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TMI Blog1998 (2) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... rs which can be classified into three categories :- Original Equipment Manufacturers (OEM);(a) Replacement User - also described as Actual Users (Aus);(b) and Dealers who import for stock and sale.(c) In addition to this Skefko book orders on their own behalf for stock and sale in India. Ball bearings could only be imported against an import licence and in order to secure a large volume of orders, agents were required to contact the licence holders and secure their orders for the purpose of consolidating these orders into one large order. Skefko had appointed persons, described as "Canvassers", who would go round the market and secure large volume of orders. Punjab Bearing Traders were appointed as one such canvasser by Skefko. 3.Mirah Exports Pvt. Ltd. (hereinafter referred to as `Mirah Exports'), appellant in C.A. No. 47/90, is a private limited company incorporated under the Companies Act, 1956, carrying on business as importers, exporters and manufacturers' representative at Bombay. In July and September, 1982 Mirah Exports contacted Skefko for purchase of approximately 15 lakh pieces of ball bearings from SKF from Italy/Germany. The entire negotiations for purchasing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and why penal action should not be taken against them under Section 112 of the Act. The said show cause notice was based primarily on the price list for the year 1981-82 that was furnished by the Central Office of the Oversees Suppliers to Skefko since the invoice value of the goods imported by Mirah Exports was 48.7% of the prices mentioned in the said price list. It was claimed that the price list was recovered during the course of search that was conducted by officers of the Enforcement Directorate on or about June 22, 1983. 4.Replies to the said show cause notice were submitted by Mirah Exports as well as Skefko. Mirah Exports, in their reply to the said show cause notice, stated that they were not aware of any price list in use by Skefko; since the quantity being imported was about 5 lakh pieces of each type reduced prices had been given by the supplier; the imports by M/s. Crompton Greaves, Mahindra & Mahindra and Jay Engineering Works, who had been importing quantities from 10,000 to 50,000 pieces, had been at similar prices and that even the Government undertakings like BHEL, Hindustan Tele-Printers and other public limited companies had been offered discounts rangin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy were valid and acceptable since they were from amongst those which were seized by the Enforcement Directorate and on some of which even the department had based its case. The Addl. Collector found that apart from Mirah Exports, a number of other importers, viz., Skefko, Amul Engg, Krishna Engg. Works, Delhi, Jayaveer Forge, Davangere, Ajay Trading Co., Delhi, Ramgopal Lachmi Narayan, Bombay, Sanmukh Engineering Industries, etc. had also imported comparable quantities of similar bearings at the same (or lesser) prices as those of Mirah Exports and the mere fact that the prices charged to buyers through Punjab Bearing Traders is as low as 48.7% of the price list does not prove anything by itself. The Additional Collector also found that the evidence produced by Mirah Exports, along with their reply to the show cause notice, shows that 50 to 70% discount over the list prices were the normal invoice prices for a number of unconnected importers during that period (including a public sector institution) and that there is nothing abnormal in the alleged 51.93% discount averaged by Punjab Bearing Traders. While referring to the provisions contained in Section 14 of the Act, the Addl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In addition, M/s. Rajkumar & Co. had imported one consignment of bearing of SKF brand, part No. NU 209 under invoice dated July 31, 1984. Separate show cause notices dated January 30, 1984, February 3, 1984, March 29, 1984 and October 21, 1986 were issued by the Collector of Customs, Bombay in respect of the said imports. Skefko filed its reply to the said show cause notices. On the basis of the said show cause notices separate orders dated March 20, 1987 were passed in respect of the show cause notices dated January 30, 1984, February 3, 1984 and March 29, 1984 and order dated December 5, 1986 was passed in respect of the show cause notice dated October 21, 1986. In the said orders the Collector of Customs took a view contrary to that taken by the Addl. Collector in his order dated April 16, 1985. The Collector of Customs proceeded on the basis that the price list does not show any discount schedule or reduction in the price for any reasons, i.e., cash discount, trade discount or quantity discount and that from the record seized it is seen that Skefko were entitled to 6% commission on the c.i.f. value if the invoice prices are as per the list price and that if the invoice