1. The respondents Radhey Shyam Ratanlal had entered into a contract for import of one thousand tonnes of cloves of Indonesian origin at the rate of US $750 PMT CIF Mumbai for supply between July 1998 and February 1999. The importer however could import only 463.21 MT of cloves during the contract period which was assessed and cleared at the rate of US$ 750 PMT. Since the supplier was delaying the supply of balance quantity within the contract period, the importer pursued the matter through DGFT/ Embassy of India and thereafter the supplier shipped 63.46 MT cloves of Indonesian origin (during June 99 and 50.875 MT of cloves of Zanzibar origin during November 99 and the importer filed bill of entry claiming assessment at the contracted value of US $750 PMT. Since supplies were made beyond contracted period and there was an increasing trend of prices of these commodities in the international market, the department did not accept the declared value of US $750 PMT and sought to finalise the assessment at the rate of US $1800 PMT based on the price of contemporaneous imports. The assessments were finalized accordingly.
2. The appellants filed an appeal against the same in CEGAT and the Tribunal vide its order dated 8-7-2000 remanded the case to the Adjudicating Authority for re-adjudication after issuing a proper show cause notice to the appellant and allowing them the opportunity to be heard and to examine the relevance of country of origin and commercial quantity level involved in the contemporaneous imports. Accordingly a show cause notice was issued on 31-8-2000 in respect of supplies made in the month of Nov. 99 and seeking as to why the value should not be enhanced, in respect of goods imported vide bill of entry No. 1230 and 1235 both dated 3-12-1999, to US $1800 PMT and differential duty recovered accordingly on the ground that the goods imported under these two bill of entries were that of Zanzibar origin whereas the contract was in respect of Indonesian origin and that the contract was limited only to supplies made till Feb. 1999 whereas the supplies in these two bill of entries were made during Nov. 99. The quantities involved in the subject two bills of entry were 29.6 MT and 21.275 MT respectively.
The show cause notice was dropped by the Commissioner (Customs) holding that once the transaction value is available the correctness of which is not being doubted and since the import was in terms of contract which the supplier was forced to comply with by intervention of Government authorities like DGFT. Indian Embassy and the matter was in the knowledge of the Custom House itself, the same cannot be faulted with. It was further observed that in the absence of any evidence regarding any additional payments received by supplier, the transaction value cannot be rejected and therefore the question of going in to the value of contemporaneous import does not arise. The Commissioner also considered some of the prices of the contemporaneous import obtained from Directorate of Valuation and came to the conclusion that these prices cannot be considered as contemporaneous as there was vast difference between quantity imported. Therefore on this ground also it was held that the value cannot be enhanced and therefore the decided value of US $750 PMT has to be accepted.
3. Learned JDR however submits that the Commissioner's Order was erroneous as the Commissioner has not properly appreciated the judgments in Rajkumar Knitting Mills (P) Ltd. case reported in 1998 (98) E.L.T. 292 (S.C.) wherein the Hon'ble Supreme Court had interpreted Section 14 of the Customs Act, 1962 which he used as base to his conclusion. The definition of value under Section 14 and the Rules made there under create a conflict in so far as the Rules when considered in isolation take one to the contract value whereas the value under Section 14 takes one to the price at the time of place of importation which is well after the contract is signed. The Commissioner failed to appreciate that the valuation rules cannot supersede the force of Section 14 since the rules are creation of Section 14 and the Rules have been made to render the provisions of Section 14 operational and cannot be interpreted in a manner to make the provisions of Section 14 ineffective. This is because, Section 14(1A) provides "subject to provisions of Sub-section (1) ...". and those Rules are subject to scope of Section 14. Therefore the contract price in this case cannot be treated as valid, more so because the original period for delivery had already expired and the import took place well after the contract had expired and particularly quality much better than one contracted.
4. It was submitted that Commissioner should have appreciated that the contract dated 13-7-1998 was for supplying cloves of Indonesian origin at the rate of US $750 PMT and the same was limited only for supply up to Feb..99. Again the assessee tried to import cloves of Zanzibar origin in the month of Nov.99. The Commissioner should have known that the cloves of Zanzibar origin which are considered to be superior to Indonesian cloves, could not have been imported in Nov.99 at price of US $750 PMT against the contract which was limited only for supply up to Feb.99, particularly in view of the fact that market price of cloves of Madagaskar origin had reached up to US $ 3400 PMT in Nov. 99 as reflected in the Public Ledger'. The Commissioner should have therefore rejected the claim of the importer in view of the above facts. Once the goods are imported after expiry of the original contract period the value has to be determined as per the contemporaneous import of identical quality of import and not the contracted price.
5. Learned Advocate Shri Prabhat Kumar, on behalf of the respondents submitted that in this case there is no material to doubt the genuineness of the transaction value as the supplier was not observing the contract and it was only at the intervention of the DGFT, Indian Embassy in Singapore and correspondence was entered into with the authorities in the Custom House i.e. the Dy. Commissioner of the Group as well as the Chief Commissioner (Customs), that suppliers agreed to ship the balance quantity of contract at the same price. It was submitted that the Supreme Court decision in the Rajkumar Knitting Mills (P) Ltd. case cited supra was relevant in respect of shipments made prior to 1988 under the old Section 14 of the Customs Act, 1962 where the assessable value was considered to be deemed value at which like goods are sold and not the actual value or the transaction value.
