Customs, Excise and Gold Tribunal - Delhi
Job Printers vs Collector Of Customs on 12 July, 1993
Equivalent citations: 1993ECR267(TRI.-DELHI), 1994(72)ELT124(TRI-DEL)
ORDER P.K. Desai, Member (J)
1. This appeal is directed against the Order-in-Original No. S/10-205/84G dated 3-8-1983 of the Additional Collector of Customs, Bombay, fixing the valuation of the Planetu two colour secondhand off-set printing machine imported by the appellants, at Rs. 5,62,984/-vide Section 14 of the Customs Act, 1962, and also ordering its confiscation vide Section 111(d) of the Act, read with Section 3(2) of the Imports and Exports (Control) Act, 1947, but granting option to pay fine of Rs. 1,25,000/- in lieu of confiscation.
2.1 The appellants imported one Planetu P-24 SW of 1976 manufacture, and claimed clearance thereof under O.G.L. vide Appendix 10(3) read with Appx. 2(12)18 of the Policy Book AM 1982-83. The appellants also produced a certificate from a Chartered Engineer about the year of manufacture of the machine being 1976, and the expected residual life being 10 to 15 years. The value of the machine was declared in the Bill of Entry as SEK 350,000 (Rs. 4,96,306/-) cif. This however, was suspected to be a case of under-valuation as, for contemporary import for the such machine, of 1974 manufacture, the value was quted at SEK 375,000/- by the importers M/s. Jay Print Puck Ltd., New Delhi and it was felt that therefore the subject machine ought to be at least worth SEK 400,000/- i.e. Rs. 5,62,983/-. It was also noticed that the goods were received during the policy period AM 1983-84, when such machines were not falling within the category of OGL items. On enquiry, it was revealed that the appellants had opened the Letter of Credit, with the Bank on 9-12-1982, which was initially valid upto 8-3-1983 but subsequently the validity period was extended to 8-4-1983, 30-6-1983 and 31-3-1984 and hence it was felt that, with the fundamental change effected in the contract, the import was unauthorised and the benefit of Condition 7 of Appx. 10 of AM 1982-83 which was being claimed by the appellants, was not available, and further, no reasonable explanation was also available for longer delivery period.
2.2 On the objection to clearance of the goods being raised, the appellants waived issuance of the show cause notice. Personal hearing was however given when the appellants filed their written statement of defence, and amongst others, raised a plea that the valuation was dependent not on the year of manufacture but on the condition of the machine, when the machine to be imported was a second-hand one and that therefore, the negotiated value as shown by them ought to be accepted. As regards the objection in relation to ITC provisions, it was pleaded that a firm contract was duly executed before 29-2-1983, and that the same was even got registered with the bank as early as 9-12-1982, on which date even a letter of credit was also opened, and that the delay in effecting delivery was merely on account of inability of the supplier to procure the delivery of the same in time and hence the import was protected vide condition 7 of Appx. 10 of AM 1982-83 Policy Book.
2.3 The adjudicating authority however eoncluded that there was an amendment in the contract and concession about delayed shipment was not available when the suppliers could not procure the machine, and hence provisions of condition 7 of Appx. 10 in Policy Book AM 1982-83 were not attracted and the import being during the period AM 1983-84, when the item was withdrawn from the OGL list, the import was unauthorised. The adjudicating authority held that the original negotiated value of the machine was SEK 440,000/- which was finally reduced to SEK 350,000/- because of grant of some special concession, and hence considering the circumstances, he assessed the value at SEK 400,000/- i.e. Rs. 5,62,843/- and passed the impugned order.
3.1 Shri N.C. Sogani, the ld. consultant, appearing for the appellants, has pleaded that the appellants are SSI unit engaged in the business of printing and as such, they are the actual users of the machine imported. Narrating the sequence of events, ld. consultant has pleaded that on conclusion of initial negotiations, proforma invoice No. 82383 dt. 14-10-1982 was drawn amd the certificate from chartered engineer of the same date was obtained, when the prioe for the subject machine was fixed at SEK 440,000/- CIF and based on the said invoice, a letter of credit was opened with the State Bank of India, Allahabad on 9-12-1982, which was valid upto 8-3-1983. The contract between the parties was also registered with the said Bank on 9-12-1982, however, as the delivery of the machine could not be effected within the stipulated period, the validity date of Letter of Credit was got extended thrice, and was made valid till 31-3-1984. As is pleaded by the Ld. Consultant, because the supplier was not effecting delivery Mr. M. Bhargava, of the appellants, went to Sweden in January 1984, and that because, by that time, the machine negotiated for import was further used, he negotiated for reduction in price, which ultimately was agreed at SEK 350,000/- CIF and the suppliers confirmed the same vide their letter dated 3-2-1984 and ultimately the machine was shipped on 27-3-1984 and invoice showing the price as SEK 350,000/- dt. 29-3-1984 was issued, and the Bill of Entry for home consumption was filed on 26-6-1984.
