| SooperKanoon Citation | sooperkanoon.com/4138 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Feb-05-1988 |
| Reported in | (1988)(17)LC52Tri(Delhi) |
| Appellant | Aarkeyess Imports Corporation |
| Respondent | Collector of Customs |
2. For the reason that the goods were under detention in the docks, we have heard this matter out of turn and have carefully considered the submissions of both parties and the record.
3. To take the licence aspect first, the appellants relied on the Division Bench judgment of the Gujarat High Court at -1971 (27) STC 203 (Guj.) - Vicas Tractors v. Com-missioner of Sales Tax in which it was held that Massey Ferguson farm tractor was an "agricultural machinery" within the meaning of entry 12 of Schedule C of the Bombay Sales Tax Act, 1959. As such, they pleaded, their licence which was specific for spares for agricultural machinery, should be accepted. The Additional Collector had not disputed that the imported goods were tractor parts.
The leamed representative of the department was, therefore, not correct in expressing doubts whether certain items out of the goods were tractor parts or not. While we agree with the appellants that, having not filed any cross-objection or appeal, it was not open now to the learned representative of the department to doubt the nature of certain items when the Additional Collector himself had expressed no such doubt, we do not agree the Gujarat High Court judgment aforesaid Is of any help to the appellants. In the sales tax reference matter before the Gujarat High Court, there were 2 competing entries - entry 12 relating to agricultural machinery and entry 22 which was a residuary entry. The High Court found that there were different varieties of tractors and they were used at different places for a variety of purposes, on farms, on highways, on warfields, in factories and such other and numerous places. The High Court did not agree with the test of "principal and primary use" evolved by the Maharashtra High Court or that of "exclusive use" evolved by the Madhya Pradesh High Court or that of "general use" evolved by the Mysore High Court but came to the conclusion; "Whenever, therefore, a question arises whether a tractor in a given case is an agricultural machinery or an industrial machinery or machinery of any other type, the question must necessarily be answered by reference to its design, mechanism, distinct features and special adaptability, if any, to any particular use out of the diversity of uses to which a tractor is capable of being put" The tractor in question, which was the subject-matter of the reference to the Gujarat High Court, was found to be designed specially to work in farms. On that ground, the Gujarat High Court held that it correctly fell in entry 12 - agricultural machinery. This case is clearly distinguishable from the one before us for the simple reason that the competing entries before us are differently worded. While two entries in Chapter 84 of the ITC Schedule relate to agricultural machinery of the types specified, there are two other entries in Chapter 87 which are specific for tractors, including agricultural tractors. As per the accepted principle of classification, the specific entry for tractors must prevail over the general entry for agricultural machinery. In their application to the Licensing Authority, the appellants had shown past imports of tractors also for the servicing of which spares would be needed. But the Licensing Authority chose to give them an import licence for spares of various machineries including agricultural machinery and not for spares of tractors. Since "agricultural machinery" and 'tractors" have two separate and distinct classifications in the ITC Schedule, the expression "agricultural machinery1 in the import licence could not be given Its common and generic meaning. Further, note 1 (k) to Section XVI of the Import Schedule to the Customs Tariff Act, 1975, which is equally applicable to the ITC Schedule by virtue of the note at the beginning of the ITC Schedule, excluded vehicles from the scope of Chapter 84 of the ITC schedule and put them instead in Chapter 87. This also shows that tractors falling in Chapter 87 could not be considered as falling within the scope of "agricultural machinery" of Chapter 84 of the ITC Schedule. The licence produced was, therefore, not valid to cover the spare parts of tractors. Before the adjudication, the appellants had offered before the Asstt. Collector that they would produce other REP licences. But they did not actually tender any such licence and, therefore, there was no occasion for the lower authority to examine the validity of any other licence.
4. The appellants made an alternative plea that the first two items, namely, piston rings and crankshaft assembly, were parts of trawlers and as such covered by the Open General Licence, Appendix 6, SI. No. 46 (4). We find from the record that they had taken this plea before the lower authority but had not pressed it. They revived it before us and produced a catalogue relating to trawlers in support of their argument.
