ORDER
G.P. Agarwal, Member (J)
1. This appeal is directed against the impugned Order-in-Appeal passed by the Collector of Customs (Appeals), Bombay.
2. Factual backdrop : M/s. Hindustan Equipment Engineering Co., appellants herein and M/s. Krishna & Co. are associate firms (the sole proprietor of the former firm that is to say, appellants firm has a 50% partnership share in the latter firm). It is the case of the department that the appellants imported a consignment of 12 cases of Synchroniser Cones and presented for its clearance licence No. 0314617, dated 6-1-1982 stood in the name of M/s. Chandiramani, Delhi and 2028886, dated 21-1-1981 stood In the name of M/s. Krishna & Co. The unit price for the Synchroniser Cones was shown In the import document at US $ 3.49 per piece. The importers produced two telex messages exchanged between Shri S.N. Goenka of M/s. Krishna & Co. and M/s. For Export. M/s. For Export has agreed to supply M/s. Krishna & Co. the goods at the price of US $ 3.69 CIF each provided M/s. Krishna & Co. receives a commission of US 20 Cents per piece from M/s. For Export. From this correspondence the department tentatively formed an opinion that although the appellants had declared that no indenting Agent’s commission is payable the price of US $ 3.69 CIF per piece is subject to M/s. Krishna & Co. receiving the commission of US 20 Cents per piece. Hence the price per piece would be US $ 3.89 CIF (US $ 3.69 + 0.20) per piece. As regards the import of the subject goods against the licences produced by the appellants the authorities concerned formed the tentative view that the subject goods are not covered under the said licence. As a sequel thereof a show cause notice calling upon the appellants to show cause as to why the imported goods be not confiscated and penalty be not imposed was issued. In reply while abjuring their guilt the appellants contended that the value declared by them be accepted and the subject goods be assessed under Heading 84.63(1) of the Customs Tariff and not under Heading 87.04/06 as contended by the department. After the usual adjudication proceedings the adjudicating authority ordered that the value for assessment be computed at the price of US $ 3.69 CIF. The adjudicating authority also held that the subject goods are classifiable under Heading 87.04/06(1) as parts and accessories of Motor Vehicles. It further held that as regards the ITC angle the goods of the value of Rs. 19.533/- were not covered by the licence. Consequently he ordered for the confiscation of the said goods giving an option to the appellants to clear the goods on payment of a redemption fine of Rs. 19.000/-. Being dissatisfied with the adjudication order the appellants preferred their appeal before the Collector of Customs (Appeals), Bombay who by his impugned order confirmed the findings of the Assistant Authority with respect to the valuation and the classification but set aside his find ing to the effect that the goods valuing Rs. 19,533/- was not covered under the licence No. 2866436 and also granted consequential relief. Hence the present appeal.
3. We have heard Shri M.A. Rangaswamy, learned counsel for the appellants and Shri J. Gopinath, learned SDR for the respondent.
4. Shri Rangaswamy, learned counsel for the appellants contended that the value of $ 3.49 per unit declared by the appellants be accepted. He submitted that the price @ $ 3.49 per piece was a negotiated one and that the L/C was open for this price only. Importers and suppliers had no interest in the business of each other and that this price was available to any other importer and that the invoice price @ $ 3.49 per unit only was remitted. He further submitted that no evidence of higher value for such or like goods was cited by the department and therefore the declared value be accepted. He emphasised that the authorities below failed to appreciate that M/s. Krishna & Co. and the importers being associate firms, question of payment of commission of US 20 Cents per unit does not arise. If fact no commission was paid and therefore the question of adding US 20 Cents commission does not arise. He further submitted that in the show cause notice no mention of Customs Valuation Rules, 1963 was made. He also submitted that the burden lies on the department to prove the charge of undervaluation and cited the following case iaw:-
(1) Rakesh Press v. Collector of Customs, Bombay, 1985 (21) ELT 140 (Tribunal) -wherein It was held that burden of proving the charge of under-valuation lies on the department who must produce supporting evidence.
