Calcutta High Court
Sneha Traders Private Ltd. vs Collector Of Customs on 16 May, 1991
Equivalent citations: 1992(60)ELT43(CAL)
JUDGMENT Ajit Kumar Sengupta, J.
1. This appeal was originally initiated against the refusal of the Trial Court to pass any interim order. On 19-8-1988 we passed the following order :-
"Mr. Nirmal Mitra and Mr. Dipak K. Deb, Advocates of this Court are appointed Joint Special Officers.
(a) They shall pay the customs duty on the subject goods to be calculated on the invoice value, (b) The Special Officers shall further realise a sum of Rs. 15,00,000/- (Rupees fifteen lakhs) from the petitioner to be retained by them until further orders of this Court. Upon deposit of the sum of Rs. 15,00,000/- with the Special Officers and upon payment of the customs duty, on the basis of the invoice value, the respondents shall release the goods to the Special Officers and allow removal of the goods from the bonded warehouse, (c) The petitioner shall pay warehousing charges before the goods are removed by the Special Officers, (d) The Special Officers shall retain the goods in a separate godown to be provided by the petitioners, (e) The sale shall be effected under the supervision of the Special Officers. The Special Officers shall ascertain the price, name of the parties and the quantity sold, (f) Out of the sale proceeds the Special Officers shall retain 10% of the sale proceeds and keep the same along with the said sum of Rs. 15,00,000/- separately in a fixed deposit account with the Oriental Bank of Commerce for six months for the time being and the said fixed deposit shall be renewed from time to time subject to further orders of this Court, (g) Before the goods are removed, the Assistant Collector of Customs will obtain the sample of the goods, (h) The Collector of Customs will be at liberty to proceed with the adjudication proceedings after issuing a show-cause notice and after giving the petitioner a reasonable opportunity of being heard he shall pass a speaking order. In the event the order so passed goes against the petitioner, it shall not be communicated or given effect to without the leave of the Court and such order shall be placed before this Court for consideration.
Let the order in the adjudication proceeding be made by 17-9-1988.
Each of the Joint Special Officers will be entitled to remuneration of 250 GMs. to be paid by the petitioner for the time being.
Let the matter appear in the list on 19-9-1988 as part heard application.
The Joint Special Officers and all concerned parties shall act on the signed copy of the minutes of this order on usual undertaking."
From time to time we passed several orders in this proceeding. In terms of the order dated 19-8-1988 the Collector passed an order on September 1,1988 which is under challenge, before us in this proceeding, inasmuch as the said order was passed in pursuance of the direction given by this Court.
2. The facts leading to this case, shortly stated, are that in or about September, 1987, the appellant-writ petitioner decided to import a quantity of 1000 MT of Zinc Ingots of 99.96% minimum purity. For this purpose the writ petitioner invited quotations from various foreign suppliers, who quoted the price of the said goods varying between U.S. Dollars 745 to 755 per MT. The petitioner ultimately entered into, a contract with M/s. Khater (HK) Ltd., Hongkong on 16th September, 1987 for 1000 MT of Zinc ingots of 99.96% minimum purity at a price of US Dollars 750 per MT. CIF Calcutta.
3. The said foreign supplier during the months of October/November, 1987 shipped a total quantity of about 200 MT of the said goods pursuant to the said contract. The said consignments were cleared by the Customs Authorities by determining their assessable value on the basis of the said contract and the said agreed price of US Dollars 750 per MT.
4. In the meantime the international price of Zinc ingots started increasing and due to such increase the foreign supplier withheld shipment of the remaining quantity under the said contract. After protracted discussions and correspondence the foreign supplier ultimately agreed to ship the remaining quantity under the said contract by increasing the agreed price by US Dollars 25 per MT for such remaining quantity.
