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TMI Blog2005 (6) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... m a related company, M/s. Seagram Distillers Plc. Therefore, the Customs authorities took a view that the transaction value between the appellant's related supplier and the appellant cannot form the basis for customs valuation. Accordingly, assessments were originally carried out on provisional basis. Subsequently, after investigation into import pricing by the Director General of Revenue Intelligence, two show cause notices were issued. One notice by that Directorate was in respect of imports for the period January, 1995 to June, 2000 and another notice by the Commissioner of Customs was for the period July, 2000 to May, 2001. These notices were adjudicated by the Commissioner of Customs under Order-in-Original No. AKR/CC/ICD/TKD/45-46, dated 29-8-2003 holding to the effect that the transaction values were too low, and when the consignments are assessed at the value of comparable similar scotch whisky concentrates, there would be a short-levy of about Rs. 42 crores. 3. The appellant filed an appeal before this Tribunal against the aforesaid order challenging the method of valuation on the ground that Rule 6 of the Customs (Valuation) Rules which has been resorted to by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in Rule 7 of the Valuation Rules and that the Commissioner has fixed high assessable values arbitrarily by flouting the provisions of Rule 6. The objections in regard to selecting 'similar' goods is that, the price of a high end branded consumer item is not dependent upon or determined by its intrinsic cost but is driven by its brand value. It is submitted that whisky is clearly such an item (like perfumes) and therefore resort should not have been taken to valuation based on 'similar' goods under Rule 6. The appeal also points out that the appellant's additional costs in establishing its brands in the Indian market is made clear by the fact that, during the relevant period, the appellant was incurring losses (About Rs. 4.6 crores in 1997-98) and that appellant's venture broke even only by 98-99, dispute the alleged low import prices of the main input. The submission is that the appellant's transaction value should have been seen in the context of its brand position in the Indian market at the time of the said imports. The Memorandum of Appeal also seeks to show that, if the 'deductive value' method under Rule 7 had been followed it would have been clear that the appellant's t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being valued having regard to the quality, reputation and the existence of trade mark; (ii) produced in the country in which the goods being valued were produced; and (iii) produced by the same person who produced the goods being valued, or where no such goods are available, goods produced by a different person." The appellant has also relied on the following extract from the book Customs Valuation Commentary on the GATT Customs Valuation Code by Saul L. Sherman : "Although substantial differences in price might reflect differences in quality or reputation which are factors to be taken into account in considering whether goods are identical or similar, the price itself cannot be such a factor". The learned Counsel has also relied on the opinion of Saul L. Sherman that similarity is found to be mainly with highly standard goods. Another factor emphasized by the learned Counsel for the appellant is the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined in the order. Learned Counsel has submitted that at this price, the import price of Something Special compares very favourably with the price of Black Dog inasmuch as import price was 1.554 when imported in barrel and 1.41 when imported in tankers. (c) Concentrate for Passport : The contention is that a big discount was due in view of the massive (100 times) difference in quantity of import of similar whisky. The learned Counsel has emphasized that it is well accepted that quantity is an important factor in pricing and higher quantity purchases brought quantity discounts. Learned Counsel has emphasized that this important factor in pricing should be accepted as equally applicable to transaction between related parties also. (d) Concentrate (Malt) for Indian brands : The submission is that the appellant's importation was almost 15 times more than the quantity imported by M/s Allied Mackey. It is being contended that when required adjustment is made, it would be seen that the appellant's purchase price was a fully commercial price. In support of its contention in regard to quantity discount, the appellant has produced two invoices covering its sales to Canteen St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese prices cannot find acceptance, particularly when the lowest price of other importers was 1.53 Pound. 12.With regard to the quantity discount claim, the submission of the learned Counsel is that the total import of other importers came to 385765 bulk ltrs. as against the total import by the appellants of 241369 only. 13.As already noted, we are not going into the submissions made by the appellant against valuation under Rule 6. Instead, the appeal is being disposed of after considering the alternate submissions relating to errors committed while determining the assessable values based on the transaction value of similar goods. 14.The grievance of the appellant with regard to valuation of concentrate for '100 Pipers' is that the cheapest of similar goods, namely Findlaters, was excluded from consideration. The contention is that this action is clearly illegal inasmuch as sub-rule (3) of Rule 5 specifically stipulated that "lowest such value shall be used to determine the value of imported goods". The Commissioner rejected the appellant's request for supplying to them the complete data of imports in the following terms:- It is also the allegation of M/s."408. Seagram that DRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider certain similar goods is no ground for their continued exclusion during adjudication. That cannot be the reason for the adjudicating authority not considering full data. The data disclosed during the appeal proceedings before us confirm that Findlaters was being imported. It is also seen that para 4.1 of the show cause notice specifically mentioned Findlaters as one of the comparable brands. It reads : "It was further gathered that in 1995 as well as in the subsequent periods, Something Special was being marketed as a Deluxe Whisky and in addition to Black Dog of M/s. United Distillers it used to compare and compete with two other brands - namely, Teacher (12) years old brand of Allied Domecq) - in the market in terms of selling price (price range Rs. 1050 to Rs. 1300 per bottle). It was also gathered that Black Bottle of M/s. DCM Remy, Vat 69 of M/s. United Distillers, Highland Queen of M/s. Mcdonald Mohan and Findlaters of M/s. White & Mackey were being sold at a price range of Rs. 600 to Rs. 745 per bottle to consumers of comparable status as in the case of Seagram product '100 Pipers." 16. The explanation offered during the hearing that Findlaters was not an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the specific requirements stipulated in Rule 6. That apart, those aspects, to the extent they are correct, would be satisfied since the transaction value of the similar goods which is used for valuation of the items under import, would be in terms of prevalent commercial prices. 18. The second major contention of the appellant is that adjustment in price is required to be made taking into account quantities under import of similar goods and goods under assessment. This claim is within the specific terms of rule 6. Sub rule (c) of Rule 5(1)(c) reads as under: - " Where no sale referred to in clause (b) of sub-rule (1) of this rule, is found, the transaction value of identical goods sold at 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 resonableness 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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