Customs, Excise and Gold Tribunal - Delhi
P.A.C. Systems (P) Ltd. vs Collector Of Customs on 5 June, 1991
Equivalent citations: 1991ECR647(TRI.-DELHI), 1992(58)ELT131(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Brief facts of the case are as follows:-
1.1 The appellants imported on or about February 1990 one consignment of 21 pieces of Lap Top Computer Model at a unit price of U.S.$ 1630 FOB Hong Kong from M/s. Bondwell International Ltd. On 20-2-1990, a bill of entry was filed together with invoice dated 13-2-1990.
1.2 On 30-3-1990, the appellant approached the Andhra Bank with a request to open an irrevocable letter of credit for U.S.$ 33,750 in favour of the aforesaid suppliers - M/s. Bondwell International Ltd. for 25 pieces of the Lap Top Computer Model B 310 at a unit price of U.S. $ 1350. The debit advice dated 30-3-1990 for Rs. 63,000 being 10% margin money for the letter of credit is also of the same date i.e. 30-3-1990. The said Bank has given a certificate that the credit was despatched on 2-4-1990, though it was opened on 30-3-1990 (Annexure 'D' to the appeal). Some amendments were carried out in the letter of credit by amending the name of the beneficiary and by incorporating a clause for interest, extension of expiry date, invoice number etc. On 19-7-1990, the appellant herein filed a bill of entry for clearance of 25 pieces of Lap Top Computer.
1.3 The department raised some disputes about valuation of the goods and the import licence. The appellant herein waived the show cause notice but availed the opportunity of personal hearing.
1.4 The matter was adjudicated by the Collector of Customs, Air Cargo Complex, Sahar. On the question of valuation he has found that the identical goods had been imported more or less at the same time by the party at a higher price i.e. at U.S. $ 1630 FOB Hong Kong. The explanation of the appellant that the price of the goods is lower because of fluctuation in the international market, was not accepted by the said authority on account of lack of evidence. He has, therefore, ordered that the valuation be done on the same price at which the appellant imported the goods earlier and he accordingly fixed the CIF value of the consignment at Rs. 7,29,283/-. The charge of mis-declaration of value was, therefore, upheld against the appellant and the goods were held liable to confiscation U/S 111(m) of the Customs Act, 1962 and confiscation was accordingly made.
1.5 On the question of Import Trade Control Policy, he has held that the goods do not come in the category of non-OGL capital goods, therefore, application of the flexibility clause in para 177 of the AM 1988-91 Policy was ruled out. On an another plea of ITC aspect that the letter of credit was opened on 30th March, 1990 and therefore, the provisions of para 204 (6) of ITC Policy AM 1990-93 would be applicable, the Collector while accepting that the letter of credit was opened by the appellant on 30th March 1990, has not extended the benefit of the old Policy on the ground that as per the said letter of credit the shipment of the goods ought to have been made by 30th May 1990. Since the shipment in this case was made in July 1990 and in view of the provisions in para 204 (6) of the AM 1990-93 Policy, extension of period of shipment in the letter of credit would amount to fresh commitment made after 30th March 1990; the Collector did not extend to the appellant the benefit of the old Policy. He, therefore, held that the ITC aspect in respect of the goods under consideration would have to be examined in the light of the current Policy i.e. AM 1990-93 since according to him, the goods fall under S. No. 175 of Appendix 2B and require a valid licence for their clearance and there being no such licence the goods were held liable to confiscation under Section lll(d) and were accordingly confiscated. Nevertheless, he has ordered that the REP licence produced would have to be debited for the value of the goods. In view of the aforesaid findings, the Collector has given an option of the appellant to redeem the goods on payment of a fine of Rs. 7,25,000/- in lieu of confiscation and imposed a penalty of Rs. 75,000/-on the appellant. Hence this appeal by the appellant.
