ORDER
M. Gouri Shankar Murthy, Member (J)
1. The facts in so far material, in this appeal to the Central Board of Excise and Customs, transferred to be heard by the Tribunal as if it were an appeal before it pursuant to the provisions in S. 131-B(1) of the Customs Act, 1962 [hereinafter, the Act] are :
(a) after negotiation with the Maharashtra Hybrid Seeds Company, (an Undertaking of the Maharashtra State Government) as well as ‘their principal M/s. Gunsuns Sortex Ltd., (of Fairfield Road, London, England) the appellant purchased and imported six nos. Sortex Electronic Colour Seperators (ex. demonstration machines in good condition) conforming to Model 425 together with recommended spares. The Bill of Entry was filed on 7-1-1982, declaring, inter alia, their aggregate assessable value to be Rs. 7,80,029/- ;
(b) a notice dated 10-5-1982 was issued to the appellant, alleging misdeclaration of the value and absence of Import Licence cover and consequently commission of offences under Section 111 (d) and (m) of the Act, and requiring the appellant to show cause as to why the goods in question should not be confiscated under Section 111 and a penalty imposed on the appellant under Section 112 of the Act;
(c) in reply, the appellant submitted that :
(i) the basis for an allegation of misdeclaration of value was the manu facturer’s international price list of August, 1979, wherein, the price of each of the six machines imported was shown to be £ 7920/-Sterling. Allowing a margin of 20% towards diminution in price on account of the fact the machines were used prior to import for demonstration purposes, the F.O.B. value of the six machines was worked out to be £ 38016/- as against £ 18000/- shown in the invoice and hence the charge of misdeclaration of value as well as import in excess of the licence ;
(ii) for a fact, however, the prices indicated in the list were subject to revision without notice and there is no basis or rationale for arriving at 20% demonstration discount ;
(iii) since it was a transaction where the buyer and seller had no interest in the business of each other, the price alone is the sole consideration and transaction itself genuine and should be accepted as such ;
(iv) the goods are to be valued for assessment of duty in terms of Rule 5(a) of the Customs Valuation Rules and the indentor’s certificate showing the inclusion of the indentor’s commission in the invoice value may be referred to in this context;
(d) in adjudication, it was held that :
(i) obviously, the goods were offered at a lower price since they were used for demonstration;
(ii) the international price list of the manufacturers shows the F.O.B. price of each machine to be £ 7920/-. Allowing a discount of 20% for demonstration, the F.O.B. value of six machines works out to £ 38016/- as against £ 18000/- declared, leading to an excess of £ 20016 (Rs. 3,48,680/-) and a shortfall in duty approximately in a sum of Rs. 2,00,000/- ;
(iii) the licence did not cover the excess of Rs. 3,48,680/-;
(iv) the licence also does not cover disposal goods ;
(v) there is no evidence of any extra remittance of foreign exchange, although the goods have been insured for 10% over and above the invoice price;
(vi) accordingly, the appraised value of £ 38016/- may be taken for assessment. Since, however, it “is an open market transaction between unconnected buyers and sellers where the indentors had also charged 20% commission” and the indentors are an Undertaking of the Government of the State of Maharashtra, “there is no reason to support any extra remittance of foreign exchange and as such, the invoice value may be debited to the licence produced on a warning”.
(e) the appeal to the Central Board of Excise and Customs, now heard by us, was the sequel.
2. Before us, it was contended for the appellant, inter alia, that–
(a) admittedly,
(i) the goods are not manufactured in India ;
(ii) there was no evidence of any contemporary imports whatsoever ;
(iii) it is conclusively established by the evidence on record that it is not a transaction where the seller and buyer have any interest in the business of each other. The sale was negotiated through a State
Government undertaking and there was no extra remittance of foreign exchange ;
(b) that being so, in terms of S. 14 (i) (a) of the Act, the invoice price is the price at which the goods are ordinarily sold and accordingly the assessable value ;
(c) alternatively, if S. 14 (i)(a) was inapplicable, R. 4A read with R. 5 of the Customs Valuation Rules, 1963, applies, since the goods were imported through an indentor appointed for the whole of India ;
(d) the quantum of machines sold in the transaction in one lot and at one go and the corresponding concession in price that may be reasonably offered in consequence had not been taken into consideration in the determination of the assessable value ;
(e) the adjudication order furnishes no reasons at all for the conclusions on the assessable value and deserves to be set aside.
3. The decisions reported in-
(i) 1984 E.C.R. 443
(ii) 1984 E.C.R. 287
(iii) 1985 (21) E.L.T. 140 (Tribunal)
(iv) 1985 (20) E.L.T. 335
(v) 1985 (20) E.L.T. 358
were relied upon for the appellant.
4. In reply, it was urged for the respondent that:
(a) there is a categorical admission of the normal price of the machines (U.S. $ 15,000 each) in the postscript to the letter dated 20-3-1981 from the Maharashtra Hybrid Co. Ltd. ;
(b) the assessable value of the goods can be determined only under R. 8 of the Customs Valuation Rules, 1963, in the peculiar facts and circumstances of the case and a best judgment assessment on the basis of the price list of the manufacturer cannot be assailed as arbitrary.
