AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1989 (9) TMI 277
X X X X Extracts X X X X
X X X X Extracts X X X X
....eals and are registered with the Registry as appeal Nos. C/1925/85-A, C/1926/85-A and C/1927/85-A. 2. M/s. Skefko India Bearing Co. Ltd. have also filed the above captioned appeals being aggrieved from the order passed by the Collector of Customs, Bombay. M/s. Skefko India Bearing Co. Ltd. had requested that the issue involved in the four appeals filed by them is similar to the review applications filed by the revenue and as such the same may also be heard along with them. In the interest of justice, we club the above captioned four appeals with the review applications filed by the revenue. The above captioned three review applications emerge from the same order-in-original and the same are being disposed of by this consolidated order. 3. Notices of hearing were sent to the parties. Shri V.M. Doiphode, the learned SDR has appeared on behalf of the revenue. Shri K.M. Desai, Sr. Advocate and Shri B. Parikh and Raj Darak Advocates for M/s. Skefko Bearing Co. Ltd. and Shri V. Lakshmi Kumaran, Advocate for M/s. Mirah Exports Pvt. Ltd. have appeared. Nobody has appeared on behalf of M/s. Punjab Bearing Traders and as such we proceed to decide the same on merits. 4. Appeal Nos. C/1925/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... information, the officer of the Enforcement Directorate carried out searches at the following premises :- (i) M/s. Skefko India Bearing Co. Ltd., M.G. Memorial Building, Netaji Subhash Road, Bombay-400 002. (ii) M/s. Associated Bearing Co. Ltd., Hoechest House, Nariman Point, Bombay-400 021. (iii) Shri Kishan Chand, 74 Somerset House, Bhulabhai Desai Road, Bombay. During the course of search, certain documents were taken over by the Enforcement Directorate. The said documents were scrutinised by the officers of the Department for possible violation of the provisions of the Customs Act, 1962 and copies of certain documents which were found useful and relevant were obtained from the Enforcement Directorate. On the basis of the scrutiny of those documents, a show cause notice dated 31st May, 1984 was issued. The show cause notice alleged that: "(a) That M/s. Skefko India Bearing Co. Ltd., cater to three categories of importer viz. (i) OEM's/AU's (ii) Canvassers and (iii) Skefko's own import. (b) The OEM's/AU's could obtain all types of bearings for their requirement by obtaining indents/booking orders directly with M/s. Skefko India Bearing Co. Ltd. The trade segment (stock and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M/s. Punjab Bearing Traders, M/s. Mirah Exports (P) Ltd., has been issued with indents for bearings Nos. 6201, 6201Z, 6201ZZ, 6202Z, 6203, 6203Z, 6203ZZ in July, 1982 and September, 1982. Out of the above indents a part quantity was import&d by M/s. Mirah Exports (P) Ltd., and covered by the said 24 consignments. The remaining quantity which though supposed to be imported by M/s. Mirah Exports were ultimately imported by M/s. Skefko India Bearing Co. Ltd., on their own account. (i) The following OEM/AU importer has also imported similar bearings, the details of which are as under : Importer Bearing Unit Price Period 1. M/s. Laxmi 6201 S$1.70 April 1982 Machine Works   Ltd.   6203 S $ 2.01 -do- 6203Z S$2.13 -do- 6203ZZ S $ 2.13/2.24 April/May/June, 1982 2. M/s. H.M.T. 6201 US $ 0.82 October 1982 6202Z US $ 0.95 -do- 6202 ZZ US $ 1.00 -do- 6203 US $ 1.01 -do- 6203Z US $ 1.08 -do- 6203ZZ US $ 1.14 -do- 3. M/s. Lohia Machine  6203 ZZ US $ 1.20 September, 1982 4. M/s. Larsen and Toubro  6203ZZ US $ 1.14 October, 1982. (j) That M/s. Skefko Bearings have been permitted by the Central Office of the Overs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xports is therefore P/L No. 8102 dated 15-2-1981 valid till October 1982. The unit price of the Bearing No. 6201, 6202, 6203, included shielded bearings indicated in the said P/L 8102 are as under : Bearing No. Unit Price US $ Bearing No. Unit Price US.$ 6201 0.86 6202Z 1.00 6201Z 0.91 6203 1.06 6201ZZ 0.95 6203Z 6203ZZ 1.14 1.20 (n) As against the above said unit price M/s. Mirah Exports have effected imports at unit prices as under : 6201 DM 0.81 6201 Z DM 0.81 6201 D.M. 0.81 US $ 0.34 6203 Z US $ 0.40 DM 1.30 6203 DM 0.98 US $ 0.40 6203ZZ US $ 0.41 DM 1.08 3. On this basis the department has charged the parties mentioned above that : (a) M/s. Mirah Exports Pvt. Ltd. have mis-declared the value for bearing No. 6201, 6202, 6203, including shielded Bearings in each of 24 bills of entry, which mis-declaration have rendered all the 24 imports liable for action under Section 111(m) of the Customs Act, 1962. The extent of under-valuation and consequent amount of duty sought to be evaded in respect of each of the 24 consignments are indicated in the enclosed Annexure 'C' which form an integral part of the notice. (b) In respect