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TMI Blog2003 (3) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... bsidiary of Seagram India Ltd. which in turn is a 100% subsidiary of the Seagram Company Ltd., Canada. The Foreign Investment Promotion Board (FIPB), Government of India granted approval for the proposal put forward by Seagram Company Ltd., Canada to set up a wholly owned subsidiary for, inter alia, establishment of a non-molasses based spirit manufacturing/blending facility. 3.The appellant was incorporated on 28-4-94. Its main objects were :- (a) to carry on the businesses of manufacturers, merchants, importers, factors and dealers of all kinds of alcoholic and non-alcoholic beverages, including spirits, wines and fruit juices and all products, by-products and ingredients thereof; (b) to buy sell, deal in and with, manufacture, produce, process, age, blend, rectify, compound, bottle, warehouse, store, import, export, transport and advertise for sale of all kinds of alcoholic and non-alcoholic beverages, including spirits, wines and fruit juices and all products, by-products and ingredients thereof. Pursuant to an application made by the appellant import licence dated 20-12-94 was issued by the office of Controller of Imports Exports for importing concentrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court on 27-8-2001. Relevant portion of the order is extracted below :- "Notice issued under Section 28 and Section 111 of the Customs Act, 1962 (in short the Act) is assailed in this writ petition. Learned Solicitor General, on instructions submits that the notice may be treated to be one for the purpose of finalisation of the assessment in terms of Section 18(2) of the Act." The writ petition was disposed of on the basis of the above submission made by the learned Solicitor General. 6.In the meantime, a second show cause notice was issued on 16-8-2001 by the Commissioner of Customs covering imports effected during the period July 2000 to May 2001 covering 41 Bills of Entry. Proposal was to determine the value of imported CAB on the same basis as indicated also in the first show cause notice dated 19-12-2000. Demand of a sum of Rs. 12,08,42,462/- was made in the above notice. 7.In the light of the order passed by the Hon'ble High Court of Delhi, the adjudicating authority treated both the show cause notices as notice for finalizing the provisional assessment and proceeded to, finalize the assessment under the order impugned. 8.As mentioned earlier the Commissioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the material period of import will be discussed in length which would indicate clearly that the declared value of M/s. SML is quite low and indicative of the fact that the transaction is not at arm's length. However, the importers may to claim that their contractual terms and the business strategy are vastly different from the other importers. More over in the present case there has also been transfer of intellectual property including right to use industrial assets such as patent, trade names, designs or models. These assets have considerable value even though they have no book value in the company's balance sheet. The independent manufacturers are expected to bear normal business risks such as market risk, foreign exchange risk, credit risk, inventory risk. In the present case, the contract assumes year-end adjustment to ensure the minimum return (reference document at Sl. 58 of para 5 above) on investment. To this extent the Indian manufacturer does not bear the normal business risk associated with the import and subsequent selling of the finished goods. Adequate data is also required to be furnished to give adjustment to various intra-group services. More over, details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction value of all similar goods imported at or about the same time as the imported goods should be available. (b) if more than such value is available, the lowest of such values should be taken into account. (c) the said lowest value should be adjusted for difference in commercial levels and quantities and both. (d) the adjustment should be made for differences affecting similarity such as quality, reputation and the existence of trade mark. The appellant submits that none of these requirements is satisfied in the present case while the Commissioner applied Rule 6. 11.The show cause notice dated 19-12-2000 covers the period January 1995 to June 2000 and the second show cause notice dated 16-8-2001 covers the period July 2000 to May 2001. For 100 pipers value has been fixed as GBP 1.735 on the basis of GBP of VAT 69 imported under Bill of Entry dated 5-5-99. For Passport the value of Black White imported under Bill of Entry dated 18-1-99 as GBP 1.58 is adopted. For Something Special the value at the rate of GBP 2.41 of Black Dog imported under Bill of Entry dated 5-5-99 is taken. For International Malt whisky the GBP at the rate of 1.53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to Rule 6 and after giving certain reasons it was proposed not to apply Rule 6 to arrive at the value in this case. Thus the assessee was not put to notice in the show cause notice on the application of Rule 6. Therefore, if the Commissioner thought it fit to proceed under Rule 6 for fixing the value the assessee should have been given an opportunity to put forward its contention against the proposal to proceed under Rule 6. This is a requirement to satisfy the salutary principles of natural justice. On going through the decision of the Supreme Court in N.B. Sanjana v. 