1. These five appeals were heard together by consent of all parties concerned since several common questions of fact and law arise for determination in all these appeals. Sri S.N. Nankhani, Advocate appeared on behalf of M/s Babcock Venkateshwara Hatcheries Private Limited and Sri J.R. Cama, Advocate of M/s Crawford Bayley & Co.
appeared on behalf of M/s Rallis India Limited. Sri Mahesh Kumar, Senior Departmental Representative appeared for the respondent Collector.
2. M/s Babcock Venkateshwara Hatcheries Pvt. Limited (hereinafter to be referred to as BVH Ltd. for convenience) had, under an agreement entered into with M/s Babcock International Corporation, USA, agreed to purchase and import one day old GP layer chicks as well as GP broiler chicks, prices for these varieties being fixed under an agreement. M/s BVH Limited had requested M/s Rallis India Ltd., who had Export House licences in their favour, to open letters of credit in favour of M/s Babcock International Corporation, to cover such imports. It is in respect of such imports, as well as later imports directly under licences in favour of M/s BVH Limited, that the disputes how under issue had arisen. We shall, in the first instance, give details in respect of each of the appeals separately, so that the disputes arising in each proceeding may be distinctly understood. Thereafter we shall take up for consideration the general issues arising in all these appeals and, on the basis of conclusions arrived at on such general questions, apply the same to the particular facts in each proceeding to arrive at a proper decision.
The,agreement between M/s BVH Limited and M/s Babcock International Corporation relating to these appeals is dated 25-2-1974. It purports to be for a period of three years, to be effective till 31-12-1976. The prices agreed thereunder are mentioned to be as follows :1974 Two dollars per female parent and corresponding male line free of cost, Line D 20 Dollars per each maternal grandmother .40 Dollars each broiler female parent and corresponding male line free of cost.
.40 Dollars per each parent female and corresponding male line free of cost.
2000 Broiler grandparents stock at 2.50 Dollars per each maternal grandmother and corresponding lines 12, 34 and 38 free of cost.
40 Cents per each female parent, corresponding male line free of cost.
2000 grandparent stock at 2.50 Dollars per each maternal grandmother, corresponding lines 12, 34 and 38 free of cost.
M/s Rallis India Limited filed a Bill of Entry for clearing 35 cartons containing 1775 chicks, the birds arriving on 18-9-1976. But on examination it was found that the number of chicks that had arrived was much larger, the number found by the authorities on actual counting being 2754. Similarly, M/s Rallis India Ltd. had filed another Bill of Entry for a consignment o. 47 boxes said to contain 3900 chicks, the said consignment arriving on 10-10-19/6. The first consignment consisted of GP Layer Stock and the second of Broilers. In the invoices the price payable had been shown as follows: 1000 Line D 15 Dollars each 15000 Dollars 275 Line M 5 Dollars each 1375 Dollars 400 Line B 5 Dollars | each 2100 Dollars 25 Cents | 100 Line A 2 Dollars | each 225 Dollars 25 Cents | The invoice further read that the price was FOB New York, air freight being shown separately, the total of the amount payable under the invoice being mentioned as 20,000 Dollars. So far as the Broilers are concerned the import invoice dated 21-9-1976 had shown the price as follows : 2000 L 46 0.70 Dollar each 1400 Dollars 1000 L 12 2.80 Dollars each 2800 Dollars 600 L 31 0.75 Dollar each 450 Dollars 300 L 34 2.85 Dollars each 850 Dollars In each of the invoices the price was mentioned as F.O.B. New York, airfreight being added thereto, to arrive at the total C & F Bombay price shown.
Two show cause notices were issued with reference to these imports alleging that the prices declared and shown in the bills of entry were incorrect and were much lower than the actual prices and that there had thus been misdeclaration. It was also alleged that more quantity had been imported than declared in the invoices and bills of entry and thus there had been misdec-laration on that account also. Action was proposed, therefore, under the provisions of the Customs Act, 1962 as well as the Imports and Exports (Control) Act, 1947. Action was proposed thereunder against M/s BVH Limited as well as M/s Rallis India Limited.
M/s BVH Limited pleaded that the excess quantity had been sent by the exporter without their (M/s BVH's) knowledge and that so far as the price is concerned the same was the true price based on the agreement in respect of supplies. They contended that there was, therefore, no case of misdescription by them on either account. M/s Rallis India Limited stated that since M/s BVH Limited were actual users, they (M/s Rallis India Limited) made available their licences to M/s BVH Limited for their imports and that the entire correspondence and procedure relating to import was undertaken by M/s BVH Limited and that M/s Rallis India Limited had nothing to do with the same except accommodating M/s BVH Limited and there was no case of trafficking in the licences by them.
