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TMI Blog1998 (6) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... s actual users, valid for the import of brewery hops. 3. On receipt of intelligence, investigations were opened for undervaluation. 4. Scrutiny of the documents contained in the file revealed the following :- (i) The agents of the German suppliers informed the importers in their letter dated 1-2-1990 that they sent their proforma Invoice No. 0432/90/L-76 of date to the importers for the purpose of applying to the Licensing Authority for grant of import of licence valid for import of Brewery Hops. In the said proforma invoice, the agents quoted the price of the product Lupofresh Aromatic Ferle Hops of 1989-90 Crop with 5.5% - 6% Alpha Acid content at DM 13,300 per M.T. CIF any Indian Port. It was further stated in the proforma invoice that this product was offered to them on behalf of their principals M/s. Lupofresh A E, Germany. (ii) As per the importer s letter dated 22-2-1990 addressed to the agents, they forwarded their application to DGTD along with the said proforma invoice for grant of import licence. (iii) In their letter dated 29-3-1990 addressed to the importers, the agents informed them that DGTD recommended grant of import licence being 50% brewery hops and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e importers that the licence be re-submitted along with REP licence of the equivalent amount so that the import licence was converted from Rupee Payment Area to General Currency Area. (ix) It was evident from the correspondence that licensing authorities made suitable amendments in both import licences viz., P/D/2280323, dated 30-4-1990 and P/D/2020305, dated 13-11-1990 valid for import of goods from general currency area. 5. It was alleged that from these documents, it was clear that the importers made an application for grant of import licence for the import of brewery hops with 5.5 - 6% Alpha content. While filing their application, they enclosed their proforma invoice issued in their favour by the agents who offered Lupofresh Brewery Hops with 5-6% alpha content. It was alleged that on the strength of the import application duly supported with the proforma invoices given by the sole selling agents Licencing authorities granted import licenses to the importers which were valid for the import of brewery hops i.e. hops with 5.5 - 6% alpha content. The CIF value of the licence i.e. the face value of the licence was arrived at on the basis of the proforma invoice issued by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents were as under :- Sl. No. Invoice No. Date Qnty. Price (CIF) Importers 1. 16142 4-2-1991 4000 Kgs. DM 69.7/Kg. M/s Trio Imports Exports Co. Ltd., Madras (Through Hiaps Shang Co., Singapore) 2. 16065 22-12-1990 2500 Kgs. -do- -do- 3. 16063 22-12-1990 1000 Kgs. -do- -do- (Through Shameema Trading Singapore) 4. 16064 22-12-1990 1500 Kgs., -do- -do- 5. 16141 4-2-1991 3000 Kgs. -do- -do- 6. 15913 10-9-1990 10000 Kgs. DM 36.70/Kg M/s. Integrated Exports, Madras (Through M/s. A.M. Abdullah Sahib Trading Co., Singapore). 7. 15939 29-10-1990 -do- DM 39/Kg Bombay Export International, Delhi. 8. 15740 19-3-1990 500 Kgs. DM 56/25/Kgs Himalayan Breweries, Kathmandu. 9. 16337 21-6-1991 510 Kgs. DM 83/Kg. -do- 10. 16266 11-4-1991 200 Kgs. DM 95.60/Kg -do- 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price was found to be low when compared with the prices of identical/similar goods sold by the very same suppliers to the various importers in India through their agents. Hence the revenue by show cause notice adopted the rate of DM 68.70 per Kg. being the rate of similar goods charged by the suppliers viz. Lupofresh A E, West Germany for export into India; with usual clauses calling upon them to explain why confiscation, penalty, etc. should be levied and imposed. As per this rate, a total duty demand of Rs. 18,22,703/- was raised and called upon to explain as to why this amount paid under protest at the time of provisional assessment should not be regularised and differential duty of Rs. 11,49,382/- should not be demanded under Section 28 of the Customs Act. 11. In their reply dated 1-6-1992, the importers explained that the licence issued for brewery hops was valid for importation of brewery hops in any form including extracts. They denied that there was any undervaluation of the goods and that prices of brewery hop which was an agricultural product vary widely depending upon the demand and supply position, quality, source of origin, etc. As the price vary widely the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been noted by the Commissioner that the goods under import are HOP Extract - 30% alpha belonging to Crop 90 had supplied in August, 1991 for which negotiations for the purchase had been started in July 1991. Documents show that the supply of 90 Crop (Hop Extract) has been started as early as in December, 1990. The letter dated 6-7-1991 of M/s. Pyarelal Sarin reveals that both M/s. Mysore Breweries Ltd. and Lupofresh had agreed and finalised the value of DM 71000 for the supply of 2600 Kgs. (DM 27.30 per Kg.) on a special understanding. The proforma invoice dated 6-7-1991 of the Indian Agents indicated that their understanding was to import 2600 Kgs. of Hop Extract within the overall value of 8,60,000 in the import licence owned by the importers. Subsequently on 30-7-1991 it has been decided to supply 2700 Kgs. of Hop Extract at the value of DM 57,500 within the overall value of Rs. 8,60,000/- in the import licence and accordingly a revised proforma invoice dated 30-7-1991 had been issued for value of DM 57,000. The Commissioner has noted that from the Agent s letter dated 13-7-1991 the sale of 1990 crop of Lupofresh products had come to an end around July/August; and the supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36 10. 