ORDER
G.R. Sharma, Member (T)
1. M/s. Pan Asia Enterprises have filed this appeal against the order of the Collector of Customs. The Collector of Customs in his order has held as under :
“(1) I, therefore, order that the value of the goods imported i.e. CLC 300 be taken at Rs. 6,72,835/- FOB + 20% frt. + 1.125% ins. = Rs. 8,14,971/- C1F per piece and pay the duty accordingly. I order confiscation of goods valued at Rs. 16,29,942/- CIF under Section lll(m) of the Customs Act, 1962. However, an option under Section 125 of the Customs Act, 1962 is given to M/s. Pan Asia Enterprises to redeem the goods on payment of a fine of Rs. 2,00,000/- (rupees two lakhs only). This option shall be exercised within a month from the date of receipt of this order;
(2) I also impose a penalty of Rs. 1,00,000/- (rupees one lakh only) on M/s. Pan Asia Enterprises under Section 112(a) of the Customs Act, 1962.”
2. Briefly stated the facts of the case are that appellants imported two Canons Colour Laser Copiers CLC 300 with accessories; and declared the value as Rs. 2,76,074/- and Rs. 2,54,290/-. It was observed by Customs that the goods have been imported from Traders. On examination of the goods, they were found to be manufactured in Japan by M/s. Canon. As the goods were imported from a trader in Singapore, the importers were asked to produce manufacturer’s invoice, price list as per Rule 10(l)(b) of the Customs (Valuation) Rules, 1988. The importers could not produce the manufacturer’s invoice or price list.
3. On an enquiry and investigation the customs authorities found that proforma invoice dated 2-3-1993 of M/s. Eight Fortunes Ltd., Hongkong drawn on M/s. Rohit Enterprises, Ahmedabad showed that the price of Canon Colour Laser Copier CLC 300 was quoted at HK $ 1,68,000/-(FOB) (Rs. 7,06,476)/-. It was also found by the Customs on a scrutiny of the documents that M/s. Canon Inc., Japan is the manufacturer of the goods CLC 300 and M/s. Canon Singapore is the selling organisation of M/s. Canon Japan for Asian Region. It was also observed that M/s. BEE Electronics and Machines Ltd. had placed an order on M/s. Canon Singapore. M/s. Canon Singapore had confirmed order No. BEE/675/92 @ US $ 7324 FOB for CLC 300. M/s. Pan Asia Enterprises purchased the goods from M/s. Vijay Enterprises, Singapore. The Singapore CIF supplier namely M/s. Vijay Enterprises Pvt. Ltd. had supplied the goods to the appellants at the same price (US $ 7324.00) on CIF basis at which they had purchased from M/s. Canon, Singapore on FOB basis.
4. It was alleged that M/s. Vijay Enterprises Singapore being a trader have not only supplied the goods to M/s. Pan Asia Enterprises at US $ 7324.00 CIF after purchasing the same from M/s. Canon Singapore at US $ 7324.00 FOB but had not even charged a commission. The transaction therefore did not appear to be a genuine commercial transaction and the assessable value would have been US $ 7324.00 + 21.125% (freight & Insurance) + 20% loading.
5. Show cause notice was issued to the importers asking them to explain as to why the declared transaction value should not be rejected and the value of the aforesaid goods should not be determined in terms of Rule 8 of the Customs Valuation Rules, 1988 read with Section 14 of the Customs Act, 1962 and also as to why the value should not be taken as Rs. 17,11,438/- CIF. The importers were also asked to explain as to why the goods should not be confiscated and why penalty should not be imposed. After careful consideration of the evidence on record and submission made by the appellants, the Collector of Customs ordered that the value of the goods imported should be taken at Rs. 8,14,971/- per piece. The Collector also confiscated the goods and gave an option to the importers to redeem the confiscated goods on payment of a fine of Rs. 2,00,000/-. The Collector also imposed a penalty of Rs. 1,00,000/-on the importers.
