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TMI Blog1985 (3) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... day old GP layer chicks as well 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 foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, therefore, under the provisions of the Customs Act, 1962 as well as the Imports and Exports (Control) Act, 1947. Action was proposed thereunder against M/s BVH Limited as well as M/s Rallis India Limited. M/s BVH Limited pleaded that the excess quantity had been sent by the exporter without their (M/s BVH's) knowledge and that so far as the price is concerned the same was the true price based on the agreement in respect of supplies. They contended that there was, therefore, no case of misdescription by them on either account. M/s Rallis India Limited stated that since M/s BVH Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines. 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 value of the goods as assessed under the earlier order of the Collector dated 20-9-1977 (concerned in the earlier appeals), there was found to be an excess import above the licence value. Show cause notice was therefore issued for violation of the provisions of Imports and Exports (Control) Act, 1947 as well as the provisions of Section 111 of the Customs Act. M/s BVH Limited denied that they had misdeclared the value or the quantity and claimed that as they had also mentioned in the bill of entry the customs assessable value in terms of the earlier order and paid duty on it they were not liable. But over-ruling their objections the Deputy Collector of Customs under his order dated 2-2-1978/2-3-1978 imposed a penalty of ₹ 40,000 on M/s BVH Limited under Section 112 of the Customs Act. He had held that so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisional assessment only. He therefore directed finalisation of assessment on the basis of the value as determined by the department earlier and further imposed, under Section 112 of the Customs Act, penalties of ₹ 30,000, ₹ 63,000 and ₹ 72,000 respectively (for misdeclaration of value), and ₹ 12,500, ₹ 25,000 and ₹ 30,000 respectively (for ITC Contravention). On appeal to the Central Board of Excise and Customs it was ordered by the Board under order dated 31-1-1981 that in the absence of any documentary evidence to indicate otherwise, the values determined by the department are accepted as correct and confirmed but that as regards the charge of misdeclaration of value the Board was of the view that when the appellants themselves had asked for provisional assessment in the light of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(d). He imposed a penalty of ₹ 35,000/- Appeal. The Central Board under its order dated 31-1-1981 held that the goods had been assessed finally and the importers had paid duty on the assessed value and therefore there was nothing for the Board to go into that matter. But the Board further held that there was no case made out of deliberate misdeclaration of value and there was no evidence of surreptitious payment in excess of the invoice value. Accordingly, the Board remitted the penalty in full. In their revision to the Government against the said order M/s. BVH Limited claimed that the value mentioned in the bill of entry should have been accepted as the proper value for purposes of duty and therefore the excess duty recovered should be refunded to them. It is the said revision that, on transfer, is now being dealt with as an appeal before this Tribunal. 7. The subject matter of the appeals having been set out as above we shall now take up for consideration the submissions of both sides. As mentioned earlier the general contentions relating to all cases shall be considered in the first instance and the conclusions arrived at thereon shall then be applied to the facts of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of purposes of assessment of duty is a deemed value and need not necessarily be the price agreed upon between the parties. Sri Nankhani has relied upon the decision in the Minerals and Metals Trading Corporation of India v. Collector of Customs, Bombay (1984 ECR 287) and, in particular, the passage at page 290 - "If the two contracting parties agreed to revise the contract on certain conditions, no third party has any right to question the terms of the contract. The price had been mentioned in accordance with the terms of the contract which were obtaining at the time the goods were supplied and the authorities below had no power to question the validity of the contract, more particularly when it is not a contract between private parties." But it may be noted that the subsequent sentences make it clear that if there had been other material made available which would establish that the contract price was not the proper international price the authorities would have been entitled to revise the valuation for purposes of assessment of duty. Therefore this judgment would not be an authority for the broad proposition that once the contract price is established the authorities are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... description will therefore have to be separately considered. 11. So far as the misdescription with reference to the quantity is concerned this question arises only in Appeals No. 963/80 and 964/80 and 1378/80. In the first two cases as against the declared quantity of 1775 chicks the actual count disclosed 2754 chicks to have been imported. M/s. BVH Limited or M/s Rallis India Limited do not dispute that excess quantity had been received. But the defense of M/s BVH Ltd. is that the dispatch of excess quantity was due to error on the part of the seller and M/s BVH Ltd. was not aware of the same in any manner. It is in this connection that the subsequent correspondence between M/s BVH Ltd. and Babcock International Corporation has been produced. It is pointed out that when under their letter dated 19-9-1976 M/s. BVH Ltd. complained about the receipt of excess quantity of chicks they were informed by the supplier under letter dated 23-9-1976 that for several months earlier they (Babcock International Corporation) were sending `C' line males also in addition to the `N' line males in an experiment to better breeding but that by oversight they had failed to inform the same to M/s BVH Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the invoices and the bill of entry. The contention for the department is that the ratio between male and female is to a large extent maintained even with reference to the excess quantity. This contention was advanced to suggest that the excess sent in the `D' line could not have been due to any accidental mistake. But the contention about maintenance of the ratio with reference to the excess quantity also is not strictly correct. Therefore, this would also not be a sufficient ground to infer any intentional excess in the number sought to be imported, Therefore for all the above reasons we are satisfied that the charge of misdeclaration, arising out of the quantity imported, is not established so far as the imports covered in appeals No. 963/80 and 964/80 are concerned. 