1991 (5) TMI 68 - HC - Customs

Court upholds contract validity, dismisses Collector's illegal assessable value determination.

SNEHA TRADERS PRIVATE LTD. Versus COLLECTOR OF CUSTOMS

SNEHA TRADERS PRIVATE LTD. Versus COLLECTOR OF CUSTOMS - 1992 (60) E.L.T. 43 (Cal.) Issues Involved:1. Validity of the contract and amendment between the writ petitioner and the foreign supplier.2. Prevailing international market price of the goods at the relevant time.3. Relevance of other import instances referred to in the show-cause notice.4. Effect of delay in supply by the foreign supplier.5. Legality of the Collector's determination of assessable value.6. Alleged violations of Sections 111(m) and 111(d) of the Customs Act.7. Imposition of penalty under Section 112 of the Customs Act.Summary:1. Validity of the Contract and Amendment:The court held that the contract dated 16-9-1987 and its amendment were genuine. The contract was entered into in the usual course of business with all relevant terms, including description of goods, quantity, price, and payment terms. The foreign supplier's delay and subsequent price increase were also considered normal business practices. The Collector's assumption that the contract was manipulated due to the price increase was deemed perverse and unsupported by facts.2. Prevailing International Market Price:The court found that the prevailing international market price at the time of the contract was between US $745 to $755 per MT, as quoted by various suppliers. The contract price of US $750 per MT was in line with these quotations and the LME price. Subsequent contracts by other importers at slightly higher prices due to market fluctuations were also considered, affirming that the contract price was fair and reflective of the market at the time.3. Relevance of Other Import Instances:The court ruled that the instances of other imports referred to by the Collector were irrelevant and misleading. The court noted that in similar cases, the Customs Authorities had determined the assessable value based on the contracted price, not the price at the time of shipment or arrival. This consistent practice invalidated the Collector's reliance on other import instances to justify the increased assessable value.4. Effect of Delay in Supply:The court held that the delay in shipment by the foreign supplier did not affect the determination of the assessable value. Under Section 14 of the Customs Act, the assessable value should be based on the price at the time of contract, not shipment. The court emphasized that the price for delivery at the time and place of importation should be considered, and delays by the supplier were irrelevant for valuation purposes.5. Legality of the Collector's Determination of Assessable Value:The court found the Collector's action of assuming a notional contract date and determining the assessable value based on LME prices at that assumed date to be illegal and contrary to Section 14 of the Customs Act. The court reiterated that the actual contract date and price should be the basis for valuation.6. Alleged Violations of Sections 111(m) and 111(d) of the Customs Act:The court concluded that there was no misdeclaration of value by the writ petitioner, thus nullifying the application of Section 111(m). Regarding Section 111(d), the court held that the import license covered the contracted price, and any arbitrary increase in assessable value by the Collector was illegal. The court referenced established legal precedents to support this position.7. Imposition of Penalty under Section 112 of the Customs Act:The court determined that no penalty under Section 112 could be levied as there was no contravention of the Customs Act by the writ petitioner. The alleged misdeclaration of value was unfounded, and the goods were lawfully imported.Conclusion:The court set aside the Collector's order, directing the Joint Special Officers to refund the sum held with accrued interest to the writ petitioner and discharged them from their duties. The writ petition was disposed of accordingly.