6. Shri A.S. Sunder Rajan, ld. Consultant appearing for the appellants submitted that assessable value of the photo copiers was declared on the basis of the value declared in the invoices of the suppliers; that non-submission of the manufacturer’s invoice could not lead to the presumption that the goods are undervalued; that M/s. Canon Inc. Japan did not issue the price lists even to their agents/collaborators; that it was the practice of the Deptt. not to insist on manufacturer’s invoice; that it was not the intention of Rule 10 of Customs Valuation Rules, 1988 that manufacturer’s invoice should be produced in each and every case; that there was nothing alarming with the FOB price of the Singapore party and the CIF price of the Indian importer was the same inasmuch as the Singapore exporter had borne the insurance and freight out of the 10% commission that it got from Singapore supplier of the goods; that the freight and insurance in the instant case amounted to Rs. 510/- per piece; that Rule 4 of the Customs (Valuation) Rules, 1988 was self-contained and the circumstances under which the transaction value can be discarded are specified in Sub-rule (2) of Rule 4. That in the instant case, those circumstances were not applicable; that the judgment of Honourable Calcutta High Court relied on by the respondents is not applicable to the facts of the present case; that the case Gapp’s Industries relied upon by the respondents pertains to Customs Valuation Rules, 1963 whereas their case pertains to Valuation Rules, 1988; that there was no legal basis for enhancement of the value as ordered; that the Collector failed to read and interpret the correct judgment of the Hon. Supreme Court in the case of Sharp Business Machines reported in 1979 E.L.T. 640 : 1990 (49) E.L.T. 640 (S.C.); that the circumstances and facts in the case relied upon by the Revenue were different from the facts of the instant case; that there was no justification for alleging misdeclaration and invoking the provisions of Section lll(m) of the Customs Act, 1962 that there was no justification for imposing fine in this case. That in any event, the imposition of fine amounting to Rs. 2,00,000/- was excessive. It was also pleaded that there was no case made out for imposition of a penalty. The learned consultant therefore, prayed that the impugned order may be set aside and the transaction value at which the goods have been imported may be accepted as the value for the purpose of assessment under Section 14(1) of the Customs Act, 1962 read with the Rule 4 of the Customs (Valuation) Rules, 1988.
7. Shri Satish Shah, learned JDR appearing for the respondents submitted that the learned Collector had rightly rejected the transaction value in view of the proforma invoice dated 2-3-1993 of M/s. Eight Fortune, Hongkong drawn on M/s. Rohit Enterprises, Ahmedabad that this price was further confirmed by the price quotation of M/s. J.O.S. showing the price for identical goods @ HK $ 1,60,000/-; that the learned Collector rightly observed that the supplier being a trader, the transaction does not appear to be genuine commercial transaction on the basis of the fact that freight, insurance, handling charges and the profit margin has not been included in the price as per the normal trade practice in the international market; that the Collector has rightly held that the transaction value was not acceptable under Rule 4 of the Customs (Valuation) Rules, 1988; that identical goods during the contemporary period were offered for sale at HK $ 1,68,000/- FOB in the course of international trade; that M/s. Jardine Marketing Services had quoted from Hongkong for identical goods @ HK $ 1,60,000/-; that it has also been specifically mentioned by the Collector that M/s. Jardine Marketing Services, Hongkong were exclusive distributors for CLC products for Hongkong market and therefore FOB quoted by them was the correct price for CLC product of Canon. Moreover, this price appears to be more or less the same as was mentioned in the proforma invoice of M/s. Eight Fortunes Ltd., Hongkong. In support of his contention the ld. DR cited and relied upon the ratio of judgment in the case of Atmaram Agarzvalla reported in 1992 (60) E.L.T. 217 wherein the Hon’ble Calcutta High Court had held that it cannot be said with certainty at this stage whether the transaction value would be increased by any amount on account of any commission or brokerage paid or payable by the petitioner to the foreign seller. The customs officers have applied Rule 5 by determining the value of imported goods on the basis of the value of identical goods for export to India. Therefore, the assessment order is justified.
8. It was also argued by the ld. DR that in the case of Gapps’s Industry reported in 1992 (60) E.L.T. 305, this Tribunal had held that price quotation by itself is sufficient basis for determining assessable value under Rule 3(a) of Customs (Valuation) Rules, 1963; that in the case of Wax and Wax Products -[1990 (48) E.L.T. 421], this Tribunal had held that the value based on price list of the foreign supplier available with local agents represents the correct value of the goods, the ld. DR also referred to the ratio of the judgment in the case of Khatan Makanji Spinning Wvg. Co. Ltd. reported in 1992 (57) E.L.T. 604, this Tribunal had held that the reliance placed by the department on accepting the quotation of indenter/sole selling agent of the supplier for the purpose of arriving at undervaluation of goods is correct in law and on fact that in the case of Sharp Business Machines Pvt. Ltd. reported in 1990 (49) E.L.T. 640 is 1990 (49) E.L.T. (640) (S.C.), the Hon. Supreme Court had held that in the present case, the company itself has produced copies of quotation in relation to the items imported by them, thus they cannot dispute the correctness of the price herein nor the importer has produced another material to show that the value mentioned in the invoice was correct market value of the goods at the relevant time. The ld. DR concluded his submissions by saying that the ld. Collector had rightly rejected the transaction value and therefore prayed that the impugned order may be upheld and appeal may be rejected.
