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TMI Blog1991 (5) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... are removed by the Special Officers. (d) The Special Officers shall retain the goods in a separate godown to be provided by the petitioners, (e) The sale shall be effected under the supervision of the Special Officers. The Special Officers shall ascertain the price, name of the parties and the quantity sold. (f) Out of the sale proceeds the Special Officers shall retain 10% of the sale proceeds and keep the same along with the said sum of Rs. 15,00,000/- separately in a fixed deposit account with the Oriental Bank of Commerce for six months for the time being and the said fixed deposit shall be renewed from time to time subject to further orders of this Court, (g) Before the goods are removed, the Assistant Collector of Customs will obtain the sample of the goods, (h) The Collector of Customs will be at liberty to proceed with the adjudication proceedings after issuing a show-cause notice and after giving the petitioner a reasonable opportunity of being heard he shall pass a speaking order. In the event the order so passed goes against the petitioner, it shall not be communicated or given effect to without the leave of the Court and such order shall be placed before this Court for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived at the port of Calcutta, the writ petitioner filed 10 Bills of Entry for taking clearance of the said goods. Even though the assessable value of the aforesaid earlier imports under the very same contract was determined by the Customs Authorities at the agreed contracted price, this time the Customs Authorities refused to determine the assessable value of the said goods on the basis of the agreed price of US Dollars 775 per MT and made it clear to the writ petitioner that the goods cannot be allowed to be cleared unless duties are paid on such enhanced assessable value, as may be determined by them. 6. Pursuant to the liberty granted and/or directions given by this Bench in the said order dated 19th August, 1988 the Assistant Collector of Customs, Calcutta issued a notice dated 1st September, 1988, to show-cause wherein certain allegations were made as regards the valuation of the said goods. The writ petitioner duly submitted its reply to the said notice by its letter dated 12th September, 1988. After granting a personal hearing to the writ petitioner, the Collector of Customs, Calcutta passed a purported order dated 3rd October, 1988, which is under challenge before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have been entered into one month prior to the date of shipments? (vi) Whether there has been any violation of Sections 111(m) 111(d) of the Customs Act on the part of the writ petitioner on the facts and in the circumstances of the instant case? (viii) Whether, on the facts and in the circumstances of the instant case any penalty could be levied upon the writ petitioner under Section 112 of the Customs Act? 9. On the first issue, it is contended on behalf of the respondents that the contract does not provide for any commitment on the part of the writ petitioner to accept the consignment and that no liability would have accrued on the writ petitioner if it had refused to accept the shipment. Further the foreign supplier was also under no obligation to ship the goods and that if the foreign supplier decided to renege the contract, there was absolutely nothing that the writ petitioner could have done to secure the supply of goods except for taking up the arbitration with the Hongkong General Chamber of Commerce. It is highly unlikely that a prudent supplier would choose to ship his goods at contracted prices which are 30% to 40% lower than the prevailing market pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull right to take appropriate legal steps in the matter. The contract also provided for arbitration of the disputes arising out of the contract by the Arbitrators appointed by Hongkong General Chamber of Commerce. Further and in any event the Collector failed to appreciate that even if the contract itself does not provide for the rights of the parties in the event of failure on the part of one of the parties to perform its obligations, the relevant legal provisions would automatically become applicable and appropriate legal steps against the defaulting party may always be taken by the other party. 11. Similarly, insofar as the amendment of the said contract, whereby an increase in the price by US $ 25 per MT was agreed upon, was also quite normal and there is absolutely nothing unusual or illegal about the same. The said contract was for supply of 1000 MT of zinc ingots. A quantity of about 200 MT was shipped by the foreign supplier under the said contract in October/November, 1987. However, in the meantime the international price of the said goods started increasing and due to such increase the foreign supplier did not ship the remaining quantity in spite of repeated requests. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector cannot be sustained being perverse. The Collector has not taken into account the facts and circumstances of International Trade and Commerce. The findings have been arrived at on a complete non-application of mind and by totally ignoring the relevant provisions of law including those relating to contracts. 13. The Collector as it appears proceeded on the assumption that simply because the international prices of zinc were increasing, it was unlikely that the foreign supplier would choose to ship the goods at the contracted prices which were lower than the prevailing market price at the time of shipment. The said finding has been arrived at without appreciating even the basic concepts of trade and commerce. The price for the goods is always agreed at the time of entering into the contract and the supplier has to supply the goods at such agreed price irrespective of the price prevailing at the time of shipment. Unless contract specifically provides, even if the price has increased at the time of performance of the contract the supplier cannot give a go-by to the contract and cannot refuse to supply the goods, nor would the contract get cancelled due to such price increa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto between the foreign suppliers, M/s. Phibro Energy (Australia) Pty. Ltd. and M/s. Vimleshwar Co. for import of a quantity of 40 MT of the said goods at the price of US $ 830 per MT, CIF Calcutta/Haldia. This contract was entered into through M/s. Meteor Pvt. Ltd. (b) On 20-10-1987 another contract was entered into between M/s. Binani Brothers Pvt. Ltd., and M/s. Phibro Energy (Australia) Pty. Ltd. for import of a quantity of 60 MT of similar goods at the price of US $ 830 per MT, CIF Calcutta/Haldia. (c) On 12-11-1987 a contract was entered into between M/s. Australian Ore Metal Co. Pvt. Ltd. and M/s. Vimleshwar Co. for import of a quantity of about 30 MT of the said goods at the price of US $ 835 per M.T. CIF Calcutta. The said contract was entered into through British Metal Corporation (India) Pvt. Ltd., the local agent of the foreign supplier. 