Premier Automobiles Ltd. vs Collector Of Customs on 20 November, 1996

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Customs, Excise and Gold Tribunal – Delhi
Premier Automobiles Ltd. vs Collector Of Customs on 20 November, 1996
Equivalent citations: 1997 (93) ELT 519 Tri Del


ORDER

U.L. Bhat, J. (President)

1. This appeal is directed against the order passed by the Collector of Customs, New Custom House, Bombay on 21-4-1988 loading the assessable value of the goods imported by the appellant and on that basis confiscating the imported goods with option to redeem on payment of fine of Rs. 14 lacs and imposing penalty of Rs. 2 lacs on the appellant for unauthorised import and misdeclaration of value.

2. Appellant entered into Technical Collaboration Agreement with Nissan Motor Co. Ltd. Japan for manufacture of Premier 118 NE cars in India on 5-7-1984. Approval of the Agreement was granted subject to condition that the appellant formulates a phased manufacturing programme progressively using indigenous components. Appellent submitted list of 331 components. Approval was granted only in regard to 306 components, deleting 25 components. Appellant applied for and obtained on 29-10-1984 import licence for spares issued under para 60 of April 1984-March 1985 Policy. M/s. Itoman & Co. Ltd. is a trading unit of M/s. Nissan Motor Co. Ltd. On 18-3-1985 appellant and the two Japanese concerns entered into a Memorandum of Understanding for import of components and parts for assembling and manufacture of Premier 118 NE in India by the appellant. According to the Memorandum of Understanding (MOU), appellant was to place orders with the manufacturers and invoices were to be raised by the trading unit. It appears that the Ist Purchase Order was placed on 10-6-1985. Supply was made in two lots as per Bill of Entry dated 28-11-1985 and 11-1-1986. The goods of the first lot were cleared on provisional assessment on account of ITC angle on execution of Bond. Goods imported by the second Bill of Entry were also cleared on invoice price on provisional assessment.

3. We are concerned in this appeal with the 2nd Purchase Order dated 28-7-1985 for 900 pieces of 9 items as spares. These spares had been deleted from the list of components approved by the D.G.T.D. which means that the appellant could not import these components. Bill of Entry for this consignment bears the date 18-3-1986. Relevant invoice bears the date 29-8-1986. The manufacturer has three-fold price structure for supply of parts. The first is CKD price for supply of complete pack or assembly of parts in a knocked down condition. The second is KD price for supply of certain parts constituting CKD pack to Collaborators. The third is Master Price List for supply of spare parts applicable to all customers. According to letter dated 15-1-1987 of the manufacturer, for spare parts the price charged to Collaborators was 35% less than the Master Price List price.

4. The invoice dated 29-8-1986 did not reflect the Master Price List price less 35% but, on the other hand, reflected CKD price in the CKD price list. There was objection regarding admissibility of import under the licence as also valuation. Goods were allowed to be kept at bonded warehouse on depositing the duty amount. Certain officers of the appellant were questioned. Show cause notice dated 10-12-1986 was issued stating that the licence did not permit import of spares to replace components which had been indigenously manufactured and, therefore, the import was not valid in law. The notice also proposed to reject the invoice price and suggested acceptance of Master Price List price. Appellant resisted the notice both in regard to ITC angle and valuation. Appellant accepted the stand of the Custom House that invoice value could not be acted upon but contended that 35% discount was to be deducted from the Master Price List price. Adjudication order rejected both these contentions and confirmed the proposal in the show cause notice. Hence the present appeal.

5. As already indicated the technical collaboration was approved subject to the condition of progressive indigenisation. Appellant was required to submit list of components for approval by D.G.T.D. List of 331 components was submitted, out of which approval was granted for 306 components excluding 25 items. It is admitted that 9 items covered by the subject import fell in the exclusion category. Therefore, inherently the appellant had no capacity to import these goods.

6. The licence granted in favour of the appellant referred to warranty of spares “for the purpose of providing warranty coverage for after sales service to their customers only such spares shall be permitted as were/are used by the unit as components of the said items at the time of manufacture subject to the condition that the goods imported against this licence shall be used only for the servicing and maintenance of (whether free of cost or at a price) of the machinery equipment, vehicles manufactured by the licensee.” The licence makes it clear that spares needed for a particular purpose alone could be imported. The purpose mentioned was providing warranty coverage or after sales service to customers. The nature of spares was also restricted. The licence allowed import of only such spares as were/are used by the unit as components at the time of manufacture. The language used in the licence makes it clear that spares could be imported to replace components in already manufactured machine if the manufacturers components’ had been used in such vehicles. We find that the Tribunal had taken the same view in an earlier case of the appellants which is reported in Premier Automobiles Ltd. v. Collector -1995 (75) E.L.T. 146 (Tribunal). It is submitted that Reference Application moved before the Tribunal has been dismissed and Reference Application is pending before the High Court. We have already indicated the language of the licence would clearly show that import would be admissible if imported components had been used in the vehicles and not otherwise. It is admitted that the vehicles manufactured did not contain imported components but contained only indigenously manufactured components. We therefore agree with the Collector that the import constituted violation of ITC Policy and the licence condition.