3.2 Submitting on the valuation aspect, the Ld. Consultant, has pleaded that the authority below has proceeded on the wrong premises and has overlooked the fact that the value of the second-hand machine is always related to the condition of the machine, and that the price of the machine as originally agreed to was reduced because the same was continued to be used even thereafter, before the delivery to the appellants and had therefore depreciated in value. Referring to this Bench's earlier decisions in Tara Art Printers v. Collector of Customs, 1985 (20) E.L.T. 358 (Tribunal), Rishi Gases v. Collector, 1992 (60) E.L.T. 273 (Tribunal), Otis Elevators Co. (I) Ltd. v. Collector, 1993 (64) E.L.T. 217 (Tribunal), Muddeereswara Mining Industries v. Collector, 1989 (39) E.L.T. 630 (Tribunal), and Pragati Press and Am. v. Collector 1992 (41) ECR 21 (Tribunal), the Ld. Consultant has pleaded that, it is for the department to establish the under-valuation, and in absence of any cogent evidence, the contracted value has to be accepted as the assessable value and that in assessing the value of a second-hand machine, the year of manufacture and the depreciation of the machine cannot be ignored. He has pleaded that as per the certificate from the Chartered Engineer the value of new machine in Sweden in 1976 was SEK 550,000/- and as such on depreciation, value in 1984 would be even less than what the appellants have actually declared. In his submission, thus, there is no ground to allege any under-valuation.
3.3 On the ITC aspect, the Ld. Consultant, has submitted that a firm contract was duly entered into on 14-10-1982, which was even got registered with the Bank on 9-12-1982, and on the same day irrevocable letter of credit was opened. Accepting that the validity period of the Letter of Credit was got extended subsequently, the Ld. Consultant has referred to the publication from Hongkong and Shanghai Banking Corporation, on Uniform Customs and Practice for documentary credit ICC No. 400 and has pleaded that any alteration in the validity of any Letter of Credit has to be with the agreement from the concerned bank, and as such, the bank has to be taken as having accepted the modification, and hence, irrevocable nature of the letter of credit cannot be doubted.The Ld. Consultant has submitted that reduction in purchase price would also not affect the validity of the Letter of Credit, as the said Letter of Credit was not for a specific amount but was for the amount "Not exceeding SEK 440,000/-" and the sum of SEK 350,000/- obviously was within the said limit. Again referring to this Bench's decision in Re: Tara Art Printers (supra) as also the decision in Rakesh Press v. Collector, 1985 (21) E.L.T. 140 (Tribunal), the Ld. Consultant has pleaded that mere change in date would not alter the nature of firm contract. He has also pleaded that the same machine, which was agreed to be purchased in 1982, has been received. About the delayed shipment, and observation of the adjudicating authority in that regards, the Ld. Consultant, has pleaded that extended period of shipment cannot be denied because there was delay on the part of the supplier as there is nothing in condition 7 of Appx. 10 of Policy Book AM 1982-83 to conclude that the delay should be only on account of shipping difficulty. In his submission, with firm contract entered into as early as 14-10-1992, and with other requirements of the aforementioned condition 7 having been complied with, the benefit thereunder is available to the appellants, and that the import under OGL as per the Policy provisions of AM 1982-83 be permitted.
3.4 Mr. Prabhat Kumar, the Ld. SDR, while supporting the entire order of the authority below, has submitted that four aspects are required to be considered, namely, (i) date of firm contract, (ii) legality of import from ITC angle, (iii) valuation, (iv) justification for confiscation.
