1. This was originally filed as a revision application before the Secretary to the Government of India and on transfer to the Tribunal is being dealt with as an appeal.
2. M/s Maheshwari Trading Corporation, the appellants, filed a Bill of Entry on 19th September, 1980, for the clearance of a consignment of 8" zip fasteners and declared its value as being 0.97 Singapore dollars per dozen. On examination, the goods were seen to be LFC 32' 8" type with pin lock slide. The value declared on the Bill of Entry appeared to the Customs authorities to be on the lower side and the party was asked to explain the same. The explanation given not being considered satisfactory a Show Cause Notice was issued stating that the price of the LFC 32' 8" zip fasteners was approximately Rs. 0.56 paise per piece and that this price was based upon the catalogue price of the manufacturers M/s YKK Zippers (Singapore) Pvt. Ltd. It was also stated in the Show Cause Notice that on market inquiry it was confirmed that the zip fasteners imported more LFC 32' 8" with pin lock slide fasteners and the goods are genuine YKK products. According to the notice, the price of such goods in the Delhi wholesale market from Japan and Singapore is approximately Rs. 22 per dozen with the slide fasteners. The Customs in the notice further recorded that a consignment of similar goods of 9" was cleared at the price of Rs. 0.62 paise GIF per piece under a Bill of Entry dated 11-9-1980. They also added in the notice that according to the price list for YKK zippers from M/s YKK Zippers (Singapore) Pvt. Ltd., effective from 1st June, 1980, the price of 8" LFC 32 with pin lock was Japanese yen 1594 GIF Bombay. The price of the same goods after 1st August, 1980 from Japan and Singapore was c.i.f. 1505 Japanese yen per piece. This information according to the Customs was obtained from the representative of the YKK Foreign Trade Department when he was in Delhi. The Customs view that the zip should be valued at Rs. 0.56 paise per piece was sought to be substantiated on the basis of this information. The appellants were asked to show cause why the value of the goods should not be enhanced from Rs. 0.30 paise per piece and c.i.f. as declared to Rs. 0.56 paise per piece and differential duty recovered. They were also asked to show cause as to why penal action should not be taken against them and the goods confiscated under Section 111 (d) of the Customs Act and penalty should not be imposed under Section 112.
3. In reply, the appellants denied the allegations. They denied that the market price in India had any relevance for arriving at assessable value of the goods, and stated that under Section 14 of the Customs Act, assessable value of the goods is the price at which goods are ordinarily sold in the course of international trade, the buyer and the seller having no interest in each other in any manner and the price being the sole consideration. They further explained that in the imported consignment the appellants did not have the choice of colours.
They explained that items which are left over and in deals where any kind of choice is not given in the buyer at all, but the goods are saleable in India, they are sold at a depressed price. They stated that they negotiated the price of exporting company at Singapore and the price was fixed at 0.97 Singapore dollars per dozen GIF at which price the exporters had been supplying to the other Indian buyers also.
Further, according to the appellants, they had direct negotiations and dealings with the supplier without using Indentors or Commission Agents thus giving them the advantage in price. They also stated in reply to the Collector that several consignments of similar nature were cleared at Delhi from the same supplier at the same price. They denied any undervaluation and said that the Department had no evidence to support the allegations. They also denied the correctness of the market value as ascertained and alleged by the Customs.
4. The Collector after due process held that the invoice for the goods did not reflect the true position and refused to accept the value indicated therein. He held that the department established beyond doubt that the goods of a similar type and make were being sold and offered for sale at about the same time and place of importation for a price of Rs. 0.56 paise c.i.f. per piece. He, therefore, rejected the invoice price of 30 paise per piece as declared by the importer. He further took into consideration the plea that the importers had no option on colours and on this ground fixed the value at Rs. 0.50 paise c.i.f. per piece.
5. Aggrieved by this order, the appellants filed an appeal before the Central Board of Excise and Customs. They pleaded before the Board that the goods in question were purchased from a party in Singapore who had procured it for use in manufacturing activity but were forced to sell them as stock-lot. Therefore, there was no question of tallying the price with the price list of manufacturers. Further, the appellants stated before the Board that all the evidence disclosed in this case showed that the goods were mixed up and not according to separate colour lots and there have been other importations by other importers.
6. The Board rejected the claim of the appellant for assessment of the goods at 30 paise per unit. They noted that it was not the case that the goods deteriorated in value through storage or suffered in any other respect. If the appellants were fortunate to get the goods at a lower price, they could not claim such price as the basis for assessment of Customs Duty. The Board, therefore, confirmed the Collector's orders and rejected the appeal. The appellants then preferred the revision petition which is now before us. In the revision petition and during the course of hearing, the appellants argued that they have imported zip fasteners in the normal course of trade and there was no undervaluation. They claimed that the invoice produced by them was genuine and similar zip fasteners were cleared at 30 paise in Delhi. They relied on two invoices dated 15-7-1980 and 4th June, 1980.
