Calcutta High Court
Debabrata Ghosh vs Assistant Collector Of Customs on 6 August, 1992
Equivalent citations: 1993(68)ELT551(CAL)
Author: Suhas Chandra Sen
Bench: Suhas Chandra Sen
JUDGMENT Suhas Chandra Sen, J.
1. The petitioner used to stay in the United Kingdom. He purchased a second hand Jaguar car at a price of £ 1323 at a public auction on 4th August, 1988. The petitioner has described the price of the car as bargain price. The auction receipt for the purchase price of the car was produced before the Customs authorities and has also been annexed to this writ petition. The description of the car has been given as 'second hand Jaguar of 1985 - Model Sovereign 4.2 Auto 4 door Saloon Cylinder, capacity 4235 CC.
2. The petitioner has stated in the petition that this car was purchased as a part of his plan to return to India. The petitioner was working in the United Kingdom and he retired in 1991. After retirement he came back to India along with his wife. The petitioner has brought in unaccompanied goods belonging to the petitioner which included the Jaguar car in a container. The case of the petitioner is that the car was purchased for the purpose of bringing it to India. The Department has contested the said stand of the petitioner. The petitioner's contention that the car was purchased at a bargain price was also disputed by the Department. The dispute is about the way the car is to be valued for the purpose of charging import duty. The Assistant Collector of Customs informed the petitioner that the import duty in respect of the said car had been fixed at Rs. 13 lakhs. The petitioner was not in a position to pay this large sum of money and requested the Assistant Collector of Customs to give the order of assessment in writing. Thereupon on 1st April, 1992 that is 10 weeks after the arrival of the car at the dock site, the Assistant Collector of Customs gave the petitioner a written order, assessing the duty on the said imported car at Rs. 13 lakhs. Further duty was imposed on various accessories of the car amounting to a sum of Rs. 2,07.50 paise. The auction price of the car was not taken into account for the purpose of calculation of the duty but a price of £ 18,999 on the basis of a World Car Catalogue was taken into account. The claim of the petitioner for trade discount, freight, insurance etc. was also rejected.
3. The petitioner preferred an appeal to the Collector of Customs (Appeals) against the said order. The Collector of Customs (Appeals) by an order dated 3rd April, 1992 held that the price of £ 18,995 adopted by the Assistant Collector of Customs as the price of the Jaguar car was the correct price and that the Assistant Collector of Customs was right in applying the provisions of Rule 8 of the Customs Valuation Rules, 1988. The Collector of Customs (Appeals) further held that the Assistant Collector of Customs had not supplied the petitioner the World Car Catalogue and therefore there was violation of the principles of natural justice. The Assistant Collector of Customs was directed to re-hear the case after giving a notice of hearing to the petitioner. The case was heard again. At the time of re-hearing, a photo copy of page 153 of the purported World Car Catalogue (as was directed by the Appellate Collector) was handed over to the petitioner and in the copy the words 'Worlds Car 1985' were written in hand at the top in which the ex-works price of a Jaguar Sovereign HE was shown as £ 18,999. It has been further stated that the said copy does not contain any title or the date of publication. Besides, according to the Appraiser who assisted the Assistant Collector in arriving at his decision, the said publication had ceased to exist after 1985, even before the date of manufacture of the car which was 1st August, 1985 and they had no access to any later edition of the said publication because there was none. The petitioner by letter dated 21st April, 1992 recorded his objection to undue reliance being placed on a publication about the title or existence of which the Assistant Collector of Customs himself was not sure and on demand the Assistant Collector of Customs failed to produce physical inspection of this evidence, viz. World Car Catalogue. Further case of the petitioner is that during the hearing before the Assistant Collector of Customs, the petitioner produced evidence to establish the price of the car at the time of its importation to India. Such evidence was produced, inter alia, in the form of a publication styled 'Parker's Car Price Guide' which is an internationally known guide for determination of car price published in England, where the car in question was also manufactured. In the said guide, the price of the car in question at the relevant time was shown as £ 2225 representing only 12% of the original price of the new car of the same make, being quoted at £ 18,995. The Assistant Collector of Customs allowed only 55% depreciation for 7 years while even the Income-Tax Authorities allow 20% depreciation annually on capital goods such as motor vehicles. The arbitrary decision on the part of the Customs Authorities in allowing only 55% depreciation on catalogue price in 7 years is neither legal nor justifiable but a peculiar system practised by them just for the sake of convenience in total disregard of the principles of natural justice.
4. The petitioner has now come up by way of this writ petition challenging the method of calculation of import duty on the car, brought from United Kingdom. The contention of the petitioner is that the Department has given a complete go-by to the provisions of Section 14(1) of the Customs Act. They have also ignored the fact that the Valuation Rules will apply subject to the provisions of Section 14 of the Customs Act. In any event, the Valuation Rules cannot override or overrule the provisions of Section 14. The Valuation Rules must be read to be in conformably with the provisions of Section 14.
5. It has been next contended that there was no basis for the Assistant Collector of Customs to take the original list price as the starting point for the purpose of arriving at the valuation of the car, as the car was purchased 'second hand'. The only way by which the valuation of this car can be made is to find out the comparable value of a second hand car of the same model and of the same condition. It has been further argued that no explanation has been given as to how a total depreciation of 55% for a 7 years' used car was allowed.
6. A great deal of argument had been advanced on behalf of the respondents in respect of valuation rules. Rule 8 of the Customs Valuation Rules, 1988, which was applied by the Assistant Collector of Customs as well as the Collector of Customs (Appeals), is as follows :
"8. Residual method. - (1) Subject to the provisions of Rule 3 of these rules, where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and Sub-section (1) of Section 14 of the Customs Act, 1962 (52 of 1962) and on the basis of data available in India.
