TaxTMI 
TaxTMI 
1985 (3) TMI 255
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....A, agreed to purchase and import one day old GP layer chicks as well as GP broiler chicks, prices for these varieties being fixed under an agreement. M/s BVH Limited had requested M/s Rallis India Ltd., who had Export House licences in their favour, to open letters of credit in favour of M/s Babcock International Corporation, to cover such imports. It is in respect of such imports, as well as later imports directly under licences in favour of M/s BVH Limited, that the disputes now under issue had arisen. We shall, in the first instance, give details in respect of each of the appeals separately, so that the disputes arising in each proceeding may be distinctly understood. Thereafter we shall take up for consideration the general issues arising in all these appeals and, on the basis of conclusions arrived at on such general questions, apply the same to the particular facts in each proceeding to arrive at a proper decision. 3. Appeals No. 963/80 and 964/80 (A) The agreement between M/s BVH Limited and M/s Babcock International Corporation relating to these appeals is dated 25-2-1974. It purports to be for a period of three years, to be effective till 31-12-1976. The prices agree....
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....ort invoice dated 21-9-1976 had shown the price as follows : 2000 L 46 0.70 Dollar each 1400 Dollars 1000 L 12 2.80 Dollars each 2800 Dollars 600 L 31 0.75 Dollar each 450 Dollars 300 L 34 2.85 Dollars each 850 Dollars In each of the invoices the price was mentioned as F.O.B. New York, air. freight being added thereto, to arrive at the total C & F Bombay price shown. Two show cause notices were issued with reference to these imports alleging that the prices declared and shown in the bills of entry were incorrect and were much lower than the actual prices and that there had thus been misdeclaration. It was also alleged that more quantity had been imported than declared in the invoices and bills of entry and thus there had been misdeclaration on that account also. Action was proposed, therefore, under the provisions of the Customs Act, 1962 as well as the Imports and Exports (Control) Act, 1947. Action was proposed thereunder against M/s BVH Limited as well as M/s Rallis India Limited. M/s BVH Limited pleaded that the excess quantity had been sent by the exporter without their (M/s BVH's)....
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....ne 34 (males) 200 The true value C & F Bombay was shown as U.S. Dollars 6559.83 but net C & F value, Bombay was shown as 4000 Dollars, the difference being mentioned as being absorbed by the shipper with no lien on documents. The invoice showed the price of 2000 chicks of line 46 at $ 2.50 each, no charge being mentioned in respect of the other three lines. This import was by M/s BVH Limited against their own REP Import Licence. Though Sri Nankhani has mentioned in his arguments that the quantity found on inspection was as mentioned in the invoice, it is seen from the order of the Deputy Collector of Customs dated 2-2-1978/2-3-1978 that an excess of 99 chicks had been found at the time of examination. On the basis of the value of the goods as assessed under the earlier order of the Collector dated 20-9-1977 (concerned in the earlier appeals), there was found to be an excess import above the licence value. Show cause notice was therefore issued for violation of the provisions of Imports and Exports (Control) Act, 1947 as well as the provisions of Section 111 of the Customs Act. M/s BVH Limited denied that they had misdeclared the value or the quantity and claimed that as they ....
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....er findings regarding the valuation, held that there had been misdeclaration regarding the value and therefore in view of the enhanced value for purposes of duty there had been failure with reference to proper licence also to cover the imports. As regards the contention that since they had mentioned in the bills of entry the assessable Value as declared by the department and that therefore there had been no misdeclaration, he pointed out that the importers had mentioned their own value as well as the value mentioned by the department and in such circumstances they cannot rely upon the mention of value according to the department to escape the charge of misdeclaration. He also pointed out that they had asked for provisional assessment only. He therefore directed finalisation of assessment on the basis of the value as determined by the department earlier and further imposed, under Section 112 of the Customs Act, penalties of Rs. 30,000, Rs. 63,000 and Rs. 72,000 respectively (for misdeclaration of value), and Rs. 12,500, Rs. 25,000 and Rs. 30,000 respectively (for ITC Contravention). On appeal to the Central Board of Excise and Customs it was ordered by the Board under order dated 31....