They submitted that the genuineness of the two importations for which Bills of Entry were filed has not been questioned. They also pleaded that on 6th March, 1981, two days after the personal hearing which took place on 4-3-1981 they sent written arguments to the Central Board of Excise & Customs in which they gave the particulars of three imports -two of M/s Suman Rawal and one of M/s Jeet Udyog, New Delhi. They stated that they enclosed photostat copies of the invoices and corresponding Bills of Entry. They claimed that the assessing authorities accepted invoices and the prices mentioned therein and charged duty on a value of 30 paise per piece.
7. On behalf of the department, the learned Departmental Representative Submitted that the documents were not produced before the Addl.
Collector who adjudicated the matter. He did not question the genuineness of the documents but pleaded that to obtain the originals of the documents was not an easy task. Besides, merely because the value has been accepted in another case does not render such a value correct or acceptable in all cases. Also, the invoices produced by the appellants did not relate to the goods imported by the appellants. He argued that YKK Zippers were made in Japan whereas the imported goods were certified to have been locally made in Singapore. He stated that long filler chord has more teeth and costs more and that the appellants also bought from a third person other than the manufacturer and they could not obtain goods at a price lower than that of the manufacturer.
He further submitted that the supplier nowhere referred to colour of the zip fasteners nor about the goods being of poor quality or that they were a stock-lot.
8. The appellants in their rejoinder submitted that it is wrong to say that the three invoices did not cover the goods in question. They claimed that the YKK Zippers were of Singapore origin and that the Department did not prove anything contrary.
9. We have considered the arguments of both sides. From a perusal of the Collector's order we find that the following reasons were advanced for not accepting the value declared by the appellant in the invoices i) That the catalogue price of zippers of YKK make was approximately 50 paise per piece, and goods which are not of job lot or stock-lot could not be sold at a price lower than that of the manufacturer; ii) That some enquiries were made from the Bombay Customs House and these supported the view that the value could not have been less than 56 paise per piece; iii) The Collector examined the facts of this case in the light of the judgment of Glaxo Laboratories India Pvt. Ltd. v. A.V. Venkateswaran (no citation). He agreed that the invoice is an important piece of evidence to determine what the real value is, but he also noted the contents of the judgment to the effect that the piece of evidence may be discarded if the authorities take a view that it is not a genuine document or even if they take a view that over and above the price which is being paid, some other consideration has passed under the document. The Collector held that the invoice in question does not reflect the full material particulars inasmuch as it makes no reference to the make of the goods. He held that the invoice does not reflect the true position of the goods, and, therefore, did not accept the value indicated therein. He also recorded in his order that it has been established beyond doubt that the goods of a similar type and make were being sold and offered for sale at about the same time and place of importation for a price of 50 paise per piece. He, therefore, refused to accept the price of 30 paise and fixed the price at 50 paise granting a reduction inasmuch as the importers had option of colour.
10. We have considered the grounds on which the Collector held that the price declared by the appellants and the price as shown by the invoice was not acceptable. The Collector relied on a Bombay Custom House report and a catalogue for YKK Zippers. (This catalogue of YKK has not been placed before us for our perusal). It has not been made clear as to whether trade discount and any other reduction is to be allowed on the catalogue price. In the absence of the basic evidence, this point cannot be taken as having been substantiated by the Department.
11. In the light of the Case Law noted by the Collector, it is necessary to find acceptable evidence to reject the invoice filed before Customs. Taking the order of the Collector as a whole we are of the opinion that while some suspicion has been thrown on the invoice, undervaluation has not been proved effectively. The appellants have produced evidence to show that other importations, at approximately the same time, have taken place through Delhi and the price of 30 paise per piece was accepted. It is also seen that the appellants have produced their invoice and there is no finding against them that any documents have been suppressed by them. In so far as the make of the goods is concerned, the appellants have vehemently argued that the goods which were YKK zip fasteners were of Singapore origin as evidenced by the invoices. There is force in their argument that the department has not proved to the contrary, In view of the invoices of other importations which, as mentioned earlier, took place around the time of the impugned importation at similar prices, it is difficult to sustain an order which uphelds a finding of undervaluation in respect of the imported consignment. The evidence of the other importations was not considered by the Board. No acceptable evidence is recorded to prove that the importers' own invoice filed before the Customs is unreliable. We also note that no penalty has been imposed on the appellants though according to the Collector's finding the value of the goods imported has not been declared correctly. There is no confiscation either.