(2) Glaxo Laboratories v. A.V. Venkateswaran AIR i959 Bom. 372 – wherein It was, Inter alia held that the invoice is an important piece of evidence to determine what the value is.
(3) Maheshwari Trading Corpn. v. Collector of Customs, 1987 (29) ELT 739 (Tribunal) – wherein it was held that the invoice price or the price at which the Exporter sells cannot be the deemed value both in terms of the Rules framed under Clause (b) of Section 14 as well as Clause (a) thereof, for the simple reason that Clauses (a) and (b) of Section 14 are mutually exclusive – See Para 14(iii).
In reply Shri J. Gopinath, learned SDR submitted that both the authorities below for the reasons mentioned in the two Orders correctly included the commission In the value and particularly drew our attention to the two telex messages exchanged between Shri S.N. Goenka of M/s. Krishna & Co. and M/s. For Export to show that Krishna & Co. wrote to the supplier that Invoice be prepared after deducting their commission @ US 20 Cents and showing only nett price US $ 3.49 each CIF. As regards the contention of the learned counsel for the appellants that Customs Valuation Rules were not mentioned In the show cause notice Shri J. Gopinath, learned SDR submitted that all the evidence relied upon by the department was made known to the appellants in the show cause notice and therefore mere failure to mention the Customs Valuation Rules in the show cause notice is of no consequence. As regards the burden of proof Shri J. Gopinath submitted that the department has valued the goods on the basis of the documents produced by the appellants themselves. Hence, no grievance can be made.
5. We have considered the arguments and the case law cited by the appellants. It is true that the letter of credit was for an amount figuring in the invoice and that the department has not adduced any evidence of higher value. It is also true that the appellants have produced a certificate issued by the suppliers to the effect that ‘the nett price of US $ 3.49 per piece is the price that would be charged to any other independent importer in India”. However, from the following eloquent established facts on record It cannot be said that the supplier and the importers were not at all related in any way :-
(I) it Is admitted to the appellants that they and Krishna & Co. are associate firms and that Krishna & Co. requested the suppliers to invoice the goods on nett basis after deducting US 20 Cents commission. This clearly shows that the element of commission is not reflected in the invoice value. On this point the telex message (Annexure ‘D’) addressed to the supplier by Shri S.N. Goenka of Krishna & Co. and reply thereto by the supplier are significant. In the telex message the supplier informed Shri S.N. Goenka of Krishna & Co. as follows :-
“NOTE : CONSIDERING WE HAVE TO ACCEPT YOUR CUSTOMER LOW OFFER WE WERE OBUGED AND AGREED TO ABOVE PRICES IF YOU ACCEPT TO RECEIVE US 20 CENTS PER UNIT AS COMMISSION.”
In reply thereto, Shri S.N. Goenka instructed the supplier as follows :-
“PLS AIRMAIL PROFORMA INV. DEDUCTING OUR COMMISSION US 20 CENTS AND SHOWING ONLY NETT PRICE US DOLLAR 3.49 EACH C.I.F.
(II) From the telex dated 1 -7-1982 (Annexure ‘D’) from the suppliers It is clear that this telex specifically refers to the unit price of US $ 3.69 per piece. It reads “B. PRICE US $ 3.69 EACH C.I.F. BOMBAY-BY SEA FRT”. It is addressed to Shri Goenka who is according to the appellants own letter dated 17-9-1982 Is one of the partners of the importing firm. Besides the reply to the show cause notice filed by the appellants is also signed by the importers and counter-signed by M/s. Krishna & Co. This reply, inter alia mentions that the suppliers had accepted a CIF price of US $ 3.69 each Bombay by sea freight and in addition agreed to allow M/s. Krishna & Co. a commission of US 20 Cents per unit;
(iii) From the record we find that before the adjudicating authority, that is to say before Deputy Collector of Customs, written submissions were made by the appellants in which they admitted as follows :-
“2. Valuation. As a first trial order the supplier in his telex dated 7-1-1982, agreed (for 3000 pieces) for a rate of 3.69 $ per piece, and this price includes a commission of 20 cents per unit as commission. In this case as both Hindustan Equipment Corpn. and Krishna & Co. are associate firms (the sole proprietor of the former firm has a 50% partnership share In the latter firm) M/s. Krishna & Co. requested the supplier to invoice the goods on nett basis after deducting the 20 cents commission i.e. 3.69-20 cents = 3.49$ (Telex dated 9-1-1982). This was agreed to by the supplier and accordingly the L/C was opened for 3.49 $ per piece. The relevant telexes were all produced to the Customs.”
