1. The appellants imported a consignment of spark-plugs and declared its C.I.F. value as Rs. 98,728/-. They claimed clearance of the goods against import licence No. 2030377, dated 5-4-1983. Two show cause notices were issued to the appellants on 4-1-1984 and 25-2-1984 asking them to show cause why the goods should not be confiscated and why penal action should not be taken against them under Section 112 of the Custom's Act. It was alleged in the first show cause notice that the licence produced for clearance of the goods was split-up stock and sale licence issued on 5-4-1983, in the name of M/s. S.M.S. Enterprises for import of spares and machinery instruments. The licence-holder issued a Letter of Authority (LA) in favour of the importers, the appellants, on 10-41983. The Customs further alleged that the facility of issue of L.A. in respect of licences issued for stock and sale was withdrawn and in the Policy of April to March, 1984 and as such the licence produced did not appear to be valid for the goods imported. On this ground the Customs considered that the goods were liable to confiscation. Further grounds disclosed by the Customs were that the goods which were N.G.K.Spark Plugs appearing to have been imported from a trading company and not from manufacturers. The party did not produce the manufacturer's invoice issued to M/s. Sankyo Trading Co. Ltd., Japan or the manufacturer's price list to support the correctness of the price declared by the appellants. The Customs observed that the declared price in the Bill of Entry and Invoice was 45 Yen per piece, CIF Bombay. It was stated that the Department was in possession of the quotation from the manufacturer M/s. N.G.K. Spark Plug Company Ltd., indicating the price of spark plug at US $ 0.48 per piece. On this ground the Customs stated in the show cause notice that the price quoted by the trading company cannot be less than the price quoted by the manufacturers. Therefore, the declaration appeared to be low as compared with the price indicated by the manufacturers. On this basis the Customs alleged under-valuation to the extent of Rs. 146013/- and loss of duty to the extent of Rs. 2,69,100/-. However, in the second show cause notice, the Customs modified their allegation regarding under valuation stating that M/s. Anand Motors, Delhi, imported N.G.K.Spark Plugs @ US $ 0.40 per piece CIF, from the manufacturers. On this basis it is held that the under-valuation was to the extent of Rs. 1,10,201/- and the loss of duty to the extent of Rs. 2,03,119.35/-..
2. In reply to the allegations, the appellants stated that the importation (by M/s. Anand Motors, Delhi) on which the Department relied did not take place at the time of the appellants' importation and that the goods were neither identical nor similar to the subject goods. They asked for and obtained inspection of the concerned Bill of Entry. They were heard and impugned order was passed by the Collector.
3. The Collector held that the split up licence against the impugned licence dated 30-8-1982 was issued on 5-4-1983. The letter of authority was issued in favour of the importer on 15-3-1983 and a second letter of authority on 10-4-1983 to regularise the matter. However, the Collector took the view that as the import was effected on 25-8-1983 when the Policy period was not AM-1983 but AM-1984. The new Policy which was announced on 14-4-1983 did not extend the facility of a letter of authority according to para 353(iii) thereof. According to the Collector, the Policy for AM-1984 was to be made effective from 1-4-1984 and, therefore, the import was not covered by a valid licence.
He held that the provisions of 83-84 Policy even though announced on 14-4-1983 were applicable to the split up licences dated 5-4-1983.
