Prices of transacted goods can be determined only on transaction date

Viraj Impex Pvt. Ltd. Vs Commissioner of Customs (I) (CESTAT Mumbai)

It is settled principle of the commercial transactions that the prices of the transacted goods can be determined only on the date of transaction and not on any other date whether previous or subsequent. The prices may fluctuate on account of the vagaries of market but the contractual price agreed upon by the contracting parties would be sacrosanct unless the contract provides so. The contractual price entered between the parties need to be tested against the prevailing market prices on the date of contract rather than any subsequent price. The Appellant’s contract was entered into on 19-1-2012 and the goods were shipped in March 2012. The contract price was US $ 713 per M.Ton. The appraisal price given in Metal Bulletin dated 30.01.2012 for production and exports of March 2012 of Chinese Mills, was in the range of US $ 685-695. Thus the Appellant’s price was even higher than the appraisal price given in the Metal Bulletin of January 2012 for production and export of March 2012. The London Metal Bulletin prices of subsequent date 26.03.2012 giving the appraisal price for production and exports of May 2012 to be in the range of US $ 715 to 730 per MT, cannot form the basis of enhancing the value and for rejecting the transaction price.

FULL TEXT OF THE CESTAT MUMBAI ORDER

These appeals are directed against order in appeal No 336,337/MCH/AC/Gr IV/2013 dated 03.06.2013 of Commissioner Customs (Appeals), Mumbai Zone-I. By the impugned order Commissioner has held as follows:

“ORDER

8. In view of the above discussions and findings, I find no reason to interfere with the impugned order. The said appeals are dismissed as above.”

2.1 Appellant had imported Cold Rolled Steel Sheets in Coils (CRCA) from M/S Hangzhou Cogeneration (Hong Kong) Company Ltd., Hong Kong, at unit Price of US$ 713 PMT and filed Bills of Entry with the following details for clearance through Customs.

2.2 The Appraising Group – IV, while assessing the goods, enhanced the assessable value to US$ 722 PMT and US$721.64 PMT respectively, as against the declared value of US$713 Per MT. However, no speaking order to that effect was passed by Department. The appellants cleared the goods for home consumption after paying appropriate duty on the enhanced value as assessed by the Department, under protest.

2.3 Being aggrieved of the value loading, the appellants filed the appeals before the Commissioner (Appeals). The appeals filed were dismissed as per the impugned order referred in para 1 above.

2.4 Aggrieved appellant have filed these appeals.

3.1 We have heard Ms Shamita Patel, Advocate for the appellant and Shri Manoj Kumar, Deputy Commissioner, Authorized Representative for the revenue.

3.2 Arguing for the appellant, learned Counsel submits:

> Revenue has arbitrarily rejected the transaction value which as per Section 14 of the Customs Act, 1962 is the price payable and actually paid. Hon’ble Supreme Court has in case of Eicher Tractors Ltd [2000 (122)ELT 321(SC)] that the transaction value has to be accepted unless the Department can satisfy that the transaction value is not in the course of course of transactions in international market.

> Rule 12 of the said Rules provides for the mechanism and procedure for rejection of value. It provides that the declared value shall be accepted where the proper officer is satisfied about the truth and accuracy of the declared value after enquiry and consultation with the importer. It further provides that the proper officer shall have powers to raise doubts on the truth or accuracy of the declared value based on certain reasons which may include contemporaneous imports at a significantly higher value. In the present the proper officer has not followed the said procedure laid down in the said Rule 12. In the present case there is no evidence of any contemporaneous imports at a higher price and hence the rejection and enhancement of the declared value is totally arbitrary and untenable in law.

> Tribunal in the case of Sumeet Exports (India) v CC – 2019 (4) TMI 1093-CESTAT MUMBAI, in absence of any evidence of contemporary imports at higher price, there is no basis to doubt and reject the transaction value.

> On the contrary they had produced evidence of contemporary import which has been discarded by Commissioner (Appeals).

> Even going by the Metal Bulletin appraisal prices which has formed the basis for determination of enhanced, there is no justification for rejecting the Appellant’s transaction value because revenue has relied upon metal bulletin for the subsequent period and not the one that is for the period when the imports were made. The price declared by them on the bill of entries is higher than the price as per the metal bulletin of the relevant period

> The decision relied upon by the Commissioner (Appeal) to reject their appeal is distinguishable.

3.3 Learned Authorized Representative reiterated the findings recorded by the Commissioner (Appeals) while rejecting the appeal.

4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments.

