ORDER
V.P. Gulati, Member (T)
1. These appeals are against the order of the Additional Collector of Customs, Madras. The appeals involve common issue and are therefore taken up together for disposal.
2. Brief facts are that the appellants imported Brass Ash Dross from M/s. Charney Ltd, Florida, U.S.A. and declared the invoice value based on the invoice price. The authorities however on information that the value had been misdeclared conducted investigations and sought to assess the goods based on the price of copper as given in the metal bulletin showing the London general price. There was no separate price list shown for Brass Ash Dross in the said metal bulletin, but the authorities worked out the price based on the formula for price of Brass Ash Dross as given in the Metal Bulletin as under:
“For 10 tonne lots and over delivered buyers works with Cu contents of upto 30%, a deduction of 2.5 units is made, while for material containing 30% to 50% Cu, a deduction of 2 units is made. Cu contents is paid for at lowest LME, Cu, quotation on the day less pound 60. A treatment charge is then deducted pound 135 -145 per tonne for material upto 30%. Pound 190 – 200 tonne for material 30% -50% and pound 240 – 250 tonne for material over 50%.”
3. Show cause notice was issued to the appellants indicating the higher price, worked out based on the above, at which the authorities wanted to assess the goods and the importers were charged with misdeclaration of the value of the goods. Enhanced duty based on this value was also sought to be charged. The appellants resisted the demand and urged that the value as declared by them should be accepted for the purpose of valuation under Section 14(1) of the Customs Act, 1962 it being the transaction value. They also cited some of the contemporaneous imports of similar goods made at Madras and Bombay where invoice value had been accepted and which value was about the same as declared by them and pleaded that the value should in the alternative be determined as per the valuation clause 3(1) or 5 to 8 of the Customs Valuation Rules. They also furnished copies of the Bill of Entries of the importations earlier allowed. They also pleaded that the Metal Bulletin on which the prices were based as such did not contain the price for Brass Ash Dross and the formula as given in the Metal Bulletin relied upon could not form the basis for working out the enhanced value for the Brass Ash Dross imported by them. They further pleaded that copper derived from Brass Ash Dross could not be of the prime quality and therefore the price as worked out from the Metal Bulletin based on the prime quality copper could not form the basis for valuation. It was further submitted that the prices declared by them in the Metal Bulletin were for sale in London while the appellants had imported the goods from USA and therefore, the same could not be relied upon for valuation purposes.
4. The learned lower authority took note of the following pleas made by the appellants:
(a) The LME Bulletin formula is applicable only for the local goods for sale in UK and are not applicable for the goods which are meant for export to other countries;
(b) As they have contract entered into in Aug. 1988, as per the GATT Valuation Rules their contract value is to be accepted. Even if we go by the formulae given in the metal bulletin, the valuation according to the calculation given by them works out to US $ 391/-.
(c) Brass Ash Dross is an inferior raw material than Brass Scrap and accordingly, the price of Brass Ash Dross is invariably lower.
(d) The Department had gone wrong in taking the value of the prime metal as per the date of shipment and not as per the date of contract. If the date of contract is taken into consideration, since there has been an enormous increase in the price of prime copper between August 1988 and Nov. 1988, even if the formula given in the metal bulletin is accepted, the valuation of prime copper as on date of contract is to be taken.
and held as under:
(a) LME prices are not the commercial price for U.K. and they are export price for international trade and for arriving at the value for dross in the bulletin these are not theoretical, but based on scientific principle.
(b) Transaction value could not be accepted as the computer print-outs for similar importation through Bombay for Brass Dross/Ash where the copper content is 45% to 50% is US $ 600 per M.T. and therefore recourse had to be had to the Rules of Valuation and that in view of the nature of the goods since the copper content varied from lot to lot, Rules 5 to 8 could not be pressed into service and the matter had therefore to be decided based on Rule 11 of the Valuation Rules.
(c) If value based on their plea taking the price of copper and the date of their contract for the supply of the same, and not on the date of shipment was acceptable as pleaded by the appellants then on that basis, based on the formula as worked out in the earlier paras, he fixed the value at a level lower than what was originally set out in the show cause notice but higher than what was declared in the invoice.
5. No penalties were levied on the appellants for the reason that the Department failed to show that there was any misdeclaration or there was any illegal transaction in foreign exchange. It was for this that the appellants are in appeal against the above findings of the learned Additional Collector.
