Customs, Excise and Gold Tribunal - Delhi
Gajra Beval Gears Ltd. vs Collector Of Customs on 4 July, 1995
Equivalent citations: 1995(79)ELT82(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. M/s. Gajra Beval Gears Ltd. have filed this appeal against the order-in-original passed by the Collector, Customs, Bombay. The Collector, Customs in his order had held as under :
"10. In view of the evidence analysed above I order that two numbers second hand Spline Milling Machine model KF 32 A with standard accessories imported by M/s. Gajra Bevel Gears Ltd. are liable for confiscation under Section lll(d) of the Customs Act, 1962 as they have been imported without a valid import licence. In view of the fact that contravention of the ITC Regulations in importing the machine without a valid import licence is technical as discussed earlier in this order and that the importers are the actual users, I allow redemption of the said two machines on payment of a fine of Rs. 1,00,000/- (Rupees One lakh only) for each of said machines. The total amount of fine of Rs. 2,00,000/- (Rupees Two Lakhs only) shall be paid for both the machines."
2. Briefly stated the facts of the case are that the appellants imported certain items and filed a bill of entry for clearance thereof on 9-10-1992. The items imported were declared to be as 2 nos. second hand Spline Milling Machines Model KF-32 A with standard accessories/toolings. The appellants declared the value of goods as Rs. 9,54,876/- on the basis of invoice No. 0485, dated 4-8-1992 of M/s. Farrell Engineering Ltd., U.K. The importers claimed clearance of the goods under para 25 of the Import Policy 1992-97 under OGL claiming that the imported goods were covered by Item 1 Appendix III of the Import Policy being in the automotive component sector. On scrutiny of the documents, the customs authorities found that the goods were shipped on 4-8-1992. The goods landed on 7-9-1992 and the bill of entry was filed on 9-10-1992. The Customs were of the view that during this period the Import Policy did not contain provisions for clearance of such second hand machinery under OGL by Automotive Component Sector. It was also alleged that Public Notice No. 48/(PN)/92-97, dated 18th Sept., 1992 covering capital goods in second hand condition for Automotive Component Sector came into effect only on 3-11-1992. On scrutiny of the import licence, it was noticed that the import licence was issued on 26-9-1991 for import of second hand machinery. Licence was validated for imports upto 26-6-1993. The licence was again revalidated up to 26-3-1994. This licence was valid for 2 nos. Spline Milling Machine model KF-32 A (1984 make). It was also observed that there was an endorsement in the licence to the effect that the licence is valid for goods shipped/arrived. It was also noticed that the licence was fully amended with respect to the description of the goods, year of make, value of goods, country of origin and validity period of licence. On examination of the goods, it was found that machines imported were of 1986 make. It appeared to the Customs that the licence presented by the importers was meant for second hand machinery of 1984 whereas the machine was actually found to be of 1986 make. Therefore a show cause notice was issued to the .importers asking them as to why the imported goods should not be confiscated. It was also observed that the value of the imported second hand machine declared by the importers was based on supplier's invoice and the supplier was not the manufacturer, the importers were asked to produce manufacturer's invoice as required under Rule 10 of the Customs Valuation Rules, 1983. The importers were also asked as to why the value of the imported goods should not be enhanced to Rs. 14,54,276/- for assessment purposes. The importers submitted before the Collector, Customs that they had imported 2 nos. Spline Milling Machines Model KF-32 A which is a second hand used machine; that the goods were imported under their specific licence which was produced to the Customs; that the importation was in accordance with the licensing policy of the material time; that there was specific endorsement on the license to the effect that the same was valid for goods already imported; that this clearly indicated that licensing authority was aware including the year of the make of the machine; that the only discrepancy noticed was in regard to the year of manufacture of machine; that the question was whether the machine is of 1984 make or 1986 make; that it does not have any bearing on the validity with reference to the Import Policy as a specific licence was issued in this case, that the machine was of less than seven years of old and had a residuary life of more than ten years; that in any case even such requirement has been dispensed with in the latest Import Policy in terms of Public Notice No. 48(PN)/92-97, dated 18-9-1992; that Chartered Engineer has certified the particulars of the machines which are relevant for the purpose of clearance of the goods; that merely for asking the office of the DGFT would have amended the entry as '1986 make'; that the confusion arose because of source of procurement; that the machine was earlier to be imported from Germany, however due to delay in procurement, a second hand machine from U.K. had to be imported; that the mistake was of clerical nature and should have no consequence in regard to the legality of the import.
