1. A Company known as Kumar Brothers (India) Private Limited was incorporated under the provisions of the Indian Companies Act, 1913 and was carrying on business as manufacturers and dealers in cutlery. The said Kumar Bros. (India) Pvt. Ltd. carried on business in the name and style of Kishco Cutlery . was changed to Kishco Cutlery Pvt. Ltd. On October 30, 1975, Shri K. G. Nariman and Ravi Nariman being the only shareholders of the Company transferred all their shares to one Shriyans Prasad Jain and others and thereafter the petitioner No. 1 Company became a deemed public company under the provisions of the Companies Act, 1956.
2. The petitioners, to carry on the business as manufacturers and dealers in cutlery, are regularly importing the necessary raw materials required for the manufacture of cutlery. By a contract dated July 21, 1969 entered into between the petitioner No. 1 and one Mitsui & Company Limited, Japan, an order for import of 115 Metric tonnes of prime quality stainless steel sheets in coils at the price of U.S. Dollars 878.40 per metric tonne c.i.f. was placed. The petitioner No. 1, in order to be entitled to grant of requisite import licence, booked a firm export order for supply of stainless steel cutlery of the value of U.S. Dollars 204560.00 with one Messrs Bloomfield Industries Inc., Chicago, U.S.A. The said concern from the United States of America established in favour of the petitioner No. 1 an irrevocable letter of credit dated September 17, 1969. The petitioner thereafter received a Proforma Invoice dated October 29, 1969 from Mitsui & Company Limited showing price U.S. Dollars 878.40 per metric tonne c.i.f. Bombay. The petitioners thereafter made necessary application to the respondents for issuance of import licence to meet the export commitment. The Chief Controller of Imports and Exports, New Delhi, advised the Joint Chief Controller of Imports and Exports, Bombay, to issue import licence for the quality, chemical composition and the rate of stainless steel as covered by the Proforma Invoice dated October 29, 1969. The petitioners were thereafter granted the import licence on January 13, 1970.
3. Between April 4, 1979 and June 18, 1970, eight consignments under the contract dated July 21, 1969 reached Bombay and the petitioners submitted all the necessary documents like the bill of entry, proforma invoices and other documents to the Customs Authorities for clearance of the consignment. The contract price of Rs. 878.40 per metric tonne was reflected in the invoice accompanying the said consignments and the same price was also mentioned in the bills of entry. The Officers of the Customs Appraising Department assessed the value of the goods as being U.S. Dollars 1170 per metric tonne instead of the price of U.S. Dollars 878.40 per metric tonne mentioned in all the relevant documents. The petitioners were thus compelled to pay the excess customs duty.
4. The petitioners paid the excess customs duty charged by the Customs authorities and thereafter filed applications for refund of the excess customs duty under Section 27 of the Customs Act, 1962. The refund applications filed by the petitioners were within time. The Assistant Collector of Customs, Bombay, by his order dated December 27, 1971 rejected the applications. The Assistant Collector took the view that the consignments were shipped against the contract dated November 29, 1969 and the price prevailing subsequent to October 27, 1969 was U.S. Dollars 1170 per metric tonne. The Assistant Collector rejected the claim of the petitioners that the import was based on the contract dated July 21, 1969. The reliance was placed on the letter dated October 29, 1969 from M/s. Mistui & Company Limited that the price would be charged as ruling at the time of shipment in case letter of credit is not opened within time. The petitioners carried appeals before the Appellate Collector of Customs but the appeals were dismissed by a consolidated order dated December 21, 1973. The revision applications preferred by the petitioners before the Government of India also ended in dismissal by an order dated dated May 16, 1978 and all these orders are under challenge in this petition filed under Article 226 of the Constitution of India on October 3, 1979.
5. Shri Rana, learned counsel appearing in support of the petition, submitted that the three authorities have clearly misconstrued the transaction between the petitioners and M/s. Mistui & Company Limited, Japan and there is considerable merit in the submission of the learned counsel. The authorities below have held that the petitioners did place an order for the supply of stainless steel sheets on July 21, 1969 and the Proforma invoice dated October 29, 1969 was sent by the suppliers and in both these documents, the price quoted was U.S. Dollars 878.40 per metric tonne c.i.f. Bombay. The authorities have held that the licence was granted to the petitioners on the strength of the invoice, and after securing the licence, the petitioners opened the letter of credit. The authorities felt that though the price was confirmed by the supplier in November 1969, the letters of credit were opened only on January 14, 1970 after obtaining the licence and the consignment reached the Bombay Port between April 1970 and June 1970. The authorities felt that as higher rate was prevailing at the time when the consignments were shipped, the petitioners would be liable to pay the duty on the basis that the value of the consignment was U.S. Dollars 1170 per metric tonne in accordance with the provisions of Section 14 of the Customs Act.