5. Thereafter, in May, 1988 the foreign supplier shipped a quantity of 235.826 MT out of the said remaining quantity under the said contract dated 16th September, 1987. The said goods were shipped at the price of US Dollars 775 per MT. CIF Calcutta. After the vessel carrying the said quantity of 235.826 MT arrived at the port of Calcutta, the writ petitioner filed 10 Bills of Entry for taking clearance of the said goods. Even though the assessable value of the aforesaid earlier imports under the very same contract was determined by the Customs Authorities at the agreed contracted price, this time the Customs Authorities refused to determine the assessable value of the said goods on the basis of the agreed price of US Dollars 775 per MT and made it clear to the writ petitioner that the goods cannot be allowed to be cleared unless duties are paid on such enhanced assessable value, as may be determined by them.
6. Pursuant to the liberty granted and/or directions given by this Bench in the said order dated 19th August, 1988 the Assistant Collector of Customs, Calcutta issued a notice dated 1st September, 1988, to show-cause wherein certain allegations were made as regards the valuation of the said goods. The writ petitioner duly submitted its reply to the said notice by its letter dated 12th September, 1988. After granting a personal hearing to the writ petitioner, the Collector of Customs, Calcutta passed a purported order dated 3rd October, 1988, which is under challenge before us.
7. By the said order the Collector has purported to determine the assessable value of the said goods on the basis of a price of US Dollars 1075 per M.T. CIF Calcutta as against the invoice price of US Dollars 775 per M.T. CIF charged by the foreign supplier. It has further been sought to be held by the Collector that the writ petitioner mis-declared the value and as such the goods were liable to confiscation under Section 111(m) of the Customs Act, 1962 (in short the Customs Act). Furthermore, in respect of the amount covered by such purported increase of value, the Collector has sought to hold that the writ petitioner failed to produce import licence and as such the provisions of Section 111(d) are also applicable, in respect thereof. On the basis of the aforesaid allegations the Collector has confiscated the said goods and has allowed the writ petitioner to redeem the same upon payment of fine of Rs. 5.0 lakhs. A penalty of Rs. 1.0 lakh has also been sought to be imposed upon the writ petitioner under Section 112 of the Customs Act. Thus by the said purported order the Collector has
(i) increased the assessable value from U.S. Dollars 775 per M.T. to US Dollars 1075 per M.T.
(ii) demanded a redemption fine of Rs. 5 lakhs and
(iii) levied a penalty of Rs. 1 lakh.
8. In view of the aforesaid order, the following questions fall for consideration of this Court:
(i) Whether the contract dated 16-9-1987 entered into by and between the writ petitioner and the foreign supplier and its amendment were genuine and as to whether the goods in question were imported under the said contract?
(ii) What was the prevailing international market price of the said goods at the relevant time?
(iii) Whether the instances of other imports referred to in the show cause notice are relevant in the instant case and if so, what is the effect thereof?
(iv) What would be the effect, if any, of the delay on the part of the foreign supplier in supplying the goods under the relevant contract?
(v) Whether, on the facts and in the circumstances of the case, it was legally permissible for the Collector to ignore the contract entered into by and between the writ petitioner and the foreign supplier and the prices charged by the foreign supplier and to determine the assessable value on the basis of an assumed contract on notional basis assumed to have been entered into one month prior to the date of shipments?
(vi) Whether there has been any violation of Sections 111(m) & 111(d) of the Customs Act on the part of the writ petitioner on the facts and in the circumstances of the instant case?
(viii) Whether, on the facts and in the circumstances of the instant case any penalty could be levied upon the writ petitioner under Section 112 of the Customs Act?
9. On the first issue, it is contended on behalf of the respondents that the contract does not provide for any commitment on the part of the writ petitioner to accept the consignment and that no liability would have accrued on the writ petitioner if it had refused to accept the shipment. Further the foreign supplier was also under no obligation to ship the goods and that if the foreign supplier decided to renege the contract, there was absolutely nothing that the writ petitioner could have done to secure the supply of goods except for taking up the arbitration with the Hongkong General Chamber of Commerce. It is highly unlikely that a prudent supplier would choose to ship his goods at contracted prices which are 30% to 40% lower than the prevailing market price at the time of shipment. Further, the period of supply under the contract was too long compared to the existing practice and that payment was to be made by the writ petitioner not by confirmed irrevocable Letter of Credit but after the goods were shipped. On the aforesaid basis the sanctity of the said contract is questionable and the transaction in question was nothing else but a manipulated one.