4. In respect of value, the Collector ordered that the same be fixed on the basis of US $ 0.40 per piece and confirmed the allegations against the importers. While doing so, he took the following into consideration : (i) Though opportunity was given to the importers to produce original invoice of the manufacturers to the trading agency through whom they purchased the goods, they failed to produce the same; (ii) While it was true that the Department has cited a 1981-Bill of Entry in support of the higher valuation for spark plugs of like kind and quality, it only showed that the alleged higher rates in respect of same kind and quality imports were prevailing in the year 1981 and normally the trend is that international prices of such precision articles were upward. Therefore, the prices in 1983 should be at least equal to if not higher than 1981 prices. As the importer did not submit any evidence against this position, it was not possible to accept the view that the price of such goods has come down in recent years; (iii) The Customs House has produced a catalogue of the manufacturers showing the price of N.G.K. Spark Plugs at 50 Cents for standard type and 40 Cents (also for standard type, as stated in the Collector's order). The appellants' objection to this catalogue was not accepted as the appellants did not get the matter verified by the manufacturers of the plugs; (iv) The manufacturers did not commit anywhere that they were granted any discount to this lot under importation. In fact, the price list No. 502/83 of the trading agency M/s. Sankyo Trading Co.
Ltd., quoted both the varieties as spark plugs (BP 5HS and BP 4HS) at 45 Yen per piece.
On these grounds the Additional Collector ordered that the imported goods to be valued @ 40 Cents per piece. The result was that the value of the goods was fixed at Rs. 209669/-. The Additional Collector confiscated the goods with an option for redemption on payment of fine of Rs. 2 lakhs. It is against this order dated 19-4-1984 that the appellants have come to this Tribunal in appeal.
5. In the Memorandum of appeal before us the appellants submitted that the Collector's orders are entirely unjustified. With regards to the licence, it was submitted that the new Import Policy for A.M.-83-84 came into effect on 15-4-1983. There was nothing in the policy to show that it was given retrospective effect. They explained that during the period from 1-4-1983 to 14-4-1983 there was a restriction on the issue of fresh licences [only whereas the licence issued to the appellants was revalidated on 9-8-1983 till 28-2-1984. It was submitted that they had a valid licence. Split up licence is not a new licence but only a part of the licence already issued to facilitate clearance of goods from a port where the licence is not registered.
6. On the question of value the appellants submitted that they had produced all the documents and not a single paper was suppressed by them. The department failed to substantiate their allegations inasmuch as the quotations they produced were without any addresses and were, therefore, anonymous. At best, the department could show one quotation of doubtful value and it has not been stated that there was any actual importation at that price. Also these quotations were defective inasmuch as the type of plugs covered by the same has not been specified. The quotations are not addressed to anybody. They submitted that the value of the so-called quotations diminished as the originals were not shown to the appellants. They also explained that the Collector was not correct in blaming the appellants for not producing the invoice or price list of the manufacturers as such a document was not accessible to the importers. The manufacturer sells his goods to the agent and the agent would not be willing to disclose the prices at which he purchased from the manufacturers. They also submitted that the quotation was for net price and there was no question of any trading discount.
7. The appellants also criticised the Collector's observations regarding the trends of prices of spark plugs in the international market. They submitted that in making these observations the Collector arrogated to himself the role of financial expert which he was not.
According to their submission the Collector's expressions consisted of conjectures not supported by the evidence of catalogues and price lists, none of which were produced. They also cited AIR 1961 Cal. 195 (Josoda Jiban Sahav. S.K. Chatterjee) in support of their argument that time of corportation must be given a reasonable construction and must be considered in relation to the particular facts of any given case.
8. The learned Representative for the respondent in reply reiterated the view of the Collector with regard to licence becoming invalid for the importation of the goods. Opposing the arguments of the appellants, he submitted that spark plugs were not seasonal products and there was no question of their price rising or falling. Referring to the evidence produced by the Department in the shape of invoice of M/s. Anand Motors, the learned Representative argued that this invoice was a basic document. While agreeing that it was not a contemporaneous record, he submitted that the appellant did not produce any evidence to show that prices fell after the importation by M/s. Anand Motors and before the present importation took place. He also emphasised that the documents produced by the appellants did not relate to a single importation from the manufacturers. Referring to some of the invoices and other documents produced by the appellants before us, the learned Representative submitted that no particulars of the Bill of Entry under which imports took place at the alleged price were supplied by the appellants. There was no proof that actual imports took place on the quotations produced by the appellants. Therefore, the documents were unreliable and the appellants' pleas were not acceptable.
