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TMI Blog1996 (8) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... l. No. Appellants No. Of machi- nes Value Declared (Rs.) Dept s Value (Rs.) Difference in Value (Rs.) Duty Dif- ference (Rs.) 2. MEENAKSHI SUNDARAM TEXTILES S8/327/94 SIB 118/94 B/E 30416/ 217/94 Appeal No. C/322/94 3 38,34,535 61,28,622 22,94,087 8,60,283 3. KUHARA- VEL TEX- TILES S8/328/94 SIB 120/94 Appeal No. C/323/94 1 12,78,352 20,42,970 7,64,618 2,86,770 Redemption Fine Imposed (Rs.) Penalty Imposed (Rs.) Remarks 1. 3 Lakhs 30,000 2. 2,29,000/- 20,000 3. 75,000/- 7,500 The learned lower authority has not accepted the price of the goods as shown in the invoices for the goods and as declared by the appellants in the Bills of Entry and has proceeded to fix the value as per Section 14 of Customs Act, 1962 under Rule 8 of the Valuation Rules. The second hand items of machinery have been imported from South Korea and the learned lower authority has reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineer s certificate were arranged by the suppliers and sent to us. All the 8 machines were Model Type GKW with 50 drums each the 1 machine B.E. No. 30450, dated 21-7-1994 is erroneously indicated as Type GKV instead of GKV. I am given to understand that for the purpose of assessing at the assessable value, the Deptt. will take into account the F.O.B . price of DM 3,30,000 per machine in the year of manufacture to give depreciation as per Departmental Rules and add freight, insurance and loading charges . This being the Department method of valuation and time being short, having any other evidence such as original invoice issued by M/s. Schloforst at the time of sale to the Korean company I have no objection for fixing the assessable value of individual machines at 20,42,874 for the 7 machines and 20,42,570 for one machine.". The invoice for the goods was raised by M/s. EST Fibres Inc. Rotterdam, Netherlands. A Chartered Engineer s Certificate has also been produced by the suppliers. In the absence of production of the original invoice of the manufacturers when they sold the goods to South Korean buyers to justify the price declared, the same has been enhanced as above by the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the goods are sold at the prices which the goods can fetch for export to countries like India. He has pleaded that the learned lower authority has not cited any case of similar machines having been imported into India at a higher price which is acceptable under Section 14. He has pleaded that in regard to the value under Section 14 under the Customs Act following in agreement at the international level based on GATT Code necessary amendment was carried out in Customs Act, instructions were issued by the Ministry for implementation of the same for valuation purposes Para 6 of such instructions as contained in the A.P. DO No. 77/88 following is set out : Once the importer has produced all required information it is necessary for the customs administration to decide on the method of valuation to be adopted and to determine the value. Declared value cannot be rejected without due consideration. The value also cannot be loaded solely because it is lower than the previously accepted customs values. It is here the data base built up by the Customs will be of help in identifying possible cases of deliberate or fraudulent undervaluation. In this regard attention is invited to Rule 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the existing instructions could be applied in such cases. However, before applying this method, all other methods under Rules 4 to 7 will have to be ruled out. He has pleaded that under Rule 8 the prohibited methods as set out below cannot be applied : (2) No value shall be deterrnined under the provisions of these rules on the basis of - (i) the selling price in India of the goods produced in India; (ii) a system which provides for the acceptance for customs purposes of the highest of the two alternative values; (iii) the price of the goods on the domestic market of the country of exportation; (iv) the price of the goods for the export to a country other than India; (v) minimum customs values; or (vi) arbitrary or fictitious values." His plea is that the element of depreciation available in India cannot be applied as this relates to factors which prevail in India. He pleaded that no investigation as it was done with the buying agent to verify the bonafides of the transaction. He pleaded that the learned lower authority has fixed the price based on the information received by the Department from the manufacturers of the machines who have indicated the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or the price has to be fixed under Rule 8 of the Valuation Rules based on the price as per the quotation obtained by the Department from the manufacturers of the machinery after allowing depreciation of 70%. For proper appreciation of the issue it is therefore necessary to reproduce Section 14 of the Customs Act and Rule 8 of the Valuation Rules. Section 14 of Customs Act read as under : ₹ 14. Valuation of goods for purposes of assessment. (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force where under a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be - [*] 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 such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions as entered by the appellants with the foreign supplier. It is seen from the pleas made and the evidence submitted before the learned lower authority and which has been filed before us, that the appellants had entered into the transactions through the buying agents M/s. J.R. Industries and the correspondence between the appellants and the J.R. Industries has been brought on record. It