10. These contentions have no substance. The said contract dated 16-9-1987 was entered into by and between the writ petitioner and foreign supplier .in the usual and normal course of business. All the relevant terms including description of the goods, quantity ordered for, price, shipping instructions, payment terms etc. were duly mentioned in the contract. The contract also contained an arbitration clause. There is or can be no question of the said contract being regarded as anything different from a contract for supply of goods entered by and between the writ petitioner and the foreign supplier. Insofar as the entering into of the said contract is concerned, there is or there can be no scope whatsoever for raising any doubt. In fact, the said earlier shipments of about 200 MT of the said goods were made by the foreign supplier under the said contract itself. Even at that time a copy of the said contract for supply of 1000 MT of the said goods was duly filed by the writ petitioner with the Customs Authorities and there is no dispute in this connection. The said earlier consignments were allowed to be cleared by the Customs Authorities themselves by treating and accepting the said contract as genuine. In such circumstances there can be absolutely no warrant or justification for alleging that the said contract was not genuine. The goods in question were shipped by the foreign supplier under the said contract dated 16-9-1987. In each of the ten invoices under which the goods in question, that is, 235.826 MT of zinc ingots were shipped, the number and date of the said contract has been clearly mentioned. As such, there can be no reason or justification for alleging that the said contract was not relevant or was not applicable to the imports in question. Further, all the relevant terms and conditions of the said contract were also clearly stated in the contract itself. If there was any breach of the contract on the part of any of the parties, the other party had full right to take appropriate legal steps in the matter. The contract also provided for arbitration of the disputes arising out of the contract by the Arbitrators appointed by Hongkong General Chamber of Commerce. Further and in any event the Collector failed to appreciate that even if the contract itself does not provide for the rights of the parties in the event of failure on the part of one of the parties to perform its obligations, the relevant legal provisions would automatically become applicable and appropriate legal steps against the defaulting party may always be taken by the other party.
11. Similarly, insofar as the amendment of the said contract, whereby an increase in the price by US $ 25 per MT was agreed upon, was also quite normal and there is absolutely nothing unusual or illegal about the same. The said contract was for supply of 1000 MT of zinc ingots. A quantity of about 200 MT was shipped by the foreign supplier under the said contract in October/November, 1987. However, in the meantime the international price of the said goods started increasing and due to such increase the foreign supplier did not ship the remaining quantity in spite of repeated requests. On 3-3-1988 the foreign supplier informed the writ petitioner that it was not able to ship the remaining quantity owing to very tight availability and very strong and erratic price movements. The foreign supplier requested the writ petitioner to accept a price increase of US $ 40 per MT. In the said letter it was further stated by the foreign supplier that it had tried to absorb the maximum possible rise in the price. Thereafter, in its letter dated 14-3-1988 the writ petitioner informed the foreign supplier that the remaining quantity ' under the said contract should positively be shipped within June, 1988 and that in view of the factors stated in the letter dated 3-3-1988 of the foreign supplier, the writ petitioner was willing to consider some increase in the price which would be applicable for the said remaining quantity under the said contract. Thereafter, further discussions were held with the foreign supplier and ultimately a price increase of US $ 25 per MT in respect of the remaining quantity under the said contract dated 16-9-1987 was agreed upon. The foreign supplier also accordingly issued an amendment to the said contract agreeing to ship the remaining quantity at the price of US $ 775 per MT GIF Calcutta. The goods in question that is, 238.826 MT, were accordingly shipped under the said contract dated 16-9-1987 by the said foreign supplier at the price of US $ 775 per MT CIF Calcutta.