12. But these two are incidental factors. On consideration of all the circumstances of the matter, we are of the opinion that the department has not proved that the impugned goods were undervalued. The Board's orders observed, inter alia that "even if the appellants were fortunate to get the goods at a price less than the price at which these are sold in the ordinary course of international trade, they could not claim that as the basis of assessment of Customs Duty." The appellants' plea that these goods were not purchased at a concessional price but were purchased at the prevailing price has not been disproved.
13. For these reasons and in the light of the discussions in the preceding paragraphs, we accept the appeal and allow it with consequential relief.
14. I regret my inability to agree with my learned colleagues in allowing the Appeal. I would rather the matter was remanded to the authorities below for a decision de novo in the light of such evidence as may be adduced by both the parties. I set forth my reasons hereinbelow: (a) I have held the view (and I still do so) that on a true construction of Section 14 of the Customs Act, 1962 (the Act, for short) and the Customs Valuation Rules, 1963 (hereinafter, the Rules), the deemed value of the imported goods, where duty is to be levied ad valorem, in terms of clause (a) of Section 14 of the Act, is the market price at which such goods are ordinarily sold or offered for sale at the time and place of importation and where it is not ascertainable its nearest equivalent determined in accordance with the Rules and not the landing price or the invoice price or the price at which the imported goods themselves are capable of being sold. My reasons were recorded in the decision reported in 1984 ELT (Vol. 15) 137 at p. 145 et sequentia [O.E.N. (India) Ltd., Cochin v. Collector of Customs and C.E.] and it is unnecessary to reproduce them in extenso.
(i) the expression "in the course of international trade" occurring in Section 14 (a) does not, persuade me to deviate from the aforesaid views regarding the concept of market price implicit in Section 14(a) and consider in its stead the invoice price or any other price not prevailing at the time and place of importation to be what was truly meant by the said provision; (ii) even in terms of Section 30 of the Sea Customs Act, it was the market price at the time and place of importation that was the deemed value 1978 ELT 260 - Vacuum Oil Company v. Secretary of State - "price current for staple articles, the amount of which, if not a subject of daily publication in the press, is easily ascertainable in appropriate circles"] and no change in the said concept had apparently resulted from the insertion of the aforesaid expression "in the course of international trade" in Section 14(a) or the provision as a whole, notwithstanding, perhaps, the intent of doing away with i(sic) to bring the provisions more in accord with the provisions of GATT; (iii)obviously, the invoice price or the price at which the exporter sells cannot be the deemed value both in terms of the Rules framed under clause (b) of Section 14 as well as clause (a) thereof, for the simple reason that clauses (a) and (b) of Section 14 are mutually exclusive; (iv) to put it differently - it is only if the deemed value is not ascertainable under clause (a) of Section 14 that the Rules framed under clause (b) for the nearest ascertainable equivalent become applicable. The Rules speak of the value at which such goods or comparable goods are sold or offered for sale to other buyers in India or export price outside India, [Rule 3(a) & (b)], i.e., the exporter's price in India or outside. It cannot, in the circumstances be that clause (a) of Section 14 is also speaking of the exporter's price or his invoice price. A construction to the contrary renders the alternative or residuary applicability of clause (b) meaningless; (v) indeed, Section 14(a) does not speak of the price at which the exporter sells or offers for sale either to the assessee (the invoice price) or others at all. Nothing could have been simpler in enacting in clause (a) accordingly so that the invoice price to the assessee should be the basis for determination of the deemed value if that be the legislative intent; (vi)nor does clause (a) of Section 14 specify the deemed value to be the invoice price, (provided the buyer and seller have no interest in the business of each other) or the price at which such or like goods are ordinarily sold or offered for sale at the time and place of importation or the price at which the imported goods themselves are capable of being sold at the time and place of importation, [Ford Motor Company (India) Ltd, v. Secretary of State - 1978 ELT 265 - "the language of the section 'or are capable of being sold' does not exclude all possibility of arriving at the price defined by clause (a) (of Section 30 of the Sea Customs Act) upon the basis of an actual price"], whichever is the highest; (vii) the expression "in the course of international trade" in Section 14(a) cannot, in the circumstances, be so construed that the market price for spot delivery at the time and place of import is not what was meant and accordingly to be disregarded altogether in preference to the invoice price. It means and signifies merely movement of goods from abroad into India and has also a reference to a period of time during which the movement is in progress pursuant to or connected with trade and commerce with other countries.