3. On the valuation aspect, the importers represented before the Collector, Customs that on the strength of Chartered Engineer's Certificate, coupled with the fact that the DGFT had given them the licence for specific value; there was no legal base for determining the value of second hand machinery by applying depreciation rate as indicated in the show cause notice; that in so far as the import of second hand machines are concerned, their value cannot be determined outside the Valuation Rules; that even a second hand machine has to be valued in terms of the provisions of Section 14(1) of the Customs Act, 1962 read with Rule 4 of the Customs (Valuation) Rules, 1988; that the provisions of Rule 8 can only be invoked if discarded sequentially the Rules from 4 to 7; that the transaction value is not in dispute; that there was no contemporaneous imports at different price during the material period; that even if there were contemporaneous imports the value of the second hand goods cannot be compared. It was therefore, argued before the Collector, Customs by the importers that assessable value has to be determined in terms of invoice value which is the transaction value as provided in Rule 4 of the Customs (Valuation) Rules, 1988.
4. Shri A.S. Sunder Rajan, learned Consultant appearing for the appellants reiterated the submissions made before the lower authorities. He argued that Customs has no alternative in the instant case but to accept the transaction value under Rule 4 of the Customs Valuation Rules. The learned Consultant cited and relied upon the ratio of the decision in the following cases :
1. Pradeep Kedia v. Collector of Customs reported in 1993 (67) E.L.T. 519 (Tribunal)
2. Pine Chemical Suppliers v. Collector of Customs reported in 1993 (67) E.L.T. 25 (SC)
3. Photocopy Centre v. Collector of Customs reported in 1991 (56) E.L.T. 801 (Tribunal)
4. Shiv Shakti Enterprises v. Collector of Customs reported in 1991 (52) E.L.T. 439 (Tribunal)
5. P.A.C. Systems (P) Ltd. v. Collector of Customs reported in 1992 (58) E.L.T. 131 (Tribunal).
For imposition of penalty, the learned Consultant relied upon the ratio of judgment in the case of Jain Exports Pvt. Ltd. v. Union of India reported in 1990 (47) E.L.T. 213 (SC) and in the case of Usha Micro Process Controls Ltd. v. Collector of Customs reported in 1990 (46) E.L.T. 508 (T) and submitted that in this case, no penalty can be imposed.
5. Shri Satish Shah, learned JDR submitted that the Collector has rightly identified the issues involved stating that there were two issues to be examined and they were (a) whether the licence produced is valid for the import of the subject goods and if not whether the goods are liable for confiscation or the importers are liable to penal action for breach of ITC provisions (b) whether the declared value is correct assessable value or the value should be enhanced to arrive at the assessable value of the subject goods.
6. The ld. DR submitted that on examination, the machines were found to be of 1986 make whereas the other particulars of the imported machines were found to agree with the description given in the import licence produced by the importers the year of make of the machines in the licence was of 1984 and thus this material itself becomes vital which clearly shows that the machine imported was not the same as the machines covered by the import licence produced by the appellants.
7. On the question that the value was shown in the import licence and, therefore, the transaction value should be accepted, the ld. DR submitted that in the licence the value shown was for a machine of 1984 make and, not for a machine of 1986 make and hence the transaction value shown in the invoice and declared in the bill of entry becomes suspect and has to be re-determined. The learned DR also submitted that the second hand capital goods were required to be imported in accordance with the provisions of para 26 of the Import Policy of the relevant period and that para 28 of the Import and Export Policy restricted that imported goods were not to be more than seven years old and shall have minimum residual life of five years but since the importers were issued licence for the import of the machinery of 1984 make and the machines actually imported was of 1986 make, licence does not cover import of the impugned machines; that, on the question that the issue of Public Notice No. 48/(PN)/92-97, dated 18-9-1992 permitted the import of capital goods in second hand condition, the ld. DR pleaded that the Public Notice in Automotive Component Sector was no doubt issued on 18-9-1992 but it came into effect on 3-11-1992 and therefore the import of the second hand machines in the instant case was not covered by the provisions of this Public Notice. The ld. DR also argued that the invoice of the imported goods is dated 4-8-1992 and on this count also the import of the second hand machine is not covered by the Public Notice, dated 18-9-1992; that though Shri Sunder Rajan, learned Consultant argued that no evidence has been brought on record by the customs to prove that Public Notice No. came into effect on 3-11-1992. However, that this fact was mentioned in the show cause notice and the appellants had not rebutted it, when they submitted their reply to the show cause notice. The ld. DR submitted that at this stage, the appellants cannot ask for proof.
