1999 (10) TMI 471 - AT - Customs

Summary

Issues Involved:
1. Import Valuation and Alleged Under-Valuation
2. Relevance of Manufacturer's Price
3. Amendment of Letter of Credit
4. Quantity Discount and Bulk Imports
5. Validity of Confiscation and Redemption Fine
6. Application of Unjust Enrichment Principle

Detailed Analysis:

1. Import Valuation and Alleged Under-Valuation:
The core issue revolves around the alleged under-valuation of Borax Penta Hydrate Neobor imported by the appellants. The Department contended that the declared transaction value was lower than the manufacturer's price, suggesting an under-valuation. The appellants argued that the transaction value was correct and supported by the invoices and Letter of Credit.

2. Relevance of Manufacturer's Price:
The Department argued that the manufacturer's price should be considered for valuation, which was $275 per MT FOB Los Angeles, USA. This price was evidenced by invoices raised on Samaha Trading Corporation, London. The Department insisted on adding freight and insurance costs ($57.48) to this price, making the correct value $332.48 CIF Madras. The appellants countered that no contemporaneous imports at this value were shown by the Department, and the transaction value declared should be accepted.

3. Amendment of Letter of Credit:
The Letter of Credit initially issued by M/s. Borax India Ltd. was amended after the shipment. The Department questioned the genuineness of this amendment. However, the appellants cited case law to argue that the Letter of Credit is independent of the civil contract and that such amendments do not affect the transaction value.

4. Quantity Discount and Bulk Imports:
The appellants negotiated a bulk import deal, increasing the quantity from 2000 MTs to 5000 MTs, which led to a price reduction. The Department contested the validity of this discount, arguing that it was not a single importer's consignment. The appellants cited several judgments, including the Apex Court's decision in Mirah Exports Pvt. Ltd. v. CC, to support the legality of quantity discounts in bulk imports.

5. Validity of Confiscation and Redemption Fine:
The Department imposed redemption fines on the appellants despite the goods not being available for confiscation. The appellants argued that such fines were wrongly levied, especially since the goods were cleared out of Customs charge. They further contended that confiscation under Section 111 of the Customs Act does not apply to finished products made from imported goods.

6. Application of Unjust Enrichment Principle:
The appellants paid all differential duties, penalties, and fines under protest and sought relief from unjust enrichment, arguing that the goods were used for captive consumption, not for trading. The Tribunal referenced case law to support the appellants' position that captively consumed goods are not subject to unjust enrichment principles.

Conclusion:
The Tribunal concluded that the Department failed to establish the alleged under-valuation. The declared transaction value was accepted as correct, considering the lack of evidence of contemporaneous imports at a higher value and the legality of quantity discounts. Consequently, the Tribunal set aside the impugned orders, allowing the appeals with consequential relief, and ruled out penalties and fines due to the absence of under-valuation.