3.5 Advancing the arguments as to the date of firm contract, and consequential invalidity of import, the Ld. SDR has pleaded that undisputedly during the policy period, 1983-84, AM, the subject goods were not importable as OGL item, and the import could be considered as valid only if it could satisfy the requirements of condition 7 of Appx. 10 of Policy AM 1982-83, which requires existence of a "firm contract" entered into prior to 28-2-1993. In his submission, the said criteria is not fulfilled as the subject import is not under contract allegedly entered into on 14-10-1982 but is under the new contract which came to be entered into, in or around January, 1984. As submitted by the Ld. SDR, the initial contract entered into has undergone major alteration, not only in relation to the date of delivery but also as to the price agreed to be paid as is evident from letter dated 2-3-1984 and merely because the same machine has been brought, it could not be said that the import is under the contract which was entered into on 14-10-1982 and registered with the bank on 9-12-1982. He has also pleaded that the letter of credit is merely a document executed by the bank, assuring the supplier about the due payment for the goods supplied, and that the submissions of the Ld. Consultant in that regard, would not in any way, alter the position. In support of his submission, the Ld. SDR, has referred to the decision of the Tribunal in Gurukar Plastics v. Collector, 1991 (51) E.L.T. 78 (Tribunal).
3.6 As regards the valuation, the Ld. SDR has pleaded that the mach-hine was agreed to be purchased for SEK 440,000 and as is evident from the letter dated 2-3-1984 from the supplier, the reduced price is agreed upon only by way of compensation for the delayed delivery. The Ld. SDR has pleaded that undisputedly, the contract as originally entered into was not fulfilled, and the appellants had become entitled to claim damages for breach of contract, and hence, the suppliers reduced the price "by way of compensation" with a view to evade their further liability. In his submission, the charging of the lower price, would not affect the valuation of the goods for the purpose of assessment of duty. The Ld. SDR, has in support of his submission, referred to the decision of the Supreme Court in Sharp Business Machines v. Collector -1990 (49) E.L.T. 640 (SC), as also decisions of the Tribunal in Padia Sales Corporation v. Collector -1993 (62) E.L.T. 760 (Tribunal) and Padia Sales Corporation v. Collector -1993 (66) E.L.T. 35 (SC), Mani and Press Tools Corporation v. Collector -1990 (45) E.L.T. 328 (Tri.), Merinoply & Chemicals v. Collector -1988 (35) E.L.T. 654 (Tribunal) and Wavin India Ltd. v. Collector -1992 (59) E.L.T. 456 (Tribunal).
3.7 The Ld. SDR has submitted that therefore, the impugned order of confiscation, based on contravention of the ITC provision as also on under-valuatuon of the goods, is fully justified and does not call for any interference.
4. Considering the submissions made, and going through the records, there does not appear any dispute on the issue that during the policy period AM 1982-83, the subject goods could be imported under open general licence, and that the appellants are the actual users of the said machine. There is also no challenge over the fact that during the subsequent policy period, when the actual import has taken place, the subject goods have been taken out of the OGL items and hence could not be imported without a valid licence in that regard, and to prove the subject import as permissible, the appellants have to take recourse to the provisions contained in condition 7 of Appx. 10 of Policy Book for AM 1982-83, which reads :
(7) In the case of capital goods, equipment and permissible spares covered under Open General Licence, vide Items 3, 4, 5, 6, 10, 11 and 12 above, if the eligible Actual User Importer enters into a firm contract for import up to 28-2-1983 but the goods cannot be shipped on or before 31-3-1983 on account of the longer delivery period involved, the shipment may be allowed upto 31-3-1984 in pursuance of such firm contract, provided the contract in question is duly registered with a foreign exchange dealer (bank) on or before 28-2-1983. (In specific cases, where the delivery period is still longer, CCI & E, New Delhi may allow shipment under OGL upto a further extended date in consultation with the technical authorities concerned.)"
As regards the valuation, there is no challenge to the certificate issued by the Chartered Engineer dt. 14-10-1982, that the price of the new machine in Sweden in 1976 was SEK 550,000 and that the same in the year 1982 was SEK 960,000. It is also not under dispute that the price agreed upon between the supplier and the appellants in 1982, for the subject machine was SEK 440,000 and in 1984 when the same was actually imported, the agreed price was SEK 350,000. It is also evident from the record that the department has not procured evidence of import of an identical machine from the same country during the same period, and what is taken as an evidence of contemporaneous import is in relation to a second-hand machine of 1974 manufacture.
