Indian Kanoon - Search engine for Indian Law

Skefko India Bearing Co. Ltd. [hereinafter to as `the Skefko'], appellant in C.A.Nos. 1030-34/94, are importers of ball and roller bearings. They also act as intending agents for marketing of imported ball bearings for and on behalf of AB-SKF, Sweden. Ball bearings of various types are manufactured by AB-SKF in Sweden and by their subsidiary companies in U.K., Germany, France and Italy. Skefko book orders from different types of customers which can be classified into three categories:

Mirah Exports Pvt. Ltd. [hereinafter referred to as `Mirah Exports'], appellant in C.A.No. 47/90, is a private limited company incorporated under the companies Act, 1956, carrying on business as importers, exporters and manufacturers' representative at Bombay. In July and September, 1982 Mirah Exports contacted Skefko for purchase of approximately 15 lakh pieces of ball bearings from SKF from Italy/Germany. The entire negotiations for purchasing the said goods were carried out by Mirah Exports, 24 consignments of ball bearings were imported by Mirah Exports from SKF; Italy and SKF; Germany and the balance quantities were imported by Skefko in the months of November, 1982 and January, 1983. The Bills of Entry in respect of 24 consignments imported by Mirah Exports were submitted to the collector of Customs, Bombay in the months of November, 1982 and January, 1983 and the same were noted. Clearance was sought against 22 import licences held by Mirah Exports. On or about June 22, 1983, pursuant to certain information, the officers of the Enforcement Directorate carried out search at the premises in Bombay of : [i] Skefko; [ii] Associated Bearings Co. Ltd.; and [iii] Shri Kishan Chand, the President of Skefko. During the said search certain documents were sebed by the Enforcement Directorate. After further investigation a show cause notice dated May 31, 1984 was issued to [i] Skefko; [ii] Mirah Exports; [iii] Punjab Bearing Traders; and [iv] the clearing agents of Mirah Exports. In the said show cause notice it was stated that by undervaluing, Mirah Exports had misdeclared the value for bearings nos. 6201,6202,6203 including shielded bearings in each of 24 Bills of Entry which misdeclaration had rendered all the 24 imports liable for action under Section 111(m) of the Act and that in respect of the goods, so under valued to the extent as indicated in the said show cause notice, no import licences had been produced and in the absence of any import licence in respect of such goods in each consignment, such goods had apparently become liable for action under Section 111(d) of the Act read with Section 3(2) of the Imports & Exports (Control)_ Act, 1947 and that Mirah Exports, Punjab Bearing Traders and Skefko had done or omitted to do certain acts, which acts of commission/omission had rendered the goods liable for confiscation and that they had thus become liable for action under Section 112 of the Act. The parties mentioned above were required to show cause to the collector of customs, Bombay as to why the goods detailed in Annexure `A' to the show cause notice should not be confiscated under Section 111(d) of the Act read with Section 3(2) of the Imports & Exports (Control) Act. 1947 and also under Section 111(m) of the Act and why penal action should not be taken against them under Section 112 of the Act. The said show cause notice was based primarily on the price list for the year 1981-82 that was finished by the Central Office of the Oversees Suppliers to Skefko since the invoice value of the goods imported by Mirah Exports was 48.7% of the prices mentioned in the said price list. It was claimed that the price list was recovered during the course of search that was conducted by officers of the Enforcement Directorate on or about June 22, 1983.

In pursuance of the orders dated June 7, 1985 passed by the Central Board of Excise & Customs, the Collector of Customs presented three appeals against Skefko, Mirah Exports and Punjab Bearing Traders against the order of the Addl. Collector before the Tribunal. The said appeals were registered as Appeal Nos. C/1925/85A, C/1926/85A and C/1927/85A.

