of material by the licence holder for his actual use for the purpose of manufacture of goods for reexport. The show cause notice was issued by JCCI vide letter dated 24-4-1985. He cited at this stage the order of the licensing authority dated 5-6-1987 regarding cancellation of the licence and wanted the same to be admitted as additional evidence. The said oral request made was turned down by the Bench as the learned SDR wanted to rely on the proceedings before the Licensing authorities when he had no material in his possession in respect of these proceedings except the final order of the authorities. He also did not state that he would be able to get all the relevant material.
10. Regarding the quality of the goods imported, he pleaded that the goods had been declared as defective GP steel coils while the offer was for seconds. He pleaded that the goods had been pleaded to be of second quality being off gauge and as having defects in the zinc coating. He pleaded that there was no specification produced as to how the goods could be declared as of second quality. He pleaded that the test done by the Cochin shipyard showed that the goods were of fairly good quality and these could not be considered as second quality but only of prime quality.
11. He pleaded that the offer made to the appellants was for 450 MT. but supply as per the invoice was for 413 MT. He pleaded that test weighment of 10 coils was done and the weight of the whole consignment was arrived at on a pro rata basis on the weight of the test weighment of 10 coils. He pleaded that the appellants in fact had paid duty on the excess weight as ascertained above. He pleaded having accepted to pay the duty on excess weight, the appellants could not now complain that there was no excess weight.
12. Regarding valuation the learned Departmental Representative pleaded that the Collector had assessed the value of the goods based on the recorded price obtained from Calcutta Customs House for prime quality coils. He pleaded that the goods had been supplied from Japan while the invoice was from London. In these circumstances, he pleaded that either the price as adopted by the Collector in his order should be accepted or in case the Tribunal felt that enough information was not made available, the matter for this limited purpose could be remanded.
13. The points that arise for consideration are -
i) Whether the licence produced by the appellants was valid for the purpose of goods imported;
ii) Whether the weight of the goods imported was in excess of the declared weight and as ascertained by the Customs authorities;
iii) Whether the goods imported were of prime quality or second quality;
iv) Whether the value declared by the appellants in the Bill of entry reflected the correct value under Section 14(1) (4) or the value adopted by the Customs was in terms of Section 14 of the Customs Act.
14. It is seen that the original licence was issued in the name of M/s Ganpathy Exports Ltd. with the description of the goods OTS containers. The licence is dated 12-2-1985 and Policy applicable is April/March, 1985. This license was acquired by transfer by M/s National Engineering, Bhopal and was endorsed for the import of items as per list attached under para 148 of the Import Policy 1984-85, subject to conditions as laid down in the Schedule V to Import Control Order, 1955 and other conditions as per para 148 (x) and (xi) of the 1984-85 Policy. M/s National Engineering also executed a legal undertaking as per para 148 (x) and that it is stated in the licence that it is not transferable. This endorsement, as seen from the copies of the licence from the licencee, were made by the Licensing authority. The licence was valid for the following items in the list attached. These are as under -
Appendix - 5 Serial - 51 All coated/plated including galvanised aluminium and aluminium alloy coated and uncoated sheets/strips/coils of all grades of carbon steel not rolled or cold rolled not elsewhere mentioned but excluding plastic/vinyl coated sheets/strips/coils.
Appendix - 5 Serial - 55 All seconds/second grades/defectives/cuttings/circles of sheets/ plates/coils/strips/in any shape section/form not elsewhere stated in coated/plated or uncoated condition including tin/zinc/aluminium/aluminium alloy coated/plated and commodity marketed as tin free steel in the descriptions above stated.
Appendix 3 Serial 57 Tin plate waste waste.