The learned representative of the department, who was himself a qualified Engineer, Invited our attention to the cover page of the catalogue where it was stated that the trawler was fitted with 2 main engines with total output of 8,820 KW. On the other hand, the output range of the Perkins Engines, of which the goods imported by the appellants were parts, was stated to be only 31.5 KW. A trawler has very powerful engines as it has to go on high seas. An agricultural tractor would require only a fraction of that power. Tractor engina parts could, by no stretch of imagination, become trawler engines parts. We, therefore, found no substance in the alternative plea of the appellants.
5. The appellants then made a leniency plea. They stated that they had earlier made two imports of similar goods against the same licence but they had not been objected to. They were, therefore, caught by surprise when the third consignment, the present one, arrived. We find from the record that while the appellants have submitted copies of Bills of entries of the previous 2 imports, they have not submitted the relevant import invoices with the help of which the present goods and the earlier goods could be fully compared. On the other hand, the Add).
Collector has stated in his order that the appellants had committed similar offences on previous occasions. Perhaps, that is the reason why he imposed the fine of Rs. 2 lakhs and the penalty of Rs. 50,000/-.
However, the Addl. Collector has not given the particulars of the previous offences and to that extent the appellants are handicapped in countering the Addl. Collector's conclusion. If the Addl. Collector had in view the two importations made in August and early September, 1986 against the same licence, the said importations were just a few weeks or days earlier than the present one and by that time it was too late for the appellants to have stopped the present consignment from coming in. Considering all circumstances, while we agree that the import licence produced was not valid to cover the goods, we feel that some leniency is merited in the quantum of punishment. Accordingly, we set aside the penalty in full and reduce the amount of redemption fine to Rs. 1 lakh (Rupees one lakh only).
6. To take the value aspect now, the table below will show the values declared and those assessed by the Addl. Collector:------------------------------------------------------------------------S.No. Description of Pricing Declared Assessed Date of the other the goods Unit price price invoice relied on by the Add). Collector------------------------------- -----------------------------------------(1) (2) (3) (4) (5) (6)------------------------------------------------------------------------ Pound Pound1.
Piston Rings MF A set of 3 1.00 5.13 30-12-1984 135 (1.71x3)2.
Crankshaft As- each 35.00 72.00 Order confirmation Sembly dated 18-9-1981 (1) B 709 3.63 16.00 4-4-1986 (2) B 3335 6.44 28.50 10-10-1984 and 20-5-1985 (3) B 5077 5.85 12.60 17-4-1985 and 20-5-1985 (4) B 3530H 2.20 Increase NIL Price loaded by of the average amount 7. The goods imported by the appellants were manufactured by M/s.
Vandervell, U.K. M/s. Mayphill Traders Limited, U.K. were the sole agents of M/s. Vandervell for India and Pakistan. But the appellants have imported the goods not from M/s. Mayphill but from a third party, M/s. AMC Exports, London. The appellants have imported the goods for stock and sale, i.e., in connection with servicing and maintenance of the equipment and not for its manufacturer.
8. The appellants had contracted for the purchase of the imported goods during May-June, 1986. A general plea made by them regarding valuation is that except for one invoice of April, 1986 which was contemporaneous with their contracting, all other Invoices and orders confirmation relied on by the Addl. Collector were much earlier to their contracting and hence not relevant. We find that for crankshaft assembly, the invoice relied on by the department was of 1981, i.e., 5 years prior to the appellants' contracting. The time gap is far too much and it is, therefore, not possible for us to accept this invoice as the basis of valuation in 1986. We hold that the department's case in respect of the value of crankshaft assembly is not established. In the result, we order that assessment should be made of the crankshaft assembly on the declared invoice rate of 35 pounds. In regard to piston rings, the learned representative of the department conceded that since piston rings were always quoted and sold in sets, the price of 1.71 pounds given in the invoice relied on by the department was for a set of 3 piston rings and not for each piston ring as assumed by the lower authority. We agree and order that the rate of 1.71 pounds should be taken as the rate for a set of 3 piston rings. The rate of 5.13 pounds taken by the Addl. Collector by multiplying 1.71 pounds x 3 is not correct. In regard to bush No. B 3530 H, the department had no evidence of comparable value. The Addl. Collector has increased the declared price by 311.92% on the ground that the average level of under-invoicing by the appellants in regard to the other goods was of that order. The table given above would show that the price assessed ranged from double to about 5 times. In the circumstances, it is difficult to say, in the absence of any documentary evidence, whether the price increase for B 3530 H should be double or more than double.