of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rings from other countries like USSR, Romania, Czechoslavakia and Japan. (h) The invoice price and the landed cost of the bearings favourably compared with the local prices of similar bearings being manufactured locally. In reply to the show cause notice the local agents M/s. Skefko have put forward the following arguments :- (a) The importers M/s. Mirah Exports Pvt. Ltd., are not required to pay any amount over and above the invoice prices. (b) The prices charged in the invoice are in consistence with the pricing policy of the company. (c) They have listed different types of customers viz. OEM, replacement users and dealers. The prices to these customers are determined after acceptance of the prices by the suppliers, after taking into consideration certain factors such as competitive prices, quantity, value, business potential of the customer, price level offered to customer in the past and the exchange rate. (d) The exchange rate difference has caused variation of approximately 27% over their prices in 1981-82 for US $ when compared with the exchange rate applicable to DM. (e) The local agent have a discount upto 20% and for any higher discount prices have to be accepted f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Bearing Co. Ltd. vide letter dated 11th May, 1982. The orders were placed by the canvassers M/s. Punjab Bearing Traders in July, 1982, and in turn Skefko India Bearing Co. placed with SKF Bearings Division, Sweden, and at the time of placing of the orders, there was in existence a price list No. 8102 dated 15th February, 1981 and bearing Nos. 6201, 6202 and 6203, 6201Z, 6201ZZ and similar other bearings were operating in the price list. The foreign suppliers after the receipt of the order placed by the indenting agents had duly acknowledged the order and after the arrival of the consignments, invoices were issued in favour of the importers, M/s. Mirah Exports and the rate of commission was 3%. In the price list there was no indication of any kind of discount. The 20% discount was discretionary and the same was not admissible under Section 14 of the Customs Act, 1962. More than 20% discount was given by SKF and the respondents call it as a special discount. The learned SDR further argued that the price at which the goods were sold to the respondents after giving a discount of 20% could not be called a price at which the goods were ordinarily sold. Shri Doiphode argued that discoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....He has further stated that the presumption under the law is that the seized documents were the correct documents. He has referred to para No. 10 of the Additional Collector's Order which deals with the documents. Shri Doiphode has argued that indenting agent had created a monopoly for its canvassers M/s. Punjab Bearing Traders, and in support of his argument he has referred to the letter written by M/s. Skefko India Bearing Co. Ltd. addressed to Punjab Bearing Traders which appears on page 200 of the paper book. He has referred to the letter dated 22nd June, 1982 addressed to Mr. Ulf seized from the premises of M/s. Associated Bearings which appears on page 173 and 174 of the respondents' paper book, and the said letter has been discussed on internal page 16 of the order-in-original where there is a reference to the monopoly imports by Vohra, and in the letter itself there is a mention that the goods are to be sold at throw away prices and the respondents objected to the admissibility of this letter on the ground that the same was not seized from the office premises of the appellant. The letter was not signed and whether there was any reply to the said letter and the writer of this....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... seen whether there was special relationship between the seller and the buyer/indenter (canvasser in this case). He has referred to paras (a), (b) and (c) of internal page 37 of the order-in-original. He has argued that the adjudicating authority has not applied its mind correctly, and there is a special relationship between the supplier and the buyer. He has pleaded that no kind of special discount or quantity discount is admissible under Section 14 of the Customs Act, 1962, and has also referred to Section 30 of the Old Sea Customs Act. He has again referred to page 103 of the respondent's paper book which is the pricing policy of the respondent. He has also referred to the provisions of Section 4 of the Central Excises and Salt Act, 1944 and has argued that the concept of charging different prices is not prevalent under the Customs Act, though the same was admissible under old Section 4 of the Central Excises and Salt Act. It was so held by the Madras High Court in the case of Sharada Silicate and Chemical Industries v. Collector of Central Excise, Coimbatore and Another reported in 1979 E.L.T. J-20. He has referred to another judgment of the Patna High Court in the case of Prad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing Ltd. v. Union of India and Others. (5) 1987 (27) E.L.T. 344 - General Marketing & Manufacturing Co. Ltd. v. Collector of Customs, Madras. (6) 1985 (22) E.L.T. 283 - Automotive Enterprises v. Collector of Customs, Bombay. Shri Doiphode has pleaded for the acceptance of the appeals. 