Customs, Excise and Gold Tribunal - Delhi
Automotive Enterprises vs Collector Of Customs on 19 March, 1985
Equivalent citations: 1985(5)ECR1585(TRI.-DELHI), 1985(22)ELT283(TRI-DEL)
ORDER V.T. Raghavachari, Member (J)
1. The appellants, M/s. Automotive Enterprises, Bombay, imported two consignments of bearings of various sizes from the United Kingdom, the suppliers being M/s. Harvin Exports, London. They were main bearings with Part No. AJH 5285 and connecting rod bearings Part No. AJH 5286, prices respectively being shown as-
£ 0.58 and £ 0.69 F.O.B. When the goods were examined they were found to be Glacier Brand bearings. The department issued a show cause notice dated 18-2-1978 pointing out that the price list dated 7-2-1977 prevailing at the time of importation as supplied by the Authorised Indenting Agents M/s. Overseas Manufacturers Sales Company, Bombay, showed the correct prices for the main bearings and connecting rod bearings to be respectively-
£ 1.37 and £ 1.19 It was therefore charged that the appellants had misdeclared the value, rendering the goods liable for confiscation under Section 111 (d) and(m) of the Customs Act read with Section 3(2) of the Import and Export (Control) Act, 1947. The appellants were called upon to show cause against such action being taken and also for payment of duty at the value suggested.
2. The appellants under their reply dated 14-4-1978 contended that the prices mentioned in their invoices were correct and proper and had been arrived at on negotiations and there had been no misdeclaration. They claimed that the sellers had purchased the subject goods in 1976 itself at the prices at which they were now disposed of (except in respect of certain items which were slow moving) and that as the sellers could not obtain better prices in spite of the time during which they had the goods in stock they were prepared to sell at the prices mentioned in the invoicesand they were therefore the proper prices. They further claimed that the price list of 7-2-77 of A.E. Auto Parts (relied upon by the department) was only a mere offer and indicated the maximum prices and it could only be the starting point for bargaining and in fact M/s. A.E. Auto Parts themselves had sold certain Fiat engine bearings at half the prices mentioned in their price list.
3. On adjudication, the Collector of Customs, Bombay under his order dated 29-8-1978 rejected the contentions of the appellants and held that the prices mentioned in the invoices (and carried over in the Bills of Entry) were lower than the actual prices and hence the charges against the appellants had been established. He therefore ordered confiscation of the goods but gave option for redemption and also imposed penalties as follows:
Bill of Entry No. Redemption fine Penalty
(Rs.) (Rs.)
1843/619 of
7-12-1977 . 1,60,000/- 32,000/-
1843/618 of
7-12-1977 1,52,000/- 30,000/-
The appeal against the said order to the Central Board of Excise and Customs was dismissed under order dated 29-1-1980. It is the revision petition preferred against the said order that, on transfer, is being dealt with and disposed of as an appeal under this order.
4. We have heard Shri N.C. Sogani, Consultant for the appellants and Shri A.K. Jain, Senior Departmental Representative for the respondent. Shri Sogani has cited several decisions in support of his contention that the prices mentioned in the invoices should be accepted as the proper prices unless the department is able to produce any other acceptable evidence to prove that the same was not the proper price. There can be no doubt that if a charge of misdeclaration is made against an importer it would be for the department to establish the said charge by acceptable evidence. But the same proposition would not be wholly correct so far as the assessment to duty is concerned. This is so because under Section 14(1)(a) of the Customs Act the value for purposes of assessment of duty would be the deemed value as provided for under the said Section, even if the invoice price is proved to be the true price as agreed to between the parties. The decision of the Bombay High Court in the case of Union of India and Ors. v. Glaxo Laboratories [1984 (17) E.L.T. 284 (Bombay)] is authority for this proposition. It had been laid down therein that though the price mentioned in the invoice may be the real price as between the parties the department would be entitled to levy duty on the deemed price as would be arrived at on application of the principles of Section 14(1)(a) of the Customs Act. This could be found stated at page 29I as follows :
"This actual price of supply which we would assume is a genuine price in that deal can vary from the international market price which is the 'value' for the purpose of Customs taxation."