12. When the contract had already been entered into between the parties and such contract was at the prevailing international market price on the date of contract, there can be no question of the foreign supplier being treated as imprudent when he acted in terms of such contract and supplied the materials even though at the time of shipment the prices had gone up. Similarly, the period of supply under the contract is agreed between the parties and the contract itself can never be treated as not genuine on the ground that the supply period is long. Insofar as the payment is concerned, sometimes the payment terms provide for opening of irrevocable Letter of Credit and sometimes the payment terms may provide for "payment against documents" and/or after a certain period. These are purely contractual matters and are decided and agreed upon by the parties and the same cannot invalidate a contract in any way. The purported findings to the contrary in the said order of the Collector cannot be sustained being perverse. The Collector has not taken into account the facts and circumstances of International Trade and Commerce. The findings have been arrived at on a complete non-application of mind and by totally ignoring the relevant provisions of law including those relating to contracts.
13. The Collector as it appears proceeded on the assumption that simply because the international prices of zinc were increasing, it was unlikely that the foreign supplier would choose to ship the goods at the contracted prices which were lower than the prevailing market price at the time of shipment. The said finding has been arrived at without appreciating even the basic concepts of trade and commerce. The price for the goods is always agreed at the time of entering into the contract and the supplier has to supply the goods at such agreed price irrespective of the price prevailing at the time of shipment. Unless contract specifically provides, even if the price has increased at the time of performance of the contract the supplier cannot give a go-by to the contract and cannot refuse to supply the goods, nor would the contract get cancelled due to such price increase. These basic principles of mercantile law have been totally lost sight of and ignored by the Collector in passing the said order. It would be absurd to suggest that if the foreign supplier has supplied the goods at the contracted prices even though in the meantime the market price has increased, the transaction cannot be regarded as a bona fide one.
14. The next issue is with regard to the prevailing international market price of the said goods at the material time. Before entering into the said contract the writ petitioner had invited quotations from various foreign suppliers. The foreign suppliers had quoted the price of the said goods varying between US $ 745 per MT and US $ 755 per MT. All the said quotations were sent by different foreign suppliers in the month of September, 1987. Ultimately, after examining all the relevant facts the writ petitioner decided to accept the quotation of M/s. Khater (H.K.) Ltd., Hongkong, which was US $ 750 per MT CIF Calcutta. The fact that the said various other foreign suppliers such as, M/s. Pacific Enterprises, M/s. Shun Tat, Hong, M/s. Sinochem Enterprises Co., M/s. Would Alliance Ltd., etc. were offering the said goods at the material time at the said price of US $ 745 to 775 per MT CIF Calcutta would clearly show that this was the prevailing international market price of the said goods at the relevant time.
15. The prices of zinc metal are also quoted in Daily Metal Bulletins of London Metal Exchange (in short LME). In fact the prices quoted by LME have got an important bearing on the international market price of the said goods. On 16-9-1987, that is, on the date of entering into the said contract the price of the said goods as quoted by LME was £ 453 (which is equivalent to US $ 744.64). The said price quoted by LME was for delivery Ex-LME godown in London and after adding the cost of transportation the CIF price even as per LME quotations came to about US $ 779.64.
16. In fact, in the months of October and November, 1987, several contracts. were entered into between various other importers and different foreign suppliers. During such subsequent months the prices had started increasing as compared to those prevailing in September, 1987 and accordingly such subsequent contracts were at slightly higher prices. Details of some of such contracts are as follows :-
(a) On 20-10-1987 a contract was entered into between the foreign suppliers, M/s. Phibro Energy (Australia) Pty. Ltd. and M/s. Vimleshwar & Co. for import of a quantity of 40 MT of the said goods at the price of US $ 830 per MT, CIF Calcutta/Haldia. This contract was entered into through M/s. Meteor Pvt. Ltd.
