1998 (2) TMI 124 - SC - Customs

Invoice prices upheld as transaction value under Section 14 after revenue failed to prove undervaluation or special price

SC allowed the appeals and set aside the Tribunal's judgment, holding that invoice prices must be accepted as transaction value under Section 14 of the ... Levy of Customs duty - undervaluation - importers of ball and roller bearings - Whether there was undervaluation for the purpose of levy of Customs duty under Section 14 of the Customs Act, 1962 in the invoices of the various consignments of ball bearings which were imported by the appellants? Held that:- The legal position is well settled that the burden of proving a charge of under-valuation lies upon Revenue and Revenue has to produce the necessary evidence to prove the said charge. 'Ordinarily the Court should proceed on the basis that the apparent tenor of the agreements reflect the real state of affairs' and what is to be examined is 'whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price.' Section 14 of the Act prescribes that valuation of goods for the purpose of assessment has to be made at the price at which such goods or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale. In the present case neither has it been alleged nor has any material been produced to show that Mirah Exports and the foreign suppliers have any interest in the business of each other. As regards Skefko it has been pointed out that AB-SKF, Sweden holds 39.8% of the share capital in Skefko but there is nothing to show that Skefko has any interest in the business of AB-SKF. Moreover it is of no consequence in the present case because the invoice price at which the imports were made by Skefko were the same at which Mirah Exports and other importers had imported and no special price was given to Skefko for import. In these circumstances, we are of the opinion that the invoice prices as mentioned in the invoices could be treated as the price at which the goods are ordinarily sold or offered for sale in the course of international trade and that it had been rightly accepted as the value for assessment purposes under Section 14 of the Act by the Addl. Collector of Customs. Thus the appeals are allowed, the impugned judgment of the Tribunal is set aside and it is held that the invoice prices as mentioned in the invoices for the imports of ball bearings by the appellants shall be treated as the value for the purpose of assessment of customs duty under Section 14 of the Act. Issues Involved:1. Alleged undervaluation for the purpose of levy of Customs duty under Section 14 of the Customs Act, 1962.2. Applicability of discounts in the valuation of imported goods.3. Reliance on price lists versus negotiated invoice prices.4. Relationship between the buyer and seller affecting the valuation.5. Confiscation and penal action under Sections 111(d) and 111(m) of the Customs Act, 1962.Issue-wise Detailed Analysis:1. Alleged Undervaluation for the Purpose of Levy of Customs Duty:The primary issue in these appeals was whether there was undervaluation in the invoices of various consignments of ball bearings imported by the appellants, which would affect the levy of Customs duty under Section 14 of the Customs Act, 1962. The Tribunal had previously found undervaluation based on a price list from 1981, suggesting that the invoice prices were significantly lower than the list prices.2. Applicability of Discounts in the Valuation of Imported Goods:The appellants argued that the invoice prices reflected legitimate commercial discounts given by the supplier, AB-SKF, Sweden, due to the large quantities ordered. The Additional Collector of Customs had accepted this argument, noting that quantity discounts are a recognized feature of international trade practices and that discounts ranging from 50% to 70% were normal for various importers, including public sector institutions. The Tribunal, however, limited the acceptable discount to 20%, based on the price list.3. Reliance on Price Lists Versus Negotiated Invoice Prices:The Tribunal relied on a price list from February 15, 1981, to determine the value of the goods, allowing only a 20% discount. The appellants contended that the price list alone could not be the sole basis for valuation, especially when there was evidence of negotiated prices due to bulk purchases. The Supreme Court agreed with the appellants, noting that the price list did not preclude the supplier and importers from negotiating lower prices.4. Relationship Between the Buyer and Seller Affecting the Valuation:The Tribunal and the Collector of Customs had questioned the relationship between the importers and the foreign supplier, suggesting that a special relationship might affect the valuation. The Supreme Court, however, found no evidence of any special relationship that would influence the pricing, noting that AB-SKF, Sweden, held 39.8% of the share capital in Skefko but there was no evidence of Skefko having any interest in AB-SKF's business.5. Confiscation and Penal Action Under Sections 111(d) and 111(m) of the Customs Act, 1962:The Tribunal had found violations of Sections 111(d) and 111(m) of the Customs Act, 1962, and directed the revenue authorities to fix the quantum of fine and penalty. The Supreme Court, however, set aside this finding, holding that the invoice prices should be treated as the value for the purpose of assessment of customs duty under Section 14 of the Act.Conclusion:The Supreme Court allowed the appeals, setting aside the Tribunal's judgment. It held that the invoice prices as mentioned in the invoices for the imports of ball bearings by the appellants should be treated as the value for the purpose of assessment of customs duty under Section 14 of the Customs Act, 1962. The decision emphasized that the burden of proving undervaluation lies on the Revenue, which had failed to provide sufficient evidence beyond the price list. The Court also noted that negotiated prices reflecting commercial discounts are valid under international trade practices.