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....efore there had been no violation of any of the provisions of the Imports and Exports (Control) Act or the Customs Act. The Addl. Collector under his order dated 8-2-1980/11-11-1980 rejected the said contention and held that as the import of the goods was not properly covered by the licence produced therefor M/s. BVH Limited were liable for penalty under Section 112 of the Customs Act for violation of Section 111(d). He imposed a penalty of Rs. 35,000/- Appeal. The Central Board under its order dated 31-1-1981 held that the goods had been assessed finally and the importers had paid duty on the assessed value and therefore there was nothing for the Board to go into that matter. But the Board further held that there was no case made out of deliberate misdeclaration of value and there was no evidence of surreptitious payment in excess of the invoice value. Accordingly, the Board remitted the penalty in full. In their revision to the Government against the said order M/s. BVH Limited claimed that the value mentioned in the bill of entry should have been accepted as the proper value for purposes of duty and therefore the excess duty recovered should be refunded to them. It is the said r....
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....siness of each other and the price is the sole consideration for the sale or offer for sale : Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a Shipping bill or bill of export, as the case may be, is presented under Section 50; * * * * * *" It is therefore seen that under Section 14(1)(a) the value of purposes of assessment of duty is a deemed value and need not necessarily be the price agreed upon between the parties. Sri Nankhani has relied upon the decision in the Minerals and Metals Trading Corporation of India v. Collector of Customs, Bombay (1984 ECR 287) and, in particular, the passage at page 290 - "If the two contracting parties agreed to revise the contract on certain conditions, no third party has any right to question the terms of the contract. The price had been mentioned in accordance with the terms of the contract which were obtaining at the time the goods were supplied and the authorities below had no power to question the validity of the contract, more particularly when it is not a contract between private parties." But it may be not....
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....tends that the onus of proving misdescription is on the department and that this onus can be discharged only on proof of proper facts which would discredit the price mentioned in the bill of entry and not on the basis of mere suspicion or surmise. In the cases before us the misdescription is said to be either with reference to the quantity mentioned or the price mentioned or both. The evidence with reference to either type of misdescription will therefore have to be separately considered. 11. So far as the misdescription with reference to the quantity is concerned this question arises only in Appeals No. 963/80 and 964/80 and 1378/80. In the first two cases as against the declared quantity of 1775 chicks the actual count disclosed 2754 chicks to have been imported. M/s. BVH Limited or M/s Rallis India Limited do not dispute that excess quantity had been received. But the defense of M/s BVH Ltd. is that the dispatch of excess quantity was due to error on the part of the seller and M/s BVH Ltd. was not aware of the same in any manner. It is in this connection that the subsequent correspondence between M/s BVH Ltd. and Babcock International Corporation has been produced. It is poin....
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....ched due to mistake on the part of Babcock International Corporation and was not intentional and that in any event they (M/s. BVH Limited) had no knowledge at all of the same till the birds were counted on arrival, appears to be very probable. In any event, the above circumstances would be sufficient to give the benefit of doubt to M/s. BVH Limited regarding their participation in any intended excess import than the number mentioned in the invoices and the bill of entry. The contention for the department is that the ratio between male and female is to a large extent maintained even with reference to the excess quantity. This contention was advanced to suggest that the excess sent in the `D' line could not have been due to any accidental mistake. But the contention about maintenance of the ratio with reference to the excess quantity also is not strictly correct. Therefore, this would also not be a sufficient ground to infer any intentional excess in the number sought to be imported, Therefore for all the above reasons we are satisfied that the charge of misdeclaration, arising out of the quantity imported, is not established so far as the imports covered in appeals No. 963/80 and 96....
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....mentioned for each line separately and that is why in subsequent invoices prices were mentioned separately for each line by splitting up the price for the main line between all the four lines. But it is pointed out for the department that such an explanation cannot be straightway accepted since even after 1972 in the 1974 agreement the price is mentioned for the main line only and not for each line separately. But in assessing this charge, that M/s. BVH Limited had committed misdescription by intentionally showing a wrong price, it should be noted that when the prices as agreed upon were being mentioned in subsequent imports the Board itself had held (in appeal Nos. 1464 and 1465/80) that there had been no evidence of any extra remittance having been made over and above the invoice price. Therefore, in effect, the Board itself had held, with reference to these subsequent imports, that though the price mentioned in the invoices, which was in accordance with the price mentioned in the agreements, was not being accepted for purposes of value for levy of customs duty, the price as agreed upon between the parties was the price that was actually paid. In the circumstances it would be dif....
