TMI Blog2006 (7) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... t, which may extend to about a year. According to the petitioner, in view of the inherent volatility in the price of silk, it becomes necessary to fix the price for the entire contracted quantity and not leave it to the vagaries of market forces. Through negotiations, the price is fixed and stipulated in the contract itself. Therefore, notwithstanding the market price at the time of actual import, the parties to the contract are bound by the price fixed in the contract. 4. According to the petitioner, a sales contract was entered into on 17-2-2005 for supply of 2,22,000 Kgs of Mulberry raw silk of 3A and above grade. The price for the entire contracted quantity was fixed at USD 13.50/Kg-CIF. Between 14-3-2005 and 29-8-2005, the petitioner received a total quantity of 163734.76 Kgs in 19 consignments for which separate Bills of Entry were filed. This constituted about 60% of the total contracted quantity. These Bills of Entries were finally assessed after enhancing the value to USD 13.94/Kg-CIF. Because of urgency for release of the consignments, the petitioner accepted the enhancement and cleared the goods. Under the same contract, the petitioner filed Bill of Entry No. 875113 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te release of the goods. This was disposed of directing the third respondent to follow unreservedly the order of CESTAT and to release the consignment in terms of the order of CESTAT dated 20-3-2006. The goods were released on 7-4-2006. The order passed by the CESTAT was challenged before the Supreme Court, which dismissed the civil appeal at the admission stage itself on 10-7-2006. While these proceedings were pending, the petitioner had made further imports under the same sales contract dated 17-2-2005 on various dates, the details of which are as follows :- 1. Bill of Entry No. 882827 dated 28-9-2005. 2. Bill of Entry No. 886036 dated 4-10-2005. 3. Bill of Entry No. 897030 dated 24-10-2005. 4. Bill of Entry No. 927999 dated 15-12-2005. 5. Bill of Entry No. 940217 dated 5-1-2006. In spite of the order passed by the CESTAT and this Court, the goods were permitted "only on furnishing personal bond pending decision from the Honourable Supreme Court." Since the petitioner was incurring huge expenditure by way of demurrage, the petitioner complied with the condition and cleared the goods. Thereafter, two more Bills of Entry under the same contract were filed by the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue and held that in view of the settled legal position, the activity of the appellants of merely joining of three pipes, one with other, of different dimensions to obtain a desired length can by no stretch of imagination be brought within category of manufacture. The Supreme Court held as follows :- "Before issuance of show cause notices the Revenue must carefully take into consideration the settled law which has been crystallized by a series of judgments of this Court. The Revenue must make serious endeavour to ensure that all those who ought to pay excise duty must pay but in the process the Revenue must refrain from sending of indiscriminate show cause notices without proper application of mind. This is absolutely imperative to curb unnecessary and avoidable litigation in Courts leading to unnecessary harassment and waste of time of all concerns including Tribunals and Courts." 8. 2006 (199) E.L.T. 209 (Guj) Topland Engines Pvt. Ltd. v. Union of India was also relied on, wherein it was held that the issuance of show cause notice by the department refusing to implement the Tribunal's order is not legal. 9. Learned Additional Solicitor General Mr. V.T. Gopalan, took noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objective and quantifiable data exist with regard to the adjustments required to be made, under the provisions of Rule 9, to the transaction value. (e) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which - (i) are imposed or required by law or by the public authorities in India; or (ii) limit the geographical area in which the goods may be resold; or (iii) do not substantially affect the value of the goods; (f) the sale or price is not subject to same condition or consideration for which a value cannot be determined in respect of the goods being valued; (g) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these Rules; and (h) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below. (3) (a) where the buyer and seller are related, the transaction value s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bills of entry have been imported at a unit price of USD 13.50/Kg based on a contract signed approximately 16 months prior to shipment of the subject goods." 12. The earlier show cause notice dated 29-11-2005 reads thus:- "9. Further the Apex Court, in the case of M/s. Rajkumar Knitting Mills (P) Ltd. v. Collector of Customs, Bombay [1998 (98) E.L.T. 292 (S.C.)] has held that:- Valuation (Customs) Relevant date - Contract between buyer and seller may have a bearing in governing inter se relationship between the two but relevant date for determination of value for assessment of customs duty is the date of importation or exportation and not the date of contract-Similar goods imported by another importer from the same supplier at about the same time (difference of about a week only between the dates of shipment and dates of arrival of goods in the two imports). In the case of M/s. Vikram International v. Collector of Customs, Kandla [2000 (124) E.L.T. 731 (Tribunal)] has held that burden of proof to show under valuation on the department but, once the department is able to place evidence of contemporaneous imports at higher price, the burden shifts to the assessee to establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. **** M/s. Pushpanjali Silk (P) Ltd., Bangalore, filed the EDI Bills of Entry No. 230770 dated 5-6-06 and 239300 dated 19-6-06 through their CHA M/s. Viknesh Travel Cargo Pvt. Ltd., for assessment and clearance of 'Mulberry Raw Silk 20/22D with CIQ 3 A Grade above' of China origin. The details of the respective invoice, quantity of goods supplied there under and the value thereof in respect of the two bills of entry are as below :- B/E. No. Date Invoice No. date Quantity Invoice Value date (Kgs.) USD (CIF) 230770 5-6-06 IE/JR06/06 dt. 30-4-06 16,169.47 218287.85 B/E. No. Date Invoice No. date Quantity Invoice Value (Kgs.) USD (CIF) 239300 19-6-06 IE/JR07/06 dt. 16-5-06 17,811.39 240453.77 The above referred two invoices have been raised by the supplier M/s. International Enterprises, Hong Kong, for supply of the subject goods at unit price of SD 13.5/Kg based on contract No.IE/PSR-R503/2005 dated 17-2-05. 2. Both the importer and the CHA had subscribed to a declaration as to the truth of the contents of the bill of entry as provided under Section 46 of the Customs A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es declared by the importer are not in harmony or even approximate or close to the prevailing international prices. 