1993 (11) TMI 133 - AT - Customs

Tribunal overturns Customs valuation decision due to lack of reasoning and failure to consider key rule. (1)(a)(i)

PHOTOPHONE INDUSTRIES LTD. Versus COLLECTOR OF CUSTOMS, BOMBAY

The Tribunal set aside the Additional Collector's order in a customs valuation case due to inadequate reasoning and failure to consider the essential ... Valuation Issues Involved:1. Determination of the relationship between the appellants and Konica for customs valuation.2. Acceptability of the transaction value under Rule 4 of the Customs Valuation Rules, 1988.3. Applicability of Rule 9(1)(a)(i) for loading the transaction value with indenting commission.4. Comparison of transactions between the appellants and Konica with other importers and their indenting agents.Detailed Analysis:1. Determination of the Relationship Between the Appellants and Konica for Customs Valuation:The Additional Collector concluded that Konica and the appellants were not 'related persons' for the purpose of Customs valuation. The relationship was deemed to be on a principal-to-principal basis. This finding was based on the absence of any evidence suggesting that explicit monetary consideration flowed from the appellants to Konica over and above the invoice price. The appellants were found to have the freedom to choose customers and set prices independently, indicating a normal commercial relationship.2. Acceptability of the Transaction Value Under Rule 4 of the Customs Valuation Rules, 1988:The Additional Collector held that the declared transaction value should not be rejected under Rule 4(2)(d) of the Customs Valuation Rules. There was no evidence to justify rejecting the transaction value under Rule 4(2)(a) or Rule 4(2)(b) either. The department's claim that the declared transaction value should be rejected did not merit acceptance. The transaction value was accepted subject to adjustments under Rule 9(1)(a)(i).3. Applicability of Rule 9(1)(a)(i) for Loading the Transaction Value with Indenting Commission:The Additional Collector ordered that the transaction value for photographic colour films, photographic chemicals, and lab equipment should be enhanced by the normal indentor's commission paid by Konica to other indenting agents. This was despite the fact that the appellants did not pay any such commission. The appellants contended that Rule 9(1)(a)(i) requires adding commissions or brokerage to the price paid for imported goods only if the buyer incurs the cost of such services and they are not included in the price paid. Since the appellants were not acting as indenting agents and were not rendering any indenting services, they argued that no addition to the cost of goods was warranted.4. Comparison of Transactions Between the Appellants and Konica with Other Importers and Their Indenting Agents:The appellants argued that their transactions with Konica were on a principal-to-principal basis, unlike other importers who went through indenting agents like Nippon Enterprises and Choksi Brothers. These agents received commissions from Konica, which were included in the price charged to other importers. The appellants contended that their bulk purchases allowed them to negotiate lower prices, and there was no valid reason to compare their transactions with those involving indenting agents.Conclusion:The Tribunal found that the Additional Collector failed to provide reasoned findings on all points raised by the appellants. The essential requirements of Rule 9(1)(a)(i) were overlooked, specifically whether the appellants rendered any service to Konica in relation to the imported goods and the cost of such service. The impugned order was not a reasoned and speaking order, showing non-application of mind. Consequently, the Tribunal set aside the impugned order and remanded the case for de novo adjudication in accordance with the law after granting a hearing to the appellants. The appeal was allowed by way of remand.