Case: Mirah Exports Private Limited Vs. Collector of Customs

given on the prices indicated in the price list is actually mentioned in other documents that were seized during the search. The said documents include the various letters and telexes received from SKF Oversees Bearings Division, Sweden which indicate the new pricing policy of the foreign supplier. As pointed out by the Addl. Collector of Customs in his order dated April 16, 1985 the said documents show that 20% discount is allowed to th e original equipment manufacturers who import for fitment in their manufactured products and for this build up inventories with sizeable orders after securing favorable prices between various competitors but as regards canvassers and Skefko , who import in even greater bulk for the purposes of only trading, the policy envisaged that they may even secure lower price particularly if they generated additional volumes of sales. The documents seized during the search and seizure that were produced by the appellants before the customs authorities (genuineness of which was accepted by the Addl. Collector of Customs) show that apart from Mirah Exports a number of other importers namely, Skefko, Amul Engg., Krishna Engg. work, Delhi Jayaveer Forge, Davangere, Ajay Trading Co., Delhi Ramgopal Lachmi Narayan, Bombay Sanmukh Engineering Industries, etc. has also imported comparable quantities of similar bearings at the same or lesser prices as that of Mirah Exports and that discount from 50% to 70% on the list prices was the normal invoice price for a number of unconnected importers during the period. The Collector of Customs, while passing the order dated December 5, 1986 and march 20, 1987 and the Tribunal in the impugned judgment have not taken note of the said documents and the fact that the importers had been given 50% to 70% discount on the prices indicated in the list price.In Basant Industries [supra] this Court has pointed out that "in t he business world, considerations of relationship with the customer are also a relevant factor" and that "a price which is offered by a supplier to an old customer may be different from a price which the same supplier offers to a totally new customer ". In that case, the Court, on the basis of the correspondence that had ensued between the supplier and the importer, found that there was some bargaining before the price was finalised and that the price mentioned in the invoice that was agreed was in view of the quantity that was being imported by the importer. thus it not unusual for a foreign supplier to give a higher discount to an importer who is importing a much larger quantity and merely because such a discount has been given by the supplier it cannot be said that there has been any undervaluation in the invoice. 12. Section 14 of the Act prescribes that valuation of goods for the purpose of assessment has to be made at the price at which such goods or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation of exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business o f each other and the price is the sole consideration for the sale or offer for sale. In the present case neither has it been alleged nor has any material been produced to show that Mirah Exports and the foreign suppliers have any interest in the business of each other. As regards Skefko it has been pointed out that AB-SKF, Sweden holds 39.8% of the share capital in Skefko but there is nothing to show that Skefko has any interest in the business of AB-SKF. Moreover it is of no con sequence in the present case because the invoice price at which the imports were made by Skefko were the same at which Mirah Exports and other importers had imported and no special price was given to Skefko for import. In these circumstances, we are of the opinion that the invoice prices as mentioned in the invoices could be treated as the price at which the goods are ordinarily sold or offered for sale in the course of international trade and that it had been rightly accepted as the value for assessment purposes under Section 14 of the Act by the Addl. Collector of Customs.In Sharp Business machines Pvt. Ltd. [supra] the invoice value was not accepted as the real value of the goods which were imported in view of the special facts and circumstances of that case. it was found that the appellant company in that case has tried to practise a fraud in defeating the import policy relating to import of Copiers which enabled the new entrepreneurs establishing small scale industries to import, in the first phase, 62% of the components of the copiers and the balance of the 38% was to be manufactured by them indigenously. In that case it was found that the appellant company had purchased 14 fully finish ed plain paper copiers of Japanese origin in Hong Kong and Singapore and had them dismantled in Hong Kong for importing the same in the guise of the components of the copiers and thereby the company not only had violated the terms and conditions of the licence but had also committee a fraud on the Import Policy itself in importing the fully finished copiers which was totally prohibited item for import. The finding about undervaluation in the invoices was arrived at on the basis of prices mentioned in quotations of the authorised agents of the manufacturers and it was held that there was no question of supplying the components of the copiers on a lower price than given by the manufacturers themselves. the decision i n Sharp Business Machines [supra] has, therefore, no application to the facts of this case. Similarly the decision in Padia Sales Corporation [supra] and Commerce International [supra] which were decided on their own facts have no application to the present case. 13.