8. Shri K.M. Desai, Senior Advocate, Shri B. Parikh and Shri Darak, Advocates have appeared on behalf of M/s. Skefko India Bearing Co. Ltd. Shri Desai, the learned senior advocate, who has appeared on behalf of the respondent, has stated that for the proper appreciation of the legal position, the provisions of Section 14 of the Customs Act, 1962 have to be analysed and he has stated that time and place of importation is very important. He has argued that one cannot stick to the price list and the same can always be revised. He has stated that there is no interest of business with exporter, and the importer and invoice value is the correct price, and the same is normally accepted, in case the revenue chooses not to accept the same, the burden of proof is on the revenue to prove that invoice price is not the correct price, and the revenue has to discharge the burden of the same. In support of his ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under Section 17 of the Customs Act, the department can assess the duty at a different rate. Shri Desai, the learned senior advocate, has pleaded that in some other matter there was importation of goods from Rumania and the department had accepted the value in that case. He has further argued that the price determined on the basis of trade practice has been recognised in various decisions of the Tribunal and two different prices offered under two different circumstances have been accepted. He has referred to the following judgments :- (1) 1984 (15) E.L.T. 151 (Tribunal) - Mangala Brothers v. Collector of Customs, Bombay (para 7) "We have heard both the parties at great length. We agree with the learned advocate for the appellants that the Department has not been able to put forth any strong grounds in support of their case. The lower authorities have relied on the invoice dated 25-6-1981 issued by M/s. Esquire (Electronics) Ltd. We observe that this invoice covers only 100 pieces of National Video Cassette Tapes E-180. There is a lot of force in the argument advanced by Shri Nankani that it is extremely unfair to the appellants to appraise their price for National Cassette Tapes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....serious charge like under-valuation raised against the appellants." (2) 1983 E.L.T. 2380 - Gordon Woodroffe & Co. (Madras) Pvt. Ltd., Madras v. Collector of Customs, Madras Where the Tribunal had held that: "There was nothing unusual in the supply of some quantity of tungsten ore at a fixed price and some quantity at the formula price. Since the Department has produced no evidence to show that the other Indian importers of tungsten ore, who contracted for the goods at about the same time, had paid any different price, nor there was any evidence on record to indicate that the Department doubted the bona fides of the transaction or the fixed price obtained by the appellants was not a price at arm's length, they were not justified in escalating the contracted price of US $ 129.50 for the smaller consignment of 60 M.T." (3) 1987 (29) E.L.T. 318 (Tribunal) - Weston Electroniks Ltd., New Delhi v. Collector of Customs, Bombay "The onus to prove the charge of under-valuation against the appellants was on the Customs House and the evidence relied upon by them, as contained in the adjudication order, is not at all sufficient to discharge that onus. There is no cogent, evidence on record ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rred to a note by Mr. H. Tully, Director on his visit to India which appears on pages 96 and 97 of the paper book. He has referred to the provisions of Section 14 of the Customs Act, 1962 and has also referred to the provisions of Sections 17 and 46(1) of the Customs Act. He has referred to para 17 of the order-in-original. At page 30 of the order-in-original the adjudicating authority has observed that: "I, therefore, find that the policy of selling additional volumes at higher discounts is totally within the ambit of the expression "in the course of international trade" of Section 14 ibid. It also does not by itself constitute any special interest between the seller and the buyer in the business of each other." He has pleaded that the invoice price is based on the pricing policy which is incorporated in the letters and telexes received from SKF Bearing Division, Sweden. He has argued that the department has got no contemporaneous evidence and as such invoice value has to be accepted. In support of his argument he has referred to the judgment in the case