9. Heard the submissions of both sides and considered them. We observe that the learned consultant for the appellants emphasised that in the circumstances and facts of the case, the department should have accepted the transaction value in terms of Rule 4 of the Customs (Valuation) Rules, 1988. The Hon. Supreme Court in the case of Commerce International reported in 1995 (77) E.L.T. 20 had held as under :
“2. The appellant filed a Bill of Entry for clearance of 125 cartons of toners declaring the value of the goods at a particular amount on the basis of invoice-cum-value and country of origin certificate issued by M/s. Sangill Ltd. Since the seller was not a manufacturer the Department required the appellant to furnish the price list of the goods under import but the appellant instead of filing the price list stated that they had purchased the goods from a trading company which was not willing to reveal the source of supply. Consequently, the Department obtained export price list from M/s. Coates Electrographics Limited. After examining the price list of M/s. Coates Electrographics Ltd., the Collector was of the opinion that it was a case in which Rule 3(a) could not be applied. Therefore, he proceeded to determine the value under Rule 3(b) and on the price list supplied by the manufacturer the valuation of the toner imported by the appellant was determined. It was held that the value of the goods when compared with manufacturer’s price list was much below the normal price in the international market. The goods were directed to be confiscated with an option to clear on Rs. 8 lakhs. Penalty of Rs. 1000/- was also imposed. Against this order the appellant approached the Tribunal. The Tribunal found that the Collector did not commit any error in applying Rule 3(b) but reduced the redemption fine from Rs. 8 lakhs to Rs. 5 lakhs. The penalty of Rs. 1,000/- was maintained.
3. Section 14(l)(b) of the Customs Act empowers the appropriate authority to determine the value of the imported goods in accordance with provisions contained in Rules 3 to 8. Rule 3(a) provides for determination of value of such goods, with comparable goods produced or manufactured and ordinarily sold or offered for sale to other buyers in India under competitive conditions. Rule 3(b) permits the proper officer to determine valuation on the export price at which such goods or comparable goods are ordinarily sold or offered for sale under competitive conditions to buyers outside India. The determination under Rule 3(b) could be undertaken if the valuation could not be determined under clause (a). The authorities found that in the nature of goods imported by the appellant, the valuation of it could not be determined under Rule 3(a). Therefore, Rule 3(b) was rightly invoked. And the determination having been done on comparable goods offered for sale in competitive conditions in countries outside India the order does not suffer from any error of law. The Tribunal further did not commit any error in relying on the price list supplied by the manufacturer as compared to trading company which refused to divulge the name of the manufacturer.”
10. More or less similar rulings were passed by the Apex Court in the case of Sharp Business Machines Pvt. Ltd. reported in 1990 (49) E.L.T. 640 wherein it has held as under :
“10. We have considered the submissions made by learned counsel for the parties. Section 14 of the Act provides for valuation of goods for the purpose of assessment. Section 14(1) which is relevant for our purposes reads as under :-
14. Valuation of goods for purposes of assessment:
(1) For the purpose 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 export, as the case may be, is presented under Section 50.
11. According to the above provision the value of the 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, 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 sale or offer for sale. In the present case the company itself had produced the copy of quotations received by them from M/s. Shun Hing Technology Ltd., Hongkong in respect of the copiers and other items imported alongwith their application for approval of their phased manufacturing programme. The company itself having produced these quotations, they cannot dispute the correctness of the prices mentioned therein. The company has not only not disputed the correctness of these quotations but has not produced any other material on record to show that the value mentioned in the invoices was the correct market value of the goods imported at the relevant time. The adjudicating authority in these circumstances was perfectly justified in taking the prices mentioned in the quotations as a basis for determining the correct value of the imported goods.”
