TaxTMI 
TaxTMI 
2006 (7) TMI 232
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....consignments within the time stipulated in the contract, which may extend to about a year. According to the petitioner, in view of the inherent volatility in the price of silk, it becomes necessary to fix the price for the entire contracted quantity and not leave it to the vagaries of market forces. Through negotiations, the price is fixed and stipulated in the contract itself. Therefore, notwithstanding the market price at the time of actual import, the parties to the contract are bound by the price fixed in the contract. 4. According to the petitioner, a sales contract was entered into on 17-2-2005 for supply of 2,22,000 Kgs of Mulberry raw silk of 3A and above grade. The price for the entire contracted quantity was fixed at USD 13.50/Kg-CIF. Between 14-3-2005 and 29-8-2005, the petitioner received a total quantity of 163734.76 Kgs in 19 consignments for which separate Bills of Entry were filed. This constituted about 60% of the total contracted quantity. These Bills of Entries were finally assessed after enhancing the value to USD 13.94/Kg-CIF. Because of urgency for release of the consignments, the petitioner accepted the enhancement and cleared the goods. Under the same con....
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....4 of 2006 [2006 (203) E.L.T. 21 (Mad.)] seeking immediate release of the goods. This was disposed of directing the third respondent to follow unreservedly the order of CESTAT and to release the consignment in terms of the order of CESTAT dated 20-3-2006. The goods were released on 7-4-2006. The order passed by the CESTAT was challenged before the Supreme Court, which dismissed the civil appeal at the admission stage itself on 10-7-2006. While these proceedings were pending, the petitioner had made further imports under the same sales contract dated 17-2-2005 on various dates, the details of which are as follows :- 1. Bill of Entry No. 882827 dated 28-9-2005. 2. Bill of Entry No. 886036 dated 4-10-2005. 3. Bill of Entry No. 897030 dated 24-10-2005. 4. Bill of Entry No. 927999 dated 15-12-2005. 5. Bill of Entry No. 940217 dated 5-1-2006. In spite of the order passed by the CESTAT and this Court, the goods were permitted "only on furnishing personal bond pending decision from the Honourable Supreme Court." Since the petitioner was incurring huge expenditure by way of demurrage, the petitioner complied with the condition and cleared the goods. Thereafter, two more Bil....
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.... The Supreme Court referred to the various decisions on the same issue and held that in view of the settled legal position, the activity of the appellants of merely joining of three pipes, one with other, of different dimensions to obtain a desired length can by no stretch of imagination be brought within category of manufacture. The Supreme Court held as follows :- "Before issuance of show cause notices the Revenue must carefully take into consideration the settled law which has been crystallized by a series of judgments of this Court. The Revenue must make serious endeavour to ensure that all those who ought to pay excise duty must pay but in the process the Revenue must refrain from sending of indiscriminate show cause notices without proper application of mind. This is absolutely imperative to curb unnecessary and avoidable litigation in Courts leading to unnecessary harassment and waste of time of all concerns including Tribunals and Courts." 8. 2006 (199) E.L.T. 209 (Guj) Topland Engines Pvt. Ltd. v. Union of India was also relied on, wherein it was held that the issuance of show cause notice by the department refusing to implement the Tribunal's order is not legal. ....
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....p; the sale does not involve any abnormal discount or reduction from the ordinary competitive price; (c) the sale does not involve special discounts limited to exclusive agents; (d) objective and quantifiable data exist with regard to the adjustments required to be made, under the provisions of Rule 9, to the transaction value. (e) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which - (i) are imposed or required by law or by the public authorities in India; or (ii) limit the geographical area in which the goods may be resold; or (iii) do not substantially affect the value of the goods; (f) the sale or price is not subject to same condition or consideration for which a value cannot be determined in respect of the goods being valued; (g) no part of....