4.2 Commissioner (Appeals) has by the impugned order recorded her finding while upholding the assessment order enhancing the value as declared by the importer as follows:

“I have gone through all the relevant documents & submissions made by both the parties relating to the issues relating to the issue. The question is to decide whether the value loading by the Department is proper or not.

6. It is submitted by the appellants that they have entered into a contract with the supplier in 19.01.2012 backed by Irrevocable Letter of Credit dated 20.01.2012 and prices matching with London Metal Bulletin (L.M.B.) dated 23.01.2012 to 30.01.2012. Thus they contend that their price was unquestionable. But the respondents through their written submission vide letter F. No. S/26-Misc-69/2011-12 GR IV dated 15.05.2013 have refuted the appellant’s contention, on the ground of the guidelines of the Directorate of Valuation that goods are valued as per the L.M.B. prices on or near the Bill of Lading date. In the instant cases the B/L date for both the Bills of entry was 26.03.2012. Hence, the value of goods was assessed as per the LMB issue dated 26.03.2012 at US$ 721.64 / 722.

In context to the submission in respect of the appropriate assesseable value by the respondents, I put reliance on the judgement in the case of Radhey Shyam Ratanlal versus Commissioner of Customs (Adjudication), Mumbai, as reported in 2009 (238) E.L.T. 14 (S.C.) wherein at para 20 it is held,

“…………Therefore, the provisions of sub-Section (1) of Section 14 would prevail when the transaction value required to be determined under Rule 4 does not reflect the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation. There cannot be any dispute with regard to said interpretation that it is the provision which will always prevail. In other words the deemed value contemplated under Section 14(1) would prevail when the price declared does not reflect the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation…….. “

In view of the above, the price prevailing as per the L.M.B. issue dated 26.03.2012 becomes binding on the assessing officer to load the value to @ US$ 721.64 & US$ 722 PMT respectively, for both the Bills of entries. This is further strengthened by the fact that both the parties are relying on the prices reflected through L.M.B albeit different dates. I also find that the case of Bill of entry of Rajan Kumar and Bros. Impex vide No. 6429986 dated 31.03.2012, as cited by the appellants cannot be taken for comparison as the goods therein are of different specification.

7. The appellants have pleaded about their business association with their overseas supplier since December 2006, which should be taken into consideration for favour of price benefit In light of the observation by the Apex Court in the matter of Basant Industries vs Additional Commissioner of Customs, Mumbai as reported at 1996(81) ELT 195 (SC) wherein it is held that ,

“it is essential to bear in mind the fact that in the business world, consideration of relationship with the customer are also relevant factor.”

The appellants may have a long relation with their overseas suppliers but any benefit extended to them by their supplier is neither reflected in the various documents including the sales contract submitted by the appellants nor they could prove the same.”

4.3 The entire findings of the Commissioner (Appeal) are based on the London Metal Bulletin, which as per her is to be as close as possible to the date of Bill of Lading. The above contention of the Commissioner (Appeal) cannot be upheld. In case of Agarwal Industries Ltd. [2011 (272) ELT 641 (SC)], Hon’ble Apex Court has held as follows:

“11. On a plain reading of Sections 14(1) and 14(1A), it is clear that the value of any goods chargeable to ad valorem duty is deemed to be the price as referred to in Section 14(1) of the Act. Section 14(1) is a deeming provision as it talks of deemed value of such goods. The determination of such price has to be in accordance with the relevant rules and subject to the provisions of Section 14(1) of the Act. Conjointly read, both Section 14(1) of the Act and Rule 4 of CVR, 1988 provide that in the absence of any of the special circumstances indicated in Section 14(1) of the Act and particularized in Rule 4(2) of CVR 1988, the price paid or payable by the importer to the vendor, in the ordinary course of international trade and commerce, shall be taken to be the transaction value. In other words, save and except for the circumstances mentioned in proviso to Sub-rule (2) of Rule 4, the invoice price is to form the basis for determination of the transaction value. Nevertheless, if on the basis of some contemporaneous evidence, the revenue is able to demonstrate that the invoice does not reflect the correct price, it would be justified in rejecting the invoice price and determine the transaction value in accordance with the procedure laid down in CVR, 1988. It needs little emphasis that before rejecting the transaction value declared by the importer as incorrect or unacceptable, the revenue has to bring on record cogent material to show that contemporaneous imports, which obviously would include the date of contract, the time and place of importation, etc., were at a higher price. In such a situation, Rule 10A of CVR, 1988 contemplates that where the department has a ‘reason to doubt’ the truth or accuracy of the declared value, it may ask the importer to provide further explanation to the effect that the declared value represents the total amount actually paid or payable for the imported goods. Needless to add that ‘reason to doubt’ does not mean ‘reason to suspect’. A mere suspicion upon the correctness of the invoice produced by an importer is not sufficient to reject it as evidence of the value of imported goods. The doubt held by the officer concerned has to be based on some material evidence and is not to be formed on a mere suspicion or speculation. We may hasten to add that although strict rules of evidence do not apply to adjudication proceedings under the Act, yet the Adjudicating Authority has to examine the probative value of the documents on which reliance is sought to be placed by the revenue. It is well settled that the onus to prove undervaluation is on the revenue but once the revenue discharges the burden of proof by producing evidence of contemporaneous imports at a higher price, the onus shifts to the importer to establish that the price indicated in the invoice relied upon by him is correct.”

