Briefly the facts of the case are that the appellants imported two old re-conditioned printing machines of East German origin through M/s.
Induscandia Erikson & Co. AB, a party from Sweden. A partner of the appellants' firm specifically went abroad to see the machines and to conduct negotiations for purchase of the same The negotiated price for the two machines was S.Kr. 2,00,000 for both the machines. In pursuance of this deal, a proforma invoice No. LG/GI 83100, dated 3-1-1983 was sent by the supplier.' The said invoice had been prepared with reference to the negotiated price, namely, S.Kr. 2,00,000. A letter of credit was opened by the appellants on 28-2-1983 with Grindlays Bank p.l.c, New Delhi. As the importation was being effected under Open General Licence under 1982-83 Import Policy, as per the requirement of the OGL, a certificate was furnished by the foreign supplier giving specifications of the two machines and certifying that the machines were not more than 10 years old and had expected residual life of 10-12 years at the time of importation. A home consumption bill of entry was filed by the appellants showing therein the c.i.f. value of Rs. 2,64,534. The Custom House did not accept the valuation of the goods and also questioned the importation being valid in term of the OGL.
However, issue of show cause notice was waived at the appellants' request as they were anxious to take early delivery of the goods. After affording the appellants an opportunity of personal hearing, which was attended by Shri Rakesh Bagai, a partner of the appellants firm, the Collector vide his order dated 16-1-1984 adjudicated the case. After examination of certain evidence with regard to another importation of like goods made sometime earlier, the Collector held that the appellants had under-valued the goods. He directed that the declared value of Rs. 2,64,534 be enhanced to Rs. 8 lakhs. He further held that the goods in question had been imported in contravention of ITC Regulations and ordered confiscation of the two machines under Section 111(d) of the Customs Act, 1962 (hereinafter referred to as 'Act') read with Section 3 of the Imports and Exports (Control) Act, 1947. The appellants were however, given an option to redeem the goods on payment of a fine of Rs. 2 lakhs.
1. Shri Narasimhan, the learned counsel for the appellants submitted that the Collector had fixed the appraised value of the appellants' .goods in an arbitrary manner and without assigning any valid reasons.
The entire gamut of transactions proved the bona fide character of the importation. Full documentary evidence relating to the importation had been made available to the lower authorities and the same had been rejected without adducing any cogent reasons. It was also not the finding of the Collector that the appellants had remitted to the foreign supplier any amount other than what was shown in the invoice, the letter of credit and other supporting documents.
2. Apart from the arbitrary manner in which the value of the goods had been enhanced, it was not clear from the adjudication order as to what provisions of Law had been applied while doing so. Shri Narasimhan submitted that taking the relevant portion of the Collector's order dealing with the valuation aspect, one could only presume that he had fixed the valuation for the machines in terms of Rule 8 of the Customs Valuation Rules, 1963 (hereinafter referred to as Rules). It was not understood as to why resort to the Rules was necessary without first discussing as to why the appellants' goods could not be valued under provisions of Section 14(l)(a) of the Act. Even if Rule 8 was called to aid, it was incumbent upon the adjudicating authority to first discuss and rule out the applicability of Rules 3 to 7. This was a legal requirement which had not been followed by the Collector. For fixing the value of the machines imported by the appellants, the Collector had compared the invoice value of the appellants' goods with the value of a similar import effected by another party, M/s. Sachdeva Offset and Packing Industries, New Delhi (hereinafter referred to as M/s.
Sachdeva). In the case of M/s. Sachdeva, a similar printing machine had been imported and assessed to duty on a value of Rs. 4,84,375.
Presumably, allowing for difference of one year in the year of manufacture of machines imported by the appellants and the one imported by M/s. Sachdeva, the machines of the appellants were valued at Rs. 4 lakhs each. The learned Collector had, while adopting this basis ignored some vital facts, namely :-- (a) M/s. Sachdeva had imported the machine from England whereas the machines imported by the appellants had been shipped from Sweden.
(b) M/s. Sachdeva's machine was imported in June, 1983 whereas the appellants' machines had been imported in November, 1983.