9. The learned Representative argued that the agents who sold the goods to the appellants could not have sold the goods at less price than the price at which the manufacturers sold. Besides freight and profit also would have been added to the manufacturer's price and therefore, there was no question of cheaper price for the goods sold by the agents as compared to the manufacturer's price. Also, there was no proof in the instant case that there was a clearance sale due to damage or distress.
It could not, therefore, be believed that the price at which the appellants claimed that they imported goods viz., 45 Yen per piece was the genuine value.
10. The learned Representative also argued that the appellants did not supply evidence of the price charged by the manufacturer and they did not prove any fall in prices before June, 1981 and October, 1983. They never wanted to cross-examination the importers in respect of the Bill of Entry of M/s. Anand Motors. For all these reasons, it was submitted by the learned Respondent that the Collector's orders in rejecting the declared price and applying price as was done was correct.
(i) the licence produced by the appellants covered the goods imported by them;and (ii) whether the revision of assessable value by the Collector was justified and if not, whether it should be revised and if so to what extent.
13. In so far as the first issue is concerned we note that the split up licence was issued on 5-4-1983. The original licence, as submitted by the appellants, was revalidated on 9-8-1983 till 28-2-1984. The letter of authority issued in favour of the appellant on 15-3-1983 seems to be immaterial as another letter of authority was issued on 10-4-1983.
14. The learned Consultant for the appellants drew our attention to the Public Notice No. 9, dated 31-3-1983 issued by the C.C.I. and E.wherein it was mentioned that the Import and Export Policy for April, 1983-'March, 1984 will be announced on 15-4-1983. Paras 2 and 5 of this note, which are of interest, are reproduced below : "2. Till the announcement of the import policy for 1983-84, import applications received up to 31st March, 1983, and which are pending on 1-4-1983, will be dealt with under the policy for 1982-83." "5. Persons who need to import any requirements under extraordinary circumstances during the period from 1st April, 1983 to 14th April, 1983 may apply to the Chief Controller of Imports and Exports, New Delhi. Their requests will be considered on merits." 15. It has not been shown to us that there is anything in this notification or in the policy for AM-84, to justify a finding that the provisions of the policy came into effect from 1st April, 1983. It is clear that the Public Notice cited above covered the period from 1st April till 14th April and the new policy came into effect from 15-4-1983. Therefore, applying the provisions of Para 383(i) to the licence produced by the appellants does not seem to be correct at all.
We, therefore, hold that the licence produced by the appellants covered the importation and its disposal of the first question.
16. In so far as the question of valuation is concerned, we note that the appellants produced proforma invoice, sales note, letter of credit, regular invoice and certificate of origin at the time of filing the Bill of Entry. The learned Respondent has raised objection to the proforma invoice saying that this is addressed to nobody and was an anonymous document. This may be so but we cannot ignore the international practice of sending proforma invoice to be followed in due course by a regular invoice which too has been filed by the appellants. As submitted by the learned Consultant the certificate of origin has been counter-signed by the President of the Chamber of Commerce and Industry, Osaka. The Collector found fault with the importers for not filing the original invoice of the manufacturer sent to the trading agency through whom the appellants purchased the goods.
We do not see how the appellants can be blamed for this. They purchased from a trading agency and filed the invoice sent by the trading agency.
As pertinently pointed by the Consultant in his submissions, even the Customs Department with all their power and resources did not file any catalogue or price list of the manufacturer to show that there has been under-valuation of the importation by the appellants.
17. The entries in the letter of credit filed by the appellants are also in consonance with the other documents produced by them. As against this, the Collector relied on a Bill of Entry filed by M/s.
