ORDER
G.A. Brahma Deva (J) and S.V. Maruthi (J), Members
1. This is an appeal against the Order-in-Appeal No. 3161/88 dated 29-8-1988 passed by the Collector of Customs (Appeals), Bombay.
2. Facts of the case, in brief, relating to the dispute are that the appellants imported 1875 M. Tons of PVC Resin Suspension Grade ex-M.V. OCEAN STAR from Yugoslavia declaring at a CIF price of US $ 477.44 per Metric Ton and for the whole consignment of 1850 MTs which is equivalent to Rs. 1,10,27,016/-. On arrival of the goods it was noticed by the appellants that the goods were damaged on the Voyage due to bad weather and other causes. Accordingly, they claimed 50% abatement in value of the goods. A report of Surveyors was also filed in support of their contention that the Cargo was partly damaged. In a letter dated 17-10-1985 addressed to the Assistant Collector it was stated that due to faulty loading of the Cargo in the Vessel approximately 300 tons of the Cargo was lost and the whole Cargo had depreciated in value by about 60% due to mixing of the Cargo with foreign material and that the contaminated goods were totally unfit for being taken into use for manufacture of the articles like PVC pipes because these contaminated goods will bring number of manufacturing defects such as scratches, cracks, intermittent linings etc. They submitted that the goods would not be of any use for manufacturing standard quality items and consequently the goods would not fetch even 30% of the present market value of the sound goods. They submitted that this fact has been brought to the notice of the port department and insurance company and requested that the consignment may please be examined and thereafter reasonable abatement of duty may be given to them in respect of these goods claimed to be damaged and deteriorated in quality. They also addressed a letter to the Assistant Collector of Customs stating that suppliers had agreed to a rebate of 50% in price because the Cargo was damaged on account of faulty loading at load port and the supplier was willing to bear the cost of damage.
The Deputy Collector who had passed the order had held that analysis of the samples of the goods as per report of the Customs Laboratory showed that contamination in the consignment in the form of impurities was to the extent of 6.4% as against 9 to 11% claimed by the appellants. He observed that party has claimed 50% reduction in value on the basis that the contamination of the goods was to the extent of about 10%. Since the contamination was only to the extent of 6.4%, the proportionate reduction in value to the extent of 30% would, therefore, be reasonable and, accordingly, he ordered for abatement of duty on account of damage/deterioration of the goods by reducing the value of the goods to the extent of 30% under Section 22(3)(a) of the Customs Act, 1962. This view was confirmed by the Collector (Appeals). Hence, this appeal.
3. Shri L.P. Asthana, learned Counsel, appearing for the appellants, submitted that neither copy of the test report relied upon by the Department was supplied to the appellants nor the sample taken for analysis could be considered as representative of the whole lot. He said that percentage of contamination whether 6.4% or 10% is immaterial as in any case it would render the consignment useless for the purpose for which it had been imported. He contended that claim of the appellants was not based on any report but on actual damage to the extent of 50% based on credit note given by the supplier after examining the goods. He said that since the supplier has accepted damage to the extent of 50% and given 50% rebate in price, the goods should be valued accordingly by giving 50% abatement.
4. Shri Prabhat Kumar, learned JDR while countering the arguments submitted that sample was drawn in the presence of party as can be seen from the records and party was well aware of the contents of the report. Hence, it cannot be said to be denial of principles of natural justice. The samples drawn were tested and retested on 3-12-1985 as requested by the party and samples revealed that it contained percentage of Soda Ash – 4.8% and percentage of others 1.6%. He said that since retest was done as requested and same was not rebutted by the party, a new plea cannot be taken that report cannot be relied upon as they are bound by the results. He referred to the decisions of the Tribunal in the case of Eagle Mineral Products v. Collector of C.E., reported in 1988 (38) E.L.T. 315 and Collector of Central Excise v. Navdeep Chemicals (P) Ltd. [1988 (37) E.L.T. ’62]. He said that letter of credit was neither placed before the lower authorities nor can be taken into consideration as compromise between the parties cannot be the basis to determine the value under Section 14 of the Customs Act. He contended that part of the contract is yet to be completed and the rebate given by the Supplier works out only 27% if the entire contract is taken into consideration. He said that the goods have not become useless and in fact they have been taken in use and the Department was justified in giving proportionate abatement based on chemical report to the extent damage was caused.