is seen that negotiations for transactions started as per the Telex copy enclosed dated 17-3-1994 during the visit of Shri Chockalingam, Managing Director of the appellants during his visit to Europe with M/s. J.R. Mehta/J.R. Industries, buying agents and by this Telex the Managing Director was informed about the availability of the machines and the price quoted was US $ 50,000 per machine which on negotiations was agreed to for supply at US $ 40,000 per machine and the appellants were asked to take quick decision in the matter. The price so offered was confirmed by further telex, dated 22-3-1994 and the appellants were informed that the suppliers were not prepared to come down below US $ 40,000 per piece and this price was negotiated as final price and 5% discount sought for by appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies with the agents through whom the transaction had been arranged to as certain the fact as to the under-valuation. This would also have been necessary to find out the extent of under-valuation and also the modus-operandi adopted in this regard. The authorities however for the reasons best known to them have refrained from doing so. There is nothing on record to show nor there is any finding by the learned lower authority that the appellants had adopted any fraudulent means or the transaction as entered into by the appellants through the agent was only a facade to cover up the real facts regarding under-valuation. We observe that in terms of Rule 4 of the Valuation Rules under which and in the light of the instructions issued by the Department as above, before any invoice value is rejected a basis has to be laid as to why this transaction value is not acceptable. As seen from the instructions above even where there are imports at higher price earlier the transaction value for that reason alone cannot be rejected. What has to be shown therefore by the authorities is that the transaction value as reflected was manipulated one and that there were circumstances indicating that the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tta in the case of Sandip Agarwal v. Collector of Customs reported in 1992 (62) E.L.T. 528 in the context of valuation of the goods under amended provisions of Section 14 in the context of charge of under-valuation and whether the invoice value declared should be accepted in terms of Rule 4 of the Valuation Rules and Section 14 of the Customs Act as providing the basis for arriving at the assessable value has analysed the position and held as under in paras 32 and 33 : 32. Section 14 of the Act has to be read along with Rule 4 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to as the said Rules). Under the said Rules, only in case it is not possible to arrive at the transaction value, then other method provided by the said Rules has to be followed. In this connection Rules 2 (f), 3 and 4 of the said Rules are set out hereunder : 2. Definitions. - (1) In these rules, unless the context otherwise requires, - (f) transaction value means the value determined in accordance with Rule 4 of these rules. 3. Determination of the method of valuation. - For the purpose of these rules, (i) the value of imported goods shall be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e buyer are not related ; (c) substitute values shall not be established under the provisions of clause (b) of this sub-rule." 33. The normal principle for arriving at a price is to ascertain the transaction value in terms of the provisions of Section 14 (1) of the Customs Act, 1962. The said Valuation Rules provide for the method of valuation. The value of the imported goods shall be the transaction value. The said Rules, inter alia, lay down that if it is not possible to arrive at a transaction value then the other rules of the said Valuation Rules which are framed thereunder are to be followed sequentially. Rule 4 of the said Valuation Rules, 1988 deals with transaction value. The transaction value means the value determined in accordance with the provisions of Rule 4 of the said Rules. According to Rule 4, the transaction value of the imported goods shall be the price actually paid or payable for the goods when sold and it also provides that the transaction value shall be accepted. Therefore if the transaction value is available i.e. the price actually paid or payable is available, then assessable value shall be determined by accepting the price actually paid or payable unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are issued before the new valuation provisions came into force in 1987 and the subsequent instructions of the Ministry under which clear directions has been given that the transaction value and the invoice value should normally form a basis of the assessable value and which value should not be discarded without laying a basis for the same. Even when there are earlier imports at higher value unless for valid reasons the price of the goods cannot be taken to have satisfied the criterion laid down for transaction value under Rule 4 resort cannot be had for valuation under other valuation rules. The authorities should have therefore resorted to the latter instructions of the Ministry and the Board which conform with the judgment of the Hon ble High Court of Calcutta cited supra. Just because the machinery imported is second hand does not by itself rule out that the invoice value cannot be considered as transaction value. It is possible that the authorities might not have date of imported price of similar machines contemporaneously imported and also that No. 2 sets of second hand machineries may not be similar in all respects and therefore there may not be any comparable value. But hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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