1999 (10) TMI 321 - AT - Customs

Summary

Issues Involved:
1. Inclusion of discount in the assessable value of imported goods.
2. Alleged undervaluation and import in excess of the license.
3. Confiscation of goods and imposition of fine.
4. Validity of extended period for demand of duty.
5. Alleged misdeclaration of value and special relationship affecting the transaction value.

Detailed Analysis:

1. Inclusion of Discount in Assessable Value:
The primary issue was whether the 28% discount given to the appellants by the exporter, M/s. Tandem, should be included in the assessable value of the imported goods. The Collector had disallowed this discount, terming it as a "special discount" based on a special relationship and not a normal discount in the ordinary course of business. The appellants argued that the discount was a result of genuine negotiation and not influenced by any extra-commercial considerations. They cited the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, which stipulate that the transaction value should be the price actually paid or payable for the goods. The Tribunal found no evidence that the appellants and Tandem were related persons as defined under the valuation rules and noted that similar discounts were offered to other customers, such as a 25% discount to M/s. C.M.C. and up to 50% by IBM in certain cases. Consequently, the Tribunal allowed the 28% discount.

2. Alleged Undervaluation and Import in Excess of License:
The appellants were accused of undervaluing the goods and importing in excess of their license. The Collector had confirmed the demand for additional duty and confiscated the goods with an option to redeem them on payment of a fine, based on the alleged special relationship and the resultant special discount. The appellants contended that the declared value was the genuine transaction value, and there was no evidence of any extra commercial consideration or special relationship affecting the price. The Tribunal agreed with the appellants, finding no evidence of undervaluation or import in excess of the license.

3. Confiscation of Goods and Imposition of Fine:
The Collector had confiscated the goods under Sections 111(m) and 111(d) of the Customs Act, citing misdeclaration of value and import in excess of the license. However, no penalty was imposed, as the Collector accepted the appellants' bona fide belief in their entitlement to the discount. The appellants argued that the confiscation was unwarranted, as the declared value was correct and there was sufficient balance in the license to cover the enhanced value. The Tribunal found that the confiscation under Section 111(m) was not sustainable, as there was no misdeclaration of value, and the Collector had virtually conceded the appellants' bona fides.

4. Validity of Extended Period for Demand of Duty:
The appellants challenged the extended period for the demand of duty, arguing that the first show cause notice was issued beyond the six-month period without invoking the proviso to Section 28 of the Customs Act. They cited several decisions to support their contention that suppression could not be accepted if the adjudicator did not impose a penalty. The Tribunal did not consider the issue of the extended period of limitation, as the appeal was allowed on merits.

5. Alleged Misdeclaration of Value and Special Relationship Affecting the Transaction Value:
The Department alleged that the appellants had a special relationship with the supplier, which influenced the price and led to a special discount. The appellants countered that there was no evidence of such a relationship affecting the transaction value and that the price was genuinely negotiated. The Tribunal observed that the Department had not provided any evidence to prove the applicability of the restrictions under sub-rule (2) of Rule 4 of the Customs Valuation Rules. The Tribunal concluded that the relationship was based on past business dealings and did not influence the price, thus allowing the discount and setting aside the impugned order.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and concluded that the 28% discount was admissible as it was a result of genuine negotiation and not influenced by any special relationship. The confiscation of goods and the demand for additional duty were not justified, and the issue of the extended period for the demand of duty was not considered due to the appeal being allowed on merits.