9911796707
TMI Blog2008 (6) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... f, are as follows :- (a) The appellant imported concentrates of alcoholic beverages (herein after referred to as CAB) from M/s. Joseph Seagram and Sons Ltd., Scotland which is wholly owned subsidiary of Seagram Company Ltd., Canada. The strength of CAB imported was about 60%. The appellant is admittedly a related person to the supplier and the same fact was declared to the Customs authorities. The assessment was made provisional. (b) The appellant imported CAB in four varieties one each meant for bottling of the four specific brands of whiskies namely; 100 Pipers , Passport , Something Special and International Malt . (c) The appellant was importing the CAB in wooden barrels; they were declaring the wooden barrels and their value separately for assessment. (d) The appellant diluted the imported CAB by addition of demineralized water and reduced the strength to 42.8%; packed them in bottles meant for customers under the respective brands; paid State excise duty; sold to their dealers for ultimate sales to the customers. (e) In 1999, the Officers of Directorate of Revenue Intelligence (DRI) commenced investigation which resulted in issue of two show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-2003 [2004 (163) E.L.T. A205 (S.C.)]. 3.3 Second Order of the Commissioner and second Remand order of the Tribunal In pursuance of the order of the Tribunal dated 25-3-2003, [2003 (154) E.L.T. 610 (T)] the Commissioner passed order dated 29-8-2003; he held that Rule 6 is applicable and confirmed the demand of duty amounting to Rs. 39.96 crores. Against this order, the party filed appeal to the Tribunal. In the appeal before the Tribunal, the appellant canvassed that Rule 6 was not applicable; alternatively, it was submitted that even if application of Rule 6 was upheld, there were serious flaws in the manner of applying Rule 6. Tribunal vide its second order dated 29-6-2005 [2006 (197) E.L.T. 351 (T)] again remanded the matter with certain directions (scope of the remand order is also in dispute before us.) 3.4 Third Order of the Commissioner Commissioner in pursuance of the Tribunal s order dated 29-6-2005 [2006 (197) E.L.T. 351 (T)] has passed the impugned order dated 20-6-2006 confirming a total differential duty of Rs. 40.37 crores. He has adopted valuation under Rule 6; while doing so, he has compared 100 Pipers with Findlaters as directed by the Tribunal. In resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first remand order. The issue of applicability of Rule 6 was also not decided by the Tribunal in the second remand order, the third order of the original authority passed in pursuance of such remand order being against the interest of the assessee, they are entitled to raise the issue relating to applicability of Rule 6 before the Tribunal in the present proceedings. (h) Application of Rule 6 involves first and foremost identification of similar goods. Such identification is a pre-requisite for applying the Rule 6. Rule 2(1)(e) gives the definition of similar goods . The definition has two major components. Similar goods need not be alike in all respects; but the relevant factors like quality, reputation, existence of trade mark are required to be taken into account while choosing the similar goods. For consumer goods like perfumes or alcoholic beverages, the quality, reputation and trade mark are major influencing factors. Similarity of goods should be determined with reference to two or more imported goods and not with reference to the final products manufactured out of the imported goods. Even the brands owned by their own company namely, 100 Pipers, Passport, Something S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstrated evidence. Valid price list of the supplier indicating the discount is only an illustrative document for grant of such adjustment. The appellant has demonstrated by providing the actual quantum of import by the appellant as well as the competitors, year wise and hence they are entitled to adjustment in view of their high volume of imports. If adjustments are not made available, the application of Rule 6 is ruled out. (l) While comparing the value of similar goods, it is mandatory that the Department should gather details of all contemporaneous imports and adopt the lowest of the available transaction value as Rule 6 price. The Department has not gathered all details and made available the same to the appellant as could be seen by very high overall volume of import of whisky into the country. (m) While comparing the value of different brands based on retail prices, the Department has chosen to rely on the retail prices applicable to Delhi on the ground that the goods were imported through Delhi. The retail prices of various brands in different States depend upon the State level taxes. The department should have conducted such studies extensively and should have gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The second remand order dated 29-6-2005 [2006 (197) E.L.T. 351 (T)] took note of the fact that Commissioner had applied Rule 6. The findings of the Tribunal in paras 7, 13, 16 and 20 of the order, read together would show that the Tribunal had agreed with the decision of the Commissioner fixing the prices under Rule 6. The finding that it was not going into the submissions made by the appellant against valuation under Rule 6 should not be treated as not giving decision on applicability of Rule 6. Therefore, the second remand order which was not appealed against must be treated as final and the appellant can not be allowed to agitate the applicability of Rule 6. (e) If the appellant are held entitled to agitate the applicability of Rule 6, it was submitted that in considering the similarity of imported goods, it is to be kept in mind that unlike identical goods which are required to be same in all respects , the similar goods need not be alike in all respects. (f) The decision of the Commissioner that the imported goods and the goods of the competitor are similar goods are well founded; both are imported goods; both are scotch whiskies; both originated from the same count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a year and it can not be said with certainty that for the next year also license will be issued. Under the circumstances, the appellant s attempt to club the imports over the years and to claim that they had imported substantially higher quantities when compared to their competitors brands and, therefore, they are entitled to substantial adjustment in value to arrive at assessable value in terms of Rule 6, is not correct. (k) If the applicant wanted Rule 7 to be applied, it should have produced evidence that the goods imported by them and the competitors brands are not similar. (l) In pursuance of Tribunal s order entire data of imports on the comparable goods had been given to the appellant and they were given opportunity to offer comments. 