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2010 (7) TMI 467

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..... esult 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. - 5840 of 2008/1110 of 2009 - - - Dated:- 26-7-2010 - D.K. Jain and T.S. Thakur, JJ. REPRESENTED BY: Shri V. Lakshmikumaran, for the Appellant. Shri B. Bhattacharya, A.S.G., for the Respondent. [Judgement per: D.K. Jain, J.].- These two ap .....

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..... B by the appellant, which resulted in the issuance of two show cause notices. The first show cause notice dated 19th December 2000 was issued proposing demand of differential duty of customs amounting to Rs.37,96,70,451/- in respect of imports relating to the period from January 1995 to June 2000 and the second show cause notice dated 16th August 2001 was issued demanding differential duty of customs of Rs.12,08,42,462/- relating to imports during the period July 2000 to May 2001. Penal action was also proposed in both the show-cause notices. 5. Against show-cause notice dated 19th December 2000, the appellant filed a writ petition before the High Court of Delhi. Vide its order dated 27th August 2001, the High Court be treated as notice for finalization of the provisional assessment in terms of Section 18(2) of the Act. While disposing of the petition, the High Court observed that the authorities were free to decide as to whether any notice in terms of Section 111/124 of the Act was warranted. At the same time, the High Court granted liberty to the appellant to seek its remedy as per law in the event of issuance of such a show cause notice. 6. The Commissioner of Customs adju .....

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..... his Court by way of an appeal under Section 130E of the Act, which was dismissed on 21st November 2003. The appellant pleaded that invocation of Rule 6 by the Commissioner in the final adjudication order was beyond the scope of the show cause notice, in as much as, in the show cause notice itself it was observed that Rule 6 could not be applied because of non-availability of requisite data for adjustments required to be made under the said Rule. It was asserted that the value of CAB imported had to be determined as per Rule 4(3)(b) of 1988 Rules. 9. Pursuant to the order of the Tribunal, dated 25 th March 2003, the Commissioner passed a fresh order dated 29th August 2003 and held that Rule 6 was applicable on the facts of the instant case. He accordingly, confirmed the demand of duty of customs amounting to Rs.39.96 crores. The said order was again challenged by the appellant in the Tribunal, mainly on the ground that the value of imported CAB could not be determined under Rule 6. In the alternative, it was pleaded that even the quantification of the value under Rule 6 was seriously flawed. 10. Accepting the alternative submission of the appellant relating to the errors commi .....

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..... nd in the second remand order, dated 29th June 2005, the Tribunal did not go into the applicability of the said rule and allowed the appeal on the basis of alternative pleas of the appellant, the Tribunal decided to go into the question of applicability of Rule 6. Upon re-consideration of the issue, the Tribunal upheld the decision of the Commissioner in determining the value of the imports under Rule 6. However, partly accepting the appeal, the Tribunal held that the appellant will be entitled to further adjustments in the value of CAB determined on the basis of the value of similar goods, on account of: (i) imports of substantially higher volumes of CAB; and (ii) where the retail price of bottled whisky was substantially lower than those of the comparable brands. It was, however, clarified that once the assessable value was determined for any brand by following the above method, the assessable value shall not be enhanced till a higher import price of the similar goods was noticed. The Tribunal also laid down the following methodology for making the adjustments on account of difference in volume of imports and the retail price:- "The price difference between each variety of CAB .....

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..... rent differences on the basis of which consumer preferences are decided. Different scotch whiskies have different tastes depending on the casks in which the scotch whisky is aged, the temperature during the ageing process, water used for making the scotch, the ingredients used etc. Additionally, blended scotch whiskies are blends of other scotch whiskies and blending formulae are kept secret, making each blended scotch whisky a unique product in the market; (ii) the CAB imported do not have the same quality, reputation and trademark. The concentrate imported by the appellant has a particular trademark i.e. 100 Pipers, Passport and Something Special 12 Years Old, which have certain quality and very little reputation in the Indian market whereas the concentrate imported by their competitors, having the trademark of Black Dog 12 Years Old, Black White and VAT 69 have different quality and reputation as they are relatively very well known brands being sold in India for several decades and (iii) the variation in price is largely due to the branding and individual preferences and, therefore, some goods command a premium price as compared to others, which is the case with regard to scot .....

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..... of law in re-examining the said question. It was contended that apart from the fact that second remand order dated 29th June 2005, whereby the Tribunal had directed the Commissioner to apply Rule 6 and re-determine the value of CAB after making adjustments wherever warranted, was not questioned by the appellant, in view of the dismissal of their appeal by this Court against Tribunal's order dated 25th March 2003, the said issue had attained finality and the appellant was estopped from raising it before any forum. 19. In support of revenue's appeal, learned counsel submitted that the direction by the Tribunal to the Commissioner to give adjustment of 20% while determining the value of the imported CAB is vitiated because no evidence in this behalf was produced by the appellant before the Commissioner. Referring to para 4 of the interpretative note to Rule 5 of the 1988 Rules, learned counsel asserted that no adjustment on account of difference in quantity can be granted unless there is "demonstrated evidence" on the basis whereof reasonableness and accuracy of the adjustment could be established. 20. In rejoinder, Mr. V. Lakshmikumaran argued that the appellant was fully justi .....