6. Under Rule 5(a) of the Customs Valuation Rules, 1963 commission has to be added to arrive at the value for assessment purposes. In the case of Glaxo Laboratories v. A.V. Venkateswaran, (supra) cited by the learned counsel for the appellants himself the Hon’ble Bombay High Court has clearly held that in determining the real value the Customs authorities are not bound by the price shown on the invoice by the importer though the invoice is an important piece of evidence to determine what the real value is. But that piece of evidence may be discarded if the authorities take the view that it is not a genuine document or if they take the view that over and above the price which is being paid some other consideration has passed under the document. That is what has actually happened in the instant case. Both the authorities below after taking into consideration all the facts and circumstances of the case including the telex messages produced by the appellants themselves had concluded and we think rightly so that the element of commission was not reflected in the Invoice ball. The contention of the learned counsel for the appellants that the letter issued by the supplier to the effect that ‘the nett price of US $ 3.49 per piece is the price that would be charged to any other independent importer in India” would prove that this price was also available to other independent importers in India in our opinion is also of no consequence. Firstly because the said letter is dated 2-1-1983, that is to say was issued much after the date of import and therefore appears to be clearly an after thought and secondly because this letter also says that ‘the price of US $ 3.49 per piece represents the nett discounted price, that is to say US $ 3.69 – 0.20 = $ 3.49″. The other contention of the learned counsel for the appellants that there was no mention of Customs Valuation Rides in the show cause notice is also to be stated to be rejected. From the record we find that the two telex messages produced by the appellants themselves and all other evidence oh the basis of which the adjudicating authority had valued the imported goods were quoted with details in the show cause notice and all through the appellants contested the adjudication proceedings with reference to the said two telex messages. In the case of Devidayal Rolling and Refineries Pvt. Ltd. v. A.V. Borkar, 1983 ELT 338 the Hon’ble Bombay High Court held that even the notice does not describe it as a show cause notice, but the contents thereof makes the recipient aware and conscious of the position, he cannot be permitted to raise a technical argument that a notice was bad in law. Similar view was taken by this Tribunal in the case of Collector of Central Excise v. Star Paper Mills Ltd., 1986 (26) ELT 81. Thus under these circumstances mere non-mention of the Customs Valuation Rules is in the Show Cause Notice of no consequence.
Thus we have no hesitation in holding that the valuation made by the authorities below was in accordance with law.
7. Shri Rangaswamy also contended that the goods imported are Synchroniser Cones No. 322-262 for Mercedes Benz Model OH 321. From the specifications for the parts Imported It would appear that the Imported goods has been classified under the general description “Synchronish Transmission”. He further submitted that from the specifications It would also appear that the parts Imported has been classified under general description “Gear Shafts and Gears”. He added that the adjudicating authority itself has stated that Synchroniser Cones is essentially a part of Gear Box. On this premises he submitted that the goods imported be classified under Heading 84.63 and not under Heading 87.04/06(1) as held by the authorities below. In the process he further added that BTN Explanatory Notes or CCCN have no relevance to the point at issue nor they have got a legal sanctity and cited the following case law:
(1) Nivedita Chemicals Pvt. Ltd. v. Collector of Customs, 1985 (20) ELT 382 (Tribunal) – wherein It was held that BTN Explanatory Notes have only persuasive value and cannot be engrafted into Customs Tariff when not Incorporated therein.