2. Learned consultant, Shri A.S. Sunder Rajan, for the appellant, has stated on the question of valuation that the Collector's reliance on the old Import of appellant of the same model of computer at the rate of U.S. $ 1630 FOB Hong Kong is incorrect and untenable in law inasmuch as the contract for the said import was made as early as six months before the contract for the present import. The earlier import, therefore, cannot be treated in any manner a contemporaneous import, particularly so in the matter of computers trade in which the market is extremely fluctuating because of fast obsolescence in computer technology. He has further submitted that under the new Valuation Rules, 1988 under Section 14 of the Customs Act transaction value has to be accepted. clause (1) of Rule 3 very clearly states that for the purpose of these rules the value of imported goods shall be transaction value. Clause (ii) of Rule 3 permitting recourse to the other rules is available only if the value cannot be determined under the provisions of. clause (1) of Rule 3. The adjudicating authority, according to the learned consultant, has not given even a single reason as to why the transaction value cannot be accepted.
2.1 On the question of ITC angle, learned consultant, has stated that the adjudicating authority has misread the provisions of para 204 (6) of ITC Policy AM 1990-93. It has been clearly admitted by the adjudicating authority that the letter of credit was opened on 30th March, 1990 i.e. before the expiry of the previous ITC Policy i.e. AM 1988-91. Once the letter of credit is opened then mere extension in the date of delivery of the goods and consequently extension in the date of expiry of letter of credit is not material and the import would still be governed by the old Policy. The learned consultant has relied upon in this respect a Tribunal's decision in the case of Gulab Impex Enterprises 1988 (15) ECC 318. He has also relied upon Tribunal - WRB's decision reported in 1990 (50) ELT 302 (Tri.) Amar Traders v. CCE, Bombay. He has, therefore, submitted that confiscation of goods under Section 111(d) is also not warranted and the imposition of fine in lieu of confiscation and penalty at once is unjustified.
3. Learned JDR, Shri Prabhat Kumar, on the other hand, reiterates the findings of the adjudicating authority. He states that the wording in para 204 (6) regarding the ITC aspect is very clear that an extension in the letter of credit made after 31st March 1990 "shall be treated as fresh commitments". He, therefore, submits that the Collector's finding is correct in law. On the question of valuation, he has submitted that there is not much time gap in the earlier import of the appellant and the present import and the difference in value is so vast between the two imports that it is not possible to accept the lower value in the present consignment.
4. We have carefully considered the pleas advanced on both sides. On the issue of valuation of the goods, we find that the transaction value under the new Valuation Rules, 1988 has to be accepted except in the circumstances referred in the proviso (a) (b) (c) (d) of Sub-rule (2) and even in the case of related persons, the transaction value has to be accepted if the relationship did not influence the price or if the importer demonstrates that the declared value of the goods closely approximates to transaction value of identical goods or similar goods in sales to unrelated buyers. None of the circumstances set out in Sub-rule (2) or Sub-rule (3) of Rule 4 of the Valuation Rules, 1988 have been pointed out by the adjudicating authority in discarding the transaction value in the instant matter. The only reason given is that the transaction value of the identical goods imported by the appellant at or about the same time is much higher than the transaction value of the goods in the instant case. We are unable to agree with the Collector's finding inasmuch as the contract in the instant case was entered into some time in March 1990 whereas the contract in the earlier case of the importers the contract was entered some time in 1989. There is a difference of about six months or so. It cannot, therefore, be said that the two imports of the importer are at or about the same time. In the above view, therefore, we do not find any legal justification in discarding the transaction value howsoever suspicious it may look having regard to the transaction value in respect of the identical goods imported by the appellant herein a few months earlier. Accordingly, we hold that no enhancement in value can be made on the basis of available evidence and , consequently the goods cannot also be held liable to confiscation under Section lll(m) of the Customs Act.