6. Shri Rana submits and, in my judgment, with considerable merit that the authorities below have missed the substance of the matter and have proceeded upon a wrong assumption. The contract was confirmed by M/s. Mitsui & Company Limited on July 21, 1969 and the copy of the contract is annexed as Ex. 'A' to the petition. The perusal of this exhibit makes it clear that the price agreed was U.S. Dollars 878.40 and the buyers have to open a confirmed, irrevocable Letter of Credit in U.S. Dollars and the same was to reach Tokyo, Japan by August 30, 1969. In accordance with this contract, M/s. Mitsui & Company Limited, through their Bombay Agents, handed over a Proforma Invoice to the petitioners and the copy of this proforma invoice is annexed as Ex. B to the petition. The price mentioned in this proforma invoice is identical as that mentioned in the Contract of July 21, 1969. The proforma invoice, inter alia, recites as follows :
'We may state here that this order has been booked by you since long, but you have not been able to open the letters of credit covering the above quantity and as such, even though our Principals are keeping the order valid, they have informed us that the prices of the materials will be charged to you as ruling at the time of shipment and hence, in order to avoid such situation, we request you to kindly expedite establishment of letters of credit under advice to us.'
After receipt of the proforma invoice, the petitioners sought an advance licence and the same was granted and the copy of the licence is annexed as Ex. 'B collectively'. The perusal of the licence indicates that the petitioners were permitted to import 164 metric tonnes of stainless steel sheets for manufacture and the import was to be in conformity with the types, specifications, weights and price as given in the proforma invoice dated October 29, 1969. The conditions attached to the licence establish that the advance licence was granted to the petitioners as actual users and registered exporters and was on condition that the petitioners would export only quality stainless steel cutlery as covered by the export order in favour of M/s. Bloomfield Industries Inc. - Chicago, U.S.A. After securing the licence, the petitioners received a confirmation letter dated November 29, 1969 from M/s. Mitsui & Company Limited and the copy of that confirmation letter is annexed as Ex. 'C' to the petition. This confirmation letter also states the price of the imported goods at U.S. Dollars 878.40 per metric tonne. Shri Rana submits that the authorities below have proceeded on the assumption that the confirmation letter dated November 29, 1969 is a fresh contract and the eight consignments which reached Bombay between April 1970 and June 1970 were imported on the strength of the Contract dated November 29, 1969. The assumption of the authorities on this aspect is entirely erroneous. What M/s. Mitsui & Company did on November 29, 1969 was merely to confirm the contract to sell the stainless steel sheets in coil at the stated price. This confirmation was of the contract entered earlier in July 1969 and the price in both the documents is identical.
7. In my judgment, on the face of this material on record, it was not permissible for the authorities to claim that the price of the imported goods was U.S. Dollars 1170 per metric tonne by resort to the provisions of Section 14 of the Customs Act. Section 14(1)(a) and (b) reads as under :-
'14. Valuation of goods for purposes of assessment. - (1) For the purposes of the Indian Tariff Act, 1934 (32 of 1934), 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 in the case of imported goods, such price shall be calculated with reference to the rate of exchange as in force on the relevant date referred to in sub-section (1) of section 15];
(b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this behalf.'
The material available to the authorities in the present case was more than sufficient to hold that the goods were sold to the petitioners in accordance with the Contract dated July 21, 1969 and it is an accepted position that the price prevalent on that day was U.S. Dollars 878.40 per metric tonne. Under Section 46(4) of the Act, the importer has to present the bill of entry and is required to make a declaration at the foot thereof as to the truth and contents of the bill of entry and in support of such declaration is required to produce the invoice relating to the imported goods. The petitioners have produced the proforma invoice, on the strength of which the advance licence was granted. In my judgment, on the facts and circumstances of the case, the finding of the authorities below that the price prevalent was U.S. Dollars 1170 per metric tonne on the date when the consignments were shipped and the petitioners are liable to pay excess duty is entirely untenable and unsustainable. The authorities below have overlooked that the advance licence to registered exporter is granted on the condition that such importer would export finished items at the stated value and secure foreign exchange. In my judgment, in these circumstances, the orders of the three authorities below are required to be quashed.
8. Accordingly, the rule is made absolute and the order dated December 27, 1971 passed by the Assistant Collector of Customs, Refund Section, order dated December 21, 1973 passed by the Appellate Collector of Customs. Bombay and the order dated May 16, 1978 passed by the Government of India are set aside and the Assistant Collector of Customs, Bombay is directed to grant refund to the petitioners in respect of eight refund applications on the basis that the goods imported were liable to be assessed to duty at the rate of U. S. Dollars 878.40 per metric tonne c.i.f. Bombay and not at U.S. Dollars 1170 per metric tonne c.i.f. Bombay as held by the Assistant Collector of Customs by order dated May 4, 1970. The Assistant Collector of Customs shall pass the order of refund within a period of three months from today. In the circumstances of the case, there will be no order as to costs.