4. In terms of sub-section (1) of Section 14 of the Customs Act, 1962, the international price prevailing at the time and place of importation shall be the basis of valuation for levy of Customs duty. Further sub-section (1A) of Section 14 of the Customs Act, 1962, provides for determination of value of imported goods in accordance with Customs Valuation Rules, 1988, subject to the provisions of sub-section (1). Hence, it appears that provisions under sub-ordinate sub-section (1 A) cannot override the provisions under main sub-section (1) of Section 14 of the Customs Act, 1962. In the instant case, the unit value of USD 13.5/Kg based on the contract has been declared as transaction value under Rule 4 of the Customs Valuation Rules, 1988, enacted under the sub-ordinate sub-section (1A) of Section 14 of the Customs Act, 1962. However, this unit price is not the international price prevailing at the time and place of importation as envisaged under the main sub-section (1) of Section 14 of the Customs Act, 1962 and hence the said declared transaction value under Rule 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the date of importation or exportation and not the date of contract" Apex Court had further held that "the words ordinarily sold and offered for sale do not refer to the contract between the supplier and the importer but to the prevailing price in the (international) market on the date of importation". 8. In the case of M/s. Vikram International v. Collector of Customs, Kandia [2000 (124) E.L.T. 731 (Tribunal)] the Tribunal has held that burden of proof to show undervaluation is on the department but, once the department is able to place evidence of contemporaneous imports at higher price, the burden shifts to the assessee to establish that proforma invoice price will still be the actual price for purposes of Section 14(1)(a) of Customs Act, 1962. In the absence of any plausible explanation about the supplier not revising the price to the level of prevailing price, much lower price shown in proforma invoice is not acceptable under Section 14 of Customs Act, 1962. 9. In view of the above, the declared transaction value which is based on a contract entered into 16 months prior to this present imports, and as the prevailing contemporaneous unit price is at about USD 29.30/K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice was refuted because it was seven months old, whereas, with the passage of time the same contract price is 16 months old. The appellate authority rejected the contention of the revenue and held as follows : "In the present case, the imports have been made within the contract period. The department has not challenged the contract price for its correctness, or found that the goods have been supplied beyond the contracted amount. In fact earlier clearance has been permitted as per the contract price. There is no allegation that the appellants paid to the supplier more than the contracted value. This being so the contract price cannot be discarded. The lower authority has tried to create two categories of prices to fit this situation, i.e., 'contract price' and 'market price'. He has then gone on to hold that the contract price is not a price in the ordinary course of trade under fully competitive conditions but is subject to certain conditions as stipulated in the contract and hence the same is liable for rejection. This stand is not correct. Market price for different class and categories of buyers differ for the same goods. The price of a commodity when sold on contract, or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal filed against the order of Commissioner (Appeals), CESTAT held as follows :- "... We are of the considered view that the Apex Court's ruling was rightly followed by learned Commissioner (Appeals) in the present case. The subject goods were imported in terms of a contract indicating USD 13.50 as the unit price agreed between the contracting parties. The import was made within the contracted period. The department has no case that any amount over and above the contracted price was paid by the importer to the supplier, nor is it their case that the importer was "related" to the supplier or that the price paid was influenced by any extra-commercial considerations. In the circumstance, there is no valid reason to reject the transaction value of the goods under Rule 4(1) read with Section 14. This is particularly so, as the appellant has not established that any of the special circumstances particularized under Rule 4(2) existed in this case." "We have already held that there is no valid reason in this case to reject the declared value of the goods. The question now is what is the 'declared value'. What was declared in the Bill of Entry was USD 13.5 per kg. But, subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, be read as referring to "the particular transaction" and payability in respect of the transaction envisages a situation where payment of price may be deferred. 19. That Rule 4 is limited to the transaction in question is also supported by the provisions of the other rules each of which provide for alternate modes of valuation and allow evidence of value of goods other than those under assessment to be the basis of the assessable value. Thus, Rule 5 allows for the transaction value to be determined on the basis of identical goods imported into India at the same time; Rule 6 allows for the transaction value to be determined on the value of similar goods imported into India at the same time as the subject goods. Where there are no contemporaneous imports into India, the value is to be determined under Rule 7 by a process of deduction in the manner provided therein. If this is not possible the value is to be computed under Rule 7-A. When value of the imported goods cannot be determined under any of these provisions, the value is required to be determined under Rule 8. 'using reasonable means consistent with the principles and general provisions of these rules and sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned notice. If that is so, I do not see why again and again the petitioner should be called upon to show cause as to why the value fixed by the department should not be accepted. The attitude of the department deserves reproach. 19. It was contended that the show cause notice ought not to be quashed and that if the petitioner is allowed to import as per old value, it would be detriment to national interest. In 2004 (164) E.L.T. 141 (S.C.) = 2004 (3) SCC 440 [cited supra] relied on by the respondent, it was held that the writ petitions challenging show cause notice should not be entertained unless exceptional circumstances warrant it. This indeed is a special case. There is a contract dated 17-2-2005, the period of contract expires in September 2006. Goods forming part of the contract have been imported in stages. The goods imported under the earliest bills of entry were allowed to be cleared, on payment of duty at USD 13.94 per Kg-CIF voluntarily by the petitioner though the declared value was USD 13.50 per Kg-CIF. In respect of goods imported a few months later, 7 months after the contract to be precise, a show cause notice was issued calling upon the petitioner to pay duty at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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