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....t, rejecting the price as mentioned in the invoices. It had been already seen that the price mentioned in the invoices would not conclude the matter since it would be open to the department to establish that though the parties may have really agreed upon such prices, duty could yet be demanded at a different value if the department is able to establish that the price agreed upon between the parties was not the international price, which would alone be relevant in terms of Section 14(l)(a) of the Customs Act. 16. But the question is whether the department has produced and relied upon such evidence to reject the invoice prices which, for the reasons mentioned earlier, there is no reason to believe, were not the real prices agreed upon between the parties. In rejecting the prices mentioned in the invoices the department had, in the first adjudication, relied upon a communication from the Ministry of Agriculture relating to current prices of GP stock and broilers imported by other local hatcheries. Since it is this letter that is mainly relied upon by the department to disbelieve the price mentioned in the invoices produced by the appellants in all the cases, it would be proper to e....
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.... the current prices of Babcock GP stock". It then proceeds to rely upon an agreement of April 1971 where the price was mentioned at $ 25 per female chick and therefore draws a conclusion that the price subsequently could not have been less but could only have gone up. While it may be possible to entertain such a speculation, that would not sufice as proof to arrive at a higher value for purposes of duty, in the absence of proof of actual import at such higher value by anybody else. The letter of the Ministry of Agriculture further relied upon information as to current prices of GP stock of other foreign exporters. But here again no details are given of the actual imports. The customs authorities should necessarily be in possession of records of such imports if they had taken place at the prices as mentioned in the letter of the Ministry. The omission on the part of the customs authorities to produce and rely upon such records would be a strong circumstance in favour of the appellants in their contention that there could have been really no such imports at the prices as mentioned in the Ministry's letter. In any event in the absence of such records it would not be proper to rely ....
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....ould only suggest that the price had been agreed upon between the parties after normal negotiations and such a price would therefore be the ruling price in the international markets at the relevant periods. 20. It is with reference to these conclusions which we have arrived at that, on application thereof to the facts of each case, the several appeals before us have to be disposed of. (i) Appeals No. 963 & 964/80 (A) In these appeals penalties had been levied on M/s Rallis India Ltd. as well as M/s BVH Ltd. Penalties had been levied under Section 112 of the Customs Act for contravention of Section 111(d) as well as 111(m). Sri Nankhani contends that there could be no case of unauthorised importation since the importations were under proper licences, the value of such licences being sufficient to cover the imports made. Therefore, he contends that there can be no case of contravention of Section 111(d). But it cannot be denied that if the goods had not corresponded, in respect of value or in any other particular, with the description in the bill of entry an offence under Section 111(m) would be made out. The misdescription is said to be with reference to the quantity as wel....
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....s. 60,000 on each of the appellants) have also to be set aside and are ordered accordingly. But so far as payment of duty is concerned M/s BVH Limited will be liable to pay duty on the entire imported goods at their invoice value, the entire excess of 979 birds being treated as `D' line only, in view of the statement of Mr. Barve agreeing to the same when he took charge of the birds. Duty is to be assessed on the basis of the declared value, which has been accepted by us to be the proper price. (ii) Appeal No. 1378/80 (A) In this appeal an excess import by 99 chicks had been found but no penalty had been imposed by the Deputy Collector on that ground. But on the basis of misdeclaiation in respect of value resulting in importation without cover of valid licence (as the licence produced was not sufficient to import the goods of the value as determined by the department) the Deputy Collector had imposed a penalty of Rs. 40,000 which had been reduced to Rs. 25,000 by the Appellate Collector. This imposition was under Section 112 for violation of Section 111(d) of the Customs Act. But in view of the conclusion that the price mentioned by the importer was not lower than the interna....
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....ombay High Court in Union of India v. Glaxo Laboratories - (1984) (17) E.L.T. 284 (Bombay) and the observations therein to the effect that though for purposes of assessment of duty the demand price as defined under Section 14 (1) (a) of the Customs Act would be relevant, the debit in the licence should be on the basis of the actual price paid. In the present cases it had already been held that the prices shown in the invoice were the proper prices and in fact they are to be accepted for the purposes of assessment of duty also. Therefore, we observe that the debit in the respective licences should also have been on the basis of the price of the imports as mentioned in the invoices (which have been already accepted as the proper price as also the proper value for assessment of duty). 22. In the result the five appeals are allowed to the extent indicated below and disposed of accordingly : (i) Appeals No. 963 and 964/80 (A) (a) The penalty imposed on M/s. BVH Limited (Rs. 20,000 as reduced by the Board) for violation of Section 111 (d) is set aside. The penalties with reference to misdescription with reference to quantity (Rs. 55,000 on each of the appellants) as well as misd....