On adjudication the Collector under order dated 20-9-1977 held all charges established and imposed on M/s BVH Limited under Section 112 of Customs Act penalties of Rs. 40,000/- [Section lll(m) ], Rs. 55,000/- and Rs. 60,000/-[Section 111 (d)] and similar penalties under the same provisions on M/s Rallis India Limited. On appeals to the Central Board of Excise and Customs, New Delhi, the findings were confirmed as also the penalties imposed under Section 112 for violation of Section 111 (m). The penalty of Rs. 40,000/-on M/s Rallis India Limited for violation of Section 111 (d) was set aside and the penalty of Rs. 40,000/- on M/s BVH Limited under that provision was reduced to Rs. 20,000/-. Both of them preferred revision petitions to the Government against the said order of the Central Board which, on transfer, are now being dealt with as appeals before this Tribunal. Apart from the prayer for setting aside the penalties M/s BVH Limited have prayed for refund of duty paid by them to the extent of the differential amount arising out of the enhancement of the value for purposes of duty under the orders of the Collector. They have further prayed that with reference to the debiting in the licence, the value as declared in the invoice, together with the freight and insurance, should alone be debited and not the value arrived at by the department for purposes of duty.
This appeal relates to import under bill of entry dated 19-10-1977. The import was of broilers, the numbers indicated in the invoice dated 3-10-1977 being The true value C & F Bombay was shown as U.S Dollars 6559.83 but net C & F value, Bombay was shown as 4000 Dollars, the difference being mentioned as being absorbed by the shipper with no lien on documents.
The invoice showed the price of 2000 chicks of line 46 at $ 2.50 each, no charge being mentioned in respect of the other three lines. This import was by M/s BVH Limited against their own REP Import Licence.
Though Sri Nankhani has mentioned in his arguments that the quantity found on inspection was as mentioned in the invoice, it is seen from the order of the Deputy Collector of Customs dated 2-2-1978/2-3- 1978 that an excess of 99 chicks had been found at the time of examination.
On the basis of the value of the goods as assessed under the earlier order of the Collector dated 20-9-1977 (concerned in the earlier appeals), there was found to be an excess import above the licence value. Show cause notice was therefore issued for violation of the provisions of Imports and Exports (Control) Act, 1947 as well as the provisions of Section 111 of the Customs Act. M/s BVH Limited denied that they had misdeclared the value or the quantity and claimed that as they had also mentioned in the bill of entry the customs assessable value in terms of the earlier order and paid duty on it they were not liable. But over-ruling their objections the Deputy Collector of Customs under his order dated 2-2-1978/2-3-1978 imposed a, penalty of Rs. 40,000 on M/s BVH Limited under Section 112 of the Customs Act. He had held that so far as the excess quantity imported was concerned he did not propose to penalise the party on that score. On appeal by M/s BVH Limited the Appellate Collector under his order dated 1-1-1980/9-1-1980 confirmed the findings but reduced the penalty to Rs. 25,000. it is the revision petition against the said order of the Appellate Collector that is now being, on transfer, disposed of as an appeal before this Tribunal.
This appeal relates to imports by M/s BVH Limited under three bills of entry dated 14-9-78 (day old GP layer chicks46 boxes), 19-4-1979 (day old GP broiler stock50 boxes) and 18-7-79 (day old GP layer stock46 boxes). There is no dispute regarding the quantity imported in these cases. But, following the valuation made earlier, show cause notice was issued for violation of the provisions of Section 111 of the Customs Act as well as the Imports ard Exports (Control) Act, 1947 on the basis that there had been misdeclaration in respect of value and that the import was without licence of appropriate value. M/s BVH Limited claimed that they had approached the Government by way of a revision with reference to the earlier orders and that they were prepared to pay duty at the enhanced value subject to their objections being heard and were prepared to execute a bond for purposes of value of the licences.
The supply under these bills of entry was in pursuance of the agreements dated 2-8-1978, 17-8-1978 and 9-4-1979 with the suppliers M/s Cobb Internationa] Inc. and M/s Babcock International Corporation.