(2) Sunrise Agencies v. Collector of Customs, Bombay, 1986 (26) ELT 286 (Tribunal) – in that case while dealing with the question as to whether Gskhl Makinley paper, both sides coated an paper Is classifiable under Heading 48.01/21 (3) of the Customs Tariff Act or under Heading 40.01/21 (1) or under Heading 48.07 it was observed that in the absence of any specific provision for exclusion In the Customs Tariff Act, reliance on the exclusion of art paper from Heading 48.01 in the CCCN would not be of any relevance.
8. In reply Shri J. Gopinath, learned SDR while supporting the classifications made by the authorities below submitted that the case is covered by the ratio of the decision rendered by this Tribunal in the case of Mahindra and Mahindra Ltd., Bombay v. Collector of Customs, Bombay, 1986(26) ELT 269 (Tribunal) wherein it was held that Jeep parts, Transmission Synchroniser, and Blocking Rings are classifiable under Heading 87.04/06(1) of the Customs Tariff Act, 1975 as parts of Motor Vehicles not elsewhere specified and not as parts of Engines and Motors under Heading 84.63.
9. We have considered the arguments so advanced by the parties and studied the cases cited by the parties. Tariff Heading 84.63 Is specific for assessment of transmission shafts, cranks, bearing housings, plain shaft bearings, gears and gearing (including friction gears, gear boxes and other variable speed gears) flywheels, pulleys and pulley blocks, clutches and shaft couplings. This Heading appears In Section XVI, Chapter 84 of the 1st Schedule to the Customs Tariff Act, 1975. Tariff Heading 87.04/06 falls under Section XVII and reads as follows :-
“87.04/06: Chasis fined with engines, bodies (Including cabs) and parts and accessories of the motor vehicles falling within Heading No. 87.01,87.02 or 87.03
(1) Not elsewhere specified.
(2) Parts designed for the articles covered by sub-heading No. (1) of Heading No. 87.01 and sub-heading No. (3) of Heading No. 87.02.”
Interpreting these two Headings this Tribunal held in the case of Mahindra and Mahindra Ltd. v. Collector of Customs, Bombay, (supra) that transmission Synchroniser Blocks Rings are classifiable under Heading 87.04/06(1) of the Customs Tariff Act, 1975 as parts of Motor Vehicles not elsewhere specified and not as parts of Engine and Motor under Heading 84.63. It appears from the record that before the adjudicating authority the appellants in their submissions dated 14-10-1982 had stated that ‘the articles imported viz. Synchroniser Cones is a part of Daimler Benz Engine OM 312/321 fitted on P & H Shovel as well as Tata Mercedes Trucks”. From this it is clear that the goods imported are part of the transmission system of Motor Vehicles and not an internal part of an Engine nor a clutch part. Thus applying the ratio of the decision rendered by this Tribunal In the cased Mahindra and Mahindra Ltd. v. Collector of Customs, Bombay, (supra) to the facts of the case we find that the adjudicating authority was right In classifying the imported goods under Heading 87.04/05(1) of the Customs Tariff Act.
10. The other contention of the learned counsel for the appellants that Heading 87.04/06(1) of the Customs Tariff Act, was not mentioned in the show cause notice and therefore the Imported goods cannot be classified under the said Heading has also no force. From the show cause notice it appears that the appellants claimed the clearance of the goods also under licence No. 2028835/C/XX/78/H/80, dated 21-1-1981 which was not found valid to cover the Motor Vehicle parts imported since the said licence was for importing of spares of machinery and Instruments. Ail these facts were mentioned In the show cause notice. During the adjudication proceedings also the appellants pleaded that the import was covered under the said licence because the imported goods are classifiable under Heading 84.63. Under these circumstances, the department had to decide the controversy raised by the appellants. Hence no fault can be found with the show cause notice.
11. In the result we dismiss the appeal being devoid of any merit.