1991 (9) TMI 172 - AT - Customs

Summary

Issues Involved:
1. Relationship between the buyer and the supplier.
2. Determination of transaction value.
3. Applicability of Rule 5 of Customs Valuation Rules, 1988.
4. Enhancement of value for the purpose of debiting the licence.

Summary:

1. Relationship between the Buyer and the Supplier:
The main issue was whether the supplier and the importer are 'related persons' such that the price of the goods paid by the appellants to the supplier is to be discarded. The adjudicating authority held that there was a relationship influencing the price, based on a distributorship certificate. However, the Tribunal found no evidence that the importer and supplier fell under any of the eight categories mentioned in sub-rule (2) of Rule 2 of the Customs Valuation Rules, 1988. The Tribunal concluded that the appellants and the suppliers could not be treated as 'related persons' for the purposes of the Valuation Rules.

2. Determination of Transaction Value:
The Tribunal held that the transaction value should not be discarded as the department failed to prove any undervaluation. The declared price was found to be comparable to prices in other transactions involving similar quantities. The Tribunal emphasized that discounts on listed prices are normal in international trade, and the discount given by the supplier did not seem unreasonable given the large order placed by the appellants.

3. Applicability of Rule 5 of Customs Valuation Rules, 1988:
The Tribunal found that Rule 5 was incorrectly applied by the department. The department compared the value of goods imported in different quantities and by different types of importers (actual users vs. dealers). The Tribunal noted that 'identical goods' must be the same in all respects, and the differences in quantity and type of importer were vital for influencing the price. Therefore, Rule 5 was not applicable.

4. Enhancement of Value for the Purpose of Debiting the Licence:
The issue of enhancement of value for the purpose of debiting the licence was deemed academic after the Tribunal's finding that the transaction value could not be discarded. Therefore, the Tribunal did not find it necessary to address this issue in detail.

Conclusion:
The appeal was allowed with consequential relief to the appellants. The Tribunal concluded that the department failed to establish that the appellants and the suppliers were related persons and that the transaction value should be accepted. The application of Rule 5 was found to be incorrect, and there was no evidence of undervaluation. The enhancement of value for the purpose of debiting the licence was not addressed further as it was rendered academic.