of Maheshwari Trading Corporation v. Collector of Customs, New Delhi reported in 1987 (29) E.L.T. 739 (Tribunal) and judgment in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of the Tribunal in the case of Collector of Customs, Bombay v. Maruti Udyog Ltd., Giirgaon reported in 1987 (28) E.L.T. 390, where the Tribunal had held that: "Mere holding of 26% equity shares by Suzuki in Maruti and proprotional representation of Suzuki in Board of Directors of Maruti not amounting to mutuality of interest." He has also referred to another judgment of the Tribunal in the case of Albright Morarji and Pandit Ltd., Bombay v. Collector of Central Excise, Bombay reported in 1987 (28) E.L.T. 539 (Tribunal) where the Tribunal had held that: "There was no material to show that the appellants' company had any interest in the business of M/s. D.M.C. Co. Ltd., and vice-versa. The fact that M/s. D.M.C. held 30% shares in the appellants' company and two of the directors in both the companies were common, will not go to establish that they are related persons." The said judgment was based on the Supreme Court judgment in the case of Union of India and Others v. Atic Industries Ltd. reported in 1984 (17) E.L.T. 323 (SC). Commenting on the judgments cited by the learned Senior Departmental Representative, he stated that Pradip Lamp case reported in 1977 E.L.T. 130 is not ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case of Controller of Stores, Bombay v. Collector of Customs, Bombay where it was held that fair transaction value under Section 14(1) of the Customs Act should be accepted. He has also referred to another judgment in the case of Prembhai Chhibabhai Tangal v. The Union of India and Ors. reported in 1987 (13) ECR 1109 (Bombay). Lastly he has referred to the judgment of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa reported in 1978 E.L.T. (J 159). Shri Lakshmi Kumaran further states that his other arguments are the same which have been put forth by Shri Desai, the learned senior advocate. 10. Shri B. Parikh, the learned advocate who has appeared in appeal Nos. C/1473/87-A, C/2426/87-A, C/2435/87-A and C/2472/87-A, states that the facts are similar. The only difference is that Skefko India Bearing Co. Ltd. himself is the importer and the goods are similar as in appeal No. C/1925/85-A. He has pleaded that his arguments are the same which were advanced by Shri Desai, the learned Senior Advocate in these appeals. The only difference is that Skefko India is the appellant and the Collector had adopted the value on the basis of the price list No. 8102 dated 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces of the case. In the matter before us, Skefko India Bearing Co. Ltd. are the indenting agents of SKF Bearing Division, Sweden and Punjab Bearing Traders are canvassers and Mirah Exports Pvt. Ltd. are the importers. The orders were placed in July, 1982 by Punjab Bearing Traders, the canvassers with Skefko India Bearing Co. Ltd. and SKF further placed order with the exporter, namely, SKF Overseas Bearing Division, Sweden. The orders were for ball bearing type Nos. 6201, 6202, 6203, 6201Z, 6201ZZ, etc. The respondents had filed the bills of entries, and in support of the valuation copies of the invoices were also filed. On or about 22nd June, 1983, pursuant to certain information, the officers of the Enforcement Directorate carried out the searches at the following premises :- (i) M/s. Skefko India Bearing Co. Ltd., M.G. Memorial Building, Netaji Subhash Road, Bombay - 400 002. (ii) M/s. Associated Bearing Co. Ltd., Hoechest House, Nariman Point, Bombay - 400 021. (iii) Shri Kishan Chand, 74, Somerset House, Bhulabhai Desai Road, Bombay. During the course of search, certain documents were taken over by the Enforcement Directorate. Among the other documents seized was the price ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tral Government is satisfied that it is necessary or expedient so to do it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods and where any such taiff values are fixed, the duty shall be chargeable with reference to such tariff value. (3) For the purposes of this section - (a) "rate of exchange" means the rate of exchange - (i) determined by the Central Government, or (ii) ascertained in such manner as the Central Government may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency; (b) "foreign currency" and "Indian currency" have the meanings respectively assigned to them in the Foreign Exchange Regulation Act, 1973 (46 of 1973). A simple perusal of clause (a) of sub-section (1) of Section 14 will show that in determining the value for the purposes of assessment the following have to be seen : (1) The price at which such or like goods are sold or offered for sale, for delivery at the time and place of importation or exportation. (2) The price has to be in the course of the international