TMI Blog1985 (3) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as GP broiler chicks, prices for these varieties being fixed under an agreement. M/s BVH Limited had requested M/s Rallis India Ltd., who had Export House licences in their favour, to open letters of credit in favour of M/s Babcock International Corporation, to cover such imports. It is in respect of such imports, as well as later imports directly under licences in favour of M/s BVH Limited, that the disputes now under issue had arisen. We shall, in the first instance, give details in respect of each of the appeals separately, so that the disputes arising in each proceeding may be distinctly understood. Thereafter we shall take up for consideration the general issues arising in all these appeals and, on the basis of conclusions arrived at on such general questions, apply the same to the particular facts in each proceeding to arrive at a proper decision. 3. Appeals No. 963/80 and 964/80 (A) The agreement between M/s BVH Limited and M/s Babcock International Corporation relating to these appeals is dated 25-2-1974. It purports to be for a period of three years, to be effective till 31-12-1976. The prices agreed thereunder are mentioned to be as follows : 1974 G.P. Laye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing shown separately, the total of the amount payable under the invoice being mentioned as 20,000 Dollars. So far as the Broilers are concerned the import invoice dated 21-9-1976 had shown the price as follows : 2000 L 46 0.70 Dollar each 1400 Dollars 1000 L 12 2.80 Dollars each 2800 Dollars 600 L 31 0.75 Dollar each 450 Dollars 300 L 34 2.85 Dollars each 850 Dollars In each of the invoices the price was mentioned as F.O.B. New York, air. freight being added thereto, to arrive at the total C F Bombay price shown. Two show cause notices were issued with reference to these imports alleging that the prices declared and shown in the bills of entry were incorrect and were much lower than the actual prices and that there had thus been misdeclaration. It was also alleged that more quantity had been imported than declared in the invoices and bills of entry and thus there had been misdeclaration on that account also. Action was proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal No. 1378/80 (A) This appeal relates to import under bill of entry dated 19-10-1977. The import was of broilers, the numbers indicated in the invoice dated 3-10-1977 being - Line 46 2000 Line 12 1000 Line 34 (females) 600 And Line 34 (males) 200 The true value C F Bombay was shown as U.S. Dollars 6559.83 but net C F value, Bombay was shown as 4000 Dollars, the difference being mentioned as being absorbed by the shipper with no lien on documents. The invoice showed the price of 2000 chicks of line 46 at $ 2.50 each, no charge being mentioned in respect of the other three lines. This import was by M/s BVH Limited against their own REP Import Licence. Though Sri Nankhani has mentioned in his arguments that the quantity found on inspection was as mentioned in the invoice, it is seen from the order of the Deputy Collector of Customs dated 2-2-1978/2-3-1978 that an excess of 99 chicks had been found at the time of examination. On the basis of the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d claimed that the price mentioned in the agreements was proper and the same having been followed for showing the total value in the bills of entry there had been no misdeclaration regarding the value and therefore the imports were under cover of proper licences. After adjudication the Additional Collector under his order dated 28-2-1980/12-9-1980 rejected the contentions of M/s BVH Limited regarding the price having been mentioned properly and, following the earlier findings regarding the valuation, held that there had been misdeclaration regarding the value and therefore in view of the enhanced value for purposes of duty there had been failure with reference to proper licence also to cover the imports. As regards the contention that since they had mentioned in the bills of entry the assessable Value as declared by the department and that therefore there had been no misdeclaration, he pointed out that the importers had mentioned their own value as well as the value mentioned by the department and in such circumstances they cannot rely upon the mention of value according to the department to escape the charge of misdeclaration. He also pointed out that they had asked for provisiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight of the earlier determination of value by the department, M/s BVH Limited paid duty on the basis of value determined by the department. But in view of the said value the department further pointed out that the ITC licence produced for the import did not have adequate balance to cover the import. A show cause notice was issued for contravention of the ITC regulations by import of goods in excess of that covered under the licence produced therefor. M/s BVH Limited however reiterated their contention that the value mentioned in the bill of entry was in accordance with the invoice which was based on the earlier agreement with the exporter, and therefore there had been no violation of any of the provisions of the Imports and Exports (Control) Act or the Customs Act. The Addl. Collector under his order dated 8-2-1980/11-11-1980 rejected the said contention and held that as the import of the