M/s BVH Limited claimed that the price mentioned in the agreements was proper and the same having been followed for showing the total value in the bills of entry there had been no misdeclaration regarding the value and therefore the imports were under cover of proper licences. After adjudication the Additional Collector under his order dated 28-2-1980/12-9-1980 rejected the contentions of. M/s BVH Limited regarding the price having been mentioned properly and, following the earlier findings regarding the valuation, held that there had been misdeclaration regarding the value and therefore in view of the enhanced value for purposes of duty there had been failure with reference to proper licence also to cover the imports. As regards the contention that since they had mentioned in the bills of entry the assessable value as declared by the department and that therefore there had been no misdeclaration, he pointed out that the importers had mentioned their own value as well as the value mentioned by the department and in such circumstances they cannot rely upon the mention of value according to the department to escape the charge of misdeclaration. He also pointed out that they had asked for provisional assessment only. He therefore directed finalisation of assessment on the basis of the value as determined by the department earlier and further imposed, under Section 112 of the Customs Act, penalties of Rs. 30,000, Rs. 63,000 and Rs. 72,000 respectively (for misdeclaration of value), and Rs. 12,500, Rs. 25,000 and Rs. 30,000 respectively (for ITC Contravention). On appeal to the Central Board of Excise and Customs it was ordered by the Board under order dated 31-1-1981 that in the absence of any documentary evidence to indicate otherwise, the values determined by the department are accepted as correct and confirmed but that as regards the charge of misdeclaration of value the Board was of the view that when the appellants themselves had asked for provisional assessment in the light of the assessment made in the earlier cases the charge of misdeclaration was not sustainable. They also held that there was no evidence of any extra remittance over and above the invoice value having been made. Following the same they held that the charge of under valuation for purposes of ITC remained unestablished. In the result they remitted in full all the penalties imposed by the Additional Collector and further directed that the invoice value should be accepted for ITC purposes. But so far as duty is concerned they confirmed the final assessment made by the Additional Collector on :the basis of the value earlier determined. In the revision to the Government against the said order M/s BVH Limited prayed for refund of the excess duty recovered, contending that the value for purposes of duty should also have been accepted according to the value mentioned in the invoice. It is the said revision that, on transfer, is now being dealt with as an appeal before this Tribunal.
This appeal relates to import of day old Broilers GP stock as under : Line 46 Females 2000 This import was under bill of entry dated 4-10-1978. But as the value declared in the bill of entry as well as the invoice was held to be not correct, in the light of the earlier determination of value by the department, M/s BVH Limited paid duty on the basis of value determined by the department. But in view of the said value the department further pointed out that the ITC licence produced for the import did not have adequate balance to cover the import. A show cause notice was issued for contravention of the ITC regulations by import of goods in excess of that covered under the licence produced therefor. M/s BVH Limited however reiterated their contention that the value mentioned in the bill of entry was in accordance with the invoice which was based on the earlier agreement with the exporter, and therefore there had been no violation of any of the provisions of the Imports and Exports (Control) Act or the Customs Act. The; Addl. Collector under his order dated 8-2-1980/11-11-1980 rejected the said contention and held that as the import of the goods was not properly covered by the licence produced therefor M/s BVH Limited were liable for penalty under" Section 112 of the Customs Act for violation of Section 111 (d). He imposed a penalty of Rs. 35,000/- on Appeal the Central Board under its order .dated 31-1-1981 held that the goods had been assessed finally and the importers had paid duty on the assessed value and therefore there was nothing for the Board to go into that matter. But the Board further held that there was no case made out of deliberate misdeclaration of value and there was no evidence of surreptitious payment in excess of the invoice value. Accordingly, the Board remitted the penalty in full.
In their revision to the Government against the said order M/s BVH Limited claimed that the value mentioned in the bill of entry should have been accepted as the proper value for purposes of duty and therefore the excess duty recovered should be refunded to them. It is the said revision that, on transfer, is now being dealt with as an appeal before this Tribunal.
7. The subject matter of the appeals having been set out as above we shall now take up for consideration the submissions of both sides. As mentioned earlier the general contentions relating to all cases shall be considered in the first instance and the conclusions arrived at thereon shall then be applied to the facts of each case. A general observation that may apply to all these cases is that though contraventions of the Customs Act as well as the Imports and Exports (Control) Act had been held to have been committed inviting penalty, no order for confiscation of the goods had been passed, evidently because the goods (being perishable in nature) had been ordered to be released on bonds and were therefore not available for confiscation at the time of adjudication.
