ORDER
Krishna Kumar, Member (J)
1. Heard both sides.
2. The issue involved relates to under-valuation and duty on the differential value. The appeal has been filed by the revenue against the order passed by the Commissioner(Appeals).
3. Briefly stated the facts in the present case are that M/s Nirma Ltd. imported consignments of Normal Paraffin and claimed clearance of the same at the declared value. At the time of assessment it appeared that declared value in all the consignments was on lower side as compared to contemporary value. The goods were assessed and released provisionally against PD Bond/B.G. in terms of Section 18 of the Customs Act, 1962. All the consignments were imported during the period 15.1.98 to 10.6.99. The importers themselves imported the same consignments of similar/identical goods during the said period @ US $ 555 PMT and US $ 500 PMT CIF from M/s ICC Chemical Corporation, USA. It was also fond that M/s IPCL, Vadodara and some other importers had imported identical goods @ US $ 505 PMT C & F during the proximate period. In the light of the above fact, the importers were requested to supply the contract in original, the bank attested invoices, prevailing market prices of inputs as per MOPAG and details of price working as per their contract formula etc. vide Deptt. letter dated 25.9.2000 so as to finalize all the provisional assessments. Since the importers failed to supply these documents, a reminder dated 6.11.2000 was issued but then again they failed to respond. Therefore, a show cause notice with details of proposed enhancement as per Annexure -A was issued to the importers asking them to reply and appear for hearing on any working day between 20.1.01 to 25.1.01 vide Deptt. letter dated 22.12.2000 but they failed to respond or appear for hearing till 16.3.01. The adjudication has resulted finalization of assessment of all the 16 consignments of normal paraffin on the enhanced value of US $ 500 PMT resulting in consequential demand on the interest. Learned DR submitted that the Commissioner (Appeals) gave undue weightage to price formula submitted by the respondent. Learned DR referred to the decision of the Hon’ble Apex Court in the case of Shibani Engineering Systems v. C.C., Mumbai wherein the Apex Court has held that rejecting of transaction value was justified if the value was unrealistic.
4. Learned Counsel appearing for the respondent forcefully submitted that the respondents had entered into a long term supply agreement with M/s Condea Augusta, Italy on 24.4.1996 for purchase of N. Paraffin in order to ensure continuous availability of paraffin required by the respondents for its business of manufacture of Linear Alkyl Benzene. This contract was for three years with price variation clause therein. The respondents had declared value of @ US $ 372 PMT to @ US $ 445 PMT. under the supply agreement, the supplies were to be made between 1997 to 1999. The pricing formula given in Clause 5.1 of the agreement dated 24th April 1996 is as under:
P = Po + 1.10 x (K – Ko) + 0.5 x (FO – FOo)
Where:
P = applicable N-Paraffin price for the calendar quarter, US$/ MT
Po = N-paraffin reference price equal to 440$/ MT CIF Kandla on an Ausgusta-Kandla freight cost basis of 65$/ MT max. for lots of 4,000 MT min.
K = Kerosene price in US$/ MT calculated as the average of Platt’s Oilgram, spot price assessment, cargoes, FOB Med., Basis Italy, for the calendar quarter preceding the one in which the supply takes place.
Ko = Kerosene reference price equal to 160$/ MT.
FO = Fuel Oil price in US$/ MT calculated as the average of Platt’s Oilgram, spot price assessment, 3.5 sulphur, FOB Med., Basis Italy, for the calendar quarter preceding the one in which the supply takes place.
FOo = Fuel Oil reference price equal to 80$/ MT.
The present appeal relates to 16 Bills of Entry filed during the period from 15.1.98 to 10.6.99. The learned Counsel, inter alia, submitted that the lower Appellate authority has not erred in relying on the Apex Court judgment in the case of Eicher Tractor Ltd. reported in 2000 (122) ELT 321 (SC) holding that subject to three conditions laid down in Section 14(1), of time, place and absence of special circumstances, price of imported goods as declared is to be accepted and also noting that there is no material on record to show that the declared value was unrealistic and remarkably low as compared to the market price and value of contemporary imports, and further noting that the pricing formula of the goods has not been disputed.
