ORDER
P. Karthikeyan, Member (T)
1. This is an appeal filed by Itema India Pvt. Ltd. (formerly known as Veejay Savio Lakshmi Machinery Ltd Coimbatore, or VSL). The appellants had been importing textile machinery from M/s Promatech SPA Italy (PMT) and claiming discount from the price list price of the supplier @ 17% upto 14.6.01 and @ 25% from 15.6.2001 for the said imports. Invoices showed price net of such discount from the list price of the supplier. As the appellant was the sole Commercial Agent/Distributor of PMT, the assessments of imports made by the appellants were kept provisional, pending scrutiny of relationship between supplier and the importer by the Special Valuation Branch. During such scrutiny for finalization of assessments it transpired that VSL was appointed by PMT as its exclusive commercial agent to promote the sale of its shuttleless looms and the spares in the territory comprising India, Srilanka and Nepal. As per the agreement VSL was entitled to 17% discount on the price list price of spares as a compensation for various services specified in the agreement that VSL was required to render, to promote the sale of looms manufactured by PMT in the region. VSL was also eligible for 7% on the net amount of invoice as commission whenever spares were directly supplied to customer by PMT. They were also entitled for the services rendered, a commission on all sales of the looms @ 5% of the 93% of the net amount of invoice. As per the agreement between VSL and PMT, VSL was required to maintain an inventory of spares of a minimum value of Euro One lakh for servicing the customers of PMT . In response to a questionnaire by the Special Valuation Branch the appellants had admitted that a Director of VSL was holding an office in PMT and therefore, in terms of Rule 2(2)(i) of Customs Valuation Rules, 1988, VSL and PMT were related persons. As per the agreement the appellants would buy spares and resell them to the clients of PMT in the territory who had bought looms from PMT and protect the interests of PMT diligently. It was decided by the Joint Commissioner, SVB that VSL & PMT were related persons for the purpose of assessment of goods imported by VSL from PMT. As per the agreement dated 1.4.2002, VSL was entitled to 17% discount on the price list price of spares. The importer had been claiming a discount of 25% for their imports subsequent to 14.6.2001. As the only agreement between the supplier and buyer, which was effective from 01.04.02, provided for a discount of 17% of the list price to VSL, the Joint Commissioner SVB decided that the transaction value applying 25% discount to the list price of PMT for imports from 15.6.2001 was not acceptable and ordered that the invoice value would be loaded by 10.67 % ( ie.less 17% of list price) as per best judgment in terms of Rule 8 of the CVR 1988.
2. In the impugned order, the Commissioner (Appeals), agreed with the findings of the original authority that the supplier and the buyer are related in terms of Rule 2(2) (i) of the CVR 1988 and that invoice value had to be loaded by 10.67% in terms of the agreement providing for 17% discount on the list price of the spares. As the discount was allowed for services rendered in regard to sale of looms by PMT to other customers, he decided that the same was admissible to the importer. The appellant was seen as a different class of importer being an agent of PMT compared to their other customers. As agreement specifically provided that the importer would be eligible for 17% discount, the importer’s claim that they were eligible for 25% discount was not accepted. In his view agreement had come into force only with effect from 01.04.2002.
3. Citing various case law, the importer had argued that discount was a commercially accepted measure which might be resorted to by a vendor for a variety of reasons. They cited the ratio of in the case Jindal Photo Films Ltd and Consolidated Photo & Finves Ltd v. CC, Mumbai 2004 (95) ECC 316 (Tri.Del.) as follows:
Formal agreement in writing for purchase of imported goods with the overseas exporter not required under law. The parties had by their conduct contracted for it as evidenced by the documents.
The importer argued before the lower appellate authority that even though the discount of 25% had not been reflected in the agreement for the period from 15.6.2001, the same could be. ratified at a later stage also. After considering also the submissions made in the cross objections filed in the department, the lower appellate authority decided that the importer and the supplier were related in view of Rule 2(2) (i) of the CVR 1988 and that in view of the express provisions in the agreement providing for 17% discount, the 25% discount claimed had to be treated as abnormal discount and was liable to be disallowed. He held that the ratio of M/s Jindal Photo Films Ltd. (supra) could come into play only if there was no formal agreement in writing.