(b) On 20-10-1987 another contract was entered into between M/s. Binani Brothers Pvt. Ltd., and M/s. Phibro Energy (Australia) Pty. Ltd. for import of a quantity of 60 MT of similar goods at the price of US $ 830 per MT, CIF Calcutta/Haldia.
(c) On 12-11-1987 a contract was entered into between M/s. Australian Ore & Metal Co. Pvt. Ltd. and M/s. Vimleshwar & Co. for import of a quantity of about 30 MT of the said goods at the price of US $ 835 per M.T. CIF Calcutta. The said contract was entered into through British Metal Corporation (India) Pvt. Ltd., the local agent of the foreign supplier.
17. From the aforesaid it would be clearly evident that the said contract was entered into by the writ petitioner at the prevailing international market price.
18. On the next issue as to whether the instances of other imports referred to in the show-cause notice are relevant in the instant case and if so what is the effect thereof, it has been contended that insofar as the alleged instances of other imports relied upon by the Collector are concerned, the said alleged instances are wholly irrelevant and do not and cannot have any bearing whatsoever on determination of the assessable value of the goods imported by the writ petitioner.
19. The alleged instance of import by MMTC under Invoice No. 88.801215 dated 15-3-1988, is not at all a comparable case and does not and cannot in any way support the allegations made and/or findings given in the said order. In this connection, the following facts are relevant -
20. In the said case the contract was entered into on 3-2-1988 at the price of US $ 912.50 per MT, CIF, Calcutta. On the date of the contract, the LME price was US $ $63.00 ex-LME godowns in London. The amount of freight and insurance comes to around US $ 50 per MT. In these circumstances the said contract was entered into by MMTC at US $ 912.50 which was more or less equal to the LME price as on the date of the contract.
21. The contract was made on 3-2-1988 and the shipment was made on 15-3-1988, that is, after about 40 days. During this period of 40 days there was a substantial increase in the LME price which was US $ 966 at the time of shipment. Thus there was an increase of about US $ 103 per M.T. However, in spite of the said increase, the shipment was made by charging the price agreed in the contract.
22. Even though there was a price increase of about US $ 103 between the date of the contract and the date of the shipment, the assessments were made by the customs authorities of the said goods imported by MMTC by determining the assessable value on the basis of the agreed contracted price of US $ 912.50 and not on the basis of the price prevailing at the time of shipment which would have come to about US $ 1016 (i.e. US $966 plus US $50).
23. In this case, the goods imported by MMTC arrived in India on May 7,1988. On the said date, the LME price was £ 611 which is equal to US $ 1137. After adding the cost of transportation to the aforesaid, the C.I.F. price as prevailing on the date of arrival of the vessel would have come to US $ 1177. However, even no attempt was made to determine the assessable value on the basis of the said price prevailing on the date of arrival of the vessel. As already stated hereinbefore, the assessments were made on the basis of the agreed price and which was also the price prevailing on the date of the con- tract.
24. Insofar as the alleged instances of imports made by MMTC against invoice dated 29-2-1988 at US $ 924 per M.T. C.I.F., Calcutta and the imports made by M/s. Amrit Steels Ltd. against invoice No. 88.803044 dated March 15, 1988, at the price of US $ 912.50 are concerned, the facts and circumstances are similar to those stated above; In these cases also, the contracts were entered into on the basis of the LME prices as prevailing on the date of contracts. The shipments were made much later. The prices prevailing on the dates of the shipments and on the dates of arrival of the vessels were much higher as compared to the prices prevailing on the dates of the contracts. However, in spite of the aforesaid, assessments were made on the basis of the agreed contracted prices and without in any way taking into consideration the prices prevailing on the dates of shipments and/or on the dates of arrival of the vessels.