Construing the expression "in the course of the import of goods into or export of the goods out of the territory of India" occurring in Article 286 (1)(b) of the Constitution of India, Chief Justice Patanjali Sastry (with whom three other learned Judges agreed) had occasion to observe in AIR 1953 SC 333 at 336 (State of Travancore, Cochin v. S.V.C. Factory) - 'It is obvious that the words "import into" or "export out of" in this context do not mean the article or commodity imported or exported. The reference to "the goods" and "the territory of India" make it clear that the words "export out of" and "import into" mean the exportation out of the country and importation into the country respectively. The word "course" etymologically denotes movement from one point to another and the expression "in the course of" not only implies a period of time during which the movement is in progress but postulates also a connected relation. For instance, it has been held that the words "debts due to the bankrupt in the course of his trade" in Section 15(5), English Bankruptcy Act, 1869, do not extend to all debts due to the bankrupt during the period of his trading but include only debts connected with the trade [See In re Pryce - Exparte Rensburg - (1877) 4 Ch.D 865 (c) and Williams on Bankruptcy - 16th Edition - p.
3071 A sale in the course of export out of the country should similarly be understood in the context of clause (1)(b) as meaning a sale taking place not only during the activities directed to the end of exportation of the goods out of the country but also as part of or connected with such activities. It is farfetched to deduce from the said expression any thing resembling on invoice price or an export price and conclude that the market price at the time and place of importation is of no relevance whatever; (viii) this is not to say that the invoice price becomes altogether irrelevant. It furnishes the basis in terms of rules 4(a), 5, 6 and 8 of the Rules. Except for this, it is not relevant for the ascertainment of the assessable value in terms of Section 14(a) - i.e., the market price for identical or like goods at the time and place of importation.
15. The Additional Collector was, in the premises, right when he took the market price into consideration for a determination of the assessable value in terms of Section 14(a). He was refreshingly correct in his observation "in my opinion, there is no doubt that the value for the purpose of assessment to duty is not the price paid by the buyer but rather a notional price at which such or like goods are sold or offered for sale" - one may add, at the time and place of importation.
Indeed, the enquiry about the market rate in Delhi, the place of importation, was initiated only at the instance of the Appellant. (Para 3 of the portion of the Adjudication order headed 'Findings'). When once the result of the market enquiry was not upto their expectation, the Appellant makes a grievance of the reliance on market rate and insists on the acceptance of the invoice price as the only decisive factor for the determination of the assessable value in terms of Section 14(a). Says he - it is not the market price but the invoice price that is sacrosance-unless the Respondent is able to prove that the deal was not at arm's length and the invoice did not correctly represent the actual price paid -as if the deemed value is the actual price paid by the individual importer and not the market price at the time and place of importation, in terms of S.16. But then, a mere market enquiry is not evidence. To prove the market price ruling on or about the time and place of importation, evidence has to be adduced of a plurality of actual transactions of sale of identical or, if such evidence is not available, near identical or comparable goods. When such evidence is adduced, it would be possible for the assessee as well to disprove it in cross-examination or establish by other evidence, a lesser market price.
17. Nor is a vague allegation of other clearances at lesser assessable value evidence. Far from adducing any acceptable evidence of such clearances, by the production of the relevant documents (the Appellant could have even required the Department to produce them by notice on pain of an adverse inference to be drawn in case of failure) and examination of such witnesses as may be necessary to establish such clearances, the Appellant could not even furnish the names of such importers or the dates of import or any other particulars of the imports alleged to have been assessed to lesser value. And yet, it is urged that the Appellant had produced evidence of other imports at Delhi, when the goods were said to have been assessed to a lesser value. If the market rate was not proved by adducing appropriate evidence, so also were the alleged clearances. One can only ask oneself if it was evidence and even if it were, to what effect? A determination of the assessable value that could be proved to be wrong, unrelated, as it is, to the market price at the time and place of importation of which only Section 14(a) speaks, cannot conclude the issue and preclude a correct determination of the assessable value on a true construction and application of Section 14(a). It is not as if the Revenue is stuck with such clearances, if any, and are to be restrained for all time from a determination of the assessable value in accord with the provisions of Section 14. There is no estoppel against law.
18. I, reiterate, therefore, that this is pre-eminently a matter which is to be remanded for a de novo adjudication. In such adjudication, it will be possible for either party to adduce evidence of the market rate prevailing at the time and place of importation for identical or similar goods, so as to enable an appropriate determination of the assessable value of the goods in question. Even if the goods are not physically available, they are described in sufficient detail to enable such determination.