17. From the aforesaid it would be clearly evident that the said contract was entered into by the writ petitioner at the prevailing international market price. 18. On the next issue as to whether the instances of other imports referred to in the show-cause notice are relevant in the instant case and if so what is the effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreed price and which was also the price prevailing on the date of the contract. 24. Insofar as the alleged instances of imports made by MMTC against invoice dated 29-2-1988 at US $ 924 per M.T. C.I.F., Calcutta and the imports made by M/s. Amrit Steels Ltd. against invoice No. 88.803044 dated March 15, 1988, at the price of US $ 912.50 are concerned, the facts and circumstances are similar to those stated above. In these cases also, the contracts were entered into on the basis of the LME prices as prevailing on the date of contracts. The shipments were made much later. The prices prevailing on the dates of the shipments and on the dates of arrival of the vessels were much higher as compared to the prices prevailing on the dates of the contracts. However, in spite of the aforesaid, assessments were made on the basis of the agreed contracted prices and without in any way taking into consideration the prices prevailing on the dates of shipments and/or on the dates of arrival of the vessels. 25. Insofar as the import made by MMTC at the price US $ 975 per MT, CIF Calcutta is concerned, this is not at all a comparable case. In this case, the date of shipment was 29-2-1988 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evailing at the time of arrival of the vessel in India. 27. From the aforesaid it would be evident that the various alleged instances of imports referred to and relied upon by the Collector do not in any way support the allegations made and/or findings given in the order passed by the Collector. On the other hand, the said alleged instances themselves clearly show that the Customs Authorities have always been determining the assessable value of the goods on the basis of the prices prevailing at the time of entering into the contract and that the prices prevailing either on the date of shipment or on the date of arrival of the vessel are never taken into consideration. 28. The next issue is what would be the effect if there is any delay on the part of the foreign suppliers in supplying the goods under the relevant contract. It is contended that under Section 14 of the Customs Act, the assessable value of the goods shall be deemed to be the price at which the said goods are ordinarily sold or offered for sale for delivery at the time and place of importation in the course of international trade, where the seller and the buyer have no interest in the business of each other and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest in the business of each other and price is the sole consideration, the contracted price should be accepted. In fact, similar view has also been taken by the Bombay High Court in a decision in Kishco Cutlery Limited v. Union of India, reported in 1984 (15) E.L.T. 367. 32. In fact, even the appellate authorities under the Customs Act have also repeatedly held that for determination of assessable value under the provisions of Section 14 of the Customs Act it is the date of contract which is the relevant date. One such order passed on March 13, 1987, in the case of H.B. Bagri Co. has already been referred to in the stay application filed by the writ petitioner before this Court. 33. In the Affidavit-in-reply filed on behalf of the writ petitioner and affirmed by one Laxminarayan Somani on July 22, 1988, a statement has been 'enclosed giving details of about 32 cases of imports made by different importers. In the said various cases mentioned in the said statement there were long delays in shipment of the goods on the part of the foreign suppliers and during the intervening period the prices either went up or came down. However, in none of the said cases, the agreed prices we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be done by the Collector. 36. The contentions of the writ petitioner are also fully supported by the provisions of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (in short, the 1988 Rules) which came into force on 16th August, 1988. The said 1988 Rules have been framed by the Government of India for determining the assessable value of the imported goods. Under Rule 3 of the said 1988 Rules the assessable value of the imported goods shall be the transaction value and it is only if such transaction value is not available that the assessable value can be determined by applying the other mode/s. Rule 4 of the 1988 Rules defines the expression "transaction value". The said Rule 4 provides, inter alia, that the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of the said Rules. None of the various factors for which adjustments are provided in Rule 9 exist in the instant case. Thus the Government of India itself has recognised and accepted that the assessable value of the imported goods has to be determined on the basis of the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licence could be debited only by the value arrived at on the basis of the said price of US $ 775 per M.T., C.I.F. Calcutta. 39.The last issue is whether on the facts and in the circumstances of the instant case any penalty could be levied upon the writ petitioner under Section 112 of the Customs Act. It is contended that the said goods were lawfully and validly imported by the writ petitioner. We do not find that there has been any contravention of any of the provisions of the Customs Act either on the part of the writ petitioner or in respect of the said imports. The writ petitioner has not done or omitted to do any of the acts or things mentioned in the said Section 112 of the Customs Act. In the circumstances no penalty whatsoever under the provisions of Section 112 of the Customs Act could be levied upon the petitioner. The only ground for levy of the said purported penalty of Rs. 1,00,000/- as given by the Collector is that there was a mis-declaration of value on the part of the writ petitioner. As would be evident from the facts stated hereinbefore, there was no such misdeclaration at all. 40.The facts of the case clearly demonstrate that in the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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