We cannot justify the average loading of 311.92%. We order, therefore, that the declared invoice rate of 2.20 pounds for B 3530 H should be accepted.
9. The remaining invoices and confirmation orders relied on by the Addl. Collector pertain to 1985 and late 1984, except in the case of one invoice of 4-4-1986 for bush B 709. Normally, we would not take the prices prevalent in late 1984 and in 1985 as a basis for comparison with the prices of mid-1986. But there are four good reasons in the present case for which we feel that even slightly older prices are not entirely irrelevant. First, the comparison as between late 1984 prices and 1985 prices shows that the prices were almost steady during this period. It is, therefore, reasonable to assume that in 1986 they could not have fallen steeply to 1/5th or even 112 of 1985 level. Secondly, the one contemporaneous invoice of April 1986 which we do have shows the price of bush B 709 at 16 pounds per 100 while the appellants' declared price is only 3.63 pounds per 100, i.e. nearly 1/5th. This single Instance leads us to believe that there is something wrong with the prices declared by the appellants. Thirdly, the appellants claimed to have imported 2 or 3 consignments of similar goods against the same licence a little earlier. They have produced the Bills of entry relating to those imports but have chosen to withhold the invoices of those importations. These invoices of their own importations, and of similar goods at about the same time, would have given us a good comparison of unit prices. The learned representative of the department also mentioned this omission on the part of the appellants but the appellants just kept mum about it. Fourthly, the appellants claimed to be in the regular stock and sale business of the goods imported. In other words, they must be having, or atleast be well aware of, the ruling price lists of the manufacturer, M/s. Vandervell. There could have been no better evidence of the price ordinarily charged in the course of international trade than the manufacturer's price list for the goods. We ourselves repeatedly pointed this out to the appellants.
But they did not come out with the price list. The appellants, on the other hand, placed before us a note prepared by them pointing out that there had been a depression in the market. We have to reject their note for 3 reasons. First, it is based on fresh evidence collected after the Additional Collector had adjudicated adjudged upon the matter.
Secondly, the comparison in the note is as between 1986 prices and 1987 prices and not between 1985 prices and 1986 prices. Thirdly, the items taken for comparison in the note are different than those imported by the appellants. While the appellants imported piston rings, crankshaft assembly and bushes, the note gives the prices of Connecting Bearing, Ford Main & Connecting, Main & Connecting Peugot and Bedford (Connecting). In the circumstances, we have to fall back and on whatever evidence is on record and which for the relevant goods imported. As the table given in paragraph 6 above would show, the prices could not have fallen so low in mid-1986 as claimed to be by the appellants.
10. The appellants then pleaded that they had purchased the goods out of a stock lot and hence the prides were low. They stated that M/s.
Vandervell, U.K., the manufacturer, sold the stock lot to a dealer in Cyprus. The Cyprus dealer re-sold the goods to a third party black in U.K., M/s. AMC Exports, London. The appellants, in turn, purchased the goods from M/s. AMC Exports, London. The Addl. Collector did not question their contention that the goods were out of a stock lot. Even so, the stock lot sale was a one-shot affair and so long as the goods were identical in all respects with those normally manufactured and traded, and the goods had not become obsolete and their further manufacture not dis-continued, the stock lot prices could not be considered as the prices ordinarily charged in the course of international trade. The reliance of the learned representative of the department on the Bombay High Court judgment -1987 (31) E.LT 356 (Bom.) - Satellite Engineering Limited and Anr. v. U.O.I, was well taken. In paragraph 20 of this judgment the Bombay High Court had held that "a clearance offer" was not the sole consideration for the sale and it could not represent the normal price in the course of international trade. We hold, therefore, that the prices declared by the appellants for bushes (other than B 3530 H) were not acceptable as the basis for assessment of customs duty; the prices assessed by the Addl. Collector were the correct basis. To sum up - (2) the redemption fine is reduced from Rs. 2 lakhs to Rs. 1 lakh only; (3) declared prices for crankshaft assembly and bush B 3530 H are accepted; (4) the assessed price of 11.71 pounds is accepted for a set of 3 piston rings; and (5) assessed prices for other 4 varieties of bushes are accepted.
The appeal is partly allowed in the above terms and Is otherwise rejected.