Case: All India Glass Manufacturers' Federation,New Delhi Vs. Collector Of Customs, Bombay

goods can arise only in case where such damage or deterioration before the clearance is proved to the satisfaction of the proper officer. When there had been no indication of any such condition and the duty has been assessed on the basis of the invoice value and duty is paid, the assessment would be binding. The importer on finding the goods cleared and distributed not to his entire satisfaction may have a claim in contract against the seller for providing sub-standard, damaged or deteriorated goods for the value in the invoice, and it may be open to the buyer to realize from the seller such damages as he would in law be entitled to. That claim for damages cannot have any bearing to the assessment at the time of the clearance. The price at which the goods had been sold is represented by the invoice price and whatever amount is realized on subsequent agreement is only by way of compensation as damages. It cannot be said that the damages thus received represents the difference in price that had been paid and that ought to have been paid. When the seller had agreed to compensate the buyer for the quality of the goods imported, the buyer does not get the right to claim abatement of duty on the assumption that the real price was something less than what has been indicated in the invoice 15. Learned counsel for the appellant referred to para 574 at page 121, Vol. 12 of Halsburys Laws of England, 4th edn "574. Goods not in accordance with contract. - Where it is shown to the satisfaction of the Commissioners of Customs and Excise that goods were imported in pursuance of a contract of sale and that their description, quality, state of condition was not in accordance with the contract, or that they were damaged in transit, and also that the importer, with the consent of the seller, either returned the goods unused to him or destroyed them unused, the importer is entitled to obtain from the commissioners repayment of any customs duty paid on their importation. The foregoing, however, does not apply to goods imported on approval, or on sale or return, or on other similar terms." * It deals with the returning of goods or destroying the goods unused without acceptance and not where the goods have been accepted and used and the importer had been compensated for the reduction in standard. The learned counsel also referred to the decision in Biggin & Co. Ltd. v. Premanite Ltd., Berry Wiggins & Co. Ltd. ( 1951 (1) KB 422 : 1951 (2) ALLER 191, Cehave N.V. v. Bremer Handelsgesellschaft mbH ( 1975 (3) ALLER 739: 1975 (3) WLR 447), Ford Motor Company of India Ltd. v. Secretary of State for India ((1937-38) 65 IA 32 : 1938 AIR(PC) 15 : 1938 (1) MLJ 161); and Vacuum Oil Co. v. Secretary of State for India (LR (1932) 59 IA 258 : 1932 AIR(PC) 168 : 34 Bom LR 1057) 16. On the basis of these decisions, the learned counsel for the appellant contended that when the seller has allowed the reduction, the real price of the goods is that which has been accepted by the seller and that the assessment made on a higher value on the basis of the invoice price is in excess is refundable to the appellant 17. It is not necessary to elaborate on the principle stated in the decisions on the facts of the present case 18. It is admitted case of the appellants that the alleged inferior nature of goods discovered by the appellant after clearance. Until the refund application was made, no requisition appears to have been made to the customs authorities to have the value of the goods redetermined for the purpose of Section 22. The correspondence between the appellants and the sellers and their agents could only reveal that the appellant put forward a claim for compensation on the ground that the goods imported had become lumpy and was also of inferior standard. Ultimately the sellers agreed to reimburse the appellants and pay compensation to the tune of US $ 2, 40, 000. What appellants have received from the sellers is compensation for the damage for breach of warranty. It does not appear that the value was reduced or amount remitted by the appellant was the reduced value of the goods. The amount was the total compensation extended by the sellers to the appellants. From the fact of payment of compensation of reimbursement by the sellers it cannot be taken that at the time and place of importation the goods imported was worth only the amount stated in the invoice less the compensation paid. In other words, there is no proof that the real value of the goods at the time and place of importation was less than what had been entered in the invoice and stated in the Bill of Entry. So long as examination of the goods had not been made or its value re-assessed to the satisfaction of the assessing authorities, it cannot be said that duty was charged not on the real value of the goods but on a higher amount. The contention that the inherent defect in the supply of goods resulted in the diminution of the value of the goods cannot be countenanced when it is conceded that what had been paid by the seller is only compensation for the breach of warranty. Furthermore, there is no material or record to show that even by the team of experts there had been a re-assessment of the value of the goods. What had been estimated is only quantum of damages sustained by the buyers and to that extent they had been compensated. That arrangement between the buyer and the seller cannot be linked with the assessment of duty and no claim for abatement of duty under the provisions of Section 22 or a claim for refund under Section 27 could be legitimately entertained.