Case: Commissioner of Customs, Kolkata Vs. M/s. Initiating Explosives Systems I Ltd

M/s. Initiating Explosives Systems India Ltd., the respondent herein, had been importing "Orange Shock Tube" from M/s. The Ensign Bickform Co., 660, Hopmeadow Street, USA (hereinafter referred to as, the exporter) at a unit price of US$ 15.00/1000 ft. (0.015/ft.) which was the declared value of the tubes till November 2000. In November 2000, the price was reduced to US$ 0.0141/ft. (14.10/1000 ft.). The said reduction in the price was attributed to the increase in the import by the importer. The Department accepted the said reasoning.However, in June 2001, the importer declared the value of the imported tubes at a unit price of US$ 0.01/ft. (i.e. US$ 10.00/1000 ft.) and submitted Invoicedt. 05.02.2001. The total quantity imported vide Bill of Entry was 78 lacs feet indicating the value at Indian Rs.6.30 crores and US$ 13,25,660 ft. As per Export Import Policy, this item is restricted one and import is allowed only against specific licence.The Customs Officer, while comparing the value of the tubes with the value of the tubes imported in the month of November 2000, February, March and May 2001, found that the declared value was substantially lower than the actual value. Respondent, when asked to explain the reasons for this reduction in the price of the imported goods, submitted that they had entered into an agreement dated 16th April 2001/23rd April 2001 with the foreign supplier and one of the conditions of the said agreement was that the respondent shall purchase from the supplier 100% of their annual requirement of the goods in question and in the light of these conditions the import price was reduced and thus quoted.

Reasoning:
We agree with the view taken by the Tribunal. No doubt, the exporter was holding 30% of the equity in the share capital of the importer but the holding of the equity in the share capital does not establish the mutuality of interest as the respondent did not hold any equity in the unit of the supplier. This finding has been recorded following the decisions in the case of Daewoo Motors India Ltd. (supra) and Maruti Udyog Ltd., Gurgaon (supra) which have attained finality. There is no doubt that the respondent had imported the identical goods at a higher price prior to the agreement dated 16th April 2001/23rd April 2001, but, the respondent had purchased goods in question at a lesser price from the exporter only after the said agreement subject to the condition that the respondent shall purchase 100% of its annual requirement from the same exporter. We find from the record that the respondent had purchased 7.15 lac metres during the year1.3 crore metres during the year1.31 crore metres during the yearand 1.90 crore metre during the yearIt is manifest from the said period that the volume of import was increased substantially by the importer. The said increase in the volume of import may have been the reason for decreasing the price. This can be a valid consideration. Revenue has failed to place any contemporaneous imports of identical goods by any other importer during the material time showing the purchase to be more than US$ 10/1000 ft. The burden to prove that the goods in question wereby the respondent lies on the Revenue which the Revenue has failed to discharge.