(c) It was on record that the machine imported by M/s. Sachdeva had undergone substantial re-conditioning (abroad) and the s expenses of such re-conditioning were stated to be 50% or so of the total value of the machine. On the other hand, in the appellants' case, as per the certificate of inspection furnished by the foreign supplier, the total cost of re-conditioning the two machines came to Rs. 13,300.
(d) As per the Chartered Engineer's certificate, the residual life of the machine imported by M/s. Sachdeva was shown as 10/15 years; the corresponding residual life of the machines imported by the appellants was certified to be 10/12 years.
(e) With regard to second-hand machinery, supply and demand conditions prevailing in the country of shipment and the time of shipment of the goods are very material. This aspect had not been kept in view by the adjudicating authority while deciding the valuation aspect in the present case.
3. Shri Narasimhan submitted that the learned Collector had not taken into account the relevance of the above-mentioned vital factors while adjudging the valuation of the goods. It was, therefore, but natural that the assessable value determined by the Collector was very much on the high side. Shri Narasimhan attacked the valuation basis adopted by the Collector from another angle also. He submitted that it was not clear as to why the Collector did not resort to the provisions of Section 14(l)(a) of the Act. The invoice value of the appellants goods could be accepted straightaway because they could be treated as 'such goods' since other conditions laid down in the said Section were satisfied.
4. Shri Narasimhan referred to a number of judgments of the CEGAT where valuation of the goods under the Customs Act was the subject of dispute. He made a particular reference to the case of Super Fastners v. Collector of Customs, Bombay 1984 ECR 443 (CEGAT). He also referred to certain observations contained in our Order Nos. 165 & 166/84-A in Appeal Nos. CD(SB) 1999 and 2323/84-A ( Weston Electronics Ltd., New Delhi v. Collector of Customs, Bombay) and Order No. 113/84-A in Appeal No. CD(SB) 92/82-A ( Didwania Import & Export Pvt. Ltd., Madras v.Collector of Customs, Calcutta). He submitted that in these judgments it had been held by the Tribunal consistently that the lower authorities could not discard the declared value of the importers merely on grounds of suspicion or surmises, nor could such authorities adopt arbitrary or ad hoc bases for valuation purposes. As the burden of proving the charge of under-invoicing was cast on the Department, it was necessary for the lower authorities to build their case with reference to sound pieces of evidence and cogent grounds. It was not sufficient just to brush aside all documentary evidence produced by a party and thereafter to fix the value of the goods in an arbitrary and ad hoc manner as had been done by the learned Collector in the present case. Concluding his teguments on the valuation aspect, Shri Narasimhan urged that totality of, Evidence clearly entitled the appellants to the relief prayed for, namely, that their declared value should be accepted for assessment purposes.
5. Shri A.K. Jain, the learned S.D.R. submitted that there was no force in the various contentions made by the learned counsel for the appellants and that the Collector had fixed the valuation of the goods in a manner which was quite fair and reasonable.
6. We have given very careful consideration to the submissions made by Shri Narasimhan and the stand taken by the learned S.D.R. We see a lot of force in the grounds urged by the learned counsel for the appellants. We have had occasion to deal with a number of appeals where the charge of under-invoicing was in dispute. Some of these cases have been referred to by Shri Narasimhan. The burden of proving the charge of under-invoicing lies squarely on the Department. It is an unquestionable proposition of taw. Before discarding the valuation declared by a party, it is incumbent on the part of the lower authorities to take pains in making detailed enquiries, collect material and after such effort has gone into and adequate evidence is available on record, only then it is open to the lower authorities to enhance the value on suitable basis. We are afraid that nothing of the sort has been done in the present case. There are no regular imports of second-hand printing machines in the country and, therefore, provisions of Section 14(l)(a) of the Act can hardly be of any help in determining the valuation of such goods. Furthermore, valuation of second-hand machinery falling in different age groups with different residual life, coming from different sources etc. etc. is undisputedly a difficult task. This fact necessarily, therefore, casts a heavy responsibility on the lower authorities to collect evidence which could stand the scrutiny of judicial or quasi-judicial forums. The exercise done by the learned Collector by way of comparing the appellants' goods with similar goods imported by another importer and thereafter fixed the value of the appellants' goods in the manner adopted in this case, can hardly be treated as legally tenable based as it is, on one solitary instance, where we find the goods were not comparable in all aspects.