18. The show cause notice of 25-2-1984 stated that a consignment of 30,000 pieces of N.G.K. Spark Plugs was imported by M/s. Anand Motors, New Delhi, at a price of 40 Cent per piece. These are spark plugs of the type BP 5 ESL. The Collector held that since these were regular standard type of spark plugs, they were similar to the goods imported by the appellants and therefore, the value also should be the same.
During the course of hearing the appellants conceded that they were of similar type but did not agree about the value inasmuch as the importation cited in the show cause notice did not take place at the time of the appellants' importation. The Collector concedes that there was a time gap between the importation of M/s. Anand Motors which was on 22-8-1981 and that of the importers which was on 6-10-1983. The Collector's argument is that the prices of spark plugs have not fallen during this period. His further reasoning is that the prices at which an agent can sell cannot be less than the prices at which the manufacturer himself can sell.
19. The appellants have submitted that the Collector assumed the role of a financial expert without justification. The learned Departmental Representative argued before us that spark plugs are not seasonal products and there is no reason to believe that there was fall in prices between the two dates. He said that the appellants did not prove that there was any such fall.
20. We have considered all these arguments. We see force in the appellants submission that Section 14 refers to time and place of importation and in the instant case comparing the value of their goods imported in October, 1983 with goods imported in 1981, is not correct.
We have considered the cases cited by the learned Counsel for the appellant. These consisted of AIR 1961 Calcutta 195 (Jasoda Jiben Saha (P) Ltd. v. S.K. Chatterjee and Anr.), AIR 1936 Bombay 356 (Ford Motor Co. of India Ltd. v. Secretary of State) and ILR (1976) 2 Calcutta 202 [Bird & Co. (Pvt.) Ltd. v. Kalyan Kumar Sen Gupta]. In all these cases it has been held that the words 'Time and place of importation' occurring in Section 14 of the Customs Act have to be constructed reasonably. The first two judgments refer to the provisions of the Sea Customs Act whereas the last judgment "Bird & Co." considers Section 14 of the Customs Act, 1962. In this judgment it was held that the price at which a particular seller enters into contract with a particular buyer does not necessarily reflect the price at which such goods are sold at the time and place of exportation in the case of inter-national trade. It was further held that what is to be taken as the basis of valuation is the price at which such or like goods are ordinarily sold at the time and place of exportation and not the contract price of sale in question.
21. Applying these principles to the present matter, we are of the opinion that the appellants have produced all the documents before the Customs. It was up to the Customs to prove that the invoice did not represent the correct price charged by the exporter from the importer.
The evidence of import by M/s. Anand Motors cannot be taken as conclusive or even helpful as it was more than two years prior to the present importation. Therefore, it was the responsibility of the Customs Officers to disprove the invoiced which has been produced by the appellants. We observed earlier that the appellants have produced all the relevant documents including the letter of credit. In our opinion in such circumstances, the Customs have to disprove the documents conclusively before a charge of under-valuation can be sustained against the importers. The evidence relied upon by the Customs in the form of importation of M/s. Anand Motors is not acceptable for the reasons mentioned earlier. Nor can we agree with the reasoning of the Collector that there has been no fall in price since the importation by M/s. Anand Motors. He did not produce any material on which such an observation can be passed. We also do not agree that the importers are to be blamed for the reason they did not produce the price-list of the manufacturer. Their purchase was from a trader and they cannot be compelled to produce the price-list of the manufacturer.
Nothing stopped the Customs from producing such a price-list and we are inclined to accept the reason given by the Importer for not producing the invoice of the manufacturer to their agent from whom the appellants purchased the goods. However, the basic position still remains that the importers have not produced all the documents, it was up to the Customs to produce evidence to prove the falsity of the documents so produced by the appellants. In our view this has not been done by the Customs and there is no evidence before us on the basis of which the Collector's finding of under-valuation can be sustained.
22. We, therefore, hold that under-valuation of the imported goods has not been proved and that the Collector's order in this regard is not sustainable. In the result this appeal must succeed, which is hereby accepted.