IN THE SUPREME COURT OF INDIA A.M. Ahmadi, C.J.I. and N.P. Singh, J. BASANT INDUSTRIES Versus ADDL. COLLECTOR OF CUSTOMS, BOMBAY Civil Appeal No. 3153 of 1985, decided on 18-1-1995

IN THE SUPREME COURT OF INDIA

Valuation (Customs) - Undervaluation - Mere comparison of invoices received by the importer with the invoice of imports of same goods by other importer not conclusive for determination the queation of undervaluation - Relationship between the importer and foreign supplier a relevant factor because price offered to an old customer may be different from that offered to a totally new customer - Lower price obtained after considerable negotiations acceptable - Bearings imported by petitioner @ US $ 1.80 CIF per piece after considerable negotiations - Department revising the assessable value from US $ 1.80 to @ US $ 2.20 CIF on the basis of contemporaneous imports by other importer - Same goods imported by third importer at US $ 1.80 CIF though pointed out by the petitioner but wrongly ignored by the Department - Revision of price by the Department from US $ 1.80 to US $ 2.20 CIF wrong - Stray instance of import at higher value not to be adopted totally ignoring other attending circumstances - CEGAT order set aside - Section 14 of the Customs Act, 1962.

2.The appellant M/s. Basant Industries, sought clearance of goods imported against their Licence No. P/S/1943043, dated 6-9-1983. The price of the goods imported, namely, TAM Brand Bearings No. 75 l I was US $ 1.80 CIF per piece. On the allegation that the goods of the same description had been imported by M/s. Ravi Agricultural Industries, Agra under Invoices Nos. FDN 849031, dated 4-6-1984 and FDN 849031-B, dated 24-8-1984 at a price of US $ 2.20 CIF per piece, the Department issued a show cause notice dated 26-11- 1984 to show cause why the duty on the difference of price and penalty should not be recovered from the assessee. Cause was shown by the assessee by lettcr dated 11-12-1984 stating that the price was fixed after negotiations and in supported thereof the correspondence that had ensued between the importers and suppliers was tendered in evidence The correspondence revealed that there had been some bargaining in the matter of fixation of price before the suppliers agreed to a price of US $ 1.80 CIF per piece Notwithstanding the same, the Additional Collector of Customs, Bombay directed that the goods be valued at US $ 2.20 CIF per piece for the purposes of levy of duty and licence purposcs although he refrained from imposing a penalty on the importers Against the said decision of the Assistant Collector, thc assessee preferred an appeal before the Tribunal. In the appeal, in addition to the correspondence which had already been produced on the record, the assessee also produced another invoice of a different supplier which showed that he had charged a price of US $ 1.80 CIF per piece from M/s. India Casting Co. The Tribunal, however, affirmed the decision of the Additional Collector and hence, this appeal

3.Ordinarily, this Court would not like to interfere in a matter of price fixation, but at the same time it seems necessary to impress upon the Departmcnt that by a mere comparison of two invoices without anything more, it may not be correct to proceed on the premise that there is undervaluation. The relationship between the supplier and importer has also to be kept in mind because it is a matter of common knowledge that a price which is offered by a supplier to an old customer may be different from a price which the same supplier offers to a totally new customer. In the instant case, we find from the correspondence, that had ensued between the supplier and the appellant importer that there was some bargaining before the pricc of US $ 1.80 CIF per piece was finalised. The first is a letter of 18-6-1984. In that letter the supplier has stated that :

“We offer our last price at the rate of US $ 1.80 CIF BBY. Subject to a your purchase of total quantity of 49,670 pcs and no rebate is allowed.”

It was also stated in that letter that their principals were supplying the said commodity to them at US $ 1.69 per piece. That was to indicate the margin of profit for the supplier. To this, the importer responded by Writing a letter dated 9-7-1984 stating that they were not interested in purchasing the entire quantity of 49,670 pieces and requested the supplier to offer the rates quantity-wise i.e. to indicate the price on the basis of quantity. In response to that letter, the supplier wrote a letter dated 23-7-1984 stating as under :

“Please note as you are our old and valuable (sic), we can supply you smaller quantities on the following price :

4.It will, thus, be seen that the price of US $ 1.80 each for 40,000 pieces was fixed after considerable negotiations and was fixed after keeping in view that the importers were old and valued customers. It is not known whether the other importer, namely, M/s. Ravi Agricultural Industries had the same relationship. There is also no reason why the instance pointed out by the importer that the very same commodity had been supplied by another supplier at the same price of US $ 1.80 CIF per piece should have been totally ignored and instead the stray instance of Ravi Agricultural Industries should have been picked up for the purposes of fixation of price. It is essential to bear in mind the fact that in the business world, considerations of relationship with the customer are also a relevant factor. In the circumstances, we are of the opinion that the Department was wrong in revising the price from US $ 1.80 to US $ 2.20 CIF per piece. We, therefore, allow this appeal, set aside the order of the Additional Collector as well as the Tribunal and discharge the show cause notice. However, there will no order as to costs.

Vacancies

WTO Instruments

WCO Rulings

Val. Manual

CESTAT

S. C. Decisions

Related Links