6. At the outset, we would like to place on records our appreciation on advocates on both sides for ably assisting us by taking us through the different stages of the case and the voluminous records to enable appreciation of the facts of the case, and making elaborate submissions on various legal issues involved in this case. 7. We may, before considering the issues, extract the relevant portions of the order of the Delhi High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Elphinstone Spinning and Wvg. Mills Co. Ltd. relied on by the Revenue we do not find any ratio laid down therein which would go against the above view. In the above case the Supreme Court took the view that if the Assistant Collector of Central Excise had power to issue notice either under Rule 10A or Rule 9(2) the fact that the notice refers specifically to a particular rule, which may not be applicable, will not make the notice invalid on that ground. In coming to the above conclusion the Apex Court placed reliance on its own earlier decision in J.K. Steel Ltd. v. Union of India - 1978 (2) E.L.T. (J355) (S.C.) = AIR 1970 S.C. 1173. There it was held that if the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under different power does not vitiate the exercise of the power in question. 15. Since in the present case adjudicating authority took the view that the value can be arrived at under Rule 6, it is not necessary to go to Rule 7 or 8 as was proposed in the show cause notice. An opportunity should have been given to the appellant to put forward its case against the proposal to proceed under Rule 6. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order that Something Special imported during 1995-96 i.e., before September 1996 was of the same quality of Something Special imported after September 1996. It is the case of the appellant that Something Special was imported during the relevant period without any claim that it was 12 years old and that the age certificate would show that Something Special concentrates were only 4 years old and not 12 years. The contention of the appellant that this fact was confirmed during the investigation by H.M. Customs and Excise U.K. does not seem to be correct. The documents relied on by the appellant in support of the above contention only go to show that Something Special was priced at the same rate of Passport and 100 Pipers before September 1966. No where it is mentioned or certified that Something Special imported before September 1996 was not 12 years old but only 4 years old. The letter dated 3-6-93 addressed to the exporter would also clearly show that the importer has treated both blend and age of the product as relevant considerations. The allegation that during the relevant period Something Special concentrate was bottled by the appellant as deluxe whisky and was being sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has not been disclosed by the Department. Such allegation has not been made by M/s. Seagram. It has also been alleged that the DRI ignored comparable product of whiskey marketed by others in India. It is not the case of the department that there were comparable products of whiskey marketed by companies other than M/s. U.D. If it is the case of M/s. Seagram that there were indeed comparable brands of whiskeys marketed by companies other than M/s. U.D., it was for them to make specific submission in this regard, which they have not done. It would, therefore, stand to logic to infer that no other company, besides M/s. U.D, imported similar or comparable whiskey during the material period of the two show cause notices. Surely, the department cannot be asked to discharge the onus which is un-realistic and non est. I have, therefore, no hesitation in holding that the above request made by M/s. Seagram is infructuous and irrelevant in the subject case . However, during the hearing, learned Counsel for the Revenue has sought to justify the exclusion of Findlaters on other grounds also, like, according to the appellants themselves, the competition was with VAT 69 and the imports of Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a different commercial level or in different quantities or both, adjusted to take account of the difference attributable to commercial level or to the quantity or both, shall be used, provided that such adjustments shall be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustments, whether such adjustment leads to an increase or decrease in the value. This sub-rule is equally applicable to determination of value under Rule 6 as made clear by sub-rule (2) of Rule 6. The quantity differences are large in the case of certain varieties. The appellant s claim for deduction based on quantity is required to be considered. The rule makes it clear that this is required to be done based on evidence relating to actual commercial practice in relation to quantity discount on the item under import. 19. The appellant also has a grievance that due adjustments have not been allowed in import prices taking into account the differences in the retail prices of the similar goods and assessed goods. In the present case, similar goods have been identified based on comparable retail prices. It is further clear from para 418 of the adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-3-2003 considered the arguments of both sides about the applicability of Rule 4(3)(b) of the Valuation Rules and rejected the contention of the appellant. It was also held, the appellant cannot be herd to contend that it was able to prove that the relationship has not influenced the price . The claim that in spite of relationship the value declared by them was acceptable in terms of Rule 4(3)(b) of the Customs Valuation Rules, 1988 thus already stands rejected by the Tribunal. Therefore this issue is not to be considered again by the Tribunal in the present proceedings. 