12. So far as the import covered by appeal No. 1378/80 is concerned the excess number was only 99. It is pointed out for the appellants that it is usual to add 4% to the invoice quantity to take care of any mortality that may ensue during transit of the chicks, and that the international practice is not to charge for the 4%. It may be noted that the Deputy Collector had not chosen to impose any penalty on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge, that M/s. BVH Limited had committed misdescription by intentionally showing a wrong price, it should be noted that when the prices as agreed upon were being mentioned in subsequent imports the Board itself had held (in appeal Nos. 1464 and 1465/80) that there had been no evidence of any extra remittance having been made over and above the invoice price. Therefore, in effect, the Board itself had held, with reference to these subsequent imports, that though the price mentioned in the invoices, which was in accordance with the price mentioned in the agreements, was not being accepted for purposes of value for levy of customs duty, the price as agreed upon between the parties was the price that was actually paid. In the circumstances it would be difficult not to come to the same conclusion with reference to the earlier imports also, when the circumstances were exactly similar. 14. In coming to the conclusion that the price mentioned in the invoice was not the real price, but that under-invoicing had been done, the original authorities were influenced by the information that they had obtained from the Ministry of Agriculture (particulars as mentioned in the show cause notices) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld alone be relevant in terms of Section 14(l)(a) of the Customs Act. 16. But the question is whether the department has produced and relied upon such evidence to reject the invoice prices which, for the reasons mentioned earlier, there is no reason to believe, were not the real prices agreed upon between the parties. In rejecting the prices mentioned in the invoices the department had, in the first adjudication, relied upon a communication from the Ministry of Agriculture relating to current prices of GP stock and broilers imported by other local hatcheries. Since it is this letter that is mainly relied upon by the department to disbelieve the price mentioned in the invoices produced by the appellants in all the cases, it would be proper to extract the same in full at this stage. It reads as follows : "As regards the price of various lines of egg type and broiler GP stocks of Babcock imported by Babcock Venkateshwara Hatcheries, it may be stated that all the original papers are in the CCI & E office files in New Delhi and this office has no record to give an exact idea about the current price of Babcock GP stock. However, from a copy of an agreement dated April 1971 in our reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value by anybody else. The letter of the Ministry of Agriculture further relied upon information as to current prices of GP stock of other foreign exporters. But here again no details are given of the actual imports. The customs authorities should necessarily be in possession of records of such imports if they had taken place at the prices as mentioned in the letter of the Ministry. The omission on the part of the customs authorities to produce and rely upon such records would be a strong circumstance in favour of the appellants in their contention that there could have been really no such imports at the prices as mentioned in the Ministry's letter. In any event in the absence of such records it would not be proper to rely upon the information in the letter to disbelieve the correctness of the international price, as mentioned by the appellants, especially in the context of the earlier finding that there is no proof of remittance of any further amounts by the appellants than had been mentioned in the agreements and invoices that followed. 18. The order of the Collector mentions three different reasons for rejecting the price mentioned by M/s BVH Limited as proper international pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Rallis India Ltd. as well as M/s BVH Ltd. Penalties had been levied under Section 112 of the Customs Act for contravention of Section 111(d) as well as 111(m). Sri Nankhani contends that there could be no case of unauthorised importation since the importations were under proper licences, the value of such licences being sufficient to cover the imports made. Therefore, he contends that there can be no case of contravention of Section 111(d). But it cannot be denied that if the goods had not corresponded, in respect of value or in any other particular, with the description in the bill of entry an offence under Section 111(m) would be made out. The misdescription is said to be with reference to the quantity as well as the value. So far as the misdescription regarding quantity imported is concerned it had already been held that the said charge has not been established. Sri Cama further contends that so far as M/s Rallis India Ltd. are concerned they were in any event totally unaware of the transaction itself since, after making available their licences for import by M/s BVH Limited, the entire proceedings were being looked after by M/s BVH Limited only. But there is no denial that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the proper price. (ii) Appeal No. 1378/80 (A) In this appeal an excess import by 99 chicks had been found but no penalty had been imposed by the Deputy Collector on that ground. But on the basis of misdeclaiation in respect of value resulting in importation without cover of valid licence (as the licence produced was not sufficient to import the goods of the value as determined by the department) the Deputy Collector had imposed a penalty of ₹ 40,000 which had been reduced to ₹ 25,000 by the Appellate Collector. This imposition was under Section 112 for violation of Section 111(d) of the Customs Act. But in view of the conclusion that the price mentioned by the importer was not lower than the international price (as had been held by the lower authorities) it follows that the charge of misdeclaration regarding value [under Section 111(m) if not 111(d)] cannot be upheld. Therefore, that penalty is also set aside, directing assessment on the price declared which has been accepted by us to be the proper price. (iii) Appeal No. 1464/81 (A) There had been no case of import of excess quantity in this appeal. But the Collector under his order dated 28-2-1980 levied pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted for the purposes of assessment of duty also. Therefore, we observe that the debit in the respective licences should also have been on the basis of the price of the imports as mentioned in the invoices (which have been already accepted as the proper price as also the proper value for assessment of duty). 22. In the result the five appeals are allowed to the extent indicated below and disposed of accordingly : (i) Appeals No. 963 and 964/80 (A) (a) The penalty imposed on M/s. BVH Limited (Rs. 20,000 as reduced by the Board) for violation of Section 111 (d) is set aside. The penalties with reference to misdescription with reference to quantity (Rs. 55,000 on each of the appellants) as well as misdesciption regarding value (Rs. 60,000 on each of the appellants) are also set aside. (b) So far as payment of duty is concerned M/s. BVH Limited will be liable to pay duty on the entire imported goods, to be assessed on the basis of the declared value, the entire excess of 979 birds being treated as 'D' line only. (ii) Appeal No. 1378/80 (A) The penalty imposed on the appellants (M/s. BVH Limited) is set aside. Duty is to be assessed on the basis of the declared value. (iii) Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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