In the case of Debabrata Ghosh reported in 1993 (68) E.L.T. 551, the Hon’ble Calcutta High Court held :
“7. The question, therefore, is what should be the starting point of valuation of the imported car. Should the valuation be done on the basis of the list price of the manufacturer which is the price of a new brand car at which the car is sold or alternatively, as Mr. Gupta has suggested, the starting point should be the auction price of the car which price was actually paid by the petitioner for purchase of the car? In my judgment, Section 14 of the Customs Act is quite clear and must be followed. The endeavour of the department should be to find out 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.’ The principle laid down in Section 14 is the universal principle of finding out the price at which a willing buyer will purchase from a willing seller at arm’s length. The price must be the sole consideration of the sale. There is nothing in Rule 8 to suggest that a different test has been laid down by the Rules. On the contrary, Rule 8 categorically states that” where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and Section (1) of Section 14 of the Customs Act, 1962′. It is nowhere laid down in the Rules that if a second-hand car [is brought by an importer and brought into India, duties for the said second-hand car] have to be calculated on the basis of the price of a new car.
9. Lastly it does not appear there is any conflict between Rule 8 of the Customs Valuation Rules and Section 14(1) of the Customs Act. On the other hand, Rule 8 has been made applicable subject to the provisions of Section 14 of the Customs Act.”
12. On an analysis of the above rulings, we find that though the goods were imported when Customs Valuation Rules. 1963 were in force and the present case falls within the Valuation Rules, 1988, however, the Honourable Supreme Court had not only considered the Valuation Rules but also Section 14 of the Customs Act, 1962, again in the case of Commerce International cited (supra), the Apex Court discussed Section 14 (l)(b) of the Customs Act along with Rules 3 to 8 of the Customs (Valuation) Rules, 1963 and held that in the nature of goods imported by the appellants the offer of it could not be determined under Rule 3(a). However, Rule 3(b) was rightly invoked and the determination having been done on comparable goods offered for sale in competitive conditions in countries outside India, the order does not suffer from any error of law. The Tribunal further, did not commit any error in relying on the price list supplied by the manufacturer as compared to trading company which refused to divulge the name of manufacturers. The position is further made clear in the judgment in the case of Debabrata Ghosh that there is no conflict in Rule 8 and Section 14. So also can be said that there is no conflict in Valuation Rule 4 of 1988 and Section 14 of the Customs Act, 1962. On the other hand Rule 4 becomes applicable subject to the provisions of Section 14 of the Customs Act, 1962.
13. The ld. Consultant for the appellants has referred to the decision of the Tribunal in the case of PAC Systems reported in 1992 (58) E.L.T. 131 wherein the Tribunal had discussed various provisions of Rule 4 of the Customs Valuation Rules, 1988 and submitted that in the instant case, the consignment was imported in 1992 and therefore only Customs (Valuation) Rules, 1988 will be applicable. It was also impressed by the ld. Consultant mat all the decisions cited and relied upon by the respondents pertain to Customs (Valuation) Rules, 1963 and that after GATT Agreement transaction value under Rule 4 of the Customs Valuation Rules, 1988 has to be accepted or reasons as enumerated in Rule 4 should have been pointed out under which the transaction value was not acceptable. It was argued also that the ld. Collector had not at all considered the provisions of Rule 4 of the Customs (Valuation) Rules and has simply averred to the provisions of Section 14 of the Customs Act, 1962. The ld. consultant had therefore, argued that on the ratio of the decisions of the Tribunal in the case of PAC Systems the transaction value declared by the appellants must be accepted.
14. For the purpose of proper appreciation of the provisions of the Customs Act, 1962, Section 14 before and after the Customs (Valuation) Rules, 1988 is reproduced below:
Section 14 before Customs Valuation Rules, 1988
“14. Valuation of goods for purposes of assessment.
(1) For the purpose 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-
(a) 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 export, as the case may be, is presented under Section 50];
(b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this behalf.”
Section 14 after Customs Valuation Rules, 1988
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 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 export, as the case may be, is presented under Section 50;]
(14) subject to the provisions of Section (1) the price referred to in that Section in respect of imported goods shall be determined in accordance with the rules made in this behalf.”
15. Admittedly, the imports in this case took place after framing of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. In Rule 3 of the said Rules it has been provided :
“3. Determination of the method of valuation. – For the purpose of these rules –
(i) the value of imported goods shall be the transaction value;
(ii) if the value cannot be determined under the provisions of clause (i) above, the value shall be determined by proceeding sequentially through Rules 5 to 8 of these rules.”
