2000 (1) TMI 46 - SC - Customs

Whether the service charges payable to Minerals and Metals Trading Corporation by the appellant for the importation of raw asbestos made by them is includible in the assessable value of import as provided in the Customs Act and Customs Valuation (Determination of Price) Rules 1988 or not? Held that - There is no relationship of principal and agent between the appellant and the MMTC nor is there any agreement between the parties to pay buying commission nor has the MMTC agreed with the appellant to represent it abroad in the purchase of raw asbestos. Material on record on the contrary shows that the MMTC on its own goes through the process of identifying the foreign supplier from whom it purchases the goods in question on its own without representing any particular buyer in India and sells the same to the purchaser on high seas sales basis to the Indian buyers like the appellant. Purchase by MMTC from the foreign seller and subsequent sale by it to the Indian buyers are independent of each other. Therefore MMTC when it includes service charges in its sale consideration it does not include the same as buying commission . Therefore this contention of the appellant is rejected. Thus we should also take notice of the fact by virtue of the high seas sales through which the appellant purchased the raw asbestos from the MMTC it has derived the benefit of avoiding the payment of sales tax on these goods. These facts are sufficient to reject the contention of the appellant raised on the basis of unreasonableness of the levy. Appeal dismissed.

Summary

Issues:
Whether service charges payable to Minerals and Metals Trading Corporation (MMTC) by the appellant for the importation of raw asbestos are includible in the assessable value of import as provided in the Customs Act and Customs Valuation Rules.

Analysis:
The case revolves around the inclusion of service charges in the assessable value of imported goods. The appellant, a manufacturer of asbestos cement products, imports raw asbestos mainly from foreign countries through MMTC, designated as a canalising agent. The appellant argues that the service charges do not form part of the transaction value and should not be added to the assessable value, likening the transaction to an agency arrangement. The appellant contends that the service charges are akin to "buying commission," exempt under Rule 9(l)(a)(i) of the Valuation Rules.

The respondents argue against considering the relationship between the appellant and MMTC as that of a principal and agent, asserting that the service charges are part of the consideration for high seas sales. The MMTC purchases raw asbestos in bulk, sells it on high seas sales basis to various users, including the appellant, and charges service charges in addition to the purchase value. The court notes that there is no agency relationship between the appellant and MMTC, as the MMTC does not act on behalf of specific consumers in India but makes bulk purchases for various consumers.

The appellant's attempt to claim exemption under Rule 9(l)(a)(i) by equating "service commission" to "buying commission" is rejected. The court finds that MMTC does not act as an agent for the appellant in purchasing raw asbestos, and the service charges are not akin to buying commission. The argument that the inclusion of service charges imposes an unreasonable burden on the appellant is also dismissed. The court emphasizes that even if the duty burden is heavy, it cannot be avoided, and the appellant benefits from high seas sales by avoiding sales tax on the imported goods.

Ultimately, the appeals are dismissed, and the court rules in favor of including service charges in the assessable value of imported goods, upholding the decisions of the lower authorities.