8. The argument of Shri Nankhani is that the prices mentioned in the invoices produced (for the imported goods) were based on the earlier agreements entered into in the usual course between M/s BVH Limited and M/s Babcock International Corporation or Cobb. International Inc. and that these prices having thus been arrived at on negotiation in the normal course they should be accepted as the normal prevalent international price during the periods covered by the agreements and there is no acceptable evidence to disbelieve the same to arrive at any other value for purposes of levy of duty. In effect his argument is that once the importer and the exporter had arrived at an agreement regarding the price to be paid for the imported commodity, the department should accept the same as the value for purposes of assessment of duty. In assessing this contention the terms of Section 14(1) (a) of the Customs Act have to be considered. The same reads as follows : (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be (a) the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale : Provided that such price shall be calculated with reference to the rate of exchange as in force oh the date on which a bill of entry is presented under Section 46, or a Shipping bill or bill of export, as the case may be, is presented under Section 50; It is therefore seen that under Section 14(1) (a) the value for purposes of assessment of duty is a deemed value and need not necessarily be the price agreed upon between the parties. Sri Nankhani, has relied upon the decision in the Minerals and Metals Trading Corporation of India v. Collector of Customs, Bombay (1984 ECR 287) and, in particular, the passage at page 290 "If the two contracting parties agreed to revise the contract on certain conditions, no third party has any right to question the terms of the contract. The price had been mentioned in accordance with the terms of the contract which were obtaining at the time the goods were supplied and the authorities below had no power to question the validity of the contract, more particularly when it is not a contract between private parties." But it may be noted that the subsequent sentences make it clear that if there had been other material made available which would establish that the contract price was not the proper international price the authorities would have been entitled to revise the valuation for purposes of assessment of duty. Therefore this judgment would not be an authority for the broad proposition- that once the contract price is established the authorities are bound to accept the same for purposes of assessment of duty also. As earlier stated, the very terms of Section 14(1) (a) would be against this contention. In Bird and Company v. Kalyan Kumar [ILR 1976 (II) Calcutta 202] it had been 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 of exportation in the case of international trade and 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 the sale in question.
9. Another judgment which would also be relevant in this connection is that of the Bombay High Court in Union of India v. Glaxo Laboratories [1984 (17) E.L.T. 284 (Bombay)]. At page 280 it is observed that "no arguments are raised, nor is the respondent doubting the right of the department to take into account the international price of the disputed goods for the purposes of customs duty." This was with reference to the fact that the respondent (M/s Glaxo Laboratories) had paid customs duty on the international market price but wanted the licence to be debited with reference to the CIF value which was the actual value under the contract between them and the seller. With reference to these facts it had been observed at page 291 that "this actual price of supply which we would assume is a genuine price in that deal can vary from the international market price which is the value for the purposes of customs taxation". Therefore these judgments make it abundantly clear that the agreed price between the parties, though genuine, would not be the concluding factor with reference to assessment for customs duty since under Section 14(1) (a) duty will have to be levied on the deemed value, which is defined in the section as extracted earlier.
10. But Sri Nankhani is correct when he contends that the onus of proving misdescription is on the department and that this onus can be discharged only on proof of proper facts which would discredit the price mentioned in the bill of entry and not on the basis of mere suspicion or surmise. In the cases before us the misdescription is said to be either with reference to the quantity mentioned or the price mentioned or both. The evidence with reference to either type of misdescription will therefore have to be separately considered.
11. So far as the misdescription with reference to the quantity is concerned this question arises only in Appeals No. 963/80 and 964/80 and 1378/80. In the first two cases as against the declared quantity of 1775 chicks the actual count disclosed 2754 chicks to have been imported. M/s BVH Limited or M/s Rallis Tndia Limited do not dispute that,excess quantity had been received. But the defence of M/s BVH Ltd. is that the despatch of excess quantity was due to error on the part of the seller and M/s BVH Ltd. was not aware of the same in any manner. It is in this connection that the subsequent correspondence between M/s BVH Ltd. and Babcock International Corporation has been produced. It is pointed out that when under their letter dated 19-9-1976 M/s BVH Ltd. complained about the receipt of excess quantity of chicks they were informed by the supplier under letter dated 23-9-1976 that for several months earlier they (Babcock International Corporation) were sending 'C line males also in addition to the 'N' line males in an experiment to better breeding but that by oversight they had failed to inform the same to M/s BVH Limited and that the excess in the 'D' line (which according to them was 500 only) was due to a clear mistake on the part of their shipping department in labelling and packaging. It is contended for M/s BVH Limited that thus it is established that the misdescription regarding quantity in the bill of entry filed for that import was due to total ignorance on their part of the excess despatched and therefore there was no wilful misdeclaration, which alone would invite a penalty. From the correspondence produced (between M/s BVH Limited and Babcock International Corporation) it appears that Babcock International Corporation were in fact willing to have the excess number of chicks destroyed if importation thereof was objected to as being more than the quantity mentioned in the bill of entry or in the alternative they were willing to send a supplementary invoice for the excess in the 'D' line leaving it to M/s BVH Limited to adopt either course. But the department appears to have been unwilling to allow the first alternative as they felt that destruction of the birds would merely entail loss of revenue to the Government. Therefore Babcock International Corporation appear to have sent a supplementary invoice dated 27-10-1976 with reference to the excess quantity, charging the 'D' line only (500 numbers) under that invoice. M/s BVH Limited contend that these letters would also establish that the excess quantity had been sent without their knowledge and, evidently, due to a mistake in the labelling and packaging department of Babcock International Corporation. Further, as pointed out by them, these imports were to be always allowed only after physical check and counting. In the circumstances it may be normally expected that M/s BVH Limited could not have agreed for the despatch of a number larger than mentioned in the invoice and, consequently, in the bill of entry. In the circumstances their defence that the excess quantity had been despatched due to mistake on the part of Babcock International Corporation and was not intentional and that in any event they (M/s BVH Limited) had no knowledge at all of the same till the birds were counted on arrival, appears to be very probable. In any event, the above circumstances would be sufficient to give the benefit of doubt to M/s BVH Limited regarding their participation in any intended excess import than the number mentioned in the invoices and the bill of entry.
