1987 (12) TMI 160 - AT - Central Excise

Summary

Issues: Valuation of imported goods under Section 14 of the Customs Act, 1962 based on the pricing at the time of importation versus negotiated lower prices by the importer.

In this judgment by the Appellate Tribunal CEGAT, New Delhi, the appellants imported leather tanning machinery from foreign suppliers for a project in India. The appellants claimed that they negotiated lower prices with the suppliers based on proforma invoices dated before the actual opening of Letters of Credit (L/C). However, the suppliers had increased their prices before the L/Cs were opened. The appellants argued that the negotiated lower prices should be considered for customs valuation under Section 14 of the Customs Act, 1962. The department contended that the ruling prices at the time of opening the L/C should be the basis for customs duty assessment.

Upon analysis, the Tribunal found that Section 14 of the Customs Act requires goods to be valued at the prices at which such goods are ordinarily sold in the course of international trade at the time of importation. The Tribunal emphasized that if an importer negotiates exceptionally low prices not available to other importers at that time, those prices cannot be the basis for assessment. In this case, the appellants negotiated lower prices before opening the L/Cs, but by the time the L/Cs were opened, the suppliers had increased their prices significantly. The Tribunal noted that the lower prices obtained by the appellants did not meet the test of Section 14 as they were not the prices ordinarily quoted in international trade at the time of importation.

Furthermore, the Tribunal highlighted that the suppliers' own documents indicated that the prices from 1973 and 1974 were not firm and subject to change. The conditions mentioned in the suppliers' documents allowed for price adjustments based on market changes. Despite these conditions, if the appellants obtained lower prices, it could not be the basis for customs valuation under Section 14, which focuses on prices generally charged in international trade.

Ultimately, the Tribunal upheld the value assessed by the lower authorities based on the ruling prices at the time of opening the L/Cs and dismissed the appeals. The judgment underscores the importance of valuing imported goods based on the prevailing prices in international trade at the time of importation, rather than negotiated lower prices obtained by individual importers.