2013 (9) TMI 92 - AT - Customs

Tribunal overturns Revenue's under-valuation charge due to genuine declared transaction value

The Tribunal concluded that the Revenue failed to prove the charge of under-valuation. The reasons for obtaining a lower price due to intense negotiation ... Rejection of Transaction value - Undervaluation - Appellants had imported the concentrate Scotch whisky for dilution and sale and not for blending - Held that:- The explanation given by the appellant for obtaining the lower price in respect of the supplies from the foreign supplier was convincing and there was no reason to reject the transaction price declared by them - The letter dated 27-10-2009 from the foreign supplier clearly indicated that the Scotch whisky supplied to the appellant was a blend of grain whisky and malt whisky and was suitable to be used for direct consumption after dilution with de-mineralised water - The foreign supplier in the said letter had also confirmed with respect to the difference in the price between the goods supplied to the appellant and other importers in India that each different blend had a different malt content and that the price charged will be dependent on the malt content - The foreign supplier had also in the said letter confirmed that the cost of malt whisky was higher than that for Grain Scotch Whisky - The submission of the foreign supplier was also confirmed by the literature available on the subject matter in the internet wherein it was stated that production of grain whisky was much easier and cheaper than distillation of malt whisky - Wikipedia also confirmed that Neutral spirits, near-neutral spirits and other ‘fillers’ were usually much cheaper to produce than straight or single malt whisky, so blends containing them were usually much cheaper to buy. There was no evidence available on record to prove that the appellant had paid higher sum than what was declared in the import documents as also in the bank documents - the Revenue had completely failed to prove the charge of under-valuation in the case - EICHER TRACTORS LTD. Versus COMMISSIONER OF CUSTOMS, MUMBAI [2000 (11) TMI 139 - SUPREME COURT OF INDIA] - merely because of the appellant obtained the higher discount from the foreign supplier that by itself cannot be a reason for rejection of the transaction value – Order Set aside – Decided in favour of Assessee. Issues Involved:1. Rejection of declared transaction value.2. Comparison of imported goods with those imported by other companies.3. Justification for the lower price obtained by the appellant.4. Evidence supporting the declared transaction value.5. Applicability of legal precedents.Issue-wise Detailed Analysis:1. Rejection of Declared Transaction Value:The appellant argued that the rejection of the declared transaction value was neither legal nor proper. They contended that the price of the concentrate of Scotch whisky was negotiated down to USD 1 per litre, supported by documentary evidence including a Letter of Intent and proforma invoice from the foreign supplier. The Revenue, however, proposed to demand differential customs duty by enhancing the value of the imported consignment, citing higher values of contemporaneous imports of identical goods.2. Comparison of Imported Goods with Those Imported by Other Companies:The appellant contended that the goods imported by M/s. Mc Dowell Co. Ltd. and M/s. United Spirits Ltd. were not comparable to those imported by them. They argued that the imports by Mc Dowell had a higher malt content suitable for blending with Indian whisky, whereas their imports were for direct consumption after dilution. The Revenue, on the other hand, asserted that the supplier and description of the goods were the same, justifying the enhancement of transaction value based on contemporaneous imports.3. Justification for the Lower Price Obtained by the Appellant:The appellant provided a statement from their Director explaining that they negotiated a lower price of USD 1 per litre due to their new business status and the need to compete with established players. They also provided a letter from the foreign supplier confirming the blend and pricing differences based on malt content. The foreign supplier agreed to the lower price to establish their product in India, and the appellant was promoting the supplier's product by indicating it on the labels.4. Evidence Supporting the Declared Transaction Value:The appellant argued that all documents, including bank documents, supported the declared transaction value, and there was no evidence of paying a higher price. The Revenue failed to provide evidence to contradict the appellant's statement or prove under-valuation. The Tribunal found the appellant's explanation convincing and noted that the Revenue did not discharge the onus of proving the charge of under-valuation.5. Applicability of Legal Precedents:The appellant relied on the judgment of the Hon'ble Apex Court in the case of Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai, where it was held that the existence of a price list does not disprove the transaction value. The Tribunal agreed that the ratio of this judgment applied to the appellant's case, as the negotiated price was genuine, and there was no evidence of any consideration reducing the transaction value.Conclusion:The Tribunal concluded that the Revenue failed to prove the charge of under-valuation. The reasons for obtaining a lower price due to intense negotiation were clearly explained and supported by evidence. The declared transaction value was genuine, and the rejection of the transaction value was not justified. Consequently, the impugned order was set aside, and the appeals were allowed with consequential relief.