5. It is pertinent to mention here that during the course of argument, the learned DR appearing for the revenue has fairly admitted that the pricing formula filed by the respondent has not been disputed by the department. On the insistence of the department, the respondent has filed a statement showing consignment of N. Paraffin cleared during August 1997 to June 1999. But a mere look at the statement shows that the respondent has imported the product in question ranging from US $ 350 PMT to US $ 555 PMT. The contention of the learned Counsel for the respondent is that the statement clearly shows that the respondent has imported the product in question at the lowest at US $ 350 PMT to US $ 555 PMT during the period in question. This clearly establishes that the rate of US $ 372 PMT to US $ 445 PMT declared by them is fully justified as the contract is variable and the price of the product in question is dependent only on the increase or decrease of the fuel price or the kerosene oil. Learned Counsel has also submitted that the agreement and the price of N. paraffin was to change on quarterly basis in view of the changes in the price of kerosene and fuel oil which was to be determined on the basis of Platt’s price. Learned Counsel vehemently submitted that the department did not have any material on record to show that while talking of the contemporary price, they had the price from the same country, same quantity, same supplier and at the same time. The department cannot compare the transaction value with the contemporary price from the other countries, from other supplier and for a different quantity. So far as the reliance of the revenue on the case of the Apex Court on Rajkumar Knitting Mills (P) Ltd. v. C.C., Bombay is concerned, he submitted that the case related to fixed price contract whereas the contract involved in this case is based on variable price contract and the pricing formula submitted with the department. His contention is that the department has gone by three imports of a smaller quantity made in July 1997, August 1998 and March 1999, that too, from other supplier of other country and while doing so, has not considered the instances of other countries of N. Paraffin from the same supplier where Bills of entry have been finally assessed. He also submitted that there are no special circumstances which would have affected the price. He submitted that it is well settled legal position that the contract price of the imported goods as declared is to be accepted as transaction value under Section 14 of the Customs Act, 1962 and the absence of any special circumstances statutorily required under Rule 4(4) of the Customs Valuation Rules, 1988. Learned Counsel relied on the following case law to support his contention that the transaction value has to be accepted:
(i) Sunshine Metal & Alloys Inds. Pvt. Ltd. v. C.C., Bombay – held – So long as the factor of fluctuation of price is available and there is no challenge to the genuineness of the contract, then Section 14(1)(a) is required to be followed without any deviation. The contract price can certainly be rejected provided the sale is hidden in the veil of secrecy and the department cannot ascertain the transaction value with mathematical precision. No such allegation has been made. The contractual invoice of the appellant cannot be rejected.
(ii) C.C., Mumbai v. Haidery Tins held – It is to be noted that the goods under consideration were imported from Australia whereas the goods that the Assistant Commissioner has considered were imported from countries in Europe. These goods were therefore, neither identical goods specified in Rule 5 nor similar goods specified in Rule 6. The transaction price is not absurdly unrealistic price. The quantities totally imported by the appellant in nine consignments were in pursuance of one order and is of larger quantity of 63 tons whereas the quantity of 21 tones was imported in the order relied on. The substantial difference in quantity would have prompted a reduction in the price by taking the lowest value of US $ 380.
(iii) Andhra Sugars Ltd. v. C.C, Visakhapatnam (T) – held – Customs authorities while assessing value of imported goods not bound by the figure mentioned in the invoice and can rely on contemporaneous evidence. In the present case, revenue had shown that there was contemporaneous import in the same shipment on a higher value. Rajkumar Knitting Mills case followed to uphold findings of Commissioner.
(iv) Bayer India Ltd. v. C.C., Mumbai -held – Valuation (Customs) – Transaction value cannot be rejected and Rule 10A of Customs (Valuation) Rules, 1988 cannot be invoked merely on ground that identical goods have been imported into India at a higher price -Rule 10A ibid can be invoked only if there is doubt as to genuineness of transaction value between exporter and importer such as in the event of extra remittance by importer to exporter.
6. As regards Rule 10A, he submitted that it has been held in Radhey Shyam Ratanlal v. C.C., Sheva, Raigad by the Tribunal that Rule 10A is a subordinate legislation and cannot override Section 14 of Customs Act, 1962. He also submitted that the department has itself accepted the final assessment of three bills of entry in the case of the respondent itself from the same supplier on the same transaction value. Therefore, it was not open for the department to challenge the transaction value declared by the respondent.
