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Issues: (i) Whether the imported machinery was covered by the Open General Licence despite subsequent amendment of the letter of credit. (ii) Whether the charge of under-valuation of the imported machinery was sustainable.
Issue (i): Whether the imported machinery was covered by the Open General Licence despite subsequent amendment of the letter of credit.
Analysis: A firm letter of credit had been opened before the relevant cut-off date. Its later amendment only altered the shipment date because of shipping difficulty and did not revoke the original commercial commitment or alter the agreed price. The subsequent amendment could not be treated as the opening of a fresh letter of credit. The goods were therefore to be tested on the basis of the original commitment and shipment date.
Conclusion: The goods remained covered by the Open General Licence and the confiscation founded on alleged contravention of Section 111(d) of the Customs Act, 1962 read with the relevant import control provisions was not sustainable.
Issue (ii): Whether the charge of under-valuation of the imported machinery was sustainable.
Analysis: The declared value was supported by the contract, letter of credit and import documents. The departmental valuation rested on comparison with another import and did not rest on cogent evidence of any additional payment or clandestine remittance. In the case of capital goods and machinery, valuation must be supported by reliable material, and the burden to prove under-valuation lies on the department. The valuation adopted below was found to be ad hoc and arbitrary.
Conclusion: The allegation of under-valuation was not established and the declared assessable value was not liable to be rejected.
Final Conclusion: The appeal was allowed, the confiscation and valuation findings were set aside, and consequential relief was granted to the importers.
Ratio Decidendi: A subsequent amendment to a valid letter of credit that only varies the shipment date does not destroy the original import commitment for Open General Licence purposes, and a charge of under-valuation of imported machinery cannot be sustained without cogent evidence from the department.
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