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. (J 355) (S.C.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue cannot be permitted later to rely on Rule 10 to sustain the demand which would be within time under Rule 10. 15.In the present case since the 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 also of the view that while working out the provisions of Rule the Commissioner has not taken into consideration all the relevant factors. While fixing the value under Rule 6 the authority has to look into the definition of the term 'similar goods' under Rule 2(e) and that the conditions contained therein are satisfied. Clauses (b) and (c) of sub-rule (1), sub-rule (2) and sub-rule (3) of Rule 5 are made applicable to Rule 6 also. We find that there is no proper consideration of the above provisions by the Commissioner while arriving at the value under Rule 6. The appellant is justified in complaining that comparison was not made with the transaction of similar goods sold for export to India and imported at or about the time as the goods bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove that the relationship had not influenced the price. 19.We will now refer to the issue whether Something Special imported during the period 1995-96 has to be treated on a par with Passport and 100 Pipers as far as its value is concerned. It was alleged in the show cause notice that during the period the appellant had bottled Something Special as deluxe whisky and sold the same in Indian market at a price of Rs. 1200/- to Rs. 1300/- as against Rs. 650/- to Rs. 800/- of Passport and 100 Pipers. The Commissioner has held in the assessment 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is a specific Entry 2208.30 irrespective of its alcoholic strength and irrespective of whether it is consumable in its imported condition. The Commissioner observes that a whisky which has been distilled and matured in Scotland for a period of over three years can only be called as Scotch whisky. The importers in their agreement had stated that they would import 'Bulk Scotch Whisky'. He further states that letter of approval from FIPB to the importer states that the project involves imports of scotch whisky for local bottling and marketing and to be used in upgrading local liquors through blending. The goods have been described as whisky along with its particular brand, namely 100 Pipers or Passport or Something Special or Malt Whisky in the import documents in the initial stages which were later erased with white ink to change the description to CAB before submitting to Customs. It is further alleged that the description of the goods on the barrels was also required to be removed at the instance of the Indian importer. The Commissioner, therefore, arrives at the conclusion that the importer was all along aware that the correct description of the goods was whisky which is assessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omments made by the Commissioner on the decision of the High Court show scant respect for the higher judiciary. It is also pointed out by the appellant that the import licence issued to the appellant showed the description of the goods as concentrate alcoholic beverages. The appellant denied the allegation that it had erased the description in the import documents made by the importer. The appellant had advised the exporter to use the same description as is given in the import licence in the invoice and other documents. If any correction had been made it was by the importer and not by the appellant. In any view of the matter what is relevant is whether the product imported could be classified under the relevant entry and not the description given by the importer. 24.We find merit in the contention raised by the appellant. The Revenue has no case that the import licence issued to the appellant was not for importing concentrate of alcoholic beverages. It has also no case that the import was made in violation of the terms of the import licence. No material is placed before us, nor any submission made by the Revenue to controvert the contention raised by the appellant that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows :- "The stand taken by SML in their submissions that the imported spirit having alcoholic strength of over 60% v/v is not consumable as such and, therefore, is not classifiable as 'whisky' is incorrect. The item is classifiable under this heading irrespective of its alcoholic strength and irrespective of whether it is consumable in its imported condition." The above finding of the Commissioner is directly against the view taken by the Hon'ble High Court in the judgment referred above. The Commissioner cannot be permitted to disregard the above finding of a High Court on an identical issue and justify his stand that the High Court's decision was based on "certain wrong premises placed before it." 26.The Commissioner refers to justification note attached to the import application by SML and observes that the appellant has referred the product to be imported as 'bulk scotch whisky'. On going through the letter dated 20-9-94 forwarding the application it is seen that the appellant has specifically referred to the product to be imported as scotch whisky concentrate/malts. The relevant portion reads as follows :- "Government approval also permitted the company to import scot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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