2000 (11) TMI 139 - SC - Customs

Supreme Court rules in favor of appellant, transaction value upheld under Rule 4(1) (1)

EICHER TRACTORS LTD. Versus COMMISSIONER OF CUSTOMS, MUMBAI

The Supreme Court set aside the decision of the Tribunal and the Assistant Collector, holding that the transaction value declared by the appellant should ... Whether Assistant Collector should have determined the transaction value under Rule 4 at the price actually paid by the appellant for the 1989 bearings? Held that:- No reason has been given by the Assistant Collector for rejecting the transaction value under Rule 4(1) except the price list of vendor. In doing so, the Assistant Collector not only ignored Rule 4(2) but also acted on the basis of the vendor's price list as if a price list is invariably proof of the transaction value. This was erroneous and could not be a reason by itself to reject the transaction value. A discount is a commercially acceptable measure, which may be resorted to by a vendor for a variety of reasons including stock clearance. A price list is really no more than a general quotation. It does not preclude discounts on the listed price. In fact, a discount is calculated with reference to the price list. Admittedly in this case discount up to 30% was allowable in ordinary circumstances by the Indian agent itself. There was the additional factor that the stock in question was old and it was a one time sale of 5 year old stock. When a discount is permissible commercially, and there is nothing to show that the same would not have been offered to any one else wishing to buy the old stock, there is no reason why the declared value in question was not accepted under Rule 4(1). Thus production of the price list did not discharge the onus cast on the Customs authorities to prove that the value of the 1989 bearings in 1993 as declared by the appellant was not the 'ordinary' sale price of the bearings imported. The decision of the Tribunal accepting the determination of value by the Assistant Collector cannot, therefore, be sustained. Appeal allowed. Issues Involved:1. Determination of the value of imported goods for customs duty purposes.2. Applicability and interpretation of Rule 4 and Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.3. Validity of discounts in determining transaction value.4. Compliance with Section 14 of the Customs Act, 1962.Detailed Analysis:1. Determination of the value of imported goods for customs duty purposes:The primary issue was whether the value declared by the appellant for the imported bearings should be accepted for levying customs duty. The Assistant Commissioner of Customs rejected the declared value, determining the price under Rule 8 of the Customs Valuation Rules, 1988, based on the vendor's price list minus a permissible discount.2. Applicability and interpretation of Rule 4 and Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988:The appellant argued that Rule 8 should not have been applied without first determining the value under Rule 4. Rule 4(1) mandates that the transaction value should be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with Rule 9. The court emphasized that the transaction value should be accepted unless it falls under exceptions specified in Rule 4(2). The Assistant Collector's reliance on Rule 8 without proper application of Rule 4 was deemed incorrect.3. Validity of discounts in determining transaction value:The appellant justified the 77% discount as a normal commercial practice given the circumstances, including the age and specific nature of the stock. The court noted that discounts are a recognized feature of international trade and should be accepted unless there are specific reasons to reject them under Rule 4(2). The Assistant Collector failed to provide valid reasons for rejecting the discount, relying solely on the vendor's price list, which was insufficient.4. Compliance with Section 14 of the Customs Act, 1962:The court analyzed Section 14(1) of the Customs Act, which stipulates that the value for customs duty shall be the price at which such goods are ordinarily sold in the course of international trade. The court clarified that the term 'ordinarily' excludes extraordinary or special circumstances. The Assistant Collector's rejection of the declared value based on an old price list did not align with the statutory requirements. The court found that the transaction value should be accepted unless it falls under the exceptions in Rule 4(2), which were not applicable in this case.Conclusion:The Supreme Court set aside the decision of the Tribunal and the Assistant Collector, holding that the transaction value declared by the appellant should have been accepted under Rule 4(1) as there were no valid reasons to reject it under Rule 4(2). The appeal was allowed, and the judgment under appeal was overturned without any order as to costs.