Appellate Tribunal upholds Revenue Authority's decision on foreign agents' commission adjustment in exported goods

The Appellate Tribunal CEGAT dismissed the appeal, affirming the Revenue Authority's decision regarding the adjustment of foreign agents' commission in the assessable value of exported goods. The Tribunal held that the Trade Notice issued by the Central Board of Revenue did not alter the statutory provision of Section 14 of the Customs Act, 1962. It was clarified that the price for assessment should be based on the price at which goods are ordinarily sold in international trade, where there is no business interest between the seller and buyer. The Tribunal concluded that the short levy demand was correctly raised, and exporters post-November 1970 did not contest the assessment of commission paid to foreign agents.

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Issues: Interpretation of Section 14 of the Customs Act, 1962 regarding adjustment of foreign agents' commission in the assessable value of exported goods; applicability of Trade Notice issued by the Central Board of Revenue regarding the price for export assessment.

In the present case before the Appellate Tribunal CEGAT, the exporter filed a revision application against an order passed by the Appellate Collector of Customs, Madras, which was transferred to the Tribunal as an Appeal under Section 131-B of the Customs Act, 1962. The exporter contended that the commission paid to foreign agents should be deducted from the valuation of goods for assessment purposes, despite the provision of Section 14. Additionally, it was argued that since the bond was not continued, the recovery of short levy was beyond the Customs Authorities' competence. However, the Appellate Collector rejected the latter argument citing the limitation under Section 28 of the Customs Act, which commences from the date of adjustment of duty after final assessment. The exporter, represented by Shri R.G. Sheth, Advocate, decided to press the appeal only on the interpretation of Section 14, disregarding the Memorandum of Revision/Appeal.

Regarding the contention of adjusting foreign agents' commission from the assessable value of goods exported, the Tribunal noted that there was no dispute about the price charged by the exporter to their buyers. The exporter's argument relied on a Public Notice issued by the Central Board of Revenue in October 1970, stating that the price for export assessment would include foreign agents' commission. However, the Tribunal found this plea unfounded as the Trade Notice merely clarified the position under Section 14 of the Act and did not alter any statutory provision. Section 14 of the Act specifies that the price for assessment is the price at which goods are ordinarily sold in international trade, where the seller and buyer have no business interest in each other.

The Tribunal emphasized that the Trade Notice issued in November 1970 clarified the position of Section 14 of the Act and dispelled any doubts that may have existed among Customs Officers. It was concluded that the short levy demand was correctly raised, and there was no dispute regarding the calculation. The Tribunal also highlighted that post-November 1970, exporters did not contest the assessment of commission paid to foreign agents for valuation of goods offered to buyers. The Revenue Authority, represented by Shri Kunnikrishnan, Jr. D.R., argued that the exporter's agitation was unnecessary, leading to avoidable litigation. Ultimately, the Tribunal dismissed the appeal, affirming the Revenue Authority's decision, stating that any other view would have been incorrect.

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