5. It is therefore to be considered whether the price mentioned in the invoices relied upon by the appellants is the true price and, if not, what would have been the deemed price as under Section 14(1)(a) of the Customs Act. It is with reference to findings on these points that the decision will have to be given in this appeal.
6. The appellants had relied upon the letter dated 22-8-1977 of M/s. Harvin Exports under which they have offered to M/s. Overseas Manufacturers Sales Company, Bombay, main bearings AJH 5285 (of various sizes) at £ 0.58 each and also connecting rod bearings AJH 5286 (of various sizes) at £ 0.69 each, The prices are mentioned as FOB. The appellants have produced another letter dated 19-9-1977 by Overseas Manufacturers Sales Company to M/s. Harvin Exports whereunder reference is made to a further negotiation for supply of the goods on CIF terms and the refusal for such supply and the order therefore being placed on the basis of FOB prices. (In the photostat copy produced the word 'FOB' has been struck out and 'CIF' are written but it is agreed that the final agreement was for supply on 'FOB' basis only). The appellants claimed what it was following such negotiations that they placed orders through M/s. Overseas Manufacturers Sales Company, Bombay to Harvin Exports for supply of the subject goods at the prices as agreed upon and it was in accordance therewith that the supply had been made. It is therefore contended that the prices agreed upon were the normal international prices at about the time of the importation and therefore there was no case of misdeclaration.
7. On the other hand the department relied upon a letter by M/s. A.E. Auto Parts to Overseas Manufacturers Sales Company dated 7-2-1977 in which the prices of the same parts (the equivalent part numbers being mentioned therein) is shown at £1.37 and £ 1,08 respectively. The equivalent part numbers are-
M3157M = AJH 5285 B4170M = AJH 5286 It is therefore contended for the department that M/s. Overseas Manufacturers Sales Company being the main importing agent for these parts and M/s. A.E. Auto Parts being a recognised and reputed supplier of these parts it is the prices mentioned in this letter, which is specifically mentioned as special net prices for India, that were the actual prices at the relevant time and the prices mentioned in the invoices of the appellants were not the correct prices.
8. The defence in this connection is that-
(i) M/s. Harvin Exports had the subject goods on stock with them from about the middle of 1976 and they were therefore anxious to dispose of the stock at the best available price and that is why they were willing to sell the goods at the prices agreed upon as mentioned earlier ; and
(ii) That the letter dated 7-2-1977 was a mere circular letter offering the goods at particular rates but that the prices were negotiable and there is no proof that the bearings of the two types in question were in fact actually sold or imported at prices higher than the one mentioned in the invoices of the appellants.
9. In connection with the first contention abovesaid the appellants relied upon the commercial invoices of the Glacier Metal Company Ltd. (the manufacturers of the subject, goods) issued to M/s. Harvin Exports on 4-6-1976 (invoice No. 3108) and 31-3-1976 (invoice No. 2922), copies of these invoices having been sent by M/s. Harvin Exports to the appellants at their request. It is pointed out for the appellants that the subject goods had been received by M/s. Harvin Exports under these invoices and had been therefore lying with them since 1976 and as they could not be disposed of by M/s. Harvin Exports even by the end of August 1977 they offered them for sale under their letter dated 22-8-1977 at the rates mentioned therein. The appellants had during their appeal before the Board relied upon a letter dated 27-2-1978 from M/s Harvin Exports in which they had referred to the abovesaid commercial invoices. The Board had no doubt observed that the said letter dated 27-2-1978 had not been produced though referred to. Shri Sogani states that a copy of the letter was in fact given. In any event we have looked into a photocopy of that letter also.
10. The acceptability of the arguments above-mentioned would therefore depend upon the truth of the allegation of stock having been held as dead stock for over 1 1/2 years and therefore being offered at the particular rates mentioned in the letter dated 22-8-1977. We have carefully looked into the matter. A tabular statement indicating the stock offered for sale under letter dated 22-8-1977, the confirmed orders placed following the same, and the supplies under the two invoices, is shown below :
Size 10 20 30 40 50 60 70 80 2.5 BEARING No. AJH 5285=M3157M Offer dt.