6. The learned Consultant for the appellants pleaded that the appellants have made imports in the course of international trade and there were no extra-commercial relationship between them and the suppliers. He has pleaded that the authorities have failed to show that there was any remittance of foreign exchange or there was any deliberate element of misdeclaration involved. In fact the appellants have been absolved of this in the order of the learned lower authority wherein he has given reasons for refraining from levying any personal penalty on the appellants. He has pleaded that the London Metal exchange price could not form the basis for arriving at the value under Section 14(1) of Customs Act, 1962. As it is, he has pleaded that the Metal Bulletin price relied upon by the learned lower authority could be applicable for shipment from London and therefore was not relevant for arriving at the value for importation of the goods from USA. In this connection he drew our attention to the photostat copy of the relevant sheet of the Metal Bulletin of November, 1988 in respect of UK. He has pleaded that in the opening paragraph it has been stated that the table represents the current market values in the UK and further goes to show that there was however, normally some regional variations and that the prices of scrap are the consumers’ buying prices delivered to their works in London and the Midlands. He has pleaded that this goes to show that the prices in the Metal Bulletin so far as the copper was concerned were for the local market as otherwise there was no need for mentioning the price for delivery to the works in London and the Midlands. He has pleaded that in that view of the matter, reliance placed by the learned lower authority on this Bulletin was totally misplaced. He has also pleaded that the learned lower authority had also erred in not applying the formula correctly. The formula provided for reduction £ 60 from the price of prime copper and pleaded that this reduction should be given after the unit reduction as provided for and if that be done, the price declared will approximate to that worked out based on the formula. He has further pleaded that the lower authority had totally ignored the appellants’ plea that similar imports based on the invoice price had been allowed and the price of the goods in those cases approximated to that declared by the appellants taking into consideration the copper content in the lots imported. He has pleaded that the lower authority had referred to some price given in the computer print-outs and had not furnished full details in regard to the same to the appellants either in the show cause notice or at the time of personal hearing and had taken note of the price behind their back while at the same time the lower authority has chosen to ignore the earlier imports at Bombay and Madras as cited by them. He has pleaded that in that view of the matter, the lower authority’s order suffers from serious lacunae as the learned lower authority could not have relied upon any piece of evidence not made known to the appellants and could not have ignored the instances of imports made at about the same prices. He has pleaded that as it is the rationale for arriving at the price of the goods based on the formula – LME was flawed inasmuch as while percentage of the copper as ascertained chemically has been adopted as the basis for arriving at the reduced price, while that percentage of copper was not available for recovery. He has pleaded that the recovery made from the Brass Ash Dross was not to the extent of 100% as ascertained chemically, and in some cases, the percentage was as low as 50 to 55%. He has further pleaded that the quality of copper recovered was not of prime quality and contained impurities which would affect the price that the copper can fetch. He has pleaded that the onus to prove under valuation was on the authorities and in this connection he cited the following case laws:
(a) Gordon Woodroffe & Co. Madras P. Ltd. v. CC, Madras – reported in 1983 (14) E.L.T. 2380.
(b) Mangla Brothers v. CC, Bombay – reported in 1984 (15) E.L.T. 151.
(c) Rakesh Press, New Delhi v. CC, Bombay – reported in 1985 (21) E.L.T. 140.
(d) R.N. Agarwal and Co. v. CC, Bombay – reported in 1985 (22) E.L.T. 165.
(e) Orient Enterprises v. CC, Cochin – reported in 1986 (23) E.L.T. 507.
(f) Weston Electroniks Ltd. v. CC, Bombay – reported in 1987 (29) E.L.T. 318.
(g) Steel Tube Products v. CC – reported in 1989 (44) E.L.T. 97.
(h) Ghamhyam Chejra v. CC – reported in 1989 (44) E.L.T. 202.
(i) Kay Pee Enterprises v. CC – reported in 1990 (45) E.L.T. 644.
(j) Sippy Pramod Steel Alloys Pvt. Ltd. v. CC – reported in 1990 (45) E.L.T. 444.
(k) Ambitious Gold Nib Mafg. Co. Pvt. Ltd. v. CC – reported in 1990 (47) E.L.T. 396.
