Important Point
The burden of proving a charge of undervaluation lies upon Revenue and Revenue has to produce the necessary evidence to prove the charge u/s 14 of the Customs Act, 1962.

Headnote:(i) Customs Act, 1962-Sections 14, 111(d), 111(m) and 112 -Imports and Exports (Control) Act, 1947-Section 3(2)-Liability for action u/s 111(d), (m) r/ws 3(2) -Charge of undervaluation for the purpose of levy of custom duty u/s 14 in the invoices of the various consignments of ball bearings which were imported by the appellants-Appellant, importers of ball and roller bearings also acted as intending agents for marketing of imported ball bearings - Show cause notice was based primarily on the price list for the year 1981-82 that was furnished by the Central Office of the Overseas Suppliers-Invoice value of the goods imported was 48.7 of the prices mentioned in the price list-Appellants case that since the quantity being imported was about 5 lakh pieces of each type reduced prices had been given by the suppliers-Evidence produced to show that 50 to 70 discount over the list prices were the normal invoice prices during that period-Whether, on facts and circumstances of the case, the invoice prices could be accepted as the value for assessment purposes u/s 14 of the Act?-(Yes).
       Held, the only evidence that was adduced by Revenue in support of the charge of under-valuation in the price list No. 8102 dated February 15, 1981 which was found during the course of search in the premises of Skefko, etc. that was conducted by the officers of the Enforcement Directorate on or about June 22, 1983. The price list does not even mention about the discount of 20 that has been allowed by the Tribunal in the impugned judgment. The matter of discount to be given on the prices indicated in the price list is actually mentioned in other documents that were seized during the search. The said documents include the various letters and telexes received from SKF Oversees Bearings Division, Sweden which indicate the new pricing policy of the foreign supplier. As pointed out by the Addl. Collector of Customs in his order dated April 16, 1985 the said documents show that 20 discount is allowed to the original equipment manufacturers who import for fitment in their manufactured products and for this build up inventories with sizeable orders after securing favourable prices between various competitors but as regards canvassers and Skefko, who import in even greater bulk for the purposes of only trading, the policy envisaged that they may even secure lower price particularly if they generated additional sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale. In the present case neither has it been alleged nor has any material been produced to show that Mirah Exports and the foreign suppliers have any interest in the business of each other. As regards Skefko it has been pointed out that AB-SKF, Sweden holds 39.8 of the share capital in Skefko but there is nothing to show that Skefko has any interest in the business of AB-SKF. Moreover it is of no consequence in the present case because the invoice price at which the imports were made by Skefko were the same at which Mirah Exports and other importers had imported and no special price was given to Skefko for import. In these circumstances, we are of the opinion that the invoice prices as mentioned in the invoices could be treated as the price at which the goods are ordinarily sold or offered for sale in the course of international trade and that it had been rightly accepted as the value for assessment purposes under Section 14 of the Act by the Addl. Collector of Customs. (Para 13)
       (ii) Customs Act, 1962-Section 14-Burden of proving a charge of undervaluation-Revenue has to produce the necessary evidence to prove the charge. (Para 12)

Judgment

S.C. Agrawal, J.-These appeals have been filed against the judgment of the Customs Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as ‘the Tribunal’) dated September 4, 1989. They raise the question whether there was undervaluation for the purpose of levy of customs duty under Section 14 of the Customs Act, 1962 (hereinafter referred to as ‘the Act’) in the invoices of the various consignments of ball bearings which were imported by the appellants.

2. Skefko India Bearing Co. Ltd. (hereinafter referred to as ‘the Skefko’), appellant in C.A. Nos. 1030-34/90, are importers of ball and roller bearings. They also act as intending agents for marketing of imported ball bearings for and on behalf of AB-SKF, Sweden. Ball bearings of various types are manufactured by AB-SKF in Sweden and by their subsidiary companies in U.K., Germany, France and Italy. Skefko book orders from different types of customers which can be classified into three categories:

(a) Original Equipment Manufacturers (OEM);

(b) Replacement User - also described as Actual Users (Aus); and

In addition to this Skefko book orders on their own behalf for stock and sale in India. Ball bearing could only be imported against an import licence and in order to secure a large volume of orders, agents were required to contact the licence holders and secure their orders for the purpose of consolidating these orders into one large order. Skefko had appointed persons, described as “Canvassers”, who would go round the market and secure large volume of orders. Punjab Bearing Traders were appointed as one such canvasser by Skefko.

3. Mirah Exports Pvt. Ltd. (hereinafter referred to as ‘Mirah Exports’), appellant in C.A.No. 47/90, is a private limited company incorporated under the Companies Act, 1956, carrying on business as importers, exporters and manufacturers’ representative at Bombay. In July and September, 1982 Mirah Exports contacted Skefko for purchase of approximately 15 lakh pieces of ball bearings from SKF from Italy/Germany. The entire negotiations for purchasing the said goods were carried out by Mirah Exports with Punjab Bearing Traders. Out of the goods contracted to be purchased by Mirah Exports, 24 consignments of ball bearings were imported by Mirah Exports from SKF; Italy and SKF; Germany and the balance quantities were imported by Skefko in the months of November, 1982 and January, 1983. The Bills of Entry in respect of 24 consignments imported by Mirah Exports were submitted to the Collector of Customs, Bombay in the months of November, 1982 and January, 1983 and the same were noted. Clearance was sought against 22 import licences held by Mirah Exports. On or about June 22, 1983, pursuant to certain information, the officers of the Enforcement Directorate carried out search at the premises in Bombay of : (i) Skefko; (ii) Associated Bearings Co. Ltd.; and (iii) Shri Kishan Chand, the President of Skefko. During the said search certain documents were seized by the Enforcement Directorate. After further investigation a show cause notice dated May 31, 1984 was issued to (i) Skefko; (ii) Mirah Exports; (iii) Punjab Bearing Traders; and (iv) the clearing agents of Mirah Exports. In the said show cause notice it was stated that by undervaluing, Mirah Exports had misdeclared the value for bearings Nos. 6201, 6202, 6203 including shielded bearings in each of 24 Bills of Entry which misdeclaration had rendered all the 24 imports liable for action under Section 111 (m) of the Act and that in respect of the goods, so undervalued to the extent as indicated in the said show cause notice, no import licences had been produced and in the absence of any import licence in respect of such goods in each consignment, such goods had apparently become liable for action under Section 111(d) of the Act read with Section 3(2) of the Imports and Exports (Cont

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1998 Supreme(SC) 159

Important PointThe burden of proving a charge of undervaluation lies upon Revenue and Revenue has to produce the necessary evidence to prove the charge u/s 14 of the Customs Act, 1962.

Cases Referred (5)

Important Point
The burden of proving a charge of undervaluation lies upon Revenue and Revenue has to produce the necessary evidence to prove the charge u/s 14 of the Customs Act, 1962.