goods was not properly covered by the licence produced therefor M/s. BVH Limited were liable for penalty under Section 112 of the Customs Act for violation of Section 111(d). He imposed a penalty of ₹ 35,000/- Appeal. The Central Board under its order dated 31-1-1981 held that the goods had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of Section 14(1)(a) of the Customs Act have to be considered. The same reads as follows : 14. Valuation of goods for purposes of assessment - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be - (a) the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale : Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a Shipping bill or bill of export, as the case may be, is presented under Section 50; * * * * * * It is therefore seen that under Section 14(1)(a) the value of purposes of assessment of duty is a deemed value and need not necessarily be the price agreed upon betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value under the contract between them and the seller. With reference to these facts it had been observed at page 291 that this actual price of supply which we would assume is a genuine price in that deal can vary from the international market price which is the value for the purposes of customs taxation . Therefore these judgments make it abundantly clear that the agreed price between the parties, though genuine, would not be the concluding factor with reference to assessment for customs duty since under Section 14(1)(a) duty will have to be levied on the deemed value, which is defined in the section as extracted earlier. 10. But Sri Nankhani is correct when he contends that the onus of proving misdescription is on the department and that this onus can be discharged only on proof of proper facts which would discredit the price mentioned in the bill of entry and not on the basis of mere suspicion or surmise. In the cases before us the misdescription is said to be either with reference to the quantity mentioned or the price mentioned or both. The evidence with reference to either type of misdescription will therefore have to be separately considered. 11. So far as the mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the `D line only (500 numbers) under that invoice. M/s. BVH Limited contend that these letters would also establish that the excess quantity had been sent without their knowledge and, evidently, due to a mistake in the labelling and packaging department of Babcock International Corporation. Further, as pointed out by them, these imports were to be always allowed only after physical check and counting. In the circumstances it may be normally expected that M/s. BVH Limited could not have agreed for the dispatch of a number larger than mentioned in the invoice and, consequently, in the bill of entry. In the circumstances their defence that the excess quantity had been dispatched due to mistake on the part of Babcock International Corporation and was not intentional and that in any event they (M/s. BVH Limited) had no knowledge at all of the same till the birds were counted on arrival, appears to be very probable. In any event, the above circumstances would be sufficient to give the benefit of doubt to M/s. BVH Limited regarding their participation in any intended excess import than the number mentioned in the invoices and the bill of entry. The contention for the department is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een mentioned in the invoices with reference to each of the lines, the total arrived at with reference to the four lines being different from the price mentioned in the agreement for the `D line and it may also be noted that the total price charged under the invoice is finally mentioned as the price that would be payable for the main line only at the rate mentioned in the agreement. The explanation of M/s. BVH Limited in this connection is that on earlier imports the import invoices also mentioned the price for the main line only, the other lines being mentioned to be free, but that in about 1972 the Customs authorities objected to the same and insisted that the price must be mentioned for each line separately and that is why in subsequent invoices prices were mentioned separately for each line by splitting up the price for the main line between all the four lines. But it is pointed out for the department that such an explanation cannot be straightway accepted since even after 1972 in the 1974 agreement the price is mentioned for the main line only and not for each line separately. But in assessing this charge, that M/s. BVH Limited had committed misdescription by intentionally sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the appellants that the price mentioned in their own agreements (and subsequently shown in the invoices) were themselves the proper international prices at the relevant time. The omission on the part of the department to produce any such material, which must be available with them, would certainly lend support to this contention of Sri Nankhani. Therefore, we are satisfied that so far as the charge of misdescription arising out of the prices mentioned in the invoices, the said charge cannot be said to have been satisfactorily established even in Appeals No. 963, 964 and 1378/80. 