4. Learned Counsel for the appellants has argued that as per Valuation Rule 2(2) (i) two ‘persons’ shall be deemed to be related “only if they were officers or directors of one another’s businesses” and ‘person’ included legal persons. He submitted that as per Explanation II to the above sub-rule persons who were associated in the business of one another, in that one was the sole agent or sole distributor of the other shall be deemed to be related for the purpose of Valuation Rules only if they fell within the criteria of Sub-rule (2) of Rule 2 of CVR 1988. As there was no officer or Director of PMT in the business of VSL, though a Director of VSL held an office in PMT, Sub-rule (2)(2) (i) did not apply. They had been getting a discount of 25% from the suppliers from 15.6.2001 and this was an admissible deduction from the price list price as per the agreement. Even otherwise, the department had riot shown that their invoice price had not represented the real value of the impugned goods and therefore, the same could not be rejected. The invoice price had to be accepted as no remittance by VSL in excess of the invoice price to PMT had been proved by the department.
5. Ld. Counsel submitted the following case law in support of his argument.
i) Kiswok Industries (P) Ltd. v. CC, Calcutta 2001 (137) ELT 431 (Tri.Kol)
ii) Triveni Glass Ltd. v. CCE, Allahabad
iii) Etcher Tractors Ltd. v. CC, Mumbai
Ld. Counsel relied on the ratio of the Tribunal’s decision in the case of Kiswok Industries (P) Ltd. v. CC, Calcutta (supra), ERB, Kolkotta, wherein the Tribunal had . observed that the amount/cumulative price charged by the foreign supplier should be taken as the assessable value. He further relied on the decision of the Tribunal in the case of Triveni Glass Ltd v. CCE (supra), wherein the Principal Bench of this Tribunal had held that in a case where price was paid provisionally at the time of removal and subsequently settled by issue of credit notes on monthly basis, “discounted price”, “net of credit note” was to be treated as assessable. In the case of Eicher Tractors Limited v. CCE (supra) the Hon’ble Supreme Court had decided that price list of the foreign supplier was not a proof of transaction value and existence of price list could not be the sole reason to reject transaction value. Price list was only a general quotation and discount was a commercially acceptable measure which may be resorted to by a vendor for a variety of reasons. The assessable value was price list price less discount charged. Ld. Counsel, therefore, argued that the list price less 25% discount charged was the correct value to be adopted for assessment.
6. The learned Counsel for the appellants produced an e-mail dated 15 June 2001 , addressed to VSL from PMT. Text of the same is reproduced below:
Attn: Mr. SUKUMAR
Please find Vamatex Spare Part Price List in EURO currency issued
on 15 June 2001
Please note that you (VSL) have a discount of 25% on these prices.
Best regards
PROMATECH spa
Vamatex Spare Parts Dept.
Fabio Gelmi
7. The document was produced to prove that the appellant was getting 25% discount from the price list price of PMT from 15.6.2001 even though the agreement was signed only on 01.04.2002. According to the learned Counsel considerable time is taken in getting the terms of an agreement relating to international transactions reduced in writing . Hence the delay in signing of the agreement till 01.04.2002.
8. The leaner SDR argues that in the light of written agreement which came into force on 01.04.2002, the 25% discount provided in the agreement cannot be allowed retrospectively for earlier imports as the same was not contemplated in the agreement. As regards the e-mail referred to, the same was not produced before the lower authorities for consideration.
9. We have carefully considered the case records and the submissions. In view of the provisions of Rule 2(2) (i) of CVR 1988, we are inclined to agree with the argument of the learned Counsel that the finding of the lower appellate authority that the buyer and the seller are related is incorrect. The lower appellate authority has allowed 17% discount on the price list price of spares to determine the applicable assessable value of import of spares by VSL. However, the claim of the appellants that they had been getting 25% discount from 15.06.2001 carries’cqnsiderable force in view of the fact that the bona fide nature of the invoices of the supplier allowing 25% discount has not been called into question. We find that the e-mail which contained a message crucial in deciding the assessable value of spares imported in the material time had not been produced before the lower authorities, and the same is produced for the first time, before us. We feel that this communication should have been produced before the original authority to enable him to decide the dispute correctly. Accordingly, we remand the matter to the original authority for taking a fresh decision after affording the appellants a reasonable opportunity of being heard .
(Operative portion of this order pronounced in open Court on 22.9.06)