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TMI Blog2004 (8) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... f 3 Com USA brand. Based on the above purchase order of VSNL, orders were placed by MVCPL on M/s. 3 Com Asia Pacific, USA (hereinafter referred to as 3 Com USA). The applicant company decided to procure software from 3 Com, USA and hardware from any of their distributors. Since the applicant company had been importing hardware from one M/s. Micro United Net Work Pvt. Ltd., Singapore (MUN), one of the various distributors of 3 Com USA Products, they placed orders with the said MUN for a lesser configuration so that they supplement the hardware already available with them, and supply to VSNL. Accordingly, they imported 39 nos. of total Control Hyper Hub Systems with built-in firmware supplied by 3 Com USA through MUN, Singapore at a price of US $ 3500 per piece, vide 5 BsE no. 128176, dated 10-9-1999, 130476 dated 25-9-1999, 131497 dated 1-10-1999, 132597 dated 8-10-1999 and 132598 dated 8-10-1999. The imported goods were supplied by 3 Com, USA to MUN @ US $ 15,101 per unit, although the price of the said unit as per the pricelist of 3 Com, USA was US $ 83,698 per unit, with an admissible discount of 40%. The price charged to MUN was claimed to be at a discount of 81.953%, subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with VSNL, the applicant placed the purchase order directly with 3 Com USA. The purchase orders are numbered as 61 to 65/99-2000 dated 17-5-1999. The value as per this purchase order is US $ 15,101/- for a RAS. Further during the hearing on 5-7-2004, the Counsel further clarified that the said price was actually the negotiated price of the supplier, 3 Com USA with VSNL (the ultimate customer, in India). Accordingly the Learned Advocate submitted that the Department s refusal to accept the purchase order price because of the restriction regarding the end user, and their reliance for the same on the Apex Court s judgement in the case of Padia Sales Corporation, is not correct since in this case, the price was negotiated directly between the American supplier and the ultimate customer in India viz. VSNL, a government undertaking. It was therefore, contended that the heavy discount offered cannot also be questioned and the price quoted therein should be adopted. 6.2 He also argued that since the goods have been routed through the Singapore firm, the price has been quoted by the Singapore firm as US$ 3500 to reduce the duty liability, as alleged correctly by the Department; The appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a restriction that the imported goods had to be sold to VSNL, which had substantially affected the value of the goods. He drew attention of the Bench to the judgment of Supreme Court in Padia Sales Corporation v. Collector of Customs and Commerce International v. Collector of Customs and in support of his contention. However, he also admitted that this case law does not object to the grant of heavy discounts. He also conceded that the decision in the case of Padia Sales Corporation related to Valuation Rules as they stood prior to the period of imports under dispute. On a query by the Bench that if the sales had been effected directly to VSNL by 3COM, USA, would the Department have made out a case of undervaluation then also, the representative of the Revenue replied that the Rule position at that point of time would have made it impossible, and that this Rule was amended only later on in 2000. To another specific query, he conceded that Revenue does not dispute the applicant s contention that the price of US$ 15,101 per system was the negotiated price of VSNL with 3 Com, USA and, hence, the transaction value for the subject goods. However, he contented that the applicant com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be resold; or (iii) do not substantially affect the value of goods. The department s contention that the condition stipulating that the goods shall be sold only to VSNL and the large discount offered justified their retention of transaction value. 8.5 However, the Bench finds that the restriction as to the disposition or use of goods by the buyer, should be in the context of any goods imported for trading purpose in the general course of import and marketing, and not to goods imported for a specific project, by a buyer like VSNL, since such project imports prices are necessarily negotiated and finalized, and at the relevant point of time there was no restriction as to the quantum of discount that can be offered. Moreover the buyer being VSNL the instructions to MVCPL, the distributor of the supplier, cannot be considered as a restriction as to disposition and use imposed on buyer vide Rule 4(2) of Valuation Rules 1988. In addition to the above, VSNL being an undertaking of the Government of India, possibility of any under valuation and flow back of money over and above the negotiated price is not bright. In view of the facts that the buyer is an undertaking of Government of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute is not similar to the dispute of Commerce International. In the instant case there is a negotiated price with manufacturer which is not disputed by Revenue and the only contention position is the instruction from the manufacturer supplier to his Indian distributor that the goods should be sold only to VSNL and the heavy discount offered which has already been found above to be admissible. 8.8 On the other hand, in the case of Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai - 2000 (122) E.L.T. 321 (S.C.), the department rejected the actual transaction value involving the huge discount of 77% and worked out the assessable value based on the list price of the vendor, after a deduction of 30% on account of discount. The Hon ble Supreme Court over-ruled the argument of the Department that Rule 4(1) of Valuation Rules allows determination of the ordinary international value of the goods on the basis of data other than the price actually paid for the goods. Accordingly, the Hon ble Court held that if the transaction value can be determined under Rule 4(1) and does not fall under any of the excepting in Rule 4(2), there is no question of determining value under the subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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