price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list No. 8211 of 1982 will be taken as the base and if discount is allowed up to 20% of the price list, depending upon the quantity, the same can be accepted. This being an old case, where the goods have already been cleared provisionally, the Collector refrained from taking any action under Section 111(d) of the Act and further held that since the importers declared their special relationship with the supplier and, therefore, special price charged cannot be treated as misdeclaration as the importers have paid the amount only due to their special relationship, charge under Section 111(m) of the Act was also dropped. Feeling aggrieved by the aforesaid orders of the Collector of Customs, Skefko filed four appeals (Nos. C/1473/87-A, C/2426/87-A, C/2435/87-A and C/2472/87-A) before the Tribunal. 9.All the 7 appeals have been disposed of by the Tribunal by the impugned judgment dated September 4, 1989. The Tribunal has dismissed the appeals filed by Skefko against the orders of the Collector of Customs dated December 5, 1986 and March 20, 1987 but has allowed the appeals filed by the Collector of Customs against the order of the Addl. Collector of Customs dated April 16, 1985. The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14 of the Act. It has been urged that the price list of the supplier does not preclude the supplier and the importers from negotiating at a lower price keeping in view the quantity of the bearings to be imported and that the Collector of Customs was in error in holding that such negotiated price was not permissible for the purpose of assessment of the value of the goods under Section 14 of the Act. It was also urged that the Tribunal was in error in holding that the reliance could not be placed on the pricing policy of the foreign supplier. Shri Salve has submitted that at the relevant time SKF was facing stiff competition from other manufacturers and the prices of SKF were higher than those quoted by Japanese manufacturers of bearings and that this fact is borne out by the documents that were seized during the course of search of the premises of Skefko, etc. The learned Counsel has placed reliance on the decisions of this Court in Basant Industries v. Addl. Collector of Customs, Bombay - 1996 (81) E.L.T. 195 (S.C.); Collector of Customs, Bombay v. Nippon Bearings (P) Ltd. - 1996 (82) E.L.T. 3 (S.C.); and Union of India v. Mahindra & Mahindra Ltd. - 1995 (76) E.L.T. 481 (S.C.). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they may even secure lower price particularly if they generated additional volumes of sales. The documents seized during the search and seizure that were produced by the appellants before the Customs authorities (genuineness of which was accepted by the Addl. Collector of Customs) show that apart from Mirah Exports a number of other importers, namely, Skefko, Amul Engg., Krishna Engg. Works, Delhi, Jayaveer Forge, Davangere, Ajay Trading Co., Delhi, Ramgopal Lachmi Narayan, Bombay, Sanmukh Engineering Industries, etc. had also imported comparable quantities of similar bearings at the same or lesser prices as that of Mirah Exports and that discount from 50% to 70% on the list prices was the normal invoice price for a number of unconnected importers during the period. The Collector of Customs, while passing the orders dated December 5, 1986 and March 20, 1987 and the Tribunal in the impugned judgment have not taken note of the said documents and the fact that the importers had been given 50% to 70% discount on the prices indicated in the list price. 14.In Basant Industries (supra) this Court has pointed out that "in the business world, considerations of relationship with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of that case. It was found that the appellant company in that case had tried to practise a fraud in defeating the import policy relating to import of Copiers which enabled the new entrepreneurs establishing small scale industries to import, in the first phase, 62% of the components of the copiers and the balance of the 38% was to be manufactured by them indigenously. In that case it was found that the appellant company had purchased 14 fully finished Plain Paper Copiers of Japanese origin in Hong Kong and Singapore and had them dismantled in Hong Kong for importing the same in the guise of the components of the copiers and thereby the company not only had violated the terms and conditions of the licence but had also committed a fraud on the Import Policy itself in importing the fully finished copiers which was totally prohibited item for import. The finding about undervaluation in the invoices was arrived at on the basis of prices mentioned in quotations of the authorised agents of the manufacturers and it was held that there was no question of supplying the components of the copiers on a lower price than given by the manufacturers themselves. The decision in Sharp Business Mach ..... X X X X Extracts X X X X X X X X Extracts X X X X
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