12. In Eicher Tractors Ltd. (supra), relied upon by the Tribunal, this Court had held that the principle for valuation of imported goods is found in Section 14(1) of the Act which provides for the determination of the assessable value on the basis of the international sale price. Under the said Act, customs duty is chargeable on goods. According to Section 14(1), the assessment of duty is to be made on the value of the goods. The value may be fixed by the Central Government under Section 14(2). Where the value is not so fixed it has to be decided under Section 14(1). The value, according to Section 14(1), shall be deemed to be the price at which such or like goods are ordinarily sold or offered for sale, for delivery at the time and place and importation in the course of international trade. The word “ordinarily” implies the exclusion of special circumstances. This position is clarified by the last sentence in Section 14(1) which describes an “ordinary” sale as one where the seller or the buyer have no interest in the business of each other and price is the sole consideration for the sale or offer for sale. Therefore, when the above conditions regarding time, place and absence of special circumstances stand fulfilled, the price of imported goods shall be decided under Section 14(1A) read with the Rules framed thereunder. The said Rules are CVR, 1988. It was further held that in cases where the circumstances mentioned in Rules 4(2)(c) to (h) are not applicable, the Department is bound to assess the duty under transaction value. Therefore, unless the price actually paid for a particular transaction falls within the exceptions mentioned in Rules 4(2)(c) to (h), the Department is bound to assess the duty on the transaction value. It was further held that Rule 4 is directly relatable to Section 14(1) of the Act. Section 14(1) read with Rule 4 provides that the price paid by the importer in the ordinary course of commerce shall be taken to be the value in the absence of any special circumstances indicated in Section 14(1). Therefore, what should be accepted as the value for the purpose of assessment is the price actually paid for the particular transaction, unless the price is unacceptable for the reasons set out in Rule 4(2). [Also See : Rabindra Chandra Paul v. Commissioner of Customs (Preventive), Shillong, (2007) 3 SCC 93 = 2007 (209) E.L.T. 326 (S.C.)].”

Further in case of Sanjivani Non Ferrous Trading Pvt Ltd [2019 (365) ELT 3 (SC)], Hon’ble Supreme Court observed as follows:

“10. The law, thus, is clear. As per Sections 14(1) and 14(1A), the value of any goods chargeable to ad valorem duty is deemed to be the price as referred to in that provision. Section 14(1) is a deeming provision as it talks of ‘deemed value’ of such goods. Therefore, normally, the Assessing Officer is supposed to act on the basis of price which is actually paid and treat the same as assessable value/transaction value of the goods. This, ordinarily, is the course of action which needs to be followed by the Assessing Officer. This principle of arriving at transaction value to be the assessable value applies. That is also the effect of Rule 3(1) and Rule 4(1) of the Customs Valuation Rules, namely, the adjudicating authority is bound to accept price actually paid or payable for goods as the transaction value. Exceptions are, however, carved out and enumerated in Rule 4(2). As per that provision, the transaction value mentioned in the Bills of Entry can be discarded in case it is found that there are any imports of identical goods or similar goods at a higher price at around the same time or if the buyers and sellers are related to each other. In order to invoke such a provision it is incumbent upon the Assessing Officer to give reasons as to why the transaction value declared in the Bills of Entry was being rejected; to establish that the price is not the sole consideration; and to give the reasons supported by material on the basis of which the Assessing Officer arrives at his own assessable value.”

