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TMI Blog1979 (1) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... icles in any quantity they want, so as not to exceed the c.i.f. value of the licence, which in the present case, was Rs. 8,94,455/-. 3. The respondent ranks as a priority industry. It imported a raw material called "Griscofulvin" F.T. for the purpose of manufacturing anti-fungus formulations used in the treatment of skin diseases. So far as the disputed item covered by the Bill of Entry at Exh. E is concerned, two distinct valuations were disclosed by the respondent. 4. As required by Cl. 10A of the Imports (Control) Order, 1955, the Bill of Entry disclosed that the c.i.f. value on the basis of the international market price as charged by the manufacturers of England would amount to Rs. 4,44,881/-. After adding landing charges the final value in terms of rupees would be Rs. 4,47,105/-, equivalent to £ 23,307.30. They have, however, pointed out that by certain arrangements arrived at between the English Company and its associate, the respondent, less price is being charged. Instead of charging £ 25.30 per Kilogram, the Indian associate Company is charged at £ 11/- per Kilogram only. On that basis the actual c.i.f. value to the respondent was £ 11.190.50, and the rupee value come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the debit entry on this new basis has been made for the first time on 25th May, 1972. 6. The respondent challenged this order and the debit entry by filing a writ petition before the learned single Judge of this Court. It points out that there is no change in the law as regards imports all along and there is no earthly reason why the Department should have changed its stand. 7. The defence taken by the Department is that the Imports (Control) Order, 1955, has been amended in 1964 by adding Cl. (e) to the definition Cl. (2). If this definition is read along with the provisions of Section 14(1) and para 300 of the Handbook of instructions, the Customs Officers are authorised to assess the value of the goods for the purpose of levying Customs duty and of the same valuation now becomes the assessed c.i.f. value by the Customs for the purpose of debiting on the licence. The learned single Judge came to the conclusion, after going through all the relevant provisions and after considering the arguments addressed on either side, that the amended definition has not made any change in the law, nor was it ever intended to do so. It has only clarified the responsibility of the import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Trade Control Handbook of Rules and Procedure, 1971, is seen, the intention of the Government of India would be very clear. The importer, who is a manufacturer, has to indicate in the first instance the nature of the articles of the commodities which are being manufactured. A detailed data must be given of the earlier production and where the production is on the basis of imported material, figures must be supplied of the raw materials consumed and the balance thereof. The application form then requires the manufacturer to indicate in the application the estimated production in the next calendar year. When such detailed information is made available to the Union of India, they examine the real demand or the requirement of the particular industry and accordingly sanction the licence on the basis of the quantity of the imports required. Not only the applicant has to supply those details, but in a tabular form, which is a part of the application form, the particulars indicate what precisely must be stated for the information of the licensing authority. Column 4 of the tabular form requires the applicant to state the quantity (Weight/No. or other appropriate accounting unit). This me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the licence is or should be is the only disputed question. 11. The above discussion clearly brings out one fact that for granting an import licence, the manufacturer's actual needs in the industry and the country's requirement of that product are taken into account. But while granting licence it is expressed in terms of rupees, the equivalent value of which in foreign exchange could be borne by the Government of India. A balance is being struck as if between the availability of the foreign exchange and the possibility of accommodating the industry for supplying the needs of the community. It may at once be stated that for the purpose of debiting Customs' copy of the licence it has to maintain an account as to how much foreign exchange is already utilised and how much is still available under the licence. This entry is required to be made in rupees, so that the balance rupees under the licence are known for calculating them in terms of foreign exchange. 12. If this is the scheme of granting licences, it is equally logical that an entirely different valuation cannot be introduced for the purpose of debiting licence. So far as the recovery of customs duty is concerned, it appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the licence, simply because the international price is much more than Rs. 8 lakhs. If such interpretation by the Customs is permitted, wherever there are genuine sales for less price for good reasons and which less price is already accepted by the Government of India while granting the licence, the Customs authorities would be the second policy makers who would disagree with the Government of India. This is an impossible situation to be accepted. The only function of the Customs authorities is to see that goods of the proper description answering the one mentioned in the licence are imported within the value of the licence and that whatever the mutual arrangement between the suppliers and the importers in India and the issuance of licence by the Government of India, the real price has to be ascertained on the basis of the international market price and the Customs duty to be charged on such price. In other words, because of some other consideration which may weigh with Government of India for granting licence, the utilisation of the licence must be on some other basis, viz. the prevalent international market price. Thus allowing the Customs authority to substitute their decision w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re charged with a duty to assess the c.i.f. value and to debit the same to the licence. The c.i.f. value for the purpose of the licence as per the first clause of that instruction is inclusive of the commission allowed by the supplier. Now, the item of commission to be allowed to an importer is not relevant when foreign exchange payable to the exporter is to be ascertained. After deducting commission, the balance price is alone relevant for calculating the foreign exchange. There is, therefore, one kind of valuation for the purpose of assessment to Customs duty but another for the purpose of c.i.f. value which is to be debited to the licence. This value to be debited consists of the items, viz. the price of goods and the commission allowed, and where the commission is not apparent on the surface it is the duty of the Customs authorities to find out and add it to the said price so that the price of the goods plus the commission, and undoubtedly always the freight and insurance would constitute the c.i.f. price for the purpose of debiting the licence. This is all the duty and responsibility and also the authority of the Customs Officers to make inquiries and debit the licence. To equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and function of introducing a change in the definition is to bind the importer with his own honest declaration of what he knows under Section 14(1) of the price, apart from what the Customs authorities are required to find out as price on importation. Instruction 300 read in this light is capable of vesting the Customs authorities with the power to investigate the real purchase price between the vendor and vendee, where any doubt arises. That question, however, does not arise in this case, as we find that the parent Company in England has agreed to reduce the price of the raw material in question for the benefit of this country. A drug for the treatment of skin diseases is being manufactured here with the use of the raw material imported. The need of that drug in the market could not be fulfilled or satisfied by the reduced quantity of raw material on the basis of the international price of £ 25-30 per kilogram, as converted into rupee value on the basis of the licence issued. If the same quantity was required and must be permitted to come into this country to serve the need of a priority industry, the only alternative was to reduce the selling price. The Glaxos in England have don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms authorities would lead to the same result, viz. that all valid imports would automatically become invalid when the last consignment exceeds the face value of the licence, owing to the value based on the international market price being debited to the licence instead of the c.i.f. value. 15. We may also point out that a similar view has been taken by the Madras High Court in S. Narayanan v. The Collector of Customs, Madras, (1962) 2 Mad. L.J. 421. The learned Judge points out that in cases of , licences issued under the Imports (Control) Order, 1955, the limiting factor for the purposes of clearance through customs is the value of the goods imported which is the approximate c.i.f. value, where the c.i.f. value is within the limit permitted under the licence the importer has a right to import the goods under his licence. The learned Judge further points out :- "But where the price is really what is agreed under the contract between the parties, the mere fact that the importer got the goods at a bargain price will not enable the authorities to fix the price of goods imported on the basis of Section 30 of the Sea Customs Act. If a seller is willing to sell his goods for consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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