He has pleaded that as would be seen from the case laws cited above, it is well settled that the burden to prove the charge against the appellants squarely lies on the Department. It was incumbent on the authorities to show that the imports have been made at a higher price and that the invoice did not represent the correct price charged by the exporter to the importer. He has pleaded that the Hon’ble High Court of Calcutta in the case of Ghanshyam Chejra v. Collector of Customs, reported in 1989 (44) E.L.T. 202 has observed that “once the Customs authorities have accepted the value of a particular item it becomes a precedent and subsequently it cannot hold that the valuation is not correct”. In the case of Kay Pee Enterprises v. Collector of Customs, reported in 1990 (45) E.L.T. 644, the Tribunal has held as under:
“As for the reliance placed on the Metal Bulletin for arriving at the valuation we find that for discarding the Invoice value for the purposes of Section 14 of the Customs Act, 1962, the department should produce evidence of contemporaneous import of similar or identical goods at higher values. This has been well settled by the case law cited by the appellants. We find that not only is there no evidence of value of similar or identical goods imported contemporaneously but the department also not given any finding with regard to the evidence produced by the appellants to the effect that values comparable to those declared by them had been accepted in Bombay Customs House for the same goods. In the circumstances, therefore, merely based on the prices published in Metal Bulletin, which itself declares in the preamble “the following table represents our evaluation of current market values in the UK … Owing to the nature of scrap market it is impossible to quote precise prices and it is important that the indication should be read in conjunction with the relevant market comment” and without any supporting evidence of contemporaneous import, the value so determined will not be in accordance with the provisions of Section 14(1) of the Customs Act, 1962. In this view of the matter, therefore, the Additional Collector’s order is not maintainable. It is set aside and the appeal allowed”.
He has pleaded that unless the transaction value under Rule 4(1) of Valuation Rules under Section 14 of Customs Act, 1962 is shown as unacceptable, the authorities cannot proceed to invoke the other Rules for the purpose of arriving at the assessable value. He has pleaded that in the present case no reason has been given as to why the assessable value could not be accepted and reliance has been placed only on the London Market exchange price and the higher price of goods imported at Bombay has been relied upon without making it known to the appellants in the show cause notice or thereafter before adjudication order was passed. He has pleaded that in the above view of the matter, the lower authority’s order has to be set aside. On a query from the Bench as to whether the appellants have entered into any correspondence leading to the placing of the orders and also if there was any material showing the basis on which prices had been agreed upon, the learned Consultant stated that the appellants have entered into the transaction over telephone and obtained the best price available in USA market and that there was no documentary evidence or correspondence in this regard. The learned Consultant also pleaded that Brass Ash/Dross is a regular item of import and in this connection he cited the publication titled “Non-Ferrous Report” issued from Bombay which contains the particulars of Brass Ash/Dross during week ending 31-12-1988. He has pleaded that the prices at which the goods have been imported both at Bombay and Madras are in the range of US $ 390 to 425 per M.T.
7. The learned D.R. for the Department took us through the order of the learned lower authority and pleaded that the learned lower authority had adopted the value based on the international publication and it was accepted in the trade as reflecting sale price of the various items listed therein in the course of international trade. He pleaded that formula for arriving at the value of the goods in question has been rightly applied in case of the import by the appellants. He pleaded that the lower authority while arriving at the value also took note of the prices at which similar goods have been imported at Bombay and pleaded that the price fixed is not theoretical one but the same has been arrived at after taking into consideration not only the price in the LME bulletin but also the import price of the same goods in India. He pleaded that in the facts and circumstances as held by the learned lower authority, the application of Rule 11 of the Valuation Rules was correct in law and prayed for upholding the order of the learned lower authority.
8. We observe that the issue that falls for consideration is whether the value as declared by the appellants can be accepted or not for the purpose of Section 14 of the Customs Act, 1962. The appellants’ plea is that the invoice price is transaction value and there is no need for arriving at the value under Rule 11 of the Valuation Rules. It is, therefore, desirable to examine whether the invoice value has all the attributes of transaction value. Transaction value under Section 14 of the Customs Act, 1962 has been provided for under the Rules framed in this behalf under Section 14(1)(a). Section 14 of the Customs Act, 1962 is reproduced below for convenience of reference:
“14. Valuation of goods for purposes of assessment
(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business 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 exports, as the case may be, presented under Section 50.
(1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf.
(2) Notwithstanding anything contained in sub-section (1). [or sub-section (1A)], if the Central 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 tariff values are fixed, the duty shall be chargeable with reference to such tariff value.
(3) For the purpose of this section:
(a) rate of exchange means the rate of exchange
(i) determined by the Central Govt., or
(ii) ascertained in such manner as the Central Govt. may direct for the conversion of Indian currency into foreign currency or foreign currency into Indian currency.”
(b) xxx
9. Under Customs Valuation Rules, 1988, under Rule 2(f) “transaction value” means the value determined in accordance with Rule 4 of these rules, which provides for transaction value as under:
“4. “Transaction value” (1) The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these Rules.”
(2) The transaction value of imported goods under sub-rule (1) above shall be accepted:
Provided that:-
(a) 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.
(b) 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;
(c) No part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these rules, and
(d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below.