15. There is no allegation that the goods imported by the appellants described as GP defective steel coils in the Bill of Entry are not covered within the scope of the items listed out in the list attached to the licence. The Revenue have held that licence as such was not valid for the import of the goods as at the timex when the goods were ordered for and before the import could take place, the Licensing authority contemplated proceedings for suspension of the licence and for ultimate cancellation of the licence. It is seen from the narration of the facts in the order in original that right from the beginning, the Customs authorities on scrutiny of the bill of entry and the documents filed therewith, entertained a doubt about the genuineness of the licence and they took up the matter with the Licensing authority at Bombay and Calcutta. The JCCI Bombay informed the Customs House that they were contemplating action against M/s National Engineering Works for obtaining endorsement on the said licence fraudulently and the Customs House was requested not to release the goods against the, above licence. This intimation to the Customs authorities is dated 11-4-1985. In the context of this date, the Revenue has pleaded that the various dates relevant in the context of the importation made are quite important and appellants also pleaded the same. The relevant dates for convenience of reference are set out below -
1. Date of issue of the licence 12-2-1985
2. Date of endorsement transferred to M/s. National 25-3-1985 Engg.
3. Letter of authority issued in the name of appellants by 2-4-1985 M/s National to M/s Steel Tube products
4. Application of sale by Albo bond letter No. 1/653 10-4-1985
5. Telegram from DC 11 11-4-1985
6. Bill of lading date 22-2-1985
7. Date of issue of notice of show cause by licensing 24-4-1985 authority to the appellants
8. Date of the invoice 13-5-1985 The appellants have stated other relevant dates related to the imports. The same are -
1. Date of offer 14-3-1985
2. Date of acceptance 30-3-1985
3. Date of filing the bill of entry. 30-7-1985
16. The pleas of the Revenue is that action was contemplated by the Licensing authority on 11-4-1985, and show cause notice for suspension of the licence was issued on 24-4-1985 that M/s National Engineering in whose name the licence had been endorsed, would have become aware about the proceedings being drawn against them and in turn the letter of authority holder would have been made aware of the same, by them. The learned SDR pleaded that the appellants instead of taking any action to stop the consignment, imported the goods notwithstanding the action contemplated against the licence. This action was initiated by the show cause notice on 24-4-1985. From the facts on record, no doubt, we observe the transaction for the import of goods was done in a very unusual manner. On a query from the Bench, the learned advocate could not produce any evidence that there was any correspondence which led to the supplier's offer for the goods. The record also does not show any exchange having taken place between the appellants and the seller of the goods in UK or those concerned with the manufacture and supply of goods, as to the nature, quality or the price of the goods to be imported of the specification of the goods. We observe that no Letter of Credit was opened and also there is no agreement that in case on importation, if the goods were not taken delivery of as to what could be the safeguard for the supplier in regard to the payment to be made. It is seen from the invoice that the draft was to be drawn for payment within 10 days from the date of the Bill of lading 22-4-1985, free of any bank interest. It is also pertinent to note that while Bill of lading is dated 22-4-1985, the invoice is dated 13th May, 1985. It is very strange that the Invoice should be prepared much after the goods were ready for landing on the ship. There appears to be no anxiety on the part of the supplier for getting this payment.
We observe that in spite of all the incongruities involved in this transaction vis-a-vis normal commercial transactions, the customs authorities have not done any indepth investigation to get at the totality of the facts regarding this transaction and to bring out any malafides involved pertaining to the valuation ITC Licence, weight, quality value etc. Not even statements have been recorded from the .concerned persons.