4.4 From the observations made by the Hon’ble Apex court the transaction value as declared by the importer should form the basis for determination of the assessable value for levy of custom duty. The transaction value as declared should normally be accepted and should be rejected only if the revenue has evidence to show that the transaction value do not reflect the actual transaction price in the course of international trade. Contemporaneous import at much higher transaction value, can be a reason for rejection of the declared transaction value. Interestingly revenue has not produced any evidence to that effect, on contrary appellants have produced the evidence before the Commissioner (Appeal) where in the same goods from the same supplier and shipped in the same vessel have been assessed accepting the transaction value which is less than that declared by the appellant. It is evident from the Bill of Entry No.6429986 dated 31-3 2012 filed by M/s Rajan Kumar & Bros Impex that the goods imported by them were also “Cold Rolled Steel Sheet in Coils (CRCA)” of DC01 grade and imported from the same supplier in the same vessel where assessed on the basis of declared transaction value of US$ 710/- Per MT, which is even less than the transaction value US$ 713 per MT declared by the appellant. We do not find any reason for rejecting the transaction value declared by the appellant when revenue has admitted a lower transaction value for the import of same goods.

4.5 It is settled principle of the commercial transactions that the prices of the transacted goods can be determined only on the date of transaction and not on any other date whether previous or subsequent. The prices may fluctuate on account of the vagaries of market but the contractual price agreed upon by the contracting parties would be sacrosanct unless the contract provides so. The contractual price entered between the parties need to be tested against the prevailing market prices on the date of contract rather than any subsequent price. The Appellant’s contract was entered into on 19-1-2012 and the goods were shipped in March 2012. The contract price was US $ 713 per M.Ton. The appraisal price given in Metal Bulletin dated 30.01.2012 for production and exports of March 2012 of Chinese Mills, was in the range of US $ 685-695. Thus the Appellant’s price was even higher than the appraisal price given in the Metal Bulletin of January 2012 for production and export of March 2012. The London Metal Bulletin prices of subsequent date 26.03.2012 giving the appraisal price for production and exports of May 2012 to be in the range of US $ 715 to 730 per MT, cannot form the basis of enhancing the value and for rejecting the transaction price. In case of Drunkey Exports P Ltd [2004 (165) ELT 417 (T-Kol)] tribunal has held as follows:

“6.As regards the valuation we find that the Tribunal in the case of Prabhu Dayal Prem Chand reported in 2003 (156) E.L.T. 922 (T) has held that transaction value of copper scrap is not to be rejected on the basis of the prices indicated in L.M.E. Bulletin when there is no corroborative evidence of contemporaneous imports on the higher price. Similarly is the other decision of the Tribunal in the case of 2002 (140) E.L.T. 306 (T) CC, Nheva Sheva v. Sangeeta Metals India, It was observed that the London Metal Exchange prices are only indicative of the prevailing market price, but in the absence of any contemporaneous imports of identical goods reliance on LME cannot be sustained. Inasmuch as in the present case there is no other evidence for enhancement of the value we do not find any justification in doing so. Accordingly that portion of the impugned order vide which the Commissioner has enhanced the value, is set aside.”

4.6 Commissioner (Appeals) has in her order placed reliance on decision of Hon’ble Apex Court in case of Radhey Shyam Ratanlal [2009 (238) ELT 14 (SC)],. The reasons as noted for by the Hon’ble Apex Court for the rejection of transaction value are extracted below:

“21. We are required to apply the aforesaid provision to the facts and circumstances of the present case and when done so it would appear that the appellant although claimed a transaction value, but such value could not be supported by production of the original contract or the invoices relating to procurement of cloves to the appellant under the ten Bills of Entry in question. The said documents were called for and were directed to be produced, but same could not be produced. The alleged contract dated 23-11-2000 cannot be termed as a contract between the parties and it is merely a certificate issued by M/s. Ketan Trading Co.

The respondent department has also relied upon the contemporaneous documents like the Weekly Bulletin of Spices Market and also the Public Ledger. The Weekly Bulletin of Spices Market published by the Trade Information Services of the Spices Board of the Ministry of Commerce and Industry, Government of India indicated that the price of Indonesian cloves on 24-11-2000 was US $ 4765 PMT and that of Zanzibar cloves was US $ 4650 PMT. Such bulletin also indicates that by 23-12-2001 the price of Zanzibar cloves had reached Rs. 6,100/-PMT. The Public Ledger which is also considered as International Publication of repute indicates that the price of cloves in the international market on 27-11-2000 was US Dollars 4700 which reached US Dollars 6300 on 26-3-2001.”

From the above we find that the facts of the above case are completely distinguishable and the said decision could not be the reason for rejection of the transaction value declared by the appellants.

5.1 From the discussions as above we are unable to sustain the impugned order, setting aside the same we allow the appeals.

(Order pronounced in the open court)