15. But in all the cases before us duty had been levied on the value as fixed by the department, rejecting the price as mentioned in the invoices. It had been already seen that the price mentioned in the invoices would not conclude the matter since it would be open to the department to establish that though the parties may have really agreed upon such prices, duty could yet be demanded at a different value if the department is able to establish that the price agreed upon between the parties was not the international price, which would alone be relevant in terms of Section 14(l)(a) of the Customs A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Male line Cornish GP female chick Dollars 16.00 ($ Sixteen) per day old chicks FOB Amstrerdam with adequate number of male line Cornish male chicks at no charge. The original papers in respect of all the above parties are in CCI E New Delhi, files from which import licence have been issued to them from time to time. This Department feels that the current prices of Babcock GP Stock imported by M/s Babcock Venkateshwara Hatcheries will not be less than the shown values of GP of other above mentioned international lines, viz. Shaver and Dekalb/Pilch. 17. It may be seen that the letter starts by saying that - the said office has no record to give an exact idea about the current prices of Babcock GP stock . It then proceeds to rely upon an agreement of April 1971 where the price was mentioned at $ 25 per female chick and therefore draws a conclusion that the price subsequently could not have been less but could only have gone up. While it may be possible to entertain such a speculation, that would not sufice as proof to arrive at a higher value for purposes of duty, in the absence of proof of actual import at such higher value by anybody else. The letter of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistry would not be proper. The third reason is again of a general nature and merely speculative in character and would not suffice as proof of actual variation between the contract price and the international price. Therefore, we are not satisfied that any of the three reasons mentioned by the Collector in his order dated 20-9-1977 could be accepted for holding that the international price was higher than the contract price as disclosed by the importer. As already seen, the finding of the Board itself in respect of subsequent imports, which were also under contract prices, had been that there was no proof of any payment having been made in excess of the disclosed price. That conclusion would only suggest that the price had been agreed upon between the parties after normal negotiations and such a price would therefore be the ruling price in the international markets at the relevant periods. 20. It is with reference to these conclusions which we have arrived at that, on application thereof to the facts of each case, the several appeals before us have to be disposed of. (i) Appeals No. 963 964/80 (A) In these appeals penalties had been levied on M/s Rallis India Ltd. as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no liability on the part of M/s Rallis India Ltd. also on this account. Therefore, the result of the above discussion would be that so far as the violation of Section 111(d) is concerned it has to be held that there had been no such violation since the imports were under proper licence of suitable value. Hence the penalty, imposed in that regard on M/s BVH Limited (Rs. 20,000 as reduced by the Board) is set aside. As noted earlier the penalty on M/s Rallis India Ltd. on this account had been already set aside by the Board itself. Further, penalties with reference to misdescription with reference to quantity (Rs. 55,000/- on each of the appellants) as well as misdescription regarding value (Rs. 60,000 on each of the appellants) have also to be set aside and are ordered accordingly. But so far as payment of duty is concerned M/s BVH Limited will be liable to pay duty on the entire imported goods at their invoice value, the entire excess of 979 birds being treated as `D line only, in view of the statement of Mr. Barve agreeing to the same when he took charge of the birds. Duty is to be assessed on the basis of the declared value, which has been accepted by us to be the proper price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment. But the penalty had been set aside by the Board. In this revision also the appellants have prayed for refund of excess duty paid by them on account of the difference between the ascertained value and the invoice value. Following the finding earlier it is ordered that they are entitled to refund of the said excess duty collected. 21. Another common submission in respect of all these appeals was that so far as the debiting in the licences is concerned it should have been only on the basis of the invoice value as the same was the price properly agreed upon between the parties and that alone ought to be considered for debit in the licences. We have already referred to the decision of the Bombay High Court in Union of India v. Glaxo Laboratories - (1984) (17) E.L.T. 284 (Bombay) and the observations therein to the effect that though for purposes of assessment of duty the demand price as defined under Section 14 (1) (a) of the Customs Act would be relevant, the debit in the licence should be on the basis of the actual price paid. In the present cases it had already been held that the prices shown in the invoice were the proper prices and in fact they are to be accepte ..... 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