The contention for the department is that the ratio between male and female is to a large extent maintained even with reference to the excess quantity. This contention was advanced to suggest that the excess sent in the 'D' line could not have been due to any accidental mistake. But the contention about maintenance of the ratio with reference to the excess quantity also is not strictly correct.
Therefore, this would also not be a sufficient ground to infer any intentional excess in the number sought to be imported. Therefore for all the above reasons we are satisfied that the charge of misdeclaration, arising out of the quantity imported, is not established so far as the imports covered in appeals No. 963/80 and 964/80 are concerned.
12. So far as the import covered by appeal No. 1378/80 is concerned the excess number was only 99. It is pointed out for the appellants that it is usual to add 4% to the invoice quantity to take care of any mortality that may ensue during transit of the chicks, and that the international practice is not to charge for the 4%. It may be noted that the Deputy Collector had not chosen to impose any penalty on the basis of such a misdeclaration with reference to quantity. It is therefore unnecessary to proceed further in this regard.
13. The other charge is with reference to misdescription regarding the price of the goods. It has been already seen that while the department is entitled to ignore the contract price for purposes of levy of customs duty, the onus will be on the department to show that the contract price was not the proper price if any charge of misdescription leading to imposition of penalty is to be made on that basis against the importer. The case for M/s BVH Limited, as also for M/s Rallis India Limited, is that the price mentioned in the invoices and the bills of entry was the price as had been agreed upon between the importer and the exporter after negotiations in the normal course of commercial transactions and therefore there had been no misdescription.
In support of this contention the agreements between M/s BVH Limited and the Babcock International Corporation or Cobb International Incorporated had been produced. It is pointed out for the department that while the agreements refer to the 'D' line or the 'main' line alone being charged with reference to the GP layer stocks, the other lines have been shown to be supplied free, the prices have been mentioned in the invoices with reference to each of the lines, he total arrived at with reference to the four lines being different from the price mentioned in the agreement for the 'D' line and it may also be noted that the- total price charged under the invoice is finally mentioned as the price that would be payable for the main line only at the rate mentioned in the agreement. The explanation of M/s BVH Limited in this connection is that on earlier imports the import invoices also mentioned the price for the main line only, the other lines being mentioned to be free; but that in about 1972 the Customs authorities objected to the same and insisted that the price must be mentioned for each line separately and that is why in subsequent invoices prices were mentioned separately for each line by splitting up the price for the main line between all the four lines. But it is pointed out for the department that such an explanation cannot be straightaway accepted since even after 1972 in the 1974 agreement the price is mentioned for the main line only and not for each line separately. But in assessing this charge, that M/s BVH Limited had committed misdescription by intentionally showing a wrong price, it should be noted that when the prices as agreed upon were being mentioned in subsequent imports the Board itself had held (in appeals Nos. 1464 and 1465/80) that there had been no evidence of any extra remittance having been made over and above the invoice price. Therefore, in effect, the Board itself had held, with reference to these subsequent imports, that though the price mentioned in the invoices, which was in accordance with the price mentioned in the agreements, was not being accepted for purposes of value for levy of customs duty, the price as agreed upon between the parties was the price that was actually paid. In the circumstances it would be difficult not to come to the same conclusion with reference to the earlier imports also, when the circumstances were exactly similar.
14. In coming to the conclusion that the price mentioned in the invoices was not the real price, but that under-invoicing had been done, the original authorities were influenced by the information that they had obtained from the Ministry of Agriculture (particulars as mentioned in the show cause notices) which according to them showed that the prevalent price for similar goods was higher. In this connection Sri Nankhani contends that the information furnished by the Ministry of Agriculture was itself tentative, and in the nature of a guess and not based on any acceptable data, contemporaneous in nature.