8-4-1992 Mysore Breweries Ltd. 35.00 11. 8-4-1992 Sica Breweries Ltd. 36.50 12. 8-4-1992 Hindustan Breweries 36.00 14. Ld. Commissioner has noted that considering the various direct imports made from Lupofresh, he was of the opinion that price for such goods was in the range DM 36 in the relevant period and accordingly he fixed the value for the consignment as DM 97200 at the rate of DM 36 per Kg. CIF under Rule 8 of Valuation Rules, 1988. According to him, the value DM 36 per Kg. CIF was consistent with the principles and general provisions of Section 14(1) of Customs Act, 1962 and Valuation Rules, 1988. Ld. Commissioner did not find the licence to cover the full value of the consignment as unauthenticated and held the goods to be confiscated under Section 111(d) of Customs Act read with Section 3(2) of Import and Export (Control) Act, 1947. He has proceeded to considered the licence aspect and held that the licence description of Brewery Hops include Hop Extract and there could be no violation in this respect. On the other hand the importers had got a licence only to the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Valuation Rules. He submits that there is a marked relief given by the Commissioner in terms of evidence on record. He pointed out that there was no reason to reject the valuation arrived at by the Commissioner as it was on the basis of the evidence on record. 17. On a careful consideration of the submissions, we notice from the letter dated 27-9-1990 addressed to the importers, the agents had informed them that the international price of Hops and Hop products had gone up by 100% and the Lupofresh Hops with 5-5% Alpha were offered at DM 25,500 per M.T. and Lupofresh Hops Extracts to 30% Alpha was offered at DM 73 per Kg. Again by further letter dated 28-9-1990 the agents informed the importers that the price of hops were likely to go up on account of general shortage of hops and at that time Lupofresh hops with 6-6% Alpha were offered at DM 25,200 per M.T. CIF any Indian Port. They were further informed by their letter dated 16-10-1990 by the agents that price of hops in the international market had gone up and proforma invoice sent by them was nowhere near the present market price and the price of Lupofresh Hops 5-6% Alpha was likely to go up and cross the level of DM 33 per K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same has been brought down to DM 36 in terms of evidence on record. It is also interesting to note that statements of Managing Director and other Directors were recorded, who had admitted that to meet their requirement, they had indulged in local purchase of Lupofresh Hop extract with 30% Alpha from M/s. Bombay Export International and M/s. CIL (India) (P) Ltd. through the agents, that even though such supplies were received from them, payments were made to the agents, that they had purchased at Rs. 3850 per Kg.; that either himself or his CAO Shri Ravanan used to attend to negotiation for purchasing; and he admitted that the present import of Extract was similar to the one which they had been using; that they always used to take into account while ordering Hop Extract, its Alpha acid content; that they had furnished the agents Proforma invoice for Lupofresh Hops with 5.5. to 6% alpha acid for getting import licences; that the extract or receipt were tested by their Brew Master to ensure that the consignment received quantities was as per specification; that the Hop Extract ordered for and received were one and the same even though they had been described as Lupofresh Hop Extrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they had been acting as agents for Lupofresh under an Agency Agreement, that apart from brewery, certain traders like K. Uttam Lal Exports Ltd., Bombay, Usha Trading Company, Bombay, Bombay Export International, New Delhi purchased the products through them, that as per the Agency Agreement, they were entitled to a commission of 5% on CIF value at which the goods sold from Germany, that based on their proforma invoice dated 1-2-1991 relating to offer of Lupofresh brewery hops of 1989-90 with 5.5 to 6% alpha acid, the importers had applied for grant of import licence, that on 7-8-1990 the agents had sent a letter to the importers regarding obtaining of licence, that on receiving import application from the importers sent along with the importers s letter dated 31-8-1990, they had replaced the invoice by another proforma invoice while submitting the application, that on getting the licence, the importers had approached them for importing Hop Extracts, that the question of importing maximum quantity of hop extract within the above mentioned licence value was examined, that the principals agreed to supply 2600 Kgs. of Lupofresh Hop Extract with 30% Alpha within the total value of ..... 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