The law under question changed in the year 1988 when it was aligned with GAAT valuation rules and Section 14(1A) was introduced along with the valuation rules. It was submitted that under Rule 3 of the valuation Rules the assessable value of the imported goods shall be the transaction value and only if the transaction value cannot he determined under the provisions of Sub-clause (1) that the value shall he determined by proceeding sequentially through Rules 5-8 of these Rules. It was further submitted that the Rules framed under Section 14(1A) and the provisions of Section 14(1) were interpreted by the Supreme Court in the case of Commissioner of Customs, Mumbai v. Bureau Veritas wherein Para 17 it was observed as under:" it is true that the Rules are framed under Section 14(1A) and are subject to the conditions in Section 14(1). Rule 4 is in fact directly relatable to Section 14(1). Both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to he the value in the absence of any of the special circumstances indicated in Section 14(1) and particularised in Rule 4(2)". It was submitted that the Revenue in its appeal has wrongly contended that the rules are contrary to Section 14(2) when it comes to determine the price as per the contract entered between the supplier and the importer as per the above observation of the Apex Court in the case of Bureau Veritas. As observed in this decision, Rule 4(1) speaks of transaction value. Utilization of definite article indicates that what should be accepted as the value for the purpose of assessment to customs duty is the price actually paid for the particular transaction unless of course the price is unacceptable for the reasons cited out in Rule 4(2). "Payable" in the context of the language of Rule 4(1) must, therefore, be read as referring to "the particular transaction" and payability in respect of transaction envisages a situation where payment of price may be deferred. It is only when transaction value under Rule 4 is rejected that under Rule 3(ii), the value shall be determined by proceeding sequentially through Rule. 5-8 of the Rules.
Conversely, if the transaction value can be determined under Rule 4(1) and does not fall under any of the Rules except Rule 4(2), there is no question of determining the value under the subsequent rules. Various decisions of CESTAT were cited that the transaction value cannot be rejected in the absence of any evidence to the effect that there was flow hack or it was not a genuine price. Even in effect that there was flow hack or it was not a genuine price. Even in respect of contemporaneous imports it was submitted that the Commissioner has clearly established in his order that the price cited by the Department cannot be considered as contemporaneous import as the quantity differs vastly. CEGAT decisions were cited to the effect that if the quantity/quality is not comparable then the import cannot be considered as contemporaneous. In view of this it was submitted that there is no flaw in the order of the Commissioner and the same should be uphold.6. We have considered the submissions. We find that the Revenue has challenged the value only in respect of consignments where cloves of Zanzibar origin were imported and not the cloves imported during the period July, 1999 which were of Indonesian origin even though the prevailing international market price as per the department was much higher when initially all the consignments were assessed at US $1800 PMT. The main ground of the Revenue's appeal is that as per the Supreme Court decision in Rajkumar Knitting Mills (P) Ltd. case the contract value cannot be accepted once the import is at a time much later than the time of entering into contract specially when the international market prices has gone up quite considerably. It has been presumed by the Revenue that once the goods are not supplied within the contracted period, the balance supply cannot be considered as per the terms of the contract. We are afraid that the facts as brought out in the Order in Original and the facts narrated in the memorandum of appeal do not support the department's contention. The facts clearly state that the supplier was unwilling to fulfil the contractual obligation and it was only with the intervention of the DGFT and the Indian Embassy and with the full knowledge of the authorities in the Custom House that the foreign supplier was forced to supply the contracted quantity. There is no mention in the facts or in the evidence that the subsequent supplies were not made at the contracted value or that there was a flow back of any additional funds from the importers to the supplier. In other words it can be conclusively held that the transaction value declared was the genuine value and there was no other consideration either direct or indirect received by the supplier. Therefore, once the transaction value cannot be rejected as per Rule 4(1) and Rule 3 the same has to be considered as the value for the purpose of Section 14(1). There is no contradiction between the Rules and the provisions of Section 14(1) as has been brought out by the Apex Court in the case of Bureau Veritas cited supra wherein it has been very clearly held that both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularized in Rule 4(2). Para 18 of this decision clarifies this position very clearly and the same is reproduced below.
Rule 4(1) speaks of the transaction value. Utilisation of the definite article indicates that what should be accepted as the value for the purpose of assessment to customs duty is the price actually paid for the particular transaction, unless of course the price is unacceptable for the reasons set out in Rule 4(2). "payable" in the context of the language of Rule 4(1) must, therefore, be read as referring to "the particular transaction" and payability in respect of the transaction envisages a situation where payment of price may be deferred.
7. This observation makes clear that the contract price the genuineness of which is not doubted is to be accepted and as observed in Para 20 of this very decision it is only when the transaction value under Rule 4 is rejected that recourse can be made to the Rule 5-8 of the Valuation Rules. Though there is some ground that the cloves of Zanzibar origin are not comparable with that of Indonesian origin but since the cloves have been supplied at the contracted value only which is the transaction value, the same cannot be rejected in the special circumstances of the present case where on account of differential rates the supplier was forced through intervention of Government Authorities to supply the cloves at the contracted value. In view of this the transaction value cannot be rejected.
8. In view of above, we find no force in the Revenue's appeal and accordingly reject the same.