This aspect could be more conveniently considered subsequently when the question of value for purposes of levy of customs duty is taken up. Sri Nankhani further rightly points out that under the agreement of 1974 imports had been effected in the first and second year at the price as mentioned in the agreement and, accordingly, in the invoices, but that the Customs authorities had not objected to the same in the first two years, which would again go to show as argued by the learned counsel that the prevalent international price was roughly the same as that mentioned in the agreement of 1974. He further points out that even with reference to importations of similar GP layer stock or broilers by other importers from other foreign sellers the department must necessarily be in possession of relevant material and the very fact that the department had not chosen to rely upon any such material would establish that such material is entirely in support of the stand of the appellants that the price mentioned in their own agreements (and subsequently shown in the invoices) were themselves the proper international prices at the relevant time. The omission on the part of the department to produce any such material, which must be available with them, would certainly lend support to this contention of Sri -Nankhani. Therefore, we are satisfied that so far as the charge of misdescription arising out of the prices mentioned in the invoices, the said charge cannot be said to have been satisfactorily established even in Appeals No. 963, 964 and 1378/80.
15. But in all the cases before us duty had been levied on the value as fixed by the department, rejecting the price as mentioned in the invoices. It had been already seen that the price mentioned in the invoices would not conclude the matter since it would be open to the department to establish that though the parties may have really agreed upon such prices, duty could yet be demanded at a different value if the department is able to establish that the price agreed upon between the parties was not the international pries, which would alone be relevant in terms of Section 14(1)(a) of the Customs Act.
16. But the question is whether the department has produced and relied upon such evidence to reject the invoice prices which, for the reasons mentioned earlier, there is no reason to believe were not the real prices agreed upon between the parties. In rejecting the prices mentioned in the invoices the department had, in the first adjudication, relied upon a communication from the Ministry of Agriculture relating to current prices of GP stock and broilers imported by other local hatcheries. Since it is this letter that is mainly relied upon by the department to disbelieve the price mentioned in the invoices produced by the appellants in all the cases, it would be proper to extract the same in full at this stage. It reads as follows : "As regards the price of various lines of egg type and broiler GP stocks of Babcock imported by Babcock Venkateshwara Hatcheries, it may be stated that all the original papers are in the CCI & E office files at' New Delhi and this office has no record to give an exact idea about the current price of Babcock GP stock. However, from a copy of an agreement dated April 1971 in our record it appears that the price of Babcock GP stock upto 30-09-1973 was $ 25.00 ($ Twenty five) per female chick FOB New York. It is highly unlikely there is any reduction of price after this if there is any change the prices are likely to go up. A reference may, therefore, kindly be made to the CCI & E, New Delhi, regarding the price of egg type and broiler GP stock imported by M/s Babcock Venkateshwar Hatcheries during 1975-76 on the basis of import licences issued by that office. This department, however, is aware of the current prices of GP stock of other Cos. which is as under, : 1. Shaver Stock being imported by M/s Ranishave Breeding Farms, New Delhi; (a) Shaver Star-cross layer GP chicks @ Dollars 28 00 ($ Twenty eight) per chick (in 1975) CIF. (b) Star-bro broiler GP stock @ Dollars 12.00 ($ Twelve) per day old chick (in 1975) CIR (a) Egg type GP @ Dollars. 25,00 ($ Twenty five) per day old chick C & F New Delhi (price presumed to be valid in 1975).
(b) Meat type female laying white Tock GP female Dollars 7.00 ($ Seven) per female chick FOB Amstrerdam with adequate and corresponding number of male chicks at no charge (price presumed to be valid in 1975).
(c) Male line Cornish GP female chick Dollars 16.00 ($ Sixteen) per day old chicks FOB Amstrerdam with adequate number of male line Cornish male chicks at no charge.
The original papers in respect of all the above parties are in CCI & E New Delhi, files from which import licence have been issued to them from time to time.
This Department feels that the current prices of Babcock GP Stock imported by M/s Babcock Venkateshwara Hatcheries will not be less than the shown values of GP of other above mentioned international lines, viz. Shaver and Dekalb/Pilch." "the said office has no record to give an exact idea about the current prices of Babcock GP stock".
It then proceeds to rely upon an agreement of April 1971 where the price was mentioned at $ 25 per female chick and therefore draws a conclusion that the price subsequently could not have been less but could only have gone up. While it may be possible to entertain such a speculation, that would not sufice as proof to arrive at a higher value for purposes of duty, in the absence of proof of actual import at such higher value by anybody else. The letter of the Ministry of Agriculture further relied upon information as to current prices of GP stock of other foreign exporters. But here again no details are given of the actual imports. The customs authorities should necessarily be in possession of records of such imports if they had taken place at the prices as mentioned in the letter of the Ministry. The omission on the part of the customs authorities to produce and rely upon such records would be a strong circumstance in favour of the appellants in their contention that there could have been really no such imports at the prices as mentioned in the Ministry's letter. In any event in the absence of such records it would not be proper to rely upon the information in the letter to disbelieve the correctness of the international price, as mentioned by the appellants, especially in the context of the earlier finding that there is no proof of remittance of any further amounts by the appellants than had been mentioned in the agreements and invoices that followed.