22-8-1977 738 1352 834 524 493 627 1042 980 1057
Order dated
20-9-1977 738 1352 834 524 493 627 1042 980 1057
Confirmation dt.
28-9-1977 738 1352 834 524 493 627 1042 980 1057
Size
10 20 30 40 50 60 70 80 2.5
Invoice dt.
4-11-1977 34 742 980 1057
(1)
Invoice dt.
4-11-1977 738 1150 800 974 493 677 300 - -
(2)
Toal Qty.
invoiced 738 1150 834 974 493 677 1042 980 1057
(1+2)
Excess over
order - 202 450 50
(-) (+) (+)
BEARING No. AJH 5286=B417OM
Offer 731 1496 865 698 476 491 1071 1136 1132
Order dt.
20-9-1977 731 1496 865 698 476 491 1071 1136 1132
Cofirmation dt.
28-9-1977 731 1496 865 698 476 491 1071 1136 1132
Invoice dt. 400 15 400 1071 1136 1132
11-4-1977
(1)
Invoice dt.
4-11-1977 731 1298 850 1198 126 441
(2)
Total Qty.
invoiced 731 1698 865 1198 526 441 1071 1136 1132
(1+2)
Excess over
order 202 500 50 50
(+) (+) (+) (-)
It would be seen from the above that in respect of at least certain types of bearings the supplies under the two invoices had exceeded the stock offered for sale under letter dated 22-8-1977 and also the orders placed following that letter. The excess is seen to be as follows :
Bearing No. AJH 5285 = M3157M: .40 (450)
.60 (50)
Bearing No. AJH 5186=B4170M :
.20 (202)
.40 (500)
.50 (50)
The figures in bracket indicate the excess quantity supplied compared to the stock offered for sale or the orders placed for supply.
11. As earlier mentioned the acceptability of the case of the appellants would depend upon the truth of their claim that in view of the stock having been held as dead stock for quite some time the exporter was prepared to offer the same at a particular price and that would therefore have been the normal international price at which such goods would have been available for anybody. But we have also seen that though the declared stock (dead stock as claimed by the appellants) was at a particular figure, and the appellants had placed the order for the entire stock as mentioned in the letter dated 22-8-1977, the actual supply was, at any rate so far as bearings of particular sizes are concerned, of a quantity in excess of the order. That would mean that at any rate so far as this excess was concerned it could not have formed part of the dead stock. Nor is there any explanation offered why and in what circumstances this excess supply was made by the exporter even without an order therefor. This cirucms-tance would only excite the suspicion that the negotiations between the parties may not have been only under the correspondence before us. In the above circumstances the claim of the appellants as to the normal international price having been only as under the offer dated 22-8-1977 cannot be correct. In that event the value for purposes of assessment cannot be arrived at on the basis of the said offer or the alleged supply in pursuance of that offer. In this connection the department has relied upon the circular letter dated 7-2-1977. That was by an approved supplier of the Glacier bearings, the letter being addressed to an authorised agent in India. That letter indicates a considerably higher price than the one mentioned in the letter dated 22-8-1977 or the orders and invoices following the same. The contention for the appellants in respect of that letter is that the same was merely an offer for sale at the prices mentioned therein but that the actual prices were to be concluded on further negotiations only. In their reply to the show cause notice the appellants had mentioned, with reference to this letter dated 7-2-1977, that Fiat Engine bearings mentioned in the said price list have been exported by M/s. A.E. Auto Exports at almost half the prices mentioned therein. During adjudication no proof had been offered of such an allegation. Before us Shri Sogani produced an invoice with reference to Perkins bearings, slating that the same related to item No. 13 of the letter dated 7-2-1977 and that the supply was at a price lesser than the one mentioned in the letter dated 7-2-1977. No reference had been made to this supply before the lower authorities. Nor has been any application made to receive this as an additional evidence. It is not known whether the invoice now relied upon by the appellants was itself the subject matter of any adjudication or whether it had been accepted as such for assessment in connection with that import. In these circumstances we are not inclined to go into that matter any further or to act upon evidence based on that import to disbelieve the prices mentioned in the circular letter dated 7-2-1977. As mentioned earlier, that circular letter is by an authorised supplier of Glacier bearings, mentioning special nett prices for India. In the absence of any acceptable evidence to doubt the prices mentioned therein we do not see any reason why that should be disregarded.