25. Insofar as the import made by MMTC at the price US $ 975 per MT, CIF, Calcutta is concerned, this is not at all a comparable case. In this case, the date of shipment was 29-2-1988 whereas the contract was entered into on 17-3-1988, i.e., the good were shipped earlier and the contract was made later. From this it would be quite clear that the goods in question had already been shipped by the foreign suppliers for some other party but the said contract got frustrated and accordingly the said goods were sold to MMTC as an alternative buyer when the goods had already been in transit. Further-more, here also, the assessable value was determined by the Customs Authorities at the agreed prices as per the contract, that is, on the basis of US $ 975 per M.T., C J.F., Calcutta and not on the basis of the prices prevailing at the time of shipment or at the time of arrival of the vessel in India.
26. The other alleged instances of imports made by MMTC at the price of US $ 1094.49 and 1184.82 per M.T. are not at all comparable and the reference to the said imports by the Collector was and is wholly misleading. This would be evident, inter alia, from the following:
(i) Both these consignments were shipped under a contract bearing No. MMTC/RZ/MR 68-21/80015 dated January 20,1988. The shipment at the price of US $ 1094.49 was made on 28-3-1988 and the shipment at the price of US $ 1184.82 was made on 30-4-1988.
(ii) The said contract dated 20-1-1988 was entered into by MMTC with the USSR Undertaking as per the Indo-Soviet Trade Agreement and the payment was also to be made not in foreign currency but in Indian Rupees. This was an evergreen floating price contract. No price was agreed in the contract and it was provided that the price shall be the average LME price for the month prior to the month of each shipment. This is the reason as to why even though both the said shipments were made under the same contract dated January 20,1988, the price charged in respect of one of them was equivalent to US $ 1094.49 and in the other it was equivalent to US $ 1184.82.
(iii) In connection with the said contract it would be relevant to bear in mind that here also the invoice price was agreed to be determined on the basis of the average LME price prevailing during the month prior to the month of shipment. The assessments were made on the basis of such agreed prices. No attempt whatsoever was made in the said cases also to determine the assessable Value either on the basis of the prices prevailing at the time of shipment or on the basis of the prices prevailing at the time of arrival of the vessel in India.
27. From the aforesaid it would be evident that the various alleged instances of imports referred to and relied upon by the Collector do not in any way support the allegations made and/or findings given in the order passed by the Collector. On the other hand, the said alleged instances themselves clearly show that the Customs Authorities have always been determining the assessable value of the goods on the basis of the prices prevailing at the time of entering into the contract and that the prices prevailing either on the date of shipment or on the date of arrival of the vessel are never taken into consideration.
28. The next issue is what would be the effect if there is any delay on the part of the foreign suppliers in supplying the goods under the relevant contract. It is contended that under Section 14 of the Customs Act, the assessable value of the goods shall be deemed to be the price at which the said goods are ordinarily sold or offered for sale for delivery at the time and place of importation 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 sale or offer for sale. The expression "For delivery at the time and place of importation" would mean that the price referred to in Section 14 has to be determined with reference to the price "for delivery at the time of importation" and furthermore it has to be the price "for delivery at the place of importation". Thus, if in January, 1988, a contract was entered into providing for delivery in April, 1988, such a contract cannot be compared with another contract - which, though entered into in January, 1988, provides for delivery in June, 1988. This is so because the time for delivery under die aforesaid two contracts is different. Similarly, if there is a contract providing for delivery at New York, it cannot be compared with a contract providing for delivery at Calcutta because in the aforesaid two contracts, the place of delivery is different. What has to be seen for the purpose of Section 14 is the price ordinarily prevailing at the time of entering into the contract and for this purpose the price agreed in only such contracts has to be taken into account providing for delivery at the same time and same place.
29. It is, therefore, contended that the assessable value of the goods under Section 14 of the Customs Act has to be and can be determined only on the basis of the prices prevailing at the time of contract and the prices prevailing on the date of shipment and/or on the date of arrival of the vessel in India ate wholly irrelevant. Similarly, if there is some delay on the part of the foreign suppliers in making the shipment, such a delay cannot have any effect on determination of the assessable value which, as already stated above, has to be determined with reference to the prices prevailing in the course of international trade at the time of entering into the contract.