7. There is dispute regarding valuation. Both sides have agreed that invoice value cannot be accepted for the purpose of arriving at the assessable value. Appellant had produced before the lower authorities Master Price List of the manufacturer for “spare parts”. Show cause notice proposed and this was confirmed by the impugned order, to determine the assessable value on the basis of such price. The appellant has no objection to the price list price being adopted as the basis but would contend that discount of 35% should be given. This contention was rejected by the Collector on the ground that it was a special discount.

8. Reliance is placed on three letters of the manufacturer which are seen at pages 107 to 112 of the Paper Book. The first is a letter dated 8-2-1985 of the manufacturer to the appellant regarding “spare parts prices and parts training”. It may be noticed that this letter was written after the Technical Collaboration Agreement and shortly before the MOU. The manufacturer stated in this letter that discount rate will be set at 35% based on Nissan Master Price List. It is pointed out that the two invoices relating to the first order showed price on this basis. Second letter dated 12-2-1987 of the manufacturer addressed to the appellant referred specifically to the order leading to subject import. This was in response to a letter dated 18th December, 1986 of the appellant to the manufacturer seeking information on the basis of invoice price. This letter was written after the receipt of the show cause notice. The letter came to be written because the invoice did not reflect either the price list price or the discounted price. The manufacturer stated in this letter that parts sent to the appellant were supplied out of the stock manufactured for disposal as per CKD price list. These parts remained as excess, they were ear-marked for disposal as spares and hence price as per CKD price was shown in the invoice. The third letter dated 15th January, 1987 is in the nature of a certificate explaining the three fold price structure for supply of parts i.e., CKD price, KD price and Spare parts price. In regard to spare parts price it is stated that the price charged to Collaborators would be 35% less than the price list price. The impugned order does not cast any doubt about genuineness or reliability of the contents of this letter. The impugned order would indicate that but for the fact the Collector was under the belief that the discount was a special discount granted only to Collaborator, the discount would be admissible.

9. We have already referred to the first letter dated 8-2-1985 specifically dealing with Spare Parts Prices sent by the manufacturer shortly before the MOU and the first and second purchase order. The letter disclosed that manufacturer would offer 35% discount on the price list prices to the appellant. This is supported by the contents of second letter as well as the certificate. Department has no case that there are other Collaborators of M/s. Nissan in India or that or there were other wholesale of importers of Nissan spare parts in India and that such importers were not allowed the discount offered to Collaborators. Our attention is invited to the decision of the Tribunal in Indian Airlines Corporation v. Collector of Customs, Bombay – 1987 (30) E.L.T. 923 (Tribunal). Appellant in that case claimed discount of 28% shown in the invoice and this claim was rejected on the ground that it was a special discount not available to all buyers. Appellant was sole importer of the goods into India. Tribunal held that since there were no other importers of such goods in the country, the question of discount being treated as special did not arise. On this basis discount was allowed. Quantity discount in the International trade is a well-known concept which is accepted by authorities. Quantity discount very often may involve classification. If there are different quantity discounts depending on the quantity imported such classification is based on the quantities imported. Similarly there could be other differences between imports or importers which could have an impact on the price structure. One such difference has arisen in the present case, namely, the Collaborator and other importers. It is not known that there were wholesale importers other than Collaborators though, it is common case that there could be retail importers who import spare parts for their own vehicles. If that be so, essentially the distinction is between the Collaborators who are wholesale importers and retail importers. The concept in International trade is essentially one of whole sale trade, though there could be individual or retail imports also. We are dealing in this appeal with a case of import at a wholesale level. If at the same level discount is offered to other similar importers in any country, the same cannot be regarded as special discount offered to particular importer. The only thing special about the appellant is the fact that there is a Collaboration Agreement and MOU between the parties. This quality is not something personal to the appellant. There could be other Collaborators also outside India. This discount is available to all such Collaborators and cannot be regarded as a special discount offered to a particular buyer. In these circumstances we agree with the appellant that the discount is allowable.

10. We agree the conduct of the appellant was blame-worthy in regard to ITC angle. The correct valuation remains to be worked out. We therefore, agree that the goods are liable to be confiscated but could be permitted to be redeemed on payment of Redemption Fine and that penalty could be validly imposed. The quantum of Redemption Fine and penalty will have to be worked after working out the correct assessable value and duty payable.

11. We set aside the impugned order subject to the observations in the preceding paragraph and direct the jurisdictional Commissioner to re-assess the assessable value on the basis of Master Price List price less 35% discount and work out the duty payable by the appellant. Commissioner shall also pass an order confiscating the goods and permit redemption and quantify the redemption fine and the amount of penalty.

12. The appeal is allowed.

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