12. It is therefore seen that the invoices produced and relied upon by the appellants are not acceptable at face value. On the other hand the circular letter dated 7-2-1977, coming as it does from an authorised agent of the bearings in question and addressed generally to traders and indicating the special nett price for India, would appear to us to be the proper basis for arriving at the international price which would be the basis for the deemed value under Section 14(1)(a) of the Customs Act.
13. We therefore hold that the appellants are proved to have intentionally misdeclared the prices in the invoices as well as the bill of entry. We further hold that for purposes of assessment of duty also the prices mentioned in the circular letter dated 7-2-1977 would be the proper value. The penalties levied are also not excessive having regard to the volume of import. Accordingly the orders of the lower authorities are confirmed\and this appeal is dismissed.
M. Gouri Shankar Murthy, Member (J)
14. I agree with the order proposed but for slightly different reasons.
15. As I had occasion to observe in a separate but concurring judgment in 1984 (15) E.L.T. 137 [OEN (India) Ltd. v.CC. & C.E.], the deemed value of the imported goods, in terms of Section 14 of the Customs Act, 1962, is not their actual value, invoice value or the price at which they are capable of being sold. It is, on the contrary, the price at which such goods are ordinarily sold or offered for sale at the time and place of importation, i.e., the market price at the time and place of importation, [Clause (a) of Section 14] and where it is not so ascertainable, it is the nearest equivalent determined in accordance with the Customs Valuation Rules, 1963 [Clause (b) of Section 14]. The invoice price or the reasons in justification thereof may become relevant only for best judgment assessment under Rule 8 of the aforesaid Rules and not otherwise. But then, the resort to the Rules can be only if the assessable value cannot be determined under Clause (a) of Section 14 itself.
16. The question is if the assessable value for the goods imported on 7-12-1977 can be determined under Clause (a) of Section 14 of the Act ? If not, which is the Rule applicable amongst the Valuation Rules framed under Clause (b) of Section 14.
17. It was admitted at the Bar that there were no contemporaneous imports. Nor were the market prices ruling at the time and place of importation ascertained. In fact, from the letters dated 10-8-1978 and 3-7-1978 of M/s. Overseas Manufacturers Sales Company and Grip International respectively, it would appear that the market price ruling at the time and place of importation cannot be ascertained since it is stated in the said letters that they had not been importing identical goods for the previous 4 years. There is no evidence of the market price in India for identical goods the appellants as well.
18. It, therefore, appears clear that the assessable value has to be determined in terms of the Valuation Rules under Clause (b) of Section 14 only.
19. A perusal of the Rules would appear to indicate that the only Rule applicable, in the facts and circumstances of the case, is the Rule 3(a). In terms thereof, the value of the imported goods may be based on the value at which such goods or comparable goods are ordinarily sold or offered for sale to other buyers in India under competitive conditions. It is in this context that the offer in the Circular Letter dated 7-2-1977 indicating the Export Nett Prices for identical goods and relied upon by the Respondent assumes relevance.
20. The actual price after import, accordingly, must be higher than what was quoted since the ocean-freight, insurance, import duty and expenses in clearance were not reflected in the aforesaid net export price. At any rate, there is no evidence of the prices having gone down for the identical goods or of any tranactions of sale and import or even offer for sale at lower prices. The Invoices dated 4-11-1977 from M/s. Harwin Exports and 28-11-1977 from M/s. Maphil Traders Ltd. and the special offer for camshaft bush C 3023 S dated 15-11-1977 relied upon for the Appellant as showing a decline in prices from those quoted in the aforesaid letter dated 7-2-1977, do not reflect the prices of goods identical with those actually imported. The mere fact that the prices for other parts suffer a decline does not necessarily mean and imply that the prices quoted for identical goods also declined by the time of actual import. Nor does the aforesaid offer dated 7-2-1977 lose its probative value just because the prices quoted could have been reduced by negotiation since in terms of the aforesaid Valuation Rule, an offer by itself is sufficient to be the basis of the determination of the assessable value.
21. In the result, I agree that the Appeal be dismissed.