8. On the question of valuation, the ld. DR submitted that the appellants emphasised that the invoice value (transaction value) has to be accepted under Rule 4 of the Customs (Valuation) Rules, 1988, but the fact remains that Customs (Valuation) Rules have been framed under Section 14 of the Customs Act, 1962 and the Rules cannot travel beyond the scope of main section; that in the peculiar circumstances of the case in as much as the machinery was second hand therefore, there was no likelihood of identical contemporaneous import; that the machine has been imported from the person other than the manufacturers; that the invoice value in the instant case pertains to a machine of 1984 make and therefore its value declared in the invoice cannot be accepted in terms of Rule 4 of the Customs (Valuation) Rules, 1988; that since the machine was used there was no question of looking into contemporaneous identical imports and therefore the value in terms of Rule 5 and 6 of the Customs Valuation Rules, 1988 could not be determined; that there was no date of sale of identical machine in India and therefore, value could not be determined under Rule 7; that the importers did not produce manufacturer's invoice therefore, the customs authorities have rightly determined the value of machine with reference to Rule 8 of the Customs (Valuation) Rules read with Section 14(1) of the Customs Act, 1962; that the importers themselves furnished Chartered Engineers Certificate wherein the price of the new machine has been shown as DM 80,000/- for each machine and therefore, the value of the second hand machine has correctly been determined by the Customs under Rule 8 of the Customs (Valuation) Rules read with Section 14(1) of the Customs Act, 1962; by following the practice of allowing depreciation. Concluding his arguments, the learned DR submitted that on both the issues as the Collector's decision is valid both from the points of fact and law. In support of his contention, he cited and relied upon the ratio of the decision of the cased reported in 1993 (68) E.L.T. 55.1 (Cal.), 1989 (39) E.L.T. 630 and 1991 (56) E.L.T. 801.
9. Heard the submissions of both sides. On careful consideration of the facts on record, we agree with the learned Collector that the two issues for determination as reproduced in the preceding paragraphs.
10. On the first issue whether the imported goods are liable to confiscation, there are two points contested before us: first was that licence covered the goods, the second point was that even if the licence did not cover the imported goods, second hand capital goods in the Automotive Component Sector were covered under OGL for which no specific licence is required.
11. On the first issue whether the licence covered the second hand goods imported, we find that the licence was issued in 1991. It was further amended in 1993. We also noticed that the goods had been shipped on 4-8-1992 and had landed in India on 7-9-1992. We also observe that licence was amended on 17-12-1993 making it valid for 2 nos. Spline Milling Machine Model KF 32A (1984 make) whereas the licence in all particulars tally with particulars of the machines imported, however, the year of manufacturer which is vital for valuation of any second hand goods does not tally, on the appellants' side it was stated that it was purely a clerical mistake and that if they had approached the office of DGFT for amendment in the year of manufacture of the machine, it would have been done for the asking. This contention however does not appear to be a convincing one and acceptable to us inasmuch as the licence was last amended on 17-12-1993, whereas the bill of entry was presented on 9-10- 1992 that is much before the date of amendment of licence; that on the date of the last amendment of the licence, the importers clearly knew that the machine imported by them was of 1986 make and was subject matter of contest between the customs and the importers. No satisfactory explanation has been put forth as to why the year of make of the machine was also not amended. We also like to point out that the year of manufacture in second hand machinery was important as there was a restriction for machines older than 7 (seven) years which could not be imported. Knowing this provision, no satisfactory explanation has come from the importers as to why the year of manufacture was not changed. In the instant case, we hold that the licence did not cover the machines imported.