17. We observe from the record that the appellants were issued the letter of authority on 2-4-1985 and the supplier confirmation for the sale of the goods is dated 10-4-1985 while intimation that some action was contemplated by the appellants received by the Customs from JCCI authorities is dated 11-4-1985. The bill of lading is dated 2-4-1985 while the show cause notice in regard to the suspension etc. of the licence issued by the Licensing authority is 24-4-1985. It is seen that the appellants continued with the execution of the transaction during the period when the action had been initiated against the license. No evidence has been brought on record to show that the appellants were made aware about this action or any authority had warned them not to proceed with the transaction. There is even no record as to when the goods were loaded on the ship notwithstanding the fact that the Bill of lading is dated 22-4-1985. This aspect should have been examined particularly when the invoice is dated 13th May, 1985. All that is pleaded by the Revenue is that the appellants must have been made aware by the licence holder as to the action that was being taken. The question is, is that enough to disallow the importation which had been put through by the appellants. In this connection, we may observe the issue stand settled by the judgements of the Hon'ble Supreme Court in the case of East India Chemical Company v. Collector of Customs, Calcutta [1983 E.L.T. 1342] and the judgement of the Hon'ble High Court of Calcutta in the case of Carney Colour Agency and Anr. v. Chief Controller of Imports and Exports [1987 (30) E.L.T. 175 Calcutta] and the judgement of this Tribunal in the case of Prabhal General Agencies, Bombay [1984 (16) E.L.T. 519]. We observe that the Hon'ble Supreme Court in their judgement cited (supra) have held as under -
"Nor is there any legal basis for the contention that licence obtained by misrepresentation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause (8) of Section 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable; it is good till avoided in the manner prescribed by law. On May 1,1948, the Central Government issued an order in exercise of the power conferred on it by Section 3 of the Act to provide for licences obtained by misrepresentation among others and it reads :
The authorities mentioned in the schedule hereto annexed may under one or other of the following circumstances cancel licences issued by any officer authorised to do so under Clauses (viii) to (xiv) of the notification of the Govt. of India in the late Department of Commerce No. 23-ITC-43 dated 1st July, 1943 or take such action as is considered necessary to ensure that the same is made ineffective, namely -
(i) when it is found subsequent to the issue of a licence that the same has been issued inadvertently, irregularly or contrary to rules, fradulently or through misleading statement on the part of the importer concerned; or
(ii) when it is found that the licensee has not complied with any one or more of the conditions subject to which the licence may have been issued Schedule
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Clauses Licencing authority Cancelling authority
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Clause (xiii) Any officer authorises by Chief Controller of Imports the Central Govt. and/or Govt. of India
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This order, therefore, authorised the Govt. of India or the Chief Controller of Imports to cancel such licences and make them ineffective. The specified authority has not cancelled the licence issued in this case on the ground that the condition has been infringed. We need not consider the question whether the Chief Controller of Imports or the Govt. of India as the case may be, can cancel a licence after the term of the licence has expired, for no such cancellation has been made in this case. In the circumstances, we must hold that when the goods were imported, they were imported under a valid licence and therefore, it is not possible to say that the goods imported were those prohibited or restricted by or under Clause (iv) of the Act within the meaning of Clause (8) of Section 167 of the Sea Customs Act."
18. The Hon'ble Bombay High Court among other contentions took note of the judgement of the Hon'ble Supreme Court while deciding the issue whether the cancellation of the, licence was involved. The Tribunal in their judgement in the case of Prabhat General Agencies, Bombay v. Collector of Customs, Bombay [1984 (16) E.L.T. 519] have held as under -
"We have carefully considered the submissions of both sides. The crucial question to be answered is whether the subject goods could be said to have been imported without a valid licence attracting the mischief of Section 111(d) of the Customs Act. We are not concerned in these proceedings with the correctness or otherwise of the order of cancellation of the licence passed by order, though it purports to be under Clause 9(a) of the Import Control Order, is really one under Clause 9(cc) in view of the clear ground expressly stated therein. The order does not on the fact of it, show anything to indicate that the cancellation was to take effect from a prior date, the date of issue of licence. It is relevant to note here that Clause 9(3) of the Import (Control) order provides that the competent authority may, by order, render ineffective or suspend the operation of any licence where proceedings for clearly implies that unless an order in terms of Clause 9(3) is made, the licence continues to be operative till an order of cancellation is made in terms of order under Clause 9(3) was made in the case of the present licence. The licence should therefore, be deemed to have been operative and valid till 10-3-1981 on which date the Dy. CCI & E made his order of cancellation of the licence. The Department contention that the cancellation order rendered the licence void ab initio must as a consequence be rejected"
and have interpreted the judgement of the Hon'ble Supreme Court in the following terms. This is as under -
"When the court has held that even a licence obtained by fraud is only voidable that it is good till voided in the manner prescribed by law, there is no basis whatsoever for taking the view, as the Department wants us to do that the licence in the present case should by reason of its cancellation by the order of 10-3-1981 be deemed to have been invalid ab initio from 18-2-1980 the date of issue. When the goods were shipped from abroad and even when the goods arrived in India, the licence was in force. It cannot therefore be said that the goods were imported without a licence. In this view of the matter, the order of confiscation is bad in law. The orders of the lower authorities are set aside."