5.1 Examining first, the validity of import from ITC angle, with un-disputed position as indicated hereinabove, the only issue requiring consideration is whether the appellants could have the recourse to condition 7 of Appx. 10 of the Policy Book AM 1982-83 reproduced hereinabove, which requires existence of a "firm contract" on the date of the import, but which was executed on or before 28-2-1983. The contention of the appellants is that such a firm contract has been entered into on 14-10-1982 and which has stood duly registered with the bank on 9-12-1982.
5.2 Ignoring the technical requirements of a valid contract which ought, usually, to be signed by both the contracting parties, in authentication of proposal and acceptance, and taking the proforma invoice as registered with the bank on 9-12-1982 as a valid document of contract, the same is for the purchase of machine for SEK 440,000 CIF Bombay, and time for delivery stipulated therein is 6-8 weeks after receipt of letter of credit. Obviously, the import is not effected under these conditions. For the subject import, a fresh invoice though bearing the same number as the earlier proforma invoice, has been drawn on 29-3-1984, showing the price as SEK 350,000/-.
5.3 "Firm Contract" as to be understood with reference to the Policy * provision, is the one which cannot be subjected to any subsequent alteration and in due implementation whereof, the import is effected. In such of the contracts, where time of performance is not one of the essential criteria, alteration thereof, on mutual agreement, may not make the contract, which otherwise adheres to the original terms and conditions agreed upon, is not a firm contract, merely on alteration of the date of delivery. Here, however, besides alteration in the date of delivery, there is also material alteration in the price payable. In a contract of sale, price is positively an essential ingredient, and if that is altered, the same has to be taken as a material alteration in one of the principal terms of the contract, and the import has to be taken as the one not under the original contract, entered into on 14-10-1982, but on entirely a new contract, which came into existence on 29-3-1984.
5.4 Even on the factual position as represented by the appellants themselves, because of the failure on the part of the suppliers to supply the machine, as was agreed upon vide contract dated 14-10-1982, even though the Letter of Credit was being extended, there was some correspondence, and the suppliers vide a telegram, followed by a letter, even proposed that the appellants may agree for another machine, and ultimately their Mr. M. Bhargava went to Sweden in January 1984, re-inspected the machine (same which was initially contracted to be purchased) and negotiated the price, which ultimately was agreed to by the suppliers vide letter dt. 3-2-1982. This clearly indicates that there was a novation of the contract and the original contract for purchase of the subject machine for SEK 440,000 was substituted by a contract to purchase it for SEK 350,000 and going by the provisions of Section 62 of the Indian Contract Act, the original contract has to be deemed to have been replaced by the new one.
5.5 Condition 7 of Appendix 10 of Policy AM 1982-83 protects the import effected before 30-4-1984, based on the firm contract entered into on or before 28-2-1983. Here, though one contract was entered into before 28-2-1983, the subject import is not the one made pursuant to that contract but was under a new contract entered into somewhere in January - February 1984 as is evinced from the letter dated 3-2-1984 from the supplier as also by issuance of a fresh invoice dt. 29-3-1984.
5.6 Even assuming that because the same machine is brought and the same is in relation to the contract entered into on 14-10-1982, then also the contract entered into at that time could not be taken as a firm contract, as subsequently, there has been an alteration on the most essential ingredient in a contract of sale, namely the purchase price and if that could be done, the contract initially entered into could not be taken as a firm contract. Here however is a clear case of substitution of the original contract by a new contract of purchase at the reduced price.
5.7 Considering all these factors, it is not possible to accept the plea that the import of the subject goods stands protected vide Condition (7) of Appx. 10 of the Policy Book AM 1982-83 and consequently the import has to be held as unauthorised, and the authority below has rightly held the same to be so.
5.8 It may however be observed that the view of the authority below that extended period of delivery is available only in case of Shipping difficulty, does not appear as flowing from the relevant provisions. The words "longer delivery period" would also include delivery of goods even by the supplier. This aspect however has no significant bearing on the conclusion drawn as above.
5.9 The case law referred to by the Ld. Consultant in this regard, is factually at variance with the facts here. In Re : Rakesh Press (supra), there was no alteration in the terms of contract and there was only delayed delivery whereas in Re : Tara Art Printers (supra), it was only alteration in letter of credit and not in the main terms of contract.
