2006 (2) TMI 331 - AT - Customs

Tribunal Rules in Favor of Appellants, Accepts Declared Transaction Value for Agrochemicals Import.

The Tribunal set aside the impugned order, allowing the appeals by the appellants, manufacturers of Agrochemicals and Textile Chemicals, regarding the ... Valuation of imported goods - differential duty - Demand - Limitation - confiscation of goods - Can Rule 10A be invoke on the basis of identical goods imported at a higher price - HELD THAT:- We agree with the appellants that import of mancozeb from other countries cannot be treated as import of identical goods into India as per the definition of identical goods in Rule 2(c). The cif price in US$ is being compared with the price in Indian rupees. It is, however, to be kept in mind that due to rupee devaluation and increase in exchange rate of US$, the cif price in US$ after conversion into Indian rupees always shows a higher price of the goods. Further, the quantity imported either by M/s. United Phosphorus and M/s. Lupin Agro Chemicals has not been mentioned in the impugned order. Therefore, the price at which others imported Mancozeb into India cannot be treated as import of identical goods so as to reject the value declared by Bayer. In the present case, the imports were partly made prior to introduction of Rule 10A on 19-2-98 and in the case of Adani Exports Ltd. v. CC[1999 (11) TMI 220 - CEGAT, MADRAS], the Tribunal held that Rule 10A is not retrospective and cannot be applied for imports made prior to its introduction in the statute book. The appeal of the Revenue against this decision was dismissed by the Supreme Court on merits, as seen from [2001 (3) TMI 1029 - SC ORDER]. There is yet another reason for the non-applicability of Rule 10A to the facts of the present case. The Rule applies in cases where the proper officer has reasons to doubt the truth and accuracy of the value declared to the customs, where the Customs authorities feel that there has been manipulation in the invoices or in the value declared to Customs and involving extra remittance to the foreign supplier over and above the invoice value. That is no so in the present case as there is no dispute about the truth and accuracy of the declared value. On the plea of limitation also, we find that the appellants have a strong case. What is used against them is their declaration to Customs that they and R&H are not related. This declaration was based on the understanding of the Customs Valuation Rules. The agreement between the appellants and the foreign supplier was submitted to the department on 2-5-97 itself and goods were assessed on the price declared by the appellants and it is only on 25-1-01 that the proceedings for undervaluation have been initiated against them. It is, therefore, clear that proceedings have been initiated only in view of change of opinion by the department. Hence allegation of suppression cannot sustain. The extended period of limitation is, therefore, not available to the department. Thus, we hold that the value declared by the appellant is required to be accepted, set aside the impugned order and allow the appeals. Issues Involved:1. Validity of transaction value.2. Applicability of Rule 10A of the Customs Valuation Rules, 1988.3. Relationship between the appellant and the supplier.4. Basis for adopting the price of identical goods.5. Limitation and suppression of facts.Detailed Analysis:1. Validity of Transaction Value:The appellants, manufacturers of Agrochemicals and Textile Chemicals, imported 'Mancozeb Technical 85%' from R&H to manufacture fungicide under the brand name 'Dithane M-45'. A show cause notice was issued proposing to recover differential duty based on the higher import price of identical goods by another company, M/s. Indofil. The appellants argued that their transaction value should not be rejected merely because identical goods were imported at a higher price. The Tribunal supported this view, citing precedents where transaction value cannot be discarded solely on this basis. The Tribunal concluded that the transaction value in this case could not be rejected based on the higher price at which M/s. Indofil imported Mancozeb from R&H.2. Applicability of Rule 10A of the Customs Valuation Rules, 1988:The Tribunal noted that Rule 10A could only be invoked if there was doubt about the genuineness of the transaction value, such as in cases involving extra remittance by the importer to the exporter. The Tribunal found no such doubt in the present case and emphasized that the valuation of imported goods based on transaction value should not be undermined. The Tribunal referenced multiple cases where transaction value was upheld despite identical goods being imported at higher prices.3. Relationship between the Appellant and the Supplier:The Commissioner had determined that the appellants and R&H were related based on their distributorship agreement. However, the Tribunal clarified that a sole distributor relationship does not automatically imply that the parties are related unless they meet specific criteria outlined in Rule 2(2) of the Customs Valuation Rules. The Tribunal found no evidence of cross-shareholding or control that would classify the parties as related. The Tribunal cited the Kerala Electric Lamp Works case, which distinguished general business interest from a definite and tangible interest in each other's businesses.4. Basis for Adopting the Price of Identical Goods:The Tribunal addressed the Commissioner's reliance on the import prices of Mancozeb by M/s. Indofil and other companies. It was noted that the transactions were not at the same commercial level or time, and thus, Rule 5 could not be applied. The Tribunal highlighted that the imports by Bayer were significantly higher in quantity compared to those by M/s. Indofil, which further invalidated the comparison. Additionally, the Tribunal pointed out that the price of Mancozeb imported from other countries could not be treated as identical goods due to differences in commercial levels and timeframes.5. Limitation and Suppression of Facts:The appellants argued that the proceedings were initiated based on a change of opinion by the department, not on suppression of facts. The Tribunal agreed, noting that the agreement between the appellants and R&H was submitted to the department in 1997, and the goods were assessed based on the declared price. The Tribunal found no evidence of suppression or misdeclaration, and thus, the extended period of limitation was not applicable. The Tribunal referenced several cases to support the view that mere change of opinion does not justify invoking the extended period of limitation.Conclusion:The Tribunal concluded that the transaction value declared by the appellants should be accepted, as there was no valid ground to reject it based on the higher import prices of identical goods by other companies. The Tribunal set aside the impugned order and allowed the appeals, emphasizing the importance of adhering to the transaction value unless specific conditions for rejection are met.