12. The second point that was contested before us was that in terms of Public Notice No. 48/(PN)/1992-97, dated 18-9-1992, the capital goods in second hand condition required for automotive component sector without licence could be imported. We find that this Public notice was issued on 18th Sept., 1992 whereas the goods were shipped on 4-8-1992 and landed in India on 7-9-1992. Therefore, this Public Notice did not cover the import of the goods. In the show cause notice, it was also mentioned that this Public Notice providing for import of second hand capital goods for automotive components sector was to take effect from 3-11-1992 though no documentary evidence has been produced by the customs on this count but when this point was raised in the show cause notice it was not rebutted by the appellants. Being what it may, on this point also import of the second hand goods in the instant case required a specific licence.
13. Further, in accordance with the provisions of para 26 of the Import Export Policy of the relevant period the second hand capital goods to be imported required a licence and as already held in the preceding paragraph that the licence was not valid in the instant case, therefore, the import was unauthorised.
14. On the question of valuation, the learned Consultant vehemently agitated that in their case, the transaction value should have been accepted. It was submitted by the learned Consultant for the appellants that the Customs are bound to accept the transaction value under Rule 4 of the Customs (Valuation) Rules, 1988 that the provisions of Rule 4 were not examined by the Respondent Collector before jumping to other Rules. Referring to the Tribunal's judgment reported in 1992 (58) E.L.T. 131, the learned Consultant submitted that there was no legal justification in discarding transaction value in respect of identical goods imported by the appellants. Examining the ratio of the judgment cited and relied upon by the appellants, we find that in this case the observation of the Tribunal was in respect of identical goods imported. It is a common knowledge that old and reconditioned second hand machines cannot be identical vis-a-vis contemporaneous imports. There are a number of factors which may deteriorate a machine which has been unused for some time and therefore, normally second hand machines even if manufactured by the same company cannot be identical to one another after their use. We, therefore, hold that the ratio of this judgment is not applicable to the facts of the present case.
15. We find that in the case of Debabrata Ghosh v. Assistant Collector of Customs reported in 1993 (68) E.L.T. 551 (Cal.), the Hon'ble Calcutta High Court had held as under :
"7. The question, therefore, is what should be the starting point of valuation of the imported car. Should be the valuation be done on the basis of the list price of the manufacturer which is the pride 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 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 endeavor 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.
9. Lastly, it does not appear that there is any conflict between Rules 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."
16. It would be seen from the above, the principle laid down in Section 14 is the universal principle of finding out the price at which a willing buyer will purchase from a willing sellers at arm's length. The price must be the sole consideration of the sale. There is nothing in Rule 8 to suggest that different test has been laid down by the Rules. Lastly, it does not appear that there is no conflict between Rule 8 of the Customs (Valuation) Rules, 1988 and Section 14(1) of the Customs Act, 1962. On the other hand Rule 8 has been made applicable subject to the provisions of Section 14 of the Customs Act, 1962.
17. The other point on valuation which was pleaded by the appellants was that the depreciation deduction from the original price is not a correct method. We find that this Tribunal in the case of Muddeereswara Mining Industries Co. v. Collector of Customs reported in 1989 (39) E.L.T. 630 (Tribunal) had held that valuation on best judgment assessment not whimsical when price is arrived at after deducting depreciation from original purchase price. The relevant para of this judgment is 5 which is reproduced below:
"5. It is not that the lower authority has done the Best Judgment Assessment on any whimsical basis; the authority has taken the original purchase price of the machine, given depreciation for the period of use and then converted the depreciated value into Indian Currency at the rate of exchange as in force at the time of import. The proviso requiring adoption of the rate of exchange as in force at the time of import, no doubt, occurs below Clause (a) of Section 14 (1) and not below Clause (b) thereof. But the Clause (b) requires that the value determined thereunder should be 'the nearest ascertainable equivalent' of the value in Clause (a). This can only be if the rate of exchange as in force at the time of import is applied uniformly to value under Clause (a) as well as Clause (b) the rate of exchange as in force on the date of the original or purchase of the machine by the Dutch supplier should be adopted is not acceptable."
