Case: Commissioner Of Customs, Calcutta Vs. M/S. South India Television(P) Ltd

The facts giving rise to this civil appeal are as follows. The respondent had imported six consignments of ceramic capacitors and one consignment of diodes from Hong Kong during the above period. The goods were shipped from Hong Kong by M/s Compo Export of Hong Kong and M/s Pearl Industrial Company of Hong Kong. The price of ceramic capacitors was declared by the respondent in its Bill of Entry @ HK$ 6.00 per 1000 pcs. whereas the price of diodes was declared @ HK $ 29406 CIF as reflected in the invoices. On 27.4.1998 a show cause notice was issued by the Assistant Commissioner of Customs, Calcutta alleging inter alia that as per the overseas investigation report of the Hong Kong Customs and Excise Department the declared price did not represent the transaction value under Rule 4 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 ("Customs Valuation Rules") as the price actually paid appeared to be different than the declared price and that the importer had under-invoiced the value of the goods to evade huge amount of the Governments revenue. At this stage, it may be pointed out that in the show cause notice the Assistant Commissioner had specifically invoked Rule 8 of the Customs Valuation Rules, 1988, which was subsequently given up by the Department. Be that as it may, the importer was asked to show cause as to why the value of the consignments in question should not be enhanced based on the export declaration under Rule 8 of the Customs Valuation Rules made by the Foreign Supplier. Accordingly, vide the aforestated show cause notice, the Assistant Commissioner raised a demand for the differential duty of Rs. 28,04,831.40 and fine in lieu of confiscation. In reply, the importer denied the above allegations. In reply, it was submitted that the show cause notice was based solely upon the purported investigation report of Hong Kong Customs and Excise duty; that the said report was accompanied by xerox copies of the export declarations; that the xerox copies did not bear the seal or signature of the customs officials in Hong Kong; that the authenticity of the declaration was doubtful; that the declarations were not the correct reproduction of the original and that there were endorsements to the effect that the documents shall not be used against any third party or in any legal proceedings. In other words, the importer contended that the charge of under-valuation cannot be based on xerox copies of the declarations which were not even certified by the competent authority in Hong Kong. According to the importer, such declarations had no bearing upon the actual sale price of the goods in the hands of Hong Kong exporters. According to the importer, there was no allegation in the show cause notice that it had paid higher value to the supplier than that declared by it in the Bill of Entry. Before the Assistant Commissioner, the importer supported the declared price mentioned in the Bill of Entry by relying upon various contemporaneous imports made during the above period by other importers whereas the price declared for identical goods was the same as the price declared by the importer in the present case in its Bill of Entry. It was further submitted by the importer that it was not open for the Assistant Commissioner to adjudicate the value under Rule 8 without going sequentially from Rule 5 to Rule 6 and Rule 6 to Rule 7 onwards. The importer further contended that, in the present case, the value of the goods could have been determined in terms of Rule 5 and, therefore, there was no question of invoking Rule 8. In this connection reliance was placed on the judgment of this Court in the case of Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai reported inabove arguments of the importer were rejected. The show cause notice and the demand levied was confirmed. Aggrieved by the aforesaid decision, the matter was carried in appeal to the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The Tribunal allowed the appeal by holding that xerox copies of the export declarations, even though procured from Hong Kong customs will not make such declarations genuine declarations. According to the Tribunal, the origin of the goods was from China/Tiwan, therefore, there was a possibility of the export declaration price being on the higher side (over invoiced). This was in view of the fact that in some of the above countries, the goods are subsidized by the concerned Governments. Huge subsidies are given based on the export declaration price. Similarly, incentives are also given in that regard. This possibility has not been rejected by the adjudicating authority. Even according to the adjudicating authority, the Hong Kong supplier might have inflated the price in order to earn export incentives and if that be the case then according to the Tribunal, the export declaration made by the Hong Kong supplier cannot be made the basis for increasing the value of the goods in India. Further, according to the Tribunal, in the present case, the importer has relied upon instances of import of identical goods at identical rates by other importers from the same supplier (namely, M/s Pearl Industrial Company, Hong Kong) during the aforesaid period. The Department had accepted those rates. This evidence led by the importer herein has not been rebutted. It had not been discussed by the adjudicating authority. In the circumstances, the Tribunal allowed the appeal filed by the importer. Hence, this civil appeal has been filed by the Department.