(2) No value shall be determined under the provisions of this rule on the basis of
(i) the selling price in India of the goods produced in India;
(ii) a system which provides for the acceptance for customs purposes of the highest of the two alternative values;
(iii) the price of the goods on the domestic market of the country of exportation;
(iv) the price of the goods for the export to a country other than India; (v) minimum customs values; or (vi) arbitrary or fictitious values." Sub-section (1) of Section 14 of the Customs Act, 1962 provides as under :
"Section 14. Valuation of goods for purposes of assessment. - (1) For the purpose of the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale:
Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50;
(1A) Subject to the provisions of Sub-section (1) the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf;".
7. The question, therefore, is what should be the starting point of valuation of the imported car. Should the valuation be done on the basis of the list price of the manufacturer which is the price of a new brand car at which the car is sold or alternatively, as Mr. Gupta has suggested, the starting point should be the auction price of the car which price was actually paid by the petitioner for purchase of the car? In my judgment, Section 14 of the Customs Act is quite clear and must be followed. The endeavour of the Department should be to find out the "price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interests in the business of each other and the price is the sole consideration for the sale or offer for sale." The principles laid down in Section 14 is the universal principle of finding out the price at which a willing buyer will purchase from a willing seller at arm's length. The price must be the sole consideration of the sale. There is nothing in Rule 8 to suggest that a different test has been laid down by the Rules. On the contrary, Rule 8 categorically states that "where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and Sub-section (1) of Section 14 of the Customs Act, 1962." It is nowhere laid down in the Rules that if a second-hand car is brought by an importer and brought into India, duties for the said second-hand car have to be calculated on the basis of the price of a new car.
8. Mr. Mitra on behalf of the respondent has propounded the theory that if there is no ready market or known market for second hand cars in England, then the Department would take the list price of the manufacturer as the starting point. He argued that the rules of valuation that have been adopted in the instant case was in consonance with the long standing practice of the Department and even if the long standing practice is not in conformity with statutory provisions, the long established practice of the Department must prevail. I am unable to uphold this contention. The long standing practice has not been proved by an evidence. Moreover, the long standing practice cannot override the provisions of an Act of Parliament.
9. Lastly it does not appear that there is any conflict between Rule 8 of the Customs Valuation Rules and Section 14(1) of the Customs Act. On the other hand, Rule 8 has been made applicable subject to the provisions of Section 14 of the Customs Act.
10. Both the Assistant Collector of Customs and the Collector of Customs (Appeals) have ignored the provisions of Rule 8(2)(ii) and 8(2)(iv). The endeavour of the Department has been to realise highest possible amount of duty from the petitioner, whether permitted by law or not. In the facts of this case, an arbitrary and fictitious valuation of the car has been fixed for a second hand car taking into account the price of a new car. A copy of 'Parker's Car Price Guide, April 1992 has been produced in Court. That contains the price of second hand cars in the United Kingdom. The price of 1985 model jaguar cars which are similar in description has been valued at less than £ 3,000. It does not appear on what basis the list price of a new car was taken for ascertaining the value of the second hand car. It is also not known how the figure of depreciation was arrived at. The depreciation in India at the moment is 20% per annum for a car for the Income-tax purpose.
11. In my view, the valuation has been arrived it in total disregard to the provision of Section 14 and also the provisions of Rule 8. In the premises, there will be an order of Certiorari as prayed for in terms of prayer (b) of the petition. The order dated 3rd April, 1992 passed by the Assistant Collector of Customs is ex facie erroneous and is accordingly set aside. The Assistant Collector of Customs, Respondent No. 1 is directed to make a fresh assessment in conformably with the provisions of Section 14(1) of the Customs Act as also keeping in mind the provisions of Rule 8 of the Customs Valuation Rules. I make it clear that Rule 8 must be construed and applied in a manner not to make the provisions of Section 14(1) of the Customs Act nugatory.
12. The car is now lying at the site of the Calcutta Port Trust for a long time. It is apprehended by the petitioner that the car would get rusty and unusable altogether. It has also been stated that a sum of Rs. 600/- per day is being paid by the petitioner to the Port authorities by way of demurrage charges and he will have to go on paying the demurrage charge even if the case goes on endlessly. Therefore, the petitioner has prayed for an interim order for release of the car.
13. Therefore, the following interim order is passed. The petitioners shall be entitled to get release of the car upon payment of Rs. 3 lakhs in cash towards duty and upon furnishing a Bank Guarantee of a sum of Rs. 3 lakhs on a scheduled bank to the satisfaction of the Collector of Customs, Calcutta. Upon payment of the sum of Rs. 3 lakhs and furnishing the Bank Guarantee as aforesaid, the Customs Department must release the car to the petitioner within 48 hours thereafter. The petitioner, who is present in court, has given an undertaking to court through his counsel that he will not sell or dispose of or alienate the car in any manner whatsoever till the Customs proceedings are completed. The petitioner will, however, produce the car once on the first Monday of every month at the Customs House, 15/1, Strand Road, Calcutta between 10 A.M. and 11 A.M. for inspection by the Assistant Collector of Customs and such inspection must be completed within 1 hour's time.
14. The respondents have argued this case needlessly for 3 days. What is fun to the Department is death to an individual writ petitioner. Therefore, the respondents must pay costs of this application assessed at 200 GMs. to the petitioner and such costs must be paid within a fortnight's time.
15. The writ petition is finally disposed of as above.
16. The respondents have prayed for stay of operation of this order. In the facts and circumstances of this case, I find no reason to grant any stay and accordingly the said prayer is rejected.
17. All parties shall act on a signed copy of the operative part of this order on the usual undertaking.