3. (a) Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price”.
(b) & (c) xxxxx.”
10. It is seen transaction value of the imported goods may be accepted if it is the price actually paid or is payable for the goods subject to adjustment in accordance with the provisions of Rule 9 of the Valuation Rules and provided that it satisfies the conditions as are set out under sub-rule (2) of Rule 4 of the Valuation Rules, 1988; In the present case we find that the appellants have merely sought for acceptance of the invoice value and pleaded that the same should be treated as reflecting the transaction value. We observe that for any claim for acceptance of transaction value, the pre-requisite is satisfaction of the conditions as set out under sub-rule (2) of Rule 4 of the Valuation Rules, 1988. For the authorities to be satisfied in regard to this, it would be essential for the authorities to have a look at the documents leading to the finalisation of the price including the relationship between the buyer and seller. The appellants’ plea is that they entered into a contract over Telephone and whatever prices have been agreed to should be taken to be the transaction value. This, we are afraid, cannot form the basis for acceptance of the transaction value. It is clearly envisaged in the Rules that the transaction value would be accepted provided that the conditions set out in sub-rule (2) of Rule 4 are satisfied. In short, the rules, we observe, cast a responsibility on the appellants to satisfy the authorities that the price has the attributes satisfying the conditions as set out in the Rules as above. We find in the present case that the appellants have not produced any price list from USA or any correspondence which would satisfy the authorities that the transaction entered into was in the normal course of international trade and it is not hit by any one of the conditions as set out under sub-rule (2) of Rule 4 of the Customs Valuation Rules, 1988. The appellants having failed to produce any evidence in support of their claim that invoice price reflects the transaction value cannot as a matter of right ask for the acceptance of the same as the transaction value for the purpose of assessment. It would have been a different matter in case in spite of production of the necessary evidence in this regard, the authorities had not accepted the invoice price. In that case the authorities would have been duty bound to give reasons for not accepting the price. However, where the importer has not laid any basis for acceptance of invoice price as transaction value then the authorities are legally right to proceed to fix the price under the Valuation Rule 5 onwards. However, this does not mean that the authorities also can fix any value for the purpose of assessment unless any basis for the same under the Valuation Rules has been laid. The learned lower authority has straightaway proceeded to fix the value under Rule 11 by simply observing that in the facts of this case, the other Valuation Rules are not applicable. The learned lower authority has taken note of the imports at higher prices made at Bombay and the same do not appear to have been made known to the appellants. The order of the learned lower authority does not show that the goods imported at Bombay were from same source or from same country i.e. U.S.A. and whether the goods were identical, similar or comparable and also whether the imports were near about the relevant time. The learned lower authority has relied upon the LME Bulletin and has proceeded to fix the value based on the formulae set out therein. We observe that, as pointed out by the learned Consultant for the appellants, as it is this Bulletin does not show the prices of Brass Ash/Dross. It is not clearly shown that the prices therein are for international market. The heading appears to show that the prices represent the current market value in U.K. and the higher prices in the price range typifies higher consumers’ buying levels. There is also mention that there is some regional variations also. Prices of lead scrap are the consumers’ buying prices delivered to their works in London and the Midlands. It has been further stated therein that owing to the nature of the scrap market it is impossible to quote precise prices and it is important that the indications should be read in conjunction with the relevant market comment. It would thus be seen that the price given in the table which has been relied upon by the learned lower authority cannot be conclusively taken to be reflecting the international prices as pleaded by the learned Consultant. These prices could be the prices for the U.K. market. It is clearly set out in this bulletin that the prices for relevant goods could not be quoted. If this table does not indicate the international market price it is not understandable as to how the prices can be taken to be reflective of the correct market position. We, therefore, hold that the theoretical prices worked out based on the LME bulletin cannot be accepted as the basis in the absence of any corroborative evidence of import at the prices indicated. The appellants, we find, have brought on record that similar goods have been ‘ imported both in Bombay and Madras at near about the same price as theirs. The learned lower authority has not given any reason for not taking cognisance of the same. The learned lower authority on the other hand has relied on the price in the computer printout of similar imports without furnishing the appellants with the details of the same. The learned lower authority’s basis for fixing the price for assessment purpose is, therefore, not acceptable in law. In the above view of the matter we hold that the learned lower authority’s order is not maintainable in law and we set aside the same. We order that the learned lower authority should adjudicate the matter de novo in the light of the above. The learned lower authority before deciding the case should furnish the details of the imports at Bombay relied upon by him and after giving the appellants an opportunity of hearing. The appeals are, therefore, allowed by remand.