Court's reasoning:
find no infirmity in the judgment of the Tribunal which has decided the matter in favour of the Department.Applying the above tests to the facts of the present case, we find that there is no evidence from the side of the Department showing contemporaneous imports at higher price. On the contrary, the respondent importer has relied upon contemporaneous imports from the same supplier, namely, M/s Pearl Industrial Company, Hong Kong, which indicates comparable prices of like goods during the same period of importation. This evidence has not been rebutted by the Department. Further, in the present case, the Department has relied upon export declaration made by the foreign supplier in Hong Kong. In this connection, we find that letters were addressed by the Department to the Indian Commission which, in turn, requested detailed investigations to be carried out by Hong Kong Customs Department. The Indian Commission has forwarded the export declarations in original to the Customs Department in India. One such letter is dated 19.9.1996. In the present case, the importer has alleged that the original declarations were with the Department. That certain portions of the originals were not shown to the importer despite the importer calling upon the adjudicating authority to do so. Further, by way of Interlocutory Application No. 4 in the present civil appeal, an application was moved by the importer calling upon the Department to produce the original declaration in the Court. No reply has been filed to the said I.A. till date. In the circumstances, we are of the view that the Department had erred in rejecting the invoice submitted by the importer herein as incorrect. Further, the Department received from the Hong Kong supplier a Fax message dated 22.7.1996. That was produced before the Commissioner. In that message, he had explained that the manufacturer of the impugned goods was getting export rebates and, therefore, it is possible that the manufacturer hadthe price in order to claim more rebate. The goods were of Chinese origin. In the Fax message it is further stated by the foreign supplier that he was required to show the export value on the higher side in order to claim the incentives given by his Government. This explanation of the foreign supplier, in the present case, had been accepted by the Commissioner. In his order, the Commissioner has not ruled outof the export value by the foreign supplier in order to obtain incentives from his Government. For the aforestated reasons, we find no infirmity in the impugned judgment of the Tribunal.8. Before concluding, we may point out that in the present case at the stage of show cause notice, the Department invoked Rule 8 on the ground that the invoice submitted by the importer was incorrect. In Eicher Tractors (supra) this Court observed that Rule 4(1) of the Customs Valuation Rules refers to the transaction value. Utilization of the word the as definite article indicated that what should be accepted as the transaction value for the purpose of assessment under the Customs Act is the price actually paid by the importer for the particular transaction, unless it is unacceptable for the reasons set out in Rule 4(2). In the said judgment, it has been further held that, the word payable in Rule 4(1) also refers to the "transaction value" and payability in respect of the transaction envisaged a situation where payment of price stood deferred. Therefore, this decision of the Supreme Court directs the Revenue to decide the validity of the particular value instead of rejecting the transaction value. We wish, however, to clarify that it is still open to the Department based on evidence, to show that the declared price is not the price at which like goods are sold or offered for sale ordinarily, which words occur in Section 14(1). Lastly, it is important to note that in the above decision of this Court in Eicher Tractors (supra) this Court has held that the Department has to proceed sequentially under Rules 5, 6 onwards and it is not open to the Department to invoke Rule 8 without sequentially complying with Rules 5, 6 and 7 even in cases where the transaction value is to be rejected under Rule 4. In the present case, the show cause notice indicates that the Department had invoked Rule 8 without complying with the earlierAppeal Nos. 5517/2004 and 5518/200410. These two civil appeals are a sequel to our judgment delivered today in the case of Commissioner of Customs v. M/s South India Television (P) Ltd. vide Civil Appeal No. 1137/2002. We need not refer the present set of the facts in detail once again. However, the Tribunal has held on facts that the import invoices issued by Hong Kong traders and the export declarations filed by the same traders before Hong Kong Customs bear different values. No explanation whatsoever has been given for quoting two different values. Further, the importers in the present cases have failed to file the manufacturers invoices in support of the value shown in the import invoices. On the other hand, in the earlier matter (in the case of M/s South India Television (P) Ltd.) a detailed explanation was offered regarding the Government giving incentives to exporters in China, which explanation is not there in the present cases. For the aforestated reasons, wefind no infirmity in the judgment of the Tribunal which has decided the matter in favour of the Department.