2010 (7) TMI 467 - SC - Customs

Remand order of tribunal - Valuation - related person - Import of CAB (Concentrate of Alcoholic Beverages) - Rule 6 of the Customs Valuation (Determination of Prices of Imported Goods) Rules 1988 - Classification - similar goods - Held that - As it is evident from the afore-extracted paragraphs of the said order of the Tribunal that the Tribunal categorically declined to go into the issue about the appropriateness of Rule 6 with the result that the finding of the Commissioner in his order passed pursuant to Tribunal s earlier order dated 29th August 2003 regarding applicability of Rule 6 remained undisturbed and in fact attained finality - the Tribunal erred in re-opening and examining afresh the question as to whether or not the value of CAB could be determined by applying Rule 6 and therefore the objection of the revenue in that regard deserves to be accepted. Adjustment in value - It is plain that such adjustment may not necessarily lead to a decrease in the value. It may result in an increase as well. - It is manifest that adjustment in terms of Rule 5(1)(c) of 1988 Rules for the purpose of determination of value of an import can be granted only on production of evidence which establishes the reasonableness and accuracy of adjustment and higher volumes of imports per se would not be sufficient to justify an adjustment though it may be one of the relevant considerations. Though the Tribunal had felt that requisite evidence to establish the range of adjustment was lacking and for that purpose according to it the matter was required to be remanded to the Commissioner but being influenced by the fact that there had already been three rounds of appeals to the Tribunal it undertook the exercise itself. We are convinced that this approach of the Tribunal was not in order and therefore in the absence of any demonstrated evidence its direction for ad-hoc adjustment @ 20% cannot be sustained.

Summary

Issues Involved:
1. Applicability of Rule 6 of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988.
2. Determination of the value of Concentrate of Alcoholic Beverages (CAB) for the purpose of levying customs duty.
3. Justification of the Tribunal's direction regarding adjustment to the tune of 20% in the price difference on account of volume of imports.

Analysis:

Applicability of Rule 6:
The Tribunal's decision to re-examine the question of the applicability of Rule 6 was challenged. The Supreme Court held that the issue of the applicability of Rule 6 had attained finality following the summary dismissal of the appellant's appeal by the Supreme Court on 21st November 2003. The Tribunal had confined the remand to the Commissioner for fresh adjudication only to the errors committed while determining the assessable values based on the transaction value of "similar goods," thus implicitly accepting that the valuation had to be done as per Rule 6. The Supreme Court concluded that the Tribunal erred in re-opening and examining afresh the question of whether or not the value of CAB could be determined by applying Rule 6.

Determination of Value of CAB:
The appellant argued that the CAB imported by them and by others could not be considered "similar goods" as defined in Rule 2(1)(e) of the 1988 Rules due to the unique nature of scotch whisky. The Supreme Court did not delve into the merits of this argument, given its conclusion on the first issue. The Tribunal had upheld the decision of the Commissioner in determining the value of the imports under Rule 6 but had directed further adjustments in the value of CAB determined on the basis of the value of similar goods.

Adjustment of 20% in Price Difference:
The Tribunal had directed an adjustment of 20% in the price difference between each variety of CAB of the appellant and the corresponding CAB of the competitor on account of higher volume of imports. The Supreme Court found that the provision for "adjustment" in terms of Rule 5(1)(c) of the 1988 Rules requires demonstrated evidence to establish the reasonableness and accuracy of the adjustment. The Tribunal had acknowledged the lack of requisite evidence but had still proceeded to make an ad-hoc adjustment due to the prolonged litigation. The Supreme Court held that in the absence of demonstrated evidence, the Tribunal's direction for an ad-hoc adjustment of 20% could not be sustained.

Conclusion:
The Supreme Court dismissed the appeal preferred by the importer-appellant and allowed the revenue's appeal. The order of the Tribunal was affirmed regarding the applicability of Rule 6 of the 1988 Rules. However, the direction for an adjustment of 20% in the price difference on account of volume of imports was set aside. No order as to costs was made.