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. Thus, under the scheme of the Act, the importer is entitled to clear the goods on payment of duty assessed and such assessment is to be made with reference to the tariff value of the goods where tariff values are fixed. In other cases, the price at which the goods are ordinarily sold for delivery at the time and place of importation represents the tariff value for the purpose of the assessment. When the value is assessed on the basis of the invoice and the goods are cleared, the implication is that no remission is allowed and no abatement has been occasioned. There is no express provision which enables the proper officer to make a re-assessment for the purpose of remission on the ground that the goods at the time of their importation or at the time of the clearance was sub-standard or damaged and the invoice price does not represent the real value. Even if it is assumed that in view of the provisions contained in Section 28(a) enabling the proper officer to determine the amount of duty due in cases where duty has not been levied or has been short levied or erroneously refunded after issuing show cause notice, there is a corresponding right on the importer to claim refund of the excess duty levied, it is necessary for the importer to prove to the satisfaction of the proper officer that the goods at the time of the clearance were chargeable to a lesser or lower duty for anyone of the reasons contained in Section 22 which alone provides for abatement of duty. Any error in the assessment of the value by itself does not enable the importer to claim re-assessment or refund. It has necessarily to be shown that on account of the damaged or deteriorated condition of the imported goods before or during the unloading of the goods in India, the duty to be charged on the goods was proportionate to the value of the damaged or deteriorated goods. The question of redetermining the value of the imported goods can arise only in case where such damage or deterioration before the clearance is proved to the satisfaction of the proper officer. When there had been no indication of any such condition and the duty has been assessed on the basis of the invoice value and duty is paid, the assessment would be binding. The importer on finding the goods cleared and distributed not to his entire satisfaction may have a claim in contract against the seller for providing sub-standard, damaged or deteriorated goods for the value in the invoice, and it may be open to the buyer to realize from the seller such damages as he would in law be entitled to. That claim for damages cannot have any bearing to the assessment at the time of the clearance. The price at which the goods had been sold is represented by the invoice price and whatever amount is realized on subsequent agreement is only by way of compensation as damages. It cannot be said that the damages thus received represents the difference in price that had been paid and that ought to have been paid. When the seller had agreed to compensate the buyer for the quality of the goods imported, the buyer does not get the right to claim abatement of duty on the assumption that the real price was something less than what has been indicated in theIt is admitted case of the appellants that the alleged inferior nature of goods discovered by the appellant after clearance. Until the refund application was made, no requisition appears to have been made to the customs authorities to have the value of the goods redetermined for the purpose of Section 22. The correspondence between the appellants and the sellers and their agents could only reveal that the appellant put forward a claim for compensation on the ground that the goods imported had become lumpy and was also of inferior standard. Ultimately the sellers agreed to reimburse the appellants and pay compensation to the tune of US $ 2, 40, 000. What appellants have received from the sellers is compensation for the damage for breach of warranty. It does not appear that the value was reduced or amount remitted by the appellant was the reduced value of the goods. The amount was the total compensation extended by the sellers to the appellants. From the fact of payment of compensation of reimbursement by the sellers it cannot be taken that at the time and place of importation the goods imported was worth only the amount stated in the invoice less the compensation paid. In other words, there is no proof that the real value of the goods at the time and place of importation was less than what had been entered in the invoice and stated in the Bill of Entry. So long as examination of the goods had not been made or its value re-assessed to the satisfaction of the assessing authorities, it cannot be said that duty was charged not on the real value of the goods but on a higher amount. The contention that the inherent defect in the supply of goods resulted in the diminution of the value of the goods cannot be countenanced when it is conceded that what had been paid by the seller is only compensation for the breach of warranty. Furthermore, there is no material or record to show that even by the team of experts there had been a re-assessment of the value of the goods. What had been estimated is only quantum of damages sustained by the buyers and to that extent they had been compensated. That arrangement between the buyer and the seller cannot be linked with the assessment of duty and no claim for abatement of duty under the provisions of Section 22 or a claim for refund under Section 27 could be legitimately entertained.