18. The order of the Collector mentions three different reasons for rejecting the price mentioned by M/s BVH Limited as proper international price for purposes of levy of duty. The first reason mentioned is that the invoice mentions a C & F price and not a FOB price. The second reason mentioned is that the price mentioned at $ 20 per 'D' line in the agreement of 19-7-1977 is not acceptable in view of the other instances of import of similar goods at a price ranging from $ 20 to $ 28 ; the third reason mentioned is that there had been alround price rise after 1973 in the wake of the oil crisis and in that context the contention of fresh agreement in 1974 providing for a price lower than the one in the earlier agreement is not acceptable.
19. So far as the first reason is concerned that would not appear to be sufficient to disbelieve the price of the birds as mentioned in the agreement. So far as the second reason is concerned it had been already seen that though the department relied upon a communication from the Agriculture Ministry, in which prices at higher rate had been mentioned as prevailing, there has been no evidence produced for proof of such imports, though such evidence must have been available with the department. It had therefore been earlier mentioned that in the absence of such evidence the reliance on the mere letter of the Agriculture Ministry would not be proper. The third reason is again of a general nature and merely speculative in character and would not suffice as proof of actual variation between the contract price and the international price. Therefore, we are not satisfied that any of the three reasons mentioned by the Collector in his order dated 20-9-1977 could be accepted for holding that the international price was higher than the contract price as disclose d by the importer. As already seen, the finding of the Board itself in respect of subqsequent imports, which were also under contract prices, had been that there was no proof of any payment having been made in excess of the disclosed price. That conclusion would only suggest that the price had been agreed upon between the parties after normal negotiations and such a price would therefore be the ruling price in the international markets at the relevant periods.
20. It is with reference to these conclusions which we have arrived at that, on application thereof to the facts of each case, the several appeals before us have to be disposed of.
In these appeals penalties had been levied on M/s Rallis India Ltd. as well as M/s BVH Ltd. Penalties had been levied under Section 112 of the Customs Act for contravention of Section lll(d) as well as lll(m), Sri Nankhani contends that there could be no case of unauthorised importation since the importations were under proper licences, the value of such licences being sufficient to cover the imports made. Therefore, he contends that there can be no case of contravention of Section lll(d). But it cannot be denied that if the goods had not corresponded, in respect of value or in any other particular, with the description in the bill of entry an offence under Section lll(m) would be made out. The misdescription is said to be with reference to the quantity as well as the value. So far as the misdescription regarding quantity imported is concerned it had already been held that the said, charge has not been established.
Sri Cama further contends that so far as M/s Rallis India Ltd. are concerned they were in any event totally unaware of the transaction itself since, after making available their licences for import by M/s BVH Limited, the entire proceedings were being looked after by M/s BVH Limited only. But there is no denial that the licence was in the name of M/s Rallis India Ltd., they were the importers on record and bills of entry were being filed by them as importers, though the import may have been by them at the instance of and for the benefit of M/s BVH Limited, In the circumstances it would not suffice for M/s Rallis India Ltd. To state that they did not actually participate in the matter of impost but depended upon the good sense of M/s BVH Limited in not contravening the legal requirements. The fact that M/s Rallis India Limited took no interest in the matter, except to sign the relevant records at the instance of M/s BVH Limited, would only reveal the supine indifference that they exhibited towards discharge of their legal obligations as importers under licence, who were to comply with all legal formalities in effecting such imports. Therefore it would be no defence for them to state that in fact they played no real part in the import. They would have to suffer the consequences if the trust placed by them in M/s BVH Limited was misused. But since the charge of misdescription either with reference to value or with reference to quantity is concerned has been already held to be not established there would consequently be no liability on the part of M/s Rallis India Ltd. also on this account.
Therefore, the result of the above discussion would be that so far as the violation of Section lll(d) is concerned it has to be held that there had been no such violation since the imports were under proper licence of suitable value. Hence the penalty imposed in that regard on M/s BVH Limited (Rs. 20,000 as reduced by the Board) is set aside. As noted earlier the penalty on M/s Rallis India Ltd. on this account had been already set aside by the Board itself.