6.1 As regards the proper valuation, the valuation as put by the appellants is sought to be doubted on two aspects (i) contemporary import of similar machine of 1974 make for SEK 375,000 and (ii) this very same machine has been agreed initially to be purchased for SEK 440,000 and subsequently reduced price is only, in lieu of compensation for non-fulfilment of initial contract, and that, otherwise the price payable would have remained SEK 440,000/-.
6.2 Undisputedly the subject machine is a second-hand one, and the value thereof would depend more on the condition and no two items could be identical. Though, no authentication in this regard may be necessary, the decision referred to by the Ld. Consultant also, has endorsed the same view. Besides, that, the comparison sought to be made, is, with the machine of 1974 manufacture, without any concrete data as to the condition etc. This obviously therefore, cannot be taken as the basis to conclude that the appellants have undervalued the goods. The second aspect on which the undervaluation is pleaded, is the initial agreement to purchase the same for SEK 440,000 and the reduction as made by way of only compensation for the non-fulfilment of the contract initially entered into. It is true that in the letter dated 3-2-1984, the suppliers have used the words "compensation for the very much delayed delivery". The entire subsequent negotiations have been taken, as novation to the original contract and there also exists a new invoice drawn on 29-3-1984. If the reduction was merely a compensation, issuance of a fresh invoice would not be necessary as the agreed amount of compensation could have been adjusted by issue of credit note or by any other permissible mode. The wordings in the letter dated 3-2-1984, therefore could not be read as meaning that the value of the machine has remained unchanged. A fact also cannot be ignored that the machine had remained in use by the owner for a period of a year after the price was initially negotiated and naturally, must have suffered more wear and tear affecting directly on the value of the machine.
6.3 There is no challenge to the averments in Chartered Engineer's certificate dt. 14-10-1982, that value of new machine in 1976 was SEK 550,000/-and that in 1982 was SEK 960,000/-. The machine undisputedly is a secondhand one, and is about seven years old when imported into India. When the same was in use for seven years prior to import, obviously it must have suffered wear and tear and condition thereof has to be accepted as depreciated. Assuming that because of price of the new machine had been going upward, and was SEK 960,000/- when the subject machine was imported, being a second-hand machine used for seven years, nearly 36% of the value of the new machine of 1982 manufacture and nearly 63% of the price prevailing in 1976, when the same was manufactured, has to be, in absence of any other specific data available, showing the contrary, has to be accepted as fair and reasonable, and need not be doubted as the case of undervaluation. The decisions relied upon by the Ld. SDR also do not give any contrary version.
6.4 With no clear data available before the department that the value as assessed is not proper, and when the other evidence on record indicates the value to be fair and reasonable the finding of the adjudicating authority that the subject goods have been undervalued cannot be endorsed, and as such, the said portion of the order of the authority below cannot be sustained and has to be set aside.
7. Thus, though this is not a case of undervaluation, from the ITC angle, the import is unauthorised, and has been rightly ordered confiscation vide Section 111 (d) of the Customs Act.
8. While ordering confiscation of the goods, the authority below has given option to the appellants, vide Section 125 of the Customs Act, to pay fine of Rs. 1,25,000/- in lieu of confiscation. The appellants are the actual users of the machine, and they had intended and attempted to bring the same during the policy period 1982-83 but could not do so for the reasons given. In that view of the matter, and with the allegations of undervalution as not proved, there appears some scope of showing some leniency in relation to quantum of redemption fine. In that view of the matter the fine in lieu of confiscation is reduced to Rs. 1,00,000/- (Rupees One lac only).
9. The authority below has not imposed any penalty vide Section 112(a) of the Customs Act and there is no appeal by the department on that count.
10. Under the circumstances, the appeal is partly allowed. The order fixing the value of the machine at Rs. 5,62,984/- is set aside and the value is directed to be fixed at the equivalent of SEK 350,000/- as per exchange rate prevailing on the date of import in Indian currency. The order of confiscation vide Section 111(d) of the Customs Act, 1962 is confirmed. The fine in lieu of confiscation is however reduced to Rs. 1,00,000/- (Rupees One lac only). Consequential reliefs to follow.