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..... imported CAB by them had to be determined as per Rule 4(3)(b)of the 1988 Rules. The appeal was, however, dismissed in limine. In our opinion, once a statutory right of appeal is invoked, dismissal of appeal by the Supreme Court, whether by a speaking order or non speaking order, the doctrine of merger does apply, unlike in the case of dismissal of special leave to appeal under Article 136 of the Constitution by a non-speaking order. 23. The nature, concept and logic of doctrine of merger was explained elaborately in Kunhayammed Ors. Vs. State of Kerala Anr.1. Speaking for a bench of three learned Judges, R.C. Lahoti, J. (as His Lordship then was) observed: (SCC p. 370, para 12) "12. The logic underlying the doctrine of merger is that there cannot be more than one decree or operative orders governing the same subject-matter at a given point of time. When a decree or order passed by an inferior court, tribunal or authority was subjected to a remedy available under the law before a superior forum then, though the decree or order under challenge continues to be effective and binding, nevertheless its finality is put in jeopardy. Once the superior court has disposed of the lis .....

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..... in V.M. Salgaocar Bros. Pvt. Ltd. Vs. Commissioner of Income Tax3, wherein the Court was called upon to consider the effect of dismissal of an appeal under Section 261 of the Income Tax Act, 1961 by a non speaking order. Speaking for the Bench, D.P. Wadhwa, J. while drawing distinction between an order dismissing in limine a special leave petition under Article 136 of the Constitution and an appeal under Article 133, and drawing support from the decision of this Court in Supreme Court Employees' Welfare Association Vs. Union of India Anr.4, held that former case does not but the latter does attract the doctrine of merger. The Court observed thus:- "Different considerations apply when a special leave petition under Article 136 of the Constitution is simply dismissed by saying 'dismissed' and an appeal provided under Article 133 is dismissed also with the words 'the appeal is dismissed'. In the former case it has been laid by this Court that when a special leave petition is dismissed this Court does not comment on the correctness or otherwise of the order from which leave to appeal is sought. But what the court means is that it does not consider it to be a fit case for exercis .....

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..... 40%. The stand of the latter, to the contrary, is that no demonstrated evidence, establishing the reasonableness and accuracy of the adjustment, having been adduced, the appellant is not entitled to any adjustment. Rules 3, 5 and 6 of the 1988 Rules are relevant for our purpose and they read as follows:- "3. Determination of the method of valuation.--For the purpose of these rules,- (i) the value of imported goods shall be the transaction value; (ii) if the value cannot be determined under the provisions of clause (i) above, the value shall be determined by proceeding sequentially through Rules 5 to 8 of these Rules." "5. Transaction value of identical goods.- (1)(a) Subject to the provisions of Rule 3 of these rules, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued. (b) In applying this rule, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods. (c) Where no sale referred to in clause (b) of sub-ru .....

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..... be, for : (a) quantity factors only; (b) commercial level factors only; or (c) both commercial level and quantity factors. 22 3. For the purposes of rule 5, the transaction value of identical imported goods means a value, adjusted as provided for in rule5(1) (b) and (c) and rule 5(2), which has already been accepted under rule 4. 4. A condition for adjustment because of different commercial levels or different quantities is that such adjustment, whether it leads to an increase or a decrease in the value, be made only on the basis of demonstrated evidence that clearly establishes the reasonableness and accuracy of the adjustment, e.g. valid price lists containing prices referring to different levels or different quantities. As an example of this, if the imported goods being valued consist of a shipment of 10 units and the only identical imported goods for which a transaction value exists involved a sale of 500 units, and it is recognised that the seller grants quantity discounts, the required adjustment may be accomplished by resorting to the seller's price list and using that price applicable to a sale of 10 units. This does not require that a sale had to have been m .....

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..... on the contrary, is that Rule 5(1)(c) and the interpretative note (4) to Rule 5 only seek to clarify that where identical goods are sold to two or more buyers at a time but are not at the same commercial level or quantity, an "adjustment" shall be made to take account of the difference attributable to commercial level or to quantity or both. Their plea is that since the rule itself recognizes that prices differ when quantity differs, reference to `discount' in the interpretative note needs to be viewed in a wider context because according to the appellant, the expression "demonstrated evidence" is broader in scope than the term `discount', which is used only as an example of such evidence for adjustment. It is also pleaded that tying the concept of "adjustment" to `discount' would severely restrict the application of Rule 5 or 6 as a clear evidence of `discount' may not be available in all cases though on the facts of a particular case adjustment may be needed. In support of the proposition that there is a difference between the concept of "adjustment" and `discount', reliance was placed on the decision of this Court in Commissioner of Central Excise, Jaipur Vs. Rajasthan SPG. W .....

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..... unal that the revenue having accepted the order of remand dated 29th June 2005, cannot now turn around and contend that no adjustment whatsoever is warranted. Similarly, there may also be some substance in the observation of the Tribunal that generally when the transactions are in large volumes over a long period, grant of discount is a normal commercial practice but again a commercial practice, per se, cannot be treated as conclusive evidence for determining real price of a consignment. In our opinion, therefore, in the absence of some documentary evidence indicating that any rebate/discount was given to the appellant by the supplier, adjustments under Rule 5(1)(c) cannot be justified. 35. In the present case, it is evident from the impugned order that 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 absenc .....

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