Further, penalties with reference to misdescription with reference to quantity (Rs. 55,000/- on each of the appellants) as well as misdescription regarding value (Rs. 60,000 on each of the appellants) have also to be set aside and are ordered accordingly.
But so far as payment of duty is concerned M/s BVH Limited will be liable to pay duty on the entire imported goods at their invoice value, the entire excess of 979 birds being treated as 'D' line only, in view of the statement of Mr. Barve agreeing to the same when he took charge of the birds. Duty is to be assessed on the basis of the declared value, which has been accepted by us to be the proper price.
In this appeal an excess import by 99 chicks had been found but no penalty had been imposed by the Deputy Collector on that ground. But on the basis of misdeclaration in respect of value resulting in importation without cover of valid licence (as the licence produced was not sufficient to import the goods of the value as determined by the department) the Deputy Collector had imposed a penalty of Rs. 40,000 which had been reduced to Rs. 25,000 by the Appellate Collector. This imposition was under Section 112 for violation of Section 111(d) of the Customs Act. But in view of the conclusion that the price mentioned by the importer was not lower than the international price (as had been held by the lower authorities) it follows that the charge of misdeclaration regarding value [under Section lll(m) if not lll(d)] cannot be upheld. Therefore, that penalty is also set aside, directing assessment on the price declared which has been accepted by us to be the proper price.
There had been no case of import of excess quantity in this appeal.
But the Collector under his order dated 28-2-1980 levied penalties for misdeclaration of value as well as for ITC contravention. The penalties in respect of ITC contravention have been remitted in full under the orders of the Board dated 31-1-1981. In view of the finding regarding value as mentioned earlier it follows that the penalties of misdeclaration of value as imposed by the Collector and confirmed by the Board are liable to be set aside. They are accordingly set aside. But in the revision the appellants prayed for refund of the duty collected from them, accepting their invoice price as the value for assessment of duty. Since it has been found that the price declared by M/s BVH Limited was not proved to be different from the international market price it follows that duty should have been demanded only on the basis of the declared value and not on the deemed price as had been done by the Collector. The appellants are therefore entitled to the refund of excess duty collected.
Here also the penalty was imposed under Section 112 of the Customs Act for violation of the provisions of Section 111 (d) of the Customs Act on the basis that the licence produced did not fully cover the value of the goods as determined by the department. But the penalty had been set aside by the Board. In this revision also the appellants have prayed for refund of excess duty paid by them on account of the difference between the ascertained value and the invoice value. Following the finding earlier it is ordered that they are entitled to refund of the said excess duty collected.
21. Another common submission in respect of all these appeals was that so far as the debiting in the licences is concerned it should have been only on the basis of the invoice value as the same was the price properly agreed upon between the parties and that alone ought to be considered for debit in the licences. We have already referred to the decision of the Bombay High Court in Union of India v. Glaxo Laboratories(1984) (17) ELT 284 (Bombay) and the observations therein to the effect that though for purposes of assessment of duty the demand price as defined under Section 14 (1) (a) of the Customs Act would be relevant, the debit in the licence should be on the basis of the actual price paid. In the present cases it had already been held that the prices shown in the invoice were the proper prices and in fact they are to be accepted for the purposes of assessment of duty also. Therefore, we observe that the debit in the respective licences should also have been on the basis of the price of the imports as mentioned in the invoices (which have been already accepted as the proper price as also the proper value for assessment of duty).
22. In the result the five appeals are allowed to the extent indicated below and disposed of accordingly : (a) The penalty imposed on M/s. BVH Limited (Rs. 20,000 as reduced by the Board) for violation of Section 111 (d) is set aside. The penalties with reference to misdescription with reference to quantity (Rs. 55,000 on each of the appellants) as well as misdesciption regarding value (Rs. 60,000 on each of the appellants) are also set aside.
(b) So far as payment of duty is concerned M/s. BVH Limited will be liable to pay duty on the entire imported goods, to be assessed on the basis of the declared value, the entire excess of 979 birds being treated as 'D' line only.
The penalty imposed on the appellants (M/s. BVH Limited) is set aside. Duty is to be assessed on the basis of the declared value.
The penalties imposed for misdeclaration of value as well as for ITC contravention imposed on M/s BVH Limited are set aside. The appellants are declared entitled to the refund of excess duty collected, on assessment of duty being done on the basis of declared value.
The penalty imposed under Section 112 on M/s. BVH Limited had been remitted by the Board itself. It is ordered that they are entitled to refund of the excess duty collected on assessment being done on the basis of the declared value.
23. In all the appeals we further hold that debit in the respective licences should also have been on the basis of the declared values.
24. The appeals are disposed of in the above terms, with consequential relief.