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....t of the two alternative values; (iii) the price of the goods on the domestic market of the country of exportation; (iiia) the cost of production other than computer values which have been determined for identical or similar goods in accordance with the provisions of Rule 7A. (iv) the price of the goods for the export to a country other than India; (v) minimum customs values; or (vi) arbitrary or fictitious values." 11. It is not disputed that the goods imported under the latest Bill of Entry forms part of the contract dated 17-2-2005. Even in the impugned order, there is a reference to this, as seen from the following lines:- " As stated in para (1) supra, goods covered by both the bills of entry have been imported at a unit price of USD 13.50/Kg based on a contract signed approximately 16 months prior to shipment of the subject goods." 12. The earlier show cause notice dated 29-11-2005 reads thus:- "9. Further the Apex Court, in the case of M/s. Rajkumar Knitting Mills (P) Ltd....
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.... (ii) Unit value of USD 22.36/Kg (CIF) should not be adopted under Rule 8 of CVR, 1988, by adopting the contemporary import price; 12. The importers are further called upon to produce at the time of showing cause all the evidence, documentary or otherwise upon which they intend to rely in support of their defence." **** 13. The present impugned show cause notice reads thus :- OFFICE OF THE COMMISSIONER OF CUSTOMS (PORT) CUSTOM HOUSE, NO.60, RAJAJI SALAI CHENNAI 600 001 Dated: 7-7-2006 SHOW CAUSE NOTICE UNDER SECTION 124 OF THE CUSTOMS ACT, 1962 SHOW CAUSE NOTICE SECTION NO.SCN/GR3-4/12/2006 SHOW CAUSE NOTICE MAIN NO.SCN/GR3-4/529/2006 JOB NO. 5581/2006 Despatched on 7-7-2006 Sub : Import of Mulberry raw silk by M/s. Pushpanjali Silk (P) Ltd., Vide Bills of entry No.230770 dated 5-6-06 and 239300 dated 19-6-2006 mis-declaration of Value -Drawl of adjudication proceedings Issue of SCN - Reg. **** M/s. Pushpanjali Silk (P) Ltd., Bangalore, filed the EDI Bills of Entry No. 230770 dated 5-6-06 and 239300 dated 19-6-06 through their CHA M/s. Viknesh Travel & Cargo Pvt. Ltd., for assessment and cleara....
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.... item at about USD 2 9.30/Kg. (approx) (the least contemporaneous value noticed in respect of goods of similar nature) is considerably higher than what has been declared in the impugned bills of entry. The declared unit price of USD 13.5/Kg., therefore, appears to be low and not acceptable, in view of the higher contemporaneous prices prevailing at the 'time' and 'place' of import of the impugned goods, at (or) about the same period. Further the goods are being imported from China, but the supplier is from Hong Kong. Therefore, the suppliers are not manufacturers. The price cannot be static for a period of 16 months as the goods is agricultural products. Further, it appears that the international price of mulberry raw silk are at variance and considerably higher than the prices declared by the importers. From the above it appears that the import prices declared by the importer are not in harmony or even approximate or close to the prevailing international prices. 4. In terms of sub-section (1) of Section 14 of the Customs Act, 1962, the international price prevailing at the time and place of importation shall be the basis of valuation for levy of Customs duty. Further sub-sectio....
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.... 6. The Notices vide their letters dated 29-6-06 and 30-6-06 have referred to the Order of the Honourable High Court of Madras in W.P.No.9284 of 2006 and Final Order No. 174 of 2006 dated 20-3-2006 of the Honourable CESTAT, Chennai, and have contended that the goods are required to be assessed at USD 13.94/Kg. (CIF) and clearance permitted accordingly. However, it appears that the orders of the Honourable CESTAT and Honourable High Court referred to by the Noticee refer to earlier and separate consignments for a single bill of entry and hence the ratio of the said orders cannot be made applicable in the present imports. 7. Above all the Apex Court, in the case of M/s. Rajkumar Knitting Mills (P) Ltd. v. Collector of Customs, Bombay [1998 (98) E.L.T. 292 ( SC)] has held that:- "valuation (Customs) Relevant date contract between buyer and seller may have a bearing in governing inter se relationship between the two, but relevant date for determination of value for assessment of customs duty is the date of importation or exportation and not the date of contract" Apex Court had further held that "the words ordinarily sold and offered for sale do not refer to the contr....