Taking the evidence on record and after a very careful consideration of the same, we are of the view that the charge of under-valuation levelled against the appellants is not established on account of insufficient supporting evidence. We are, therefore, constrained to set aside the Collector's finding in this behalf and direct that the value declared by the appellants be accepted, in the absence of any acceptable evidence contra.
7. The second charge against the appellants is that importation of the goods is in contravention of the Import Trade Control Regulations. Shri Narasimhan, the learned counsel for the appellants submitted that the two machines in question were covered by the OGL. He pointed out that the goods in question were contracted for import under 1982-83 Policy which allowed such importations under OGL. In this connection he referred to the various documents and in particular to the letter of credit dated 28-2-1983. It was submitted that due to unavoidable circumstances the goods could not be shipped during the currency of 1982-83 Policy. However, saving clause 7 appearing under Appendix 10 (Conditions governing imports under Open General Licence) of the said Policy made the importation in the present case eligible for the OGL.
As per the said Saving Clause, the appellants could avail themselves of the benefit of OGL even if the shipment was made under the subsequent Policy provided a firm contract for the import of the goods had been entered upto 28-2-1983 and the shipment was effected upto 31-3-1984. In the appellants case a firm contract had been effected by virtue of the letter of credit dated 28-2-1983 and the shipment of the goods had been made in August, 1983 i.e. well before the stipulated date in the said saving clause viz. 31-3-1984. Shri Narasimhan pointed out that the learned Collector had not given due thought to these provisions although he seemed to be aware of them. This was evident from what was stated in paragraph 11 of the order. It will appear that the Collector had not treated the letter of credit dated 28-2-1983 as an irrevocable commitment on the part of the appellants. In this connection Shri Narasimhan invited our attention to order No. 113/84-A passed by this Bench while disposing of Appeal No. CD(SB) 92/82-A. He pointed out that in paragraph 13 of the said order, we had held that opening of an irrevocable letter of credit constitutes entering into a firm commitment in the scheme of ITC Regulations. Shri Narasimhan also submitted that this had been the established practice in all the major Custom Houses during the past several decades and had, therefore, stood the test of time. Shri Narasimhan concluded by submitting that the goods were covered by the OGL and their confiscation and imposition of redemption fine were unjustified and not sustainable in Law.
8. Shri Jain, the learned SDR submitted that he supported the line of reasoning adopted by the Collector in his adjudication order.
9. We have carefully examined the submissions made by the learned counsel for the appellants. We have referred to the saving clause 7 appearing under Appendix 10 of 1982-83 Import Policy. For convenience of reference, the said saving clause is reproduced hereunder : "(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 upto 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)." There are three conditions figuring in the saving clause to entitle importations effected after 31-3-1983 under OGL, namely, (ii) the importer should enter into a firm contract for import upto 28-2-1983 and the contract is to be registered with a foreign exchange dealer (Bank); and It is not in dispute that the goods have been imported by an actual user and that these have been imported before 31-3-1984. The only ground on which the learned Collector has presumably not held the goods eligible under OGL is with regard to non-existence of a firm contract on the ground of inspection prior to despatch. The condition relating to inspection is not one that militates against the existence of a concluded or firm contract. It is condition relating to the performance of the contract and hence, it cannot be inferred from it that till acceptance in inspection, there is no concluded contract. As has been pointed out by Shri Narasimhan, the appellants had open an irrevocable letter of credit on 28-2-1983. The letter of credit and other documentary evidence produced before us support the contention made by Shri Narasimhan that a firm contract for the importation of the goods in question was made according to the provisions of the saving clause.
We, therefore, hold that the finding of the learned Collector that the goods in question were not entitled to be imported under OGL cannot be sustained in Law.
10. In the light of the discussion of the case above, the appeal succeeds on both counts of valuation as well as eligibility of importation under OGL. We, therefore, direct that relief flowing from this order may be made available to the appellants. The goods in question are reported to be under detention and hence our orders should be implemented expeditiously.