18. In the case of Pine Chemical Suppliers v. Collector of Customs reported in 1993 (67) E.L.T. 25 (SC) the Apex Court had held as under :
"7. The learned Counsel for the appellants conceded as evident also from the record, that no challenge was made to the laboratory test reports which had found the imported goods to be Gum Rosin of 'WG' grade instead of 'OFF' grade as declared by the appellants and also described in the Bill of Entry. This question is concluded against the appellants by the concurrent finding of fact throughout. Appellants cannot be permitted to dispute this position also in view of their categorical statement in writing to the authorities that they did not dispute the laboratory test reports and were ready to get the matter adjudicated straightaway by waiving the notice to show cause against confiscation of goods and imposition of penalty as required by Section 124 of the Act. It is on this basis that the appellants obtained clearance of the imported goods for appropriation by them. It must, therefore, be accepted that the goods imported by the appellants of which they obtained clearance with request for early adjudication, accepting the laboratory test reports, was Gum Rosin of 'WG' grade and not 'OFF' grade as declared by them or described in the Bill of Entry. The valuation of the imported goods as Gum Rosin of 'WG' grade for purposes of assessment made at US $ 465 per metric tonne on the basis indicated earlier does not, therefore, suffer from any infirmity and is not open to challenge. The only surviving question now is the examination of appellants' consequential liability as determined by the Tribunal."
19. In the case of Commerce International v. Collector of Customs reported in 1995 (77) E.L.T. 20 (SC), the Apex Court had held as under :
"3. Section 14(1) of the Customs Act empowers the appropriate authority to determine the value of the imported goods in accordance with provisions contained in Rules 3 to 8 provides for determination of value of such goods, with comparable goods produced or manufactured and ordinarily sold or offered for sale to other buyers in India under competitive conditions. Rule 3(b) permits the proper officer to determine valuation on the export price at which such goods or comparable goods are ordinarily sold or offered for sale under competitive conditions to buyers outside India. The determination under Rule 3(b) could be undertaken if the valuation could not be determined under Clause (a). The uthorities found that in the nature of goods imported by the appellant the valuation of it could not be determined under Rule 3(a). Therefore, Rule 3(b) was rightly invoked. And the determination having been done on comparable goods offered for sale in competitive conditions in countries outside India the order does not suffer from any error of law. The Tribunal further did not commit any error in relying on the price list supplied by the manufacturer as compared to trading company which refused to divulge the name of the manufacturer"
20. This Tribunal in the case of Photocopy Centre v. Collector of Customs in para 11 held that:
"In the light of the above discussions, we hold that the Deputy Collector, was right in clubbing the imported goods covered under two bills of entry and coming to the conclusion that the imported goods were 7 pcs. Complete photo copiers in SKD condition. It is not disputed even before us that the goods in question are not old and used. Since there has been clear misdeclaration of the description of the goods in the bills of entry and no valid licence was produced for such old and used photo copier machines, the appellants have contravened the provisions of Import and Export (Control) Order reading with Section 11 of the Customs Act, 1962 and accordingly the goods were liable to confiscation. Since there has been a misdeclaration of the description of the goods, the declared price cannot be said to be the transaction value and question of its acceptance does not arise, as it was rightly argued by the DR. But on the point of valuation, we concur with the arguments of the appellant counsel that the burden lies on the Dept. not only in bringing sufficient evidence on record, but also same should be disclosed to other side for rebuttal while determining the value of the goods. Since this has not been done as contended by the appellants' counsel and the contention of the appellants that M/s Macneil & Mayor were not the local agents of the manufacturers and on the other hand, they have got some documentary evidence to show the relevant price of the similar imports have to be considered by the adjudicating authority. Hence we are remanding the matter to the concerned Deputy Collector on this limited issue to redetermine the value after giving an opportunity to the appellants. Since the goods are under detention, he is directed to dispose of the matter at the earliest possible time on receipt of this order. As regards the fine and penalty, though imposition was justified for contravention of the provisions of the Import and Export (Control) Order and the Customs Act, still some more lenient view is called for particularly in view of the fact that imported goods were old and used. Accordingly, we reduce the redemption and penalty to Rs. 25,000/- and Rs. 5,000/- as against Rs. 55,000/- and Rs. 15,000/- respectively. Thus appeal is disposed of in the above terms."
21. On careful examination of the ratio of the judgments cited above, we find that in the instant case, the invoice gives particulars of import licence dated 26-9-1991 against which the goods have been supplied. This import licence is for importing machines of '1984 make' and therefore, this invoice shall give the price only of machines which are of '1984 make'. Since the second hand machines imported by the appellants were of 1986 make we therefore, hold that value indicated in the invoice was not acceptable and rightly so. The importer himself supplied Chartered Engineer's Certificate indicating that the value of the machines when manufactured was DM 80,000/-. This price has been indicated against entry VI in the Chartered Engineer Certificate.