trade. (3) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....em. 13. On the other hand, Shri Doiphode, the learned SDR on behalf of the appellant agitated that in custom importation matters the price is governed by provisions of Section 14 of the Customs Act. Shri Doiphode, on the other hand, stated that there is a gross under-valuaton in the price of the bearings even to the extent of 75% which is unheard. He argued that the value as per the price list should be adopted for the purposes of assessment in terms of Section 14 of the Customs Act. He relied on the following judgments :- (1) 1987 (28) E.L.T. 318 (Tribunal) - Macneill & Magor Ltd., Calcutta v. Collector of Customs, Calcutta. (2) 1984 (18) E.L.T. 203 (Delhi) - Oswal Woollen Mills Ltd. v. Collector of Customs, Bombay and Others. (3) 1983 (14) E.L.T. 2177 (Bombay) - Satellite Engineering Ltd. v. Union of India and Others. (4) 1987 (31) E.L.T. 356 (Bombay) - Satellite Engineering Ltd. v. Union of India and Others. (5) 1987 (27) E.L.T. 344 - General Marketing & Manufacturing Co. Ltd. v. Collector of Customs, Madras. (6) 1985 (22) E.L.T. 283 - Automotive Enterprises v. Collector of Customs, Bombay. We have perused the price list No. 8102 dated 15th February, 1981 and also the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... like other present day white collar economic offences, sophisticated jobs. One does not get at direct and positive evidence like bogus invoices or documents relating to extra remittances just for the asking. Such evidence becomes available only rarely and that too when raids and searches are conducted on receipt of specific information. It is neither possible nor desirable to organise raids and searches in every case where the declared price is found to be appreciably low, particularly when other independent evidence, such as the published catalogue price coupled with the price actually charged in previous similar importations, can be adduced. The final conclusion, of course, must rest on the peculiar facts and circumstances of each case. We, therefore, do not accept the appellants' first proposition that just because no bogus invoice or other evidence of extra remittance had been discovered in their case, confiscation and penalty proceedings cannot be initiated against them." 14. Shri Desai, the learned Senior Advocate, had argued that Macneill & Magor Ltd., judgment is not applicable in the present matter, as in that matter the observations of the Tribunal were in respect of pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... goods neither actual value nor invoice price nor price at which goods capable of being sold but price at which such goods, ordinarily sold or offered for sale, i.e., market price, at time and place of importation and in the course of international trade does not signify invoice price. Para No. 5(c) and 5(e) to (k) are reproduced below :- "(c) the deemed value of imported goods, where duty is to be levied ad valorem is, in terms of S.14 of the Act, not their actual value, the invoice value or the price at which they are capable of being sold. It is, on the contrary, the price at which such goods are ordinarily sold or offered for sale at the time and place of importation, i.e., the market price at the time and place of importation [Cl. (a) of S. 14 of the Act] and where it is not so ascertainable, its nearest equivalent determined in accordance with the Customs Valuation Rules, 1963 [Cl. (b) of Section 14 of the Act]. This was so even in terms of S. 30 of the Sea Customs Act (1978 E.L.T. 260 - Vacuum Oil Company v. Secretary of State - wherein it was laid down that it was the "price current for staple articles, the amount of which, if not a subject of daily publication in the pres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rice of sale in question; (i) nor does it follow that the invoice price is the assessable value in terms of S. 14(a), just because the buyer and seller have no mutual interest in the business of each other. The expression "where the seller and buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer of sale" is more a description of a price at which the goods or like goods are ordinarily sold - i.e., a market price which even conceptually excludes any price agreed upon on account of mutual business interests and necessarily implies that the price is the sole consideration; (j) in the facts and circumstances of the case, it has necessarily, to be held, as conceded by the Respondent, that the assessable value for the goods in question cannot be determined in terms of Clause (a) of S. 14 of the Act, since the price at which such or like goods are ordinarily sold at the time and place of importation, i.e. market price for such imported goods is unascertainable; (k) it is, therefore, in terms of S. 14(b) of the Act and the Customs Valuation Rules, 1963, that the assessable value has to be deterimined." 15. In view of the lega....