Skefko had also imported ball bearings on the basis of import licence issued in its favour under invoice dated May 20, 1983 from SKF-Germany and under Invoices dated March 17, 1983 and April 29, 1983 from SKF-Italy. In addition M/s Rajkumar & Co. had imported one consignment of bearing of SKF brand part No. NU 209 under invoice dated July 31, 1984. Separate show cause notices dated January 30, 1984 February 3, 1984, march 29, 1984 and October 21,1986 were issued by the Collector of Customs, Bombay in respect of the said imports. Skefko filed its reply to the said show cause notice. On the basis of the said show cause notices separate orders dated March 20.1987 were passed in respect of the show cause notices dated January 30, 1984, February 3, 1984 and march 29, 1984 and order dated December 5, 1986 was passed in respect of the show cause notice dated October 21,1986. In the said orders the Collector of Customs took a view contrary to that taken by the Addl. Collector in his order dated April 16, 1985. The Collector of Customs proceeded on the basis that the price list does not show any discount schedule or reduction in the price for any reasons, i.e., cash discount, trade discount or quantity discount and that from the record seized it is seen that Skefko were entitled to 6% commission on the c.i.f. value if the invoice prices are as per the list price and that if the invoice prices are with the discount upto 20% is not available to everyone but is discretionary discount to be given by the importers with utmost discretion and that any price which was less by more than 20% of the price indicated in the list price was a special price and that such discount is not available to all and hence it cannot be admissible while determining the assessable value under Section 14 or the Act. he further held that the importers had not made out any case of quantity discount at per-determined level available to all customers exceeding certain quantity or value limit. The Collector was of the view that a special price for bulk purchase is not a quantity discount and is not a percentage of a basic price and that it could at best be a negotiated price and normally even such a price will not be accepted under Section 14 of the Act, unless it is shown that it is the price at which such or like goods are normally sold or offered for sale in such quantities at the time and place of importation. The Collector has also referred to one of the seized documents, namely, "Fixation of price Level objective for 1983" and has observed that the said document shows sales to Kirloskar Electric, Bangalore of Bearing for c.i.f. value of Rs. 22,43,000/- at 0.5% discount of list price, to M/s Premier Automobiles Ltd., for c.i.f. value of Rs. 20,64,000/- at a price 30% higher than the list price, to Eicher Good Earth for c.i.f value or Rs. 20,36,000/- at a discount of 20% of the price list as against the sales to Punjab Bearing Traders of Rs. 9.21.000/- at 48.7% discount. The Collector has observed that this clearly shows that discounts given for even larger quantity or value is not more than 20%. According to the collector, the contention of the importers that only negotiated price which is actually paid should be the assessable price is therefore not tenable and is contrary to the provisions of Section 14 or the Act and that once it is established that for the similar quantity, discount not exceeding 20% is normally given, place and period of import being same, discount more than 20% becomes inadmissible in arriving at assessable value. The Collector, therefore, held that for arriving at value for assessment purposes in terms of Section 14 of the Act prices indicated in the price list No.8211 for 1982 will be taken as the base and if discount is allowed upto 20% of the price list, depending upon the quantity, the same can be accepted. This being an old case, where the goods have already been cleared provisionally, the Collector refrained from taking any action under Section 111(d) of the Act and further held that since the importers declared their special relationship with the supplier and, therefore, special price charged cannot be treated as misdeclaration as the importers have paid the amount only due to their special relationship, charge under Section 111(m) of the Act was also dropped. Feeling aggrieved by the aforesaid orders of the Collector of customs, Skefko filed four appeals [No.C/1473/87-A, C/2426/87-A, C/2435/87-A and C/2472/87-A] before the Tribunal.

Shri H.N. Salve, the learned counsel appearing on behalf of the appellants, has urged that burden lies on Revenue to show that the invoice price does not represent the true price of the goods and that there is an under valuation and that in the present case Revenue has not adduced any evidence except the price list No.8102 dated February 15, 1981 which was found among the documents seized during the course of search and seizure of the premises of Skefko, etc. It was submitted that on the basis of the said price list only it could not be said that the value as indicated in the invoices was not the correct value of the goods which were imported by the appellants. It has also been urged that the Addl. Collector of Customs in his order dated April 16, 1985 has taken into consideration the evidence that was produced by the appellants to come to the conclusion that the invoice prices represent a proper basis for valuation of the consignment for the purpose of assessment under Section 14 of the Act and neither the collector of Customs nor the Tribunal have taken note of the said evidence and that in view of the said evidence it could not be held that the invoice prices cannot be made the basis for valuing the consignment for the purpose of assessment under Section 14 of the Act. It has been urged that the price list of the supplier does not preclude the supplier and the importers from negotiating at a lower price keeping in view the quantity of the bearings to be imported and that the collector of Customs was in error in holding that such negotiated price was not permissible for the purpose of assessment of the value of the goods under section 14 of the Act. It was also urged that the Tribunal was in error in holding that the reliance could not be placed on the pricing policy of the foreign supplier. Shri Salve has submitted that at the relevant time SKF was facing stiff competition from other manufacturers and the prices of SKF were higher than those quoted by Japanese manufacturers of bearings and that this fact is borne out by the documents that were seized during the course of search of the premises of Skefko, etc. The learned counsel has placed lenience on the decisions of this Court in Basant Industries Vs. Addl. Collector of Customs, Bombay, 1996 [81] ELT 195 [SC]; Collector of Customs, Bombay Vs. Nippon Bearings (P) Ltd. 1996 [82] ELT 3 [SC]; and union of India Vs. Mahindra & Mahindra Ltd. 1995 [76] ELT 481 [SC] Shri Gauri Shanker Murthy, the learned counsel appearing on behalf of the Revenue, has submitted that the Tribunal has rightly ignored the invoice price in view of the price list of the foreign supplier, the genuineness of which is beyond doubt. The learned counsel has placed reliance on the decision of this Court in Sharp Business Machines Pvt. Ltd. Vs. Collector of Customs, 1990 [49] ELT 640 [SC]; Padia Sales Corporation Vs. Collector of Customs, 1993 [66] ELT 35 [SC] and Commerce International Vs. Collector of Customs, 1995 [7] ELT 20 [SC].