19. The learned SDR for the Department could not distinguish the facts as to how the ratio of the judgments of the Hon'ble Supreme Court and the Tribunal would not be applicable to the fact of the case. All he pleaded was that in the instant case, no order for goods had been produced or an acceptance as such nor a letter of credit or demand draft had been produced in this regard. He has not elaborated as to how the absence of these makes any difference from the legal point of view so far as the validity of the license in the light of the judgements above, is concerned.
20. We observe that the ratio of the judgement of Hon'ble Supreme Court and that of the Tribunal above, squarely applies to the facts of the case and inasmuch as, on the date of importation of the goods, the licence was still valid, it has to be held to be valid for the importation made.
21. The appellants have pleaded that the total weight of the consignment has been arrived at by the authorities on the basis of test weighment of the ten coils and that they had taken delivery of the consignment from the lower authorities as seen from para 18 of the order-in-original by stating that they were prepared to clear the goods on payment of appropriate duty on the excess weight provided the licence for the additional value was not insisted upon as the goods. According to them, the excess over the declared weight had been shipped to them without their knowledge. Even at the time of personal hearing, the same plea was taken. The appellants, we observe, have not ascertained from the suppliers as to the circumstances under which the goods in excess of the invoiced weight had been sent. There is no explanation in this regard before us as to how the goods were sent in excess of invoiced weight.
22. There is an endorsement on record by the appellants that they are ready to accept the weight on payment of duty on the consignment or the ascertained weight whichever is applicable under the circumstances. In this endorsement, they have stated, we accept the weight of ten coils to be true as it was done in the presence of our clearing agent. From the above, it is clear that the appellants for their own reasons, chose to accept the weight of the total consignment based on the test weight of the ten coils and not after getting having the whole consignment weighed. They can't now make a grievance of the excess weight as ascertained by the authorities based on weight of the ten coils and they cannot, therefore, make a grievance of action taken in respect of the same. The appellants plea therefore, in this regard is not maintainable and we dismiss the same.
23. The next point for consideration is whether the goods can be considered as second quality as claimed by the appellants or the same are of prime quality as held by the Revenue. In the case of a transaction which is entered into between a buyer and a seller, in a normal way where the agreement have been entered info, with full facts of the goods coming on record, the description of the goods as given in the correspondence exchanged between the buyer and seller, and in the invoice etc., would be quite relevant for the purpose of acceptance or otherwise of the description of goods as set out in the documents and unless there are very strong reasons to doubt, description etc., is accepted. Here we find as mentioned in the earlier paragraphs, the transaction has been entered into between the buyer and the seller in a very unusual manner. While the goods have come from Japan, the billing etc., has been done from UK. No correspondence leading to the offer or acceptance has been placed on record. There is nothing on record to show regarding the correspondence exchanged between the Japanese manufacturer and the firm which consigned the goods and the seller of the goods in UK to throw any light on the nature of the goods which were the subject matter of the sale. Inasmuch as the goods which were sought to be imported were of second quality, there would have been some description as to the nature of the defect before the price could be finalised. We observe that all that has been brought on record is an offer and an acceptance, a test certificate has been produced from the manufacturer in respect of the consignment sold to the Japanese buyer and the same is sought to be connected with the imported goods by the importers and by the marks and numbers which have been endorsed on this certificate. It is not understandable as to how the manufacturer could have got the wind of the same when the same goods were sold to a Japanese buyer before these were ultimately despatched to India. The test of the goods is normally done for their defects etc. at the Quality Control stage of the manufacture and the sale of the goods takes place thereafter. The description of the goods as sought to be made out for acceptance by the appellants is not based on an acceptable evidence. Further more, no standard specifications have been produced to show as to how these goods could be treated as of second quality or defective with reference to the prime quality goods. The Revenue on the other hand has arranged for the goods to be tested by Cochin Shipyard. During the course of the hearing, the learned SDR was asked as to what was the terms in which the test of the material was asked to be done. The learned SDR has given a copy of the letter dated 23rd August, 1985 addressed by the Assistant Collector to the Officer in Charge of the Metallurgical Laboratory, Cochin. The operative portion of the letter is reproduced below for convenience of reference -
"I am herewith sending two samples of galvanised steel sheets for ascertaining whether they are of uniform gauge and also for ascertaining whether there is any defect in the galvanising".