4.1 On the question of ITC prohibition, question involved herein is interpretation of para 204(6) of the AM 1990-93 ITC Policy. Para 204 relates to transitional arrangements in respect of goods for which orders have been placed in terms of the Old Policy but goods have been imported after commencement of the new Policy. In order to appreciate the controversy sub-para (6) of para 204 is reproduced below:-
"The REP licences issued prior to or after 1-4-1990 and Special REP licences issued prior to 1-4-1990 shall not be valid for import of items listed in Appendices 3, 5 Part A and 19 which were allowed to be imported against the flexibility in terms of Para 177 (1) of 1988-91 Policy Book, but are now not covered by the said Appendices of this Policy. Similarly, these REP licences shall not be valid for import of permissible non-OGL capital goods, tools and instruments importable in terms of para 177 (2) of 1988-91 Policy Book, which have been shifted to Appendices 1 Part A, 2 Part B, or 8 of this policy. However, in respect of REP licences issued prior to 1-4-1990, these restrictions will not apply to the extent the licence holders have already made firm commitments backed by irrevocable letters of credit opened and established through authorised dealers in foreign exchange before 1st April, 1980. Any extension in the said letters of credit made after 31st March, 1990 shall be treated as fresh commitments."
It is apparent from a reading of this para that the REP licences are no longer valid for import of permissible non-OGL capital goods, tools and instruments importable in terms of para 177 (2) of AM 1988-91 Policy Book which have been shifted to Appendices 1 Part A, 2 Part B or 8 of this Policy. An exception, however, has been made in respect of REP licences issued prior to 1st April 1990, stating that restrictions will not apply to the extent the licence holders have already made firm commitments backed by irrevocable letters of credit opened and established through' authorised dealers in foreign exchange before 1st April, 1990. The para further clarifies that any extension in the said letter of credit made after 31st March shall be treated as fresh commitments. The appellants have requested the Andhra Bank, the authorised dealers for foreign exchange, who have opened and established letters of credit, inter alia, for extending the expiry date of letter of credit to 20th June, 1990 vide the appellant's letter dated 9th May 1990 (Annexure F to the appeal). Therefore, the extension in the letter of credit obviously has been made after 31st March, 1990 and thus it has to be treated in terms of sub-para 6 of para 204 as a fresh commitment. Obviously, therefore, as held by the Collector the benefit of para 204 (6) cannot be availed of by the appellant in respect of the letter of credit opened and established on 20th March, 1990. The learned consultant in rebutting this finding of the lower authority has relied upon Tribunal's decision in the cases of (1) Gulab Impex and (2) Amar Traders, mentioned supra. We have gone through the aforesaid two citations relied upon by the learned consultant. We find that the citation relating to Amar Traders is of no relevance at all because it relates to peculiar provisions relating to Project Import licences which is not the case here. So far as Gulab Impex is concerned, we observe that the transitional provision before the Tribunal in the said case was in the following terms which is reproduced in para 8 of the said Report :-
"In respect of item(s) taken out of Open General Licence by eligible importers shall not be permitted except to the extent of irrevocable letters of credit already opened and established before the date of this Public notice, for which shipments are made within a period of 90 (ninety) days from the date of this public notice."
We observe that the crucial sentence occurring in sub-para (6) of para 204 namely "any extension in the said letter of credit made after 31st March, 1990 shall be treated as fresh commitments" is missing in the transitional provision which came up for scrutiny before the Tribunal in the case of Gulab Impex, Therefore, the Tribunal's decision in the case of Gulab Impex cannot be considered as an authority for this case where the provisions of Policy are totally different. Hence we uphold the finding of the Collector that the goods have been imported without a valid import licence and as such they are liable to confiscation under Section lll(d) of the Customs Act.
4.2 Having regard to our findings on the valuation of the goods and non-liability to confiscation under Section lll(m) of the Customs Act, there is a case for reduction in the redemption fine of Rs. 7,25,000/- imposed by the Collector. Having regard to the overall facts and circumstances of the case, we reduce the redemption fine to Rs. 3,00,000/- (Rupees three lakhs only). We are further of the view that having regard to the totality of the facts and circumstances, there is sufficient reason for substantially reducing the amount of penalty and we accordingly do it and reduce it to Rs. 25,000/- (Rupees twenty five thousand only).
5. Appeal disposed of in the above terms.