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....support of their defense. **** 14. It will be seen that the contents of the show cause notices dated 29-11-2005 and 7-7-2006 are almost identical. Against the earlier show cause notice, an appeal was filed and the appellate authority noted that there is no allegation that the contract price between the supplier and the buyer is obtained under extraneous situations or there was any extra flow of money in the transaction through authorised or unauthorised channels. The only ground on which the declared price had not been accepted is because of higher contemporaneous prices prevailing at the time and place of import of the impugned goods. The appellate authority found that the lower authority had not challenged the correctness of the contract price, but had felt that the contract price dated 17-2-2005 which was about seven months old, is not acceptable and would merit rejection, since it is not the prevalent international market price. The only difference between the earlier show cause notice and the present show cause notice is that in the earlier show cause notice, the contract price was refuted because it was seven months old, whereas, with the passage of time the same contra....
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.... doing so he would have to compare the contract price with similar other prices, and the conditions of the other contracts, or bring out how the prices of other buyers are relevant to the case. However, once having accepted a contract price, and permitted the clearance of goods, it would hold good for the entire contracted quantity unless omissions or commissions having a bearing on the value are subsequently shown, and then this value would have to be adopted for the earlier clearances as well under the same contract. There is hence merit in the appellants contention that when out of a total 277 Mts covered under the contract dated 17-2-2005, the appellant had imported and cleared 164 MTS (60% of the entire contracted quantity) at the price of US$ 13.94/Kg CIF, the sudden enhancement of the value to US$ 22.36/Kg. CIF was not warranted. In view of the above discussion and the facts and legal positions stated therein the lower authority's order is set aside and the appeal is allowed for the transaction value of US$ 13.94/Kg-CIF accepted by the appellant." (Emphasis supplied) 15. In the appeal filed against the order of Commissioner (Appeals), CESTAT held as follows :- "... ....
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....tas. There the goods imported were oil rigs which was subject to volatile fluctuation in price. The contract was entered into in January 1999, the import was in May 2000. "16. The ambit and method of Rule 4 was elaborately dealt with by this Court in Eicher Tractors Ltd. v. Commr. of Customs. 17. It is true that the Rules are framed under Section (1) and are subject to the conditions in Section 14(1). Rule 4 is in fact directly relatable to Section 14(1). Both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularised in Rule 4(2). 18. Rule 4(1) speaks of the transaction value. Utilisation of the definite article indicates that what should be accepted as the value for the purpose of assessment to customs duty is the price actually paid for the particular transaction, unless of course the price is unacceptable for the reasons set out in Rule 4(2). "Payable" in the context of the langugage of Rule 4(1) must, therefore, be read as referring to "the particular transaction" and payability in res....
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....r allegation that the transaction value does not reflect the contract value has been made. Therefore, for the goods covered by the same contract and imported within the contract period (viz., within 3rd September 2006) two different values cannot be adopted. Each consignment covered by each Bill of Entry forms part of the goods supplied under one single contract dated 17-2-2005. The reasoning of the appellate authority as well as the CESTAT with regard to the earlier Bills of Entry are equally applicable to the present case. In spite of that, the third respondent has chosen to issue the show cause notice in defiance of the earlier decision of the CESTAT in respect of goods cleared under the same contract. 18. With regard to the same petitioner, in respect of imports under the same contract, it has been held that the contract value alone will be the transaction value : This order of the appellate authority has now become final. The present import is within the contract period. The reasons given in the earlier show cause notice have been rejected outright. The same reasons are given in the present impugned notice. If that is so, I do not see why again and again the petitioner shou....