8.4 The submission at this stage that the determination of value under Rule 6 in the first order of the Commissioner is beyond the show cause notice as the show cause notice explicitly rejected the application of Rule 6, does not deserve any consideration as the said submission did not find favour in the earlier orders of the Tribunal. In fact, the Tribunal, in spite of submissions of the appellant to the contrary, directed the Commissioner to consider the applicability of Rule 6 by its first remand order. 8.5 The contention that the Commissioner has not issued fresh show cause notice in pursuance of first re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence which clearly establishes the reasonableness and accuracy of the adjustments, whether such adjustment leads to an increase or decrease in the value. (2) Where the costs and charges referred to in sub-rule (2) of Rule 9 of these rules are included in the transaction value of identical goods, an adjustment shall be made, if there are significant differences in such costs and charges between the goods being valued and the identical goods in question arising from differences in distances and means of transport. (3) In applying this rule, if more than one transaction value of identical goods is found; the lowest such value shall be used to determine the value of imported goods. Rule 6. Transaction value of similar goods. - (1) Subject to the provisions of Rule 3 of these rules, the value of imported goods shall be transaction value of similar goods sold for export to Indian and imported at or about the same time as the goods being valued. (2) The provisions of clauses (b) and (c) of sub-rule (1), sub-rule (2) and sub-rule (3), of Rule 5 of these rules shall, mutatis mutandis, also apply in respect of similar goods. Rule 7. Deductive Value. - (1) Subject to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of Rule 6 has to be determined only by comparing two or more imported goods is definitely valid. In the present case, on a close scrutiny it is seen that what is being treated as similar goods are different categories of CABs imported by the appellant with goods imported by their competitors and for identifying similar goods, certain parameters have been adopted. What the law requires is to adopt parameters which are feasible and practicable to determine similarity of goods. The Commissioner has made comparison basically between concentrates imported by the appellant with concentrates imported by their competitors. The Commissioner has held that the imported goods and the goods of the competitor are similar goods adopting the following parameters; that both are imported goods; both are scotch whiskies; both originate from the same country; both have like characteristics and like components; that the imported goods are for manufacture of branded whiskey so also the goods sought to be compared with; that they are commercially interchangeable; both have popular trade mark/brand name. We agree that the goods imported and the goods with which they were compared are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or making the scotch etc. and ingredients used and details of blending formulae are expected to be made - as painstakingly argued by the Advocate. It is not only impossible but it is also not necessary. The observation in the Commentaries and the view expressed by Sh. Saul L. Sherwan that similarity is likely to be found mainly with highly standardized goods is not legally binding and may not have relevance in the present case. Such an approach would make the provisions Rule 5 unworkable. The submissions on behalf of the appellant in this regard therefore can not be accepted. 10.4 In these circumstances, the decision of the Commissioner holding the CAB meant for the four brands as similar to the CAB of contemporaneous imports for comparable brands deserves to be upheld. 10.5 It was submitted that value can not be determined under Rule 8 on the basis of the selling price in India of the goods produced in India and, therefore, what cannot be adopted under Rule 8 cannot be adopted for the purpose of Rule 6. Theoretically the submission may be correct. However, it is to be noted that, in the present case, the retail price of the final product in India has not been taken as the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to show that such a discount was given. Such adjustment cannot be made as the transaction is between related parties. We are unable to agree with the above view of the Department. The finding of the Tribunal vide order dated 29-6-2005, [2006 (197) E.L.T. 351 (T)] on this issue, was as follows : The quantity differences are large in the case of certain varieties. The appellant s claim for deduction based on quantity is required to be considered. The rule makes it clear that this is required to be done based on evidence relating to actual commercial practice in relation to quantity discount on the item under import. Even when the transactions are between non-related parties, if large imports are made over a long period grant of a discount is a normal commercial practice, this can not be ignored in respect of transaction between related parties as in such a case, goods imported by a related person shall be assessed at a value higher that of price at which a non-related person imports. Therefore, we hold that in view of imports in higher quantities compared to the competitors, adjustment is warranted. This adjustment may not be treated on par with discount, as we are dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are higher than those adopted by the Commissioner in his second order dated 28-9-2003 is not sustainable. The submissions of the learned Advocate in this regard merits acceptance. 12. We uphold the decision of the Commissioner in determining value under Rule 6. We hold that they are eligible for adjustments from the value of the similar goods as they have imported substantially higher volume. We also hold that they are eligible for adjustments from the value of the similar goods where their retail prices of bottled whisky are substantially lower than those of the comparable brands. It is clarified that once the assessable value was determined for any brand by following the above method, the assessable value shall not be enhanced till a higher import price of the similar goods was noticed. 13.1 As already decided adjustment requires to be given considering high volume of imports. This adjustment need not be treated on par with discount, as we are dealing with transactions between related persons. In this case, we are dealing with transaction on wholesale basis. The appellant has produced details on their volume of imports in support of the adjustment claimed from the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
