1988 (5) TMI 168 - AT - Customs

Summary

Issues Involved:

1. Valuation of imported goods.
2. Classification of imported goods under the Customs Tariff Act.
3. Validity of the show cause notice regarding Customs Valuation Rules.

Detailed Analysis:

1. Valuation of Imported Goods:

The appellants, M/s. Hindustan Equipment Engineering Co., contested the valuation of Synchroniser Cones imported, arguing that the declared value of $3.49 per unit should be accepted. They emphasized that the price was negotiated and reflected in the letter of credit (L/C), and no higher value evidence was cited by the department. The appellants argued that no commission was paid to M/s. Krishna & Co., an associate firm, thus the price should not include an additional $0.20 commission per unit. The department, however, based on telex messages between M/s. Krishna & Co. and the supplier, concluded that the actual price was $3.69 CIF per piece, including a $0.20 commission. The adjudicating authority valued the goods at $3.69 CIF, which was upheld by the Collector of Customs (Appeals).

The Tribunal noted that the appellants and M/s. Krishna & Co. were related firms, and the commission was not reflected in the invoice value. The telex messages confirmed that the supplier agreed to a price of $3.69 per piece, with a $0.20 commission deducted to show a net price of $3.49. The Tribunal held that the valuation made by the authorities was in accordance with Rule 5(a) of the Customs Valuation Rules, 1963, which mandates adding commission to the value for assessment purposes. The Tribunal dismissed the appellants' contention regarding the non-mention of Customs Valuation Rules in the show cause notice, stating that all evidence was made known to the appellants, and mere non-mention was of no consequence.

2. Classification of Imported Goods:

The appellants argued that the imported Synchroniser Cones should be classified under Heading 84.63 of the Customs Tariff as parts of Gear Shafts and Gears, rather than under Heading 87.04/06(1) as parts of Motor Vehicles. They contended that the BTN Explanatory Notes or CCCN had no legal sanctity and cited case law supporting their position.

The department, supported by the Tribunal, classified the goods under Heading 87.04/06(1) based on the precedent set in Mahindra and Mahindra Ltd. v. Collector of Customs, where similar parts were classified under the same heading. The Tribunal found that the Synchroniser Cones were part of the transmission system of Motor Vehicles and not internal parts of an engine or clutch parts. Thus, the classification under Heading 87.04/06(1) was upheld.

3. Validity of the Show Cause Notice Regarding Customs Valuation Rules:

The appellants contended that the show cause notice did not mention the Customs Valuation Rules, which should invalidate the notice. The Tribunal rejected this argument, stating that the show cause notice contained all relevant facts and evidence, making the appellants aware of the position. The Tribunal cited case law indicating that technical arguments regarding the form of the notice are insufficient if the content makes the recipient aware of the issues.

Conclusion:

The appeal was dismissed, with the Tribunal upholding the valuation and classification determined by the authorities. The valuation at $3.69 CIF per piece, including the commission, was deemed correct, and the classification under Heading 87.04/06(1) as parts of Motor Vehicles was affirmed. The show cause notice was found valid despite the non-mention of the Customs Valuation Rules.