M/S. International Conveyors Ltd vs Commissioner Of Customs, Mumbai-I

(Arising out of Order-in-Appeal No. 52/2004 Dated 11.03.2004 passed by the Commissioner of Customs (Appeals), Mumbai )

For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical)

Honble Mr. Ramesh Nair, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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M/s. International Conveyors Ltd. : Appellant

VS

Commissioner of Customs, Mumbai-I : Respondent

Appearance

Shri V.M. Doiphode, Advocate for Appellant

Shri D.K. Sinha, Assistant Commissioner (A.R) for respondent

CORAM:

Mr. P.S.Pruthi, Member (Technical) Mr. Ramesh Nair, Member (Judicial)

Date of hearing : 02/09/2015 Date of decision : 30/09/2015

ORDER NO.

Per : P.S. Pruthi

This appeal is directed against the impugned Order-in-Appeal dt. 27.2.2004 passed by the Commissioner (Appeals) Mumbai.

2. The appellant imported second hand machinery vide Bill of Entry No. 6330 dated 16.08.1994. As per the License and Technical Collaboration Agreement with BBA Group PLC, a British Company, and SCANDURA INC., a U.S. base Company, second hand machinery was imported at declared price of # 65000 FOB, U.K. Port. Although the appellant produced a Chartered Engineers Certificate dt. 10.11.1993, RBI approval and purchase order showing the stated price, the declared value was enhanced by Customs on the basis of estimated value given by the Chartered Engineer as at the time of original purchase minus the permissible depreciation. The matter went through two rounds of litigation at the level of Commissioner (Appeals). Thereafter the Tribunal remanded the matter to the original authority, that is Assistant Commissioner, for passing a well reasoned order by considering judicial pronouncements including those cited by the appellant. Against the subsequent order of the Assistant Commissioner, the appellant preferred an appeal before the Commissioner (Appeals) who upheld the order of the Assistant Commissioner upholding the loading in value done at the time of original assessment. The appellant are in appeal against this order of Commissioner (Appeals).

3. Heard both sides.

4. The main plea of the Ld. Counsel is that department has not been able to dispute the genuineness of the transaction value nor adduced any evidence of contemporary import. According to him, reliance placed by Commissioner on the case of M/s. Gajra Bevel Gears Vs. Collector of Customs, Bombay 2003 (158) ELT A75 (S.C.) is misplaced and the ratio of the Apex Court judgment in the case of Tolin Rubbers Pvt. Ltd. Vs. Commissioner of Customs, Cochin 2003 (163) E.L.T. 289 (S.C.) would apply. According to him, once the transaction value is determinable under Rule 4(1) of the Customs Valuation Rules there is no question of determining the value under subsequent rules. Learned Counsel also submitted that even while arriving at the value on the basis of estimated value at the time of original purchase, the department mistakenly did not deduct the transaction value of # 65000 but deducted #38000 to arrive at the amount by which the value is loaded.

5. The Ld. AR reiterated the findings of the Commissioner (Appeals).

6. We have carefully gone through the facts of the case and submissions made by both sides. Machines of specialized nature with no specific common standards will have varying values. Thus, admittedly, prices of contemporaneous imports were not available. The course for Revenue to find the correct value was either to accept the transaction value, or if transaction value was not acceptable for justified reasons, the value could be determined under the Residual Rule 8 of Customs Valuation Rules. The Commissioner adopted the latter course on the basis of the Chartered Engineers certificate submitted by the appellant. The relevant portion of the certificate reads as :

Value of the capital goods at the time of its original purchase based on purchase price.

Not applicable Where the original purchase invoice not available, its approximate value at the time of its original purchase.

#200,000.00 Comments on reasonableness of price asked for by the suppliers and the basis for such opinion.

The contract price of #65,000 as agreed between the two companies compared with the estimated value for new equipment as shown above, is in my opinion very reasonable.

It is obvious that the Customs have ignored that part of the certificate above which states that the contract price of #65000 is reasonable. While ignoring this part of the certificate, we find that the adjudicating authority relied entirely on the part which states that the approximately value at the time of original purchase is #200,000. But the Certificate also states that this is the approximate value and the value of the goods at the time of original purchase based on purchase price is not available.

6.1. The lower authorities have relied on the Apex Court judgment in the case of Gajra Bevel Gears (supra). We find the facts in the case of Gajra Bevel Gears are at variance from the facts in the present case. In that case the value in the import license was for importing machines of 1984 make and, therefore, it was held that the invoice shall give the price only of machines which are of 1984 make whereas the second hand machines imported were of 1986 make. In that situation it was held by the Tribunal that the invoice value is not acceptable especially when the importer himself supplies Chartered Engineers certificate indicating the value of the machines when manufactured. The Honble Apex Court upheld the Tribunal judgment on this basis stating that scaling down the manufactured price by giving depreciation, does not appear to be an arbitrary method for ascertaining the value. However, in the present case, we find that the Chartered Engineer has not given the price at the time of manufacture. On the other hand, he has certified the transaction price of #65000 to be very reasonable.

Thus, the case of Gajra Bevel Gears is distinguishable. On the other hand, the reliance placed by the appellant on the case of Tolin Rubbers Pvt. Ltd. is more appropriate. Reliance on only one part of the Chartered Engineers certificate and ignoring the other part without giving satisfactory reasons for doing so is a misdirected step in arriving at the conclusion which the authority did. It is well established that for rejecting transaction value under Rule 4(1) of the Act and proceeding to Rule 8 without considering the circumstances in which transaction value can be rejected in terms of Rule 4(2) is incorrect. In such circumstances the transaction value cannot be discarded as held by the Apex Court in Tolin Rubbers Pvt. Ltd. (supra). We note that only reason is given by Commissioner (Appeals) for loading transaction value is that the Supreme Court decision in Tolin Rubbers Pvt. Ltd. does not nullify the effect of three Member decision of Supreme Court in Gajra Bevel Gears (supra). As we have seen above, the two decisions are given in a different context. Commissioner (Appeals) has neither explained the context nor given any reasons.

To prefer one judgment over the other judgments, the same cannot be quoted out of context. Therefore, the order of Commissioner (Appeals) is not sustainable.

7. Although, the point discussed above is the only basis on which Commissioner (Appeals) passed his order, the Ld. Counsel fairly concedes that the adjudicating authority had tried to establish relationship between the supplier and the appellant in that the appellant was obliged to pay royalty on the goods manufactured by them. We have seen the terms of the Agreement. There is no denying that, apart from the sale of machinery for #65000, royalty was paid. But no evidence is forthcoming to the effect that the payment of royalty influenced the transaction price of the machinery imported. Therefore, the order of adjudicating authority on this point has no legal basis. In any case as we have already held that the reasoning given by the Commissioner (Appeals) is not sustainable, we do not find it necessary to elaborate the aspect of royalty which was not discussed at all by the Commissioner (Appeals).

The impugned order is set aside and appeal is allowed.

(Pronounced in court on 30/09/2015)

(Ramesh Nair) Member (Judicial)

(P.S.Pruthi) Member (Technical)

SM.

7 Appeal No. C/559/2004-Mum