5. In reply, Shri Asthana said that credit was given by the supplier only for damaged goods and he drew our attention to the Credit Note where it was specifically mentioned that ‘Credit Note for damaged Material’. The plea of Credit Note was taken at the earliest stage as can be seen from the order of the Deputy Collector but same was not considered while giving abatement. He said that decisions cited by the Departmental Representative are not applicable to the facts of this case and there is no findings by the Collector (Appeals) with reference to the grievance taken by the party about nonsupply of test report.
6. On a careful consideration of the arguments advanced on both sides and on perusal of the records we find that there is no dispute about the damage of the goods but to what extent damage was caused for the purpose of giving abatement under Section 22 of the Customs Act. Since the goods have not become useless nor damaged fully but partly the proportionate abatement has to be given. The contention of the party is that since they availed rebate to the extent of 50% of the price from the supplier the same value has to be accepted for the purpose of abatement. Credit Note reveals credit for damaged material but no mention of percentage and further no document was placed before us to show that supplier has accepted 50% of the damage of the goods in question. Apart from this no evidence was placed before us to show that value of the goods has gone down considerably and value of the goods was less than 50% at the time of importation. On the other hand the Department has proceeded to determine the value of the goods based on test report to decide to what extent damage was caused. Since the test report of Customs Laboratory revealed contamination to the extent of 6.4% as against claim of 10% by the party at the first instance, the Department was justified in giving 30% reduction in value for the purpose of giving abatement under Section 22 of the Customs Act/Under these circumstances, we do not find any infirmity in the orders passed by the authorities below and, accordingly, the appeal filed by the appellants is hereby dismissed.
P.C. Jain, Member (T)
I agree with the conclusion reached by my learned brother Shri G.A. Brahma Deva for different reasons set out below:-
6.1. The appellants stated before the original authority that “the main impurities were soda ash, sulphur and iron fillings etc., and that too around 9 to 11%, that to remove iron from the P.V.C. resins and to make P.V.C. pipes, an additional cost at Rs. 6.30 per kg. was estimated but the actual cost came to Rs. 11.83 per kg. when they actually tried to use the same; that due to the presence of foreign material in the P.V.C. resin, the pipes manufactured out of the goods imported in question failed in impact strength, pressure test, sulphuric acid test etc.; that the wall thickness of the pipes could not be maintained due to uneven flow of such a very low thickness; that they used the damaged goods in question after a number of processes”.
7. Aforesaid submissions indicate that the goods have been used, although after a number of processes, for the same purpose for which the sound goods were to be used. We have not been told by the appellants as to what is the normal cost of manufacture of pipes from sound P.V.C. Resins. This information could have indicated the amount of depreciation in value of the P.V.C. resins.
8. We also observe from the report dated 21st November, 1985 of the Marine & General Survey Agencies Pvt. Ltd. brought on record by the appellants during the course of hearing that there were in all 73290 bags of sound and slack/torn original bags of P.V.C. resins at the time of landing, apart from 915 bags of sweeping. Out of the above, 39024 bags were total number of original slack/torn bags i.e. about 53 per cent bags were slack/torn. In other words, remaining 47 per cent bags were in sound condition and no abatement as such would be called. Probability of contamination in slack/torn bags and sweepings could not be ruled out; greater probability being in sweepings, torn bags and slack bags in the descending order. Even if we take 50 per cent depreciation in value, as contended by the appellants, this cannot be extended to the 43 per cent bags found in sound original condition. This contention can be extended to the goods which are liable to contaminate. On that basis, about 26 to 27 per cent (i.e. 50 per cent of 53 per cent bags) w6uld be the overall depreciation in value. On the basis of available evidence, we are of the view that 30 per cent overall depreciation allowed by the lower authorities is quite reasonable, even though the lower authorities have arrived at that level of depreciation on the basis of test reports of the contaminated goods.
9. As regards the appellants’ reliance placed on the Credit Notes of the supplier, I agree with the Ld. brother Shri Brahma Deva that they cannot be considered as conclusive of the extent of depreciation in value.