30. In our view these contentions have substance.
Reference may be made to the objects and reasons of Section 14 of the Customs Act. In the said objects and reasons it has been, inter alia, stated as under :-
"It is being specifically provided that the assessable value shall be based on transactions in which the seller and the buyer have no interest in the business of each other and the price is the sole consideration."
31. The aforesaid objects and reasons of Section 14 would also clearly show that where the seller and buyer have no interest in the business of each other and price is the sole consideration, the contracted price should be accepted. In fact, similar view has also been taken by the Bombay High Court in a decision in Kishco Cutlery Limited v. Union of India, .
32. In fact, even the appellate authorities under the Customs Act have also repeatedly held that for determination of assessable value under the provisions of Section 14 of the Customs Act it is the date of contract which is the relevant date. One such order passed on March 13,1987, in the case of H.B. Bagri & Co. has already been referred to in the stay application filed by the writ petitioner before this Court.
33. In the Affidavit-in-reply filed on behalf of the writ petitioner and affirmed by one Laxminarayan Somani on July 22,1988, a statement has been enclosed giving details of about 32 cases of imports made by different importers. In the said various cases mentioned in the said statement there were long delays in shipment of the goods on the part of the foreign suppliers and during the intervening period the prices either went up or came down. However, in none of the said cases, the agreed prices were ignored by the customs authorities. In all the said cases, the assessable values were determined by the Customs Authorities on the basis of the agreed contracted prices. This would also show that the Customs Authorities have themselves all along accepted that the assessable value has to be determined on the basis of the prevailing international market price at the time of entering into the contract and that the delay in shipment on the part of the foreign suppliers cannot have any effect on determination of the assessable value.
34. Apart from the said practice all along followed by the Customs Authorities themselves, even under the provisions of Section 14 of the Customs Act, the assessable value has to be determined with reference to the prevailing prices at the time of entering into the contracts as stated hereinbefore.
35. The next issue is whether on the facts and in the circumstances of the instant case it was legally permissible for the Collector to ignore the contract entered into by and between the writ petitioner and the foreign supplier and the prices charged by the foreign supplier and to determine the assessable value on the basis of an assumed contract on notional basis assumed to have been entered into one month prior to the date of shipment. From the facts stated hereinbefore it would be clearly evident that the said contract was entered into by and between the writ petitioner and the foreign supplier fully in accordance with law and the goods in question Were shipped by the foreign supplier under the said contract. In such circumstances the Collector totally erred in assuming on notional basis that a contract for the imports in question should be assumed to have been made about one month prior to the date of shipment and then taking the London Metal Exchange price prevailing on such assumed date of the contract as the basis for determining the assessable value. Such a course of action on the part of the Collector is ex facie illegal and totally contrary to the provisions of Section 14 of the Customs Act. When the said contract dated 16-9-1987 was lawfully and validly entered into between the writ petitioner and the foreign supplier and when the shipments were made under the said contract, there was or could be no scope whatsoever for assuming any contract on notional basis one month prior to the date of shipment as has been sought to be done by the Collector.
36. The contentions of the writ petitioner are also fully supported by the provisions of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (in short, the 1988 Rules) which came into force on 16th August, 1988. The said 1988 Rules have been framed by the Government of India for determining the assessable value of the imported goods. Under Rule 3 of the said 1988 Rules the assessable value of the imported goods shall be the transaction value and it is only if such transaction value is not available that the assessable value can be determined by applying the other mode/s. Rule 4 of the 1988 Rules defines the expression "transaction value". The said Rule 4 provides, inter alia, that the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of the said Rules. None of the various factors for which adjustments are provided in Rule 9 exist in the instant case. Thus the Government of. India itself has recognised and accepted that the assessable value of the imported goods has to be determined on the basis of the price actually paid or payable for the goods in question.