16. In the instant case, we find that the value declared in the bill of entry on the basis of invoice from the foreign supplier was suspect. This suspicion arose because the goods were not supplied by the manufacturer, investigation also revealed that the value of identical goods was quoted at Hongkong $ 1,68,000/-. This quotation was given by M/s. Eight Fortune Hongkong to an Indian Firm in the name and style of Rohit Enterprises, Ahmedabad. In addition, M/s. Jardine Marketing Services had quoted from Hongkong for identical goods at a rate of HK $ 1,60,000/-. Having regard to these facts that came to light on investigation of the case transaction value shown in the invoice and declared in the bill of entry was rightly suspected and therefore the question of accepting the transaction value in terms of Rule 4 of the Customs Valuation Rules, 1988 does not arise. Rightly, the officers proceeded to examine the value sequentially under Rules 5 to 8.
17. Rule 5 of the Customs (Valuation) Rules provides – “(i) transaction value of identical goods – (ii)(a) subject to the provisions of Rule 3 of these Rules, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued, (b) in applying these Rules, the transaction value of identical goods for sale at the same commercial level and substantially the same quantities as the goods being valued shall be used to determine value of imported goods.”
18. Identical goods have been defined as :- “(i) which are seen in all respects including physical characteristics, quality and reputation as the goods being valued except for minor differences in appearance that do not affect the value of the goods, (ii) produced in the country in which the goods being valued were produced and (iii) produced by the same person who produced the goods or where no such goods are available goods produced by different persons, but shall not include imported goods where engineering, development work, art work, design work, plant or sketch undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charge or at a reduced cost of for use in connection with the promotion and sale for export of these imported goods”. Examined in this light as to whether the goods value whereof has been taken up, as transaction value were identical goods or not, we find that quotations referred to pertained to identical goods of the same specification produced in Japan namely the same country of origin by the same manufacturer namely, M/s. Canon. We therefore find that the quotation were for identical goods. While discussing case law cited (supra) it has already been well settled principle of law that quotation for identical goods can be accepted to determine the transaction value for the purpose of assessment under Section 14 of the Customs Act, 1962 read with the Customs Valuation Rules, 1988. In this view of the matter, we hold that in the instant case, the transaction value shown in the invoice and declared in the bill of entry has rightly been rejected and that the other value has been accepted in terms of the Customs Valuation Rules, 1988.
19. Having crossed the hurdle created by the learned consultant that the only Rule which governed price was Rule 4 of the Customs Valuation Rules, 1988, we now proceed to determine the correct assessable value of the imported goods from the evidence on record. We find that the Revenue relied upon the quotation from M/s. Jardine Marketing Services, Hongkong. According to the Revenue, this company was sole distributor in HK for CLG product. They had indicated that the value of the imported goods was HK $ 1,60,000/-. In addition, the Revenue also took into consideration the quotation given to an Indian Firm in Ahmedabad where the CIF value at Bombay was quoted at HK $ 1,68,000/-. We find that the Collector has lucidly explained as to why the invoice value declared by the appellants was not acceptable. Moreover, in the decisions cited (supra) by the respondents, the Hon. Supreme Court had held that determination of value being done on comparable goods is not error in law and this could be acceptable. In the instant case, we observe that the invoice value was based on the suppliers’ price. Foreign suppliers’ price did not conform to internationally commercial considerations. Further, there was a quotation for very same goods from the exclusive distributor at Hongkong. To support this quotation there was another quotation from a foreign supplier to an Indian buyer.
20. We also observe that difference in value declared by the appellants and the one obtained from foreign supplier in the form of quotations is large and the appellants have not been able to furnish any satisfactory explanation. In the facts and circumstances, the goods appear to be grossly undervalued. Having regard to the facts and circumstances of the case, we would not like to interfere with the order passed by the Collector insofar as accepting the enhanced value of the imported goods is concerned.
21. Insofar as confiscation of the goods is concerned, we find that Section lll(m) has been invoked for confiscation of goods since the value was not correctly declared by the importers therefore, we uphold the confiscation. Insofar as redemption fine is concerned, we find that the value of the goods was Rs. 16,29,942/- CIF and therefore, the fine of Rs. 2,00,000/- also does not appear to be excessive.
22. Insofar as penalty is concerned, we find that the imported goods had been grossly undervalued to evade payment of duty. As the penalty is only Rs. 1,00,000/-, looking to the value of goods and the duty involved thereon, as also the intention to evade payment of duty, we do not find it to be so harsh or disproportionate to the offence committed by the appellants. Having regard to the above findings, we uphold the impugned order and dismiss the appeal.