7. After hearing, perusal of the records, provisions of law and the case laws relied on by both sides, we find that as per Rule 5(3) of the Customs Valuation Rules, 1988, if more than one transaction value of identical goods is declared, the lowest of such value shall be used to determine the value of imported goods. In the present case, the department has assessed at US $ 500 to US $ 555 PMT which is against the lowest value of US $ 365.202 to US $ 452.03 and also against the declared transaction value of US $ 372 PMT to US $ 445 PMT. It is seen that the respondent has paid the duty at the declared transaction value of US $ 372 to US $ 445. If the enhanced value is taken into account and compared to the value declared by the respondent as given in Annexure ‘A’ to the order passed by the adjudicating authority, it would be clear that there is no unrealistic difference. Moreover, there is no evidence on records with the department to belie the transaction value declared by the respondent because the department does not have the contemporary value from the same country, from the same supplier, of the same quality and quantity etc. on a higher side at the same period. They cannot adopt the higher value of other countries from a different supplier for a different quality, quantity etc. in the absence of special circumstances statutorily required. That cannot be the basis for loading higher value in the present case. The reliance placed by the learned DR on the judgment of the Hon’ble Supreme Court in the case of Rajkumar Knitting Mills (P) Ltd. (supra) is not relevant as the facts involved in this case are totally different than the facts involved in the said case. As in the said case, the comparable goods were similar goods from the same supplier, whereas, in the present case, comparison made with goods of different country of origin and different supplier. Therefore, this judgment is not applicable in this case. Besides, the Hon’ble Supreme Court has considered large quantity of import and quantity discount allowed by the Department. The respondents claim that even if the quantity discount is given to them for large quantity, there would be no difference in the value declared by them and the enhanced value. It is relevant to mention that in the present case, the price is not a fixed price, the price is a variable price on quarterly basis depending on the price of kerosene and fuel oil. Pricing formula has been prescribed and stipulated in the contract. The pricing formula has not been rejected by the Department. For comparison of two import price, both imports should be substantially of the same quantity, quality, imports from the same country of origin and at the same time. The evidence on contemporaneous imports which have been relied upon by the Department cannot be accepted as the evidence on price for the comparable goods were from different supplier and different country of origin i.e. M/s ICC Chemical Corporation, USA, for a very small quantity. As already mentioned above, three Bills of entry filed by the respondents for the import of N. Paraffin under the same agreement have been finally assessed accepting the declared value. The respondents reliance on Eicher Tractor Ltd. wherein the Hon’ble Supreme Court has held that subject to three conditions laid down in Section 14(1) of Customs Act, 1962, of time, place and absence of special circumstances, price of imported goods is to be determined under Section 14(1a) in accordance with the Customs Valuation Rules, and special circumstances have been statutorily required in Rule 4(2) of the Customs Valuation Rules, 1988 and in the absence of these exception, it is mandatory for the Customs to accept the price actually paid or payable for the goods in a particular transaction. It has also been held by the Hon’ble Apex Court in this case that if the transaction can be determined under Rule 4(1) and does not fall under any of the exception of Rule 4(2(1), there is no question of determining the value under the subsequent Rules. In the present case also, as already mentioned above, there is no allegation that the special circumstances as prescribed under Clause (a) to (d) of Rule 4(2) of the said Rules exist, therefore, the transaction value as per Rule 4(1) has to be accepted as the transaction value under Section 14(1) of the Customs Act, 1962.
8. Further, the reliance placed by the Department in the case of Shibani Engineering Systems (supra) wherein it has been held that rejection of transaction value was justified if the value was unrealistic and depressingly low when compared to the prevailing market price and contemporaneous import value. In the present case, as already mentioned above, the price is depending on the kerosene and fuel oil price and is, therefore, a variable price. The pricing formula has not been disputed by the Department. We therefore, do not find any merits in the appeal filed by the Department. The same is accordingly, rejected.
(Pronounced in the open Court on 5.12.2006)