37. The next issue is as to whether there has been any violation of Section 111(m) and 111(d) of the Customs Act on the part of the writ petitioner on the facts and in the circumstances of the instant case. The only ground on which the violation of Section 111(m) has been alleged by the Collector is that there was a misdeclaration of the value of the said goods imported by the writ petitioner. As would be evident from the facts stated hereinbefore, there was no such misdeclaration at all and accordingly the provisions of Section 111(m) do not and cannot have any application. Insofar as Section 111(d) is concerned, it has been sought to be invoked by the Collect or by alleging that as the assessable value was more, the increased value represented the goods imported without import licence. The assessable value of the said goods imported by the writ petitioner could only be determined on the basis of the agreed contracted price and the import licence for the said goods of such value was duly produced by the petitioner. The Collector has sought to increase the assessable value in an arbitrary manner and has sought to hold that for such increased value no import licence was produced by the writ petitioner. As already indicated, the increase of assessable value sought to be made by the Collector was and is ex facie illegal and untenable.
38. Even if the assessable value of the goods is increased under Section 14 of the Customs Act, the import licence is required to be debited only by the actual price paid by the importer to the foreign supplier. This position of law is now well settled by a number of decisions. Reference in this connection has been made to a judgment of the Bombay High Court in the case of Union of India v. Glaxo Laboratories (India) Ltd. . Thus, in any event there was or could be no scope to allege any violation of the provisions of Section 111(d) of the Customs Act in the instant case. Insofar as the writ petitioner is concerned, the price paid by it to the foreign supplier for the said import was the agreed contracted price of US $ 775 per M.T. No amount over and above the said contracted price was paid by the writ petitioner to the foreign supplier. No such fact has been found or alleged in the said order also. In these circumstances the import licence could be debited only by the value arrived at on the basis of the said price of US $ 775 per M.T., C.I.F., Calcutta.
39. The last issue is whether on the facts and in the circumstances of the instant case any penalty could be levied upon the writ petitioner under Section 112 of the Customs Act. It is contended that the said goods were lawfully and validly imported by the writ petitioner. We do not find that there has been any contravention of any of the provisions of the Customs Act either on the part of the writ petitioner or in respect of the said imports. The writ petitioner has not done or omitted to do any of the acts or things mentioned in the said Section 112 of the Customs Act. In the circumstances no penalty whatsoever under the provisions of Section 112 of the Customs Act could be levied upon the petitioner. The only ground for levy of the said purported penalty of Rs. 1,00,000/- as given by the Collector is that there was a misdeclaration of value on the part of the writ petitioner. As would be evident from the facts stated hereinbefore, there was no such misdeclaration at all.
40. The facts of the case clearly demonstrate that in the instant case there was no scope whatsoever to increase the assessable value of the goods imported by the writ petitioner and/or to confiscate the same and/or to levy any penalty. The Collector has passed the impugned order in violation of the provisions of the Customs Act and on mere surmises and conjectures and by ignoring the relevant records and evidence. The Collector has assumed jurisdiction in the matter by wrongly deciding the jurisdictional facts and in our view the impugned order is ex facie bad in law.
41. For the reasons aforesaid the order passed by the Collector cannot be sustained. The order under appeal as well as the order passed by the Collector impugned in this proceedings are set aside. The Joint Special Officers are directed to refund the sum lying in their hands within four weeks from the date of communication of this order along with the accrued interest thereon, after retaining their remuneration fixed at 250 G.Ms, each, to the writ petitioner.
42. The Joint Special Officers shall stand discharged after making over the sum lying in their hands with accrued interest thereon after taking their remuneration. If necessary, the Joint Special Officers will be at liberty to encash the fixed deposit receipts before maturity.
43. This order virtually disposes of the writ petition. The writ petition is also disposed of accordingly. Filing of paper book is dispensed with, and the undertaking given in that behalf will stand discharged.
44. Joint Special Officers and parties are to act on a signed copy of the minutes of the operative part of the judgment and order.