2005 (1) TMI 506 - AT - Customs

CESTAT Chennai: Exchange Rates Applicability on Indian Agent Commissions under Customs Act

The Appellate Tribunal CESTAT, CHENNAI allowed the appeals filed by the Revenue concerning the applicability of exchange rates under Section 14 of the ... Valuation Issues involved:Applicability of exchange rate under Section 14 of the Customs Act, 1962 for converting the total value of imported goods inclusive of local agency commission.Detailed Analysis:1. Issue of Exchange Rate Applicability:The appeals filed by the Revenue concern the applicability of the exchange rate under Section 14 of the Customs Act, 1962. The Controller of Stores, Southern Railways filed Bills of Entry for clearance of ball bearings, with payment in German Marks and a 5% commission to the Indian agent. The department argues that the exchange rate prescribed by the Central Govt. under Section 14 should be used to convert the total value of the goods, including the commission. However, the Commissioner (Appeals) held that the amount to be paid to the Indian agent, converted at a fixed rate of exchange for Customs duty purposes, is the relevant value. The department relies on the specific provisions of Section 14(1) and a previous decision by the Madras High Court.2. Rule Interpretation and Customs Valuation:The respondents argue that Rule 9(1) of the Customs Valuation Rules allows for the addition of commission to the assessable value only to the extent incurred by the buyer. The commission paid to the Indian agent, converted from Deutch Mark to Indian Currency at a fixed rate, should be included in the assessable value for duty purposes. They contend that the Customs Valuation Rules, aligned with GATT provisions, support their position. They cite a decision by the Delhi High Court in a similar case.3. Judgment and Legal Interpretation:The Tribunal considered both arguments and found that the commission paid to the Indian agent is part of the total price for the imported goods, thus subject to the exchange rate in force on the date of Bill of Entry presentation as per Section 14 of the Customs Act, 1962. The Tribunal rejected the argument that Section 14(1) does not apply to Customs Valuation Rules, noting that these rules are enacted in pursuance of Section 14(1A) and the GATT Code of Valuation. Referring to the Delhi High Court decision, the Tribunal emphasized the necessity for India to implement the GATT Code of Valuation, leading to the enactment of the Customs Valuation Rules. Consequently, the impugned order was set aside, and the appeals filed by the Revenue were allowed.This detailed analysis showcases the legal intricacies surrounding the applicability of exchange rates and customs valuation rules in determining the assessable value of imported goods, as interpreted by the Appellate Tribunal CESTAT, CHENNAI in the cited judgment.