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

Explanation:
1[ds]The legal position is well settled that the burden of proving a charge of under valuation lies upon Revenue and Revenue has to produce the necessary evidence to prove the said charge "Ordinarily the Court should proceed on the basis that the apparent tenor of the agreement reflect the real state of affairs" and what is to be examined is "whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price." [ See: Union of India Vs. Mahindra &Mahindra (supra), at p. 487]In the present case the only evidence that was adduced by Revenue in support of the charge of under-valuation is the price list No. 8102 dated February 15, 1981 which was found during the course of search in the premises of Skefko, etc. that was conducted by the officers of the enforcement Directorate on or about June 22, 1983. The price list does not even mention about the discount of 20% that has been allowed by the Tribunal in the impugned judgment. The matter of discount to be given on the prices indicated in the price list is actually mentioned in other documents that were seized during the search. The said documents include the various letters and telexes received from SKF Oversees Bearings Division, Sweden which indicate the new pricing policy of the foreign supplier. As pointed out by the Addl. Collector of Customs in his order dated April 16, 1985 the said documents show that 20% discount is allowed to th e original equipment manufacturers who import for fitment in their manufactured products and for this build up inventories with sizeable orders after securing favorable prices between various competitors but as regards canvassers and Skefko , who import in even greater bulk for the purposes of only trading, the policy envisaged that they may even secure lower price particularly if they generated additional volumes of sales. The documents seized during the search and seizure that were produced by the appellants before the customs authorities (genuineness of which was accepted by the Addl. Collector of Customs) show that apart from Mirah Exports a number of other importers namely, Skefko, Amul Engg., Krishna Engg. work, Delhi Jayaveer Forge, Davangere, Ajay Trading Co., Delhi Ramgopal Lachmi Narayan, Bombay Sanmukh Engineering Industries, etc. has also imported comparable quantities of similar bearings at the same or lesser prices as that of Mirah Exports and that discount from 50% to 70% on the list prices was the normal invoice price for a number of unconnected importers during the period. The Collector of Customs, while passing the order dated December 5, 1986 and march 20, 1987 and the Tribunal in the impugned judgment have not taken note of the said documents and the fact that the importers had been given 50% to 70% discount on the prices indicated in the list price.In Basant Industries [supra] this Court has pointed out that "in t he business world, considerations of relationship with the customer are also a relevant factor" and that "a price which is offered by a supplier to an old customer may be different from a price which the same supplier offers to a totally new customer ". In that case, the Court, on the basis of the correspondence that had ensued between the supplier and the importer, found that there was some bargaining before the price was finalised and that the price mentioned in the invoice that was agreed was in view of the quantity that was being imported by the importer. thus it not unusual for a foreign supplier to give a higher discount to an importer who is importing a much larger quantity and merely because such a discount has been given by the supplier it cannot be said that there has been any undervaluation in the invoiceSection 14 of the Act prescribes that valuation of goods for the purpose of assessment has to be made at the price at which such goods or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation of exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business o f each other and the price is the sole consideration for the sale or offer for sale. In the present case neither has it been alleged nor has any material been produced to show that Mirah Exports and the foreign suppliers have any interest in the business of each other. As regards Skefko it has been pointed out that AB-SKF, Sweden holds 39.8% of the share capital in Skefko but there is nothing to show that Skefko has any interest in the business of AB-SKF. Moreover it is of no con sequence in the present case because the invoice price at which the imports were made by Skefko were the same at which Mirah Exports and other importers had imported and no special price was given to Skefko for import. In these circumstances, we are of the opinion that the invoice prices as mentioned in the invoices could be treated as the price at which the goods are ordinarily sold or offered for sale in the course of international trade and that it had been rightly accepted as the value for assessment purposes under Section 14 of the Act by the Addl. Collector of Customs.In Sharp Business machines Pvt. Ltd. [supra] the invoice value was not accepted as the real value of the goods which were imported in view of the special facts and circumstances of that case. it was found that the appellant company in that case has tried to practise a fraud in defeating the import policy relating to import of Copiers which enabled the new entrepreneurs establishing small scale industries to import, in the first phase, 62% of the components of the copiers and the balance of the 38% was to be manufactured by them indigenously. In that case it was found that the appellant company had purchased 14 fully finish ed plain paper copiers of Japanese origin in Hong Kong and Singapore and had them dismantled in Hong Kong for importing the same in the guise of the components of the copiers and thereby the company not only had violated the terms and conditions of the licence but had also committee a fraud on the Import Policy itself in importing the fully finished copiers which was totally prohibited item for import. The finding about undervaluation in the invoices was arrived at on the basis of prices mentioned in quotations of the authorised agents of the manufacturers and it was held that there was no question of supplying the components of the copiers on a lower price than given by the manufacturers themselves. the decision i n Sharp Business Machines [supra] has, therefore, no application to the facts of this case. Similarly the decision in Padia Sales Corporation [supra] and Commerce International [supra] which were decided on their own facts have no application to the present case.