It is seen the parameters which were asked to be ascertained were the gauge and the defects in the galvanising. These are in fact the two parameters which the appellants have pleaded, were considered by the suppliers for treating the goods as of second quality. They have drawn our attention to the certificate of the manufacturers M/s Nippon wherein it has been stated that the material goods have been considered as second grade because of these being off cuts and also because of bungled zinc coating. It is not pleaded by the appellants that the samples were drawn behind their back. The samples were sent with the knowledge of the appellants. We find that these were sent to the Metallurgical Laboratory of the Cochin Shipyard. May be the Cochin shipyard is not a recognised as a test house like the National Test house but the fact remains that they are having a Metallurgical Laboratory where the goods were tested and test obviously was carried out to ascertain the parameters which normally a Metallurgical Laboratory should be equipped to do. It is seen the thickness has been measured on quite an accurate equipment and has been measured on micron scale and after measuring this, it has been concluded that the galvanising has been quite satisfactory. The appellants could have asked for the cross examination of the personnel of the Metallurgical Laboratory of Cochin Shipyard to challenge their conclusion if they so desired. They however, chose to put forth their own evidence. The test by surveyors arranged by appellants in the docks was not done in the presence of the Customs authorities and in any case any test of the quality is required to be done on an accurate equipment in a test laboratory. This report of Surveyors is not therefore, acceptable as evidence in support of the appellants plea that the goods were of second quality.
24. The appellants during the course of hearing were also informed that they could have made a request for retest if they so desired. We find that no request for re-test was made before the Collector nor even at this stage before us, they have not stated so and in fact the learned advocate for the appellants stated that the sample available will be only a small one and any test done on that will not be conclusive. It is seen, the goods have already been cleared by the appellants and in any case if they were so concerned about the findings of the Collector, they could have arranged for retest of the goods before clearance. Obviously, they did not request for re-test for their own reasons. In the facts and circumstances therefore the findings of the Collector cannot be considered in any way based on no evidence or perverse. He has held the goods to be of prime quality and in the circumstances of the case, these findings have to be held to be correct. We, therefore, dismiss the plea of the appellants in this regard.
25. In regard to the valuation, the appellants have pleaded that the Collector has arrived at the value based on a communication from another Customs House and that no evidence of contemporaneous import has been given. We observe that the Collector has not brought on record the particulars of import which have formed the basis of his valuation. He has recorded his enquiries from other Customs House which revealed that actual rate Rs. 650 per MT. and defective galvanised sheets at the rate of Rs. 3000 per MT. The appellants have a right to contest the basis adopted and for that, it was imperative for the Collector to have given the appellants full particulars of the import of the other goods, the value of which was adopted as the basis for valuation and it was for the Collector to record as to how that value in terms of Section 14 could be adopted for the purpose of arriving at the assessable value. Even if the basis adopted was correct, the very fact that the same was not revealed and the appellants were not given any opportunity to contest the same, taking into consideration the nature of the goods, the country of origin and other relevant parameters, it has to be held that there has been denial of principles of natural justice, apart from the fact, the basis as set out in the Collector's order, has not been shown to be acceptable. In view of this, we hold that the Collector's findings in regard to the assessable value are not maintainable in law and to this extent, his order in this regard is therefore set aside. He is directed to re-adjudicate the matter in this regard after giving the appellants full details of the import of the goods, the value of which has formed the basis of the value and also connected evidence and after giving an opportunity to appellants to put forth their pleas in the matter. Inasmuch as, we are remanding the matter in regard to one aspect of the matter, the Collector's order is set aside by remand for re-adjudication in the light of the above observations. The appellants appeal is partially allowed in the above terms.