5. On a perusal of the papers and the submissions made it would appear to us that-
(a) indisputably, the burden of proving the allegations in the notice to show cause rests on the respondent;
(b) the order in adjudication is nothing but a rehash of the allegations in the notice to show cause in so far as valuation aspect is concerned and a repetition of the submissions made in the reply in regard to contravention of the import licence. There is hardly any attempt to make detailed enquiries, collect the requisite material, go into the evidence, discuss the provisions of law applicable and come to an appropriate conclusion. It is almost as if the price list of the manufacturer is conclusive of the value, subject, however, to some deduction arbitrarily arrived at for use of the machine for demonstration purposes. No reason whatsoever furnished as to why the invoice cannot reflect the assessable value, particularly when it could be accepted for exonerating the appellant of exceeding the value indicated in the licence ;
(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 [Clause (a) of S. 14 of the Act] and where it is not so ascertainable, its nearest equivalent determined in accoidance with the Customs Valuation Rules, 1963 [Clause (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 press, is easily ascertainable in appropriate circles”] and no conceptual change had apparently resulted in the provisions as whole, notwithstanding, perhaps, the intent of doing away with it to bring the provisions more in accord with those of GATT. The price at which goods are ordinarily sold at the time and place of import cannot be anything other than the market price ruling on or about the date of import at the place of import;
(d) clauses (a) and (b) of S. 14 of the Act are mutually exclusive. The Ruels framed under Clause (b) speak of the value at which such goods or comparable goods are sold or offered for sale to other buyers in India or outside [Rule 3 (a) and (b)]-i.e., the exporter’s price in India or outside. It cannot be, in the circumstances, that Clause (a) of S. 14 is also speaking of the particular exporter’s price. A construction to the contrary renders the alternative or residuary applicability of Clause (b) meaningless ;
(e) the expression “in the course of international trade” merely means and signifies the movement of goods from abroad into India and has also a reference to a period of time during which the movement is in progress pursuant to or connected with trade and commerce with other countries, following the ratio of the Hon’ble Supreme Court in AIR 1953 S.C. 333 [State of Travancore v. S.V.S. Factory] while construing “in the course of import of goods into or export of the goods out of India”. The expression ‘in the course of international trade” does not, in any case, signify the invoice price in the case of the import in question ;
(f) this is not to say that the invoice price becomes, altogether irrelevant. It furnishes the basis in terms of Rules 4(A), 5, 6 and 8 of the Customs Valuation Rules, 1963 ;
(g) this was the purport of our decisions in 1984 (15) E.L.T. 137 at 145 O.E.N. ( India) Ltd. v. Collector of Customs & C.E.] ; 1985 E.C.R. 973 [Maheshwari Trading Co. v. Collector of Customs, New Delhi] ; judgment in Appeal No. 1021 of 1980-A-1985 (22) E.L.T. 283 (Tribunal) [Automotive Enterprises v. Collector of Customs, Bombay] ; judgment in Appeal No. 1418/83-A [Allena Impex Pvt. Ltd. v. Collector of Customs] and para 7 of our judgment in 1985 (21) E.L.T. 140 (Tribunal) [Rakesh Press v. Collector of Customst Bombay] ;
(h) to the same effect was the decision of the Calcutta High Court in I.L.R. (1976) 2 Calcutta 202 [Bird & Co. v. K.K. Sen Gupta] when it was observed on a construction S. 14 (a) that “the price at which a particular seller enters into a contract with a particular buyer does not necessarily reflect the price at which such goods are sold at the time and place of exportation it the course of international trade”. It was further held that what is to be taken as the basis of valuation is the price at which such goods or like goods are ordinarily sold at the time and place of exportation and not the contract price 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 Section 14 (b) of the Act and the Customs Valuation Rules, 1963 that the assessable value has to be determined ;
(1) it is in this context that the learned counsel relies upon Rule 4(A) read with Rule 5 for a determination of the assessable value, Rules 3 and 4 being, admittedly, inapplicable. The condition precedent for the applicability of R. 4-A is the satisfaction of the Assistant Collector to the effect that the invoice price correctly represents the price charged for the goods in question. Such satisfaction cannot, of course, be arbitrary. When the contract was concluded through a State Government Undertaking, there is no evidence of any clandestine remittance over and above the contracted price, and, accordingly, the Assistant Collector is satisfied about the price in regard to the licensing angle, there is no reason as to why he should not be so satisfied in relation to the valuation aspect as well, just because of the price list and ignoring the sale of six used machines in one lot as a factor that induces a substantial reduction in the list price. In fact, the State Government Undertaking, acting as an agent themselves write to say in their letter dated 28-3-81, preceding the conclusion of the contract, that the offer was very remunerative and the appellant “should not miss this opportunity in grabing these machines which are offered at considerably reduced rates”. Nor does it appear 1that R. 5 would apply only if the State Government Undertaking is the “sole agent” for the foreign seller. It is enough if they happen to be distrbutor or indentor appointed for the whole of India or any region thereofe. The word “sole” in R. 5 qualifies “agent” and not “distributor or indntor”. There may be a plurality of distributors or indentors appointed for the whole of India or any region thereof. This, by itself, does not render the provision inapplicable in a case where the invoice price truly represents the price charged for the goods in question.
6. In the premises, we allow the appeal, set aside the order of adjudication and remand the matter for readjudication for a redetermination of the assessable value in terms of R. 4-A and 5 of the Customs Valuation Rules and the grant of such consequential relief as the appellant may be entitled to.