1991 Supreme(Cal) 263

High Court of Calcutta
A.K. Sengupta, K.M. Yusuf, JJ.
Sneha Traders Private Ltd. – Appellant
Versus
Collector of Customs – Respondent
Appeal 526 of 1988
Decided On : May 16, 1991

The assessable value of the imported goods has to be determined on the basis of the prevailing international market price at the time of entering into the contract and the prices prevailing on the date of shipment and/or on the date of arrival of the vessel in India are wholly irrelevant.

Headnote:

CUSTOMS ACT - Section 14 - Valuation of goods - Assessable value - Determination - Contract price - Delay in shipment - Effect - Notional contract - Assumption - Legality - Misdeclaration of value - Import licence - Debit - Penalty under Section 112 - Levy - Legality.

Fact of the Case:

The petitioner entered into a contract with a foreign supplier for the import of Zinc ingots at a price of US $ 750 per MT. CIF Calcutta. The foreign supplier shipped a quantity of 235.826 MT of the said goods at the price of US $ 775 per MT. CIF Calcutta. The Customs Authorities refused to determine the assessable value of the said goods on the basis of the agreed price of US $ 775 per MT and made it clear to the petitioner that the goods cannot be allowed to be cleared unless duties are paid on such enhanced assessable value, as may be determined by them. The Collector of Customs, Calcutta passed an order determining the assessable value of the said goods on the basis of a price of US $ 1075 per M.T. CIF Calcutta as against the invoice price of US $ 775 per M.T. CIF charged by the foreign supplier. It was further sought to be held by the Collector that the petitioner mis-declared the value and as such the goods were liable to confiscation under Section 111(m) of the Customs Act, 1962. Furthermore, in respect of the amount covered by such purported increase of value, the Collector sought to hold that the petitioner failed to produce import licence and as such the provisions of Section 111(d) are also applicable, in respect thereof. On the basis of the aforesaid allegations the Collector confiscated the said goods and allowed the petitioner to redeem the same upon payment of fine of Rs. 5 lakhs. A penalty of Rs. 1 lakh was also sought to be imposed upon the petitioner under Section 112 of the Customs Act.

Finding of the Court:

The Court held that the contract entered into by the petitioner and the foreign supplier was genuine and the goods in question were imported under the said contract. The prevailing international market price of the said goods at the relevant time was US $ 745 to 755 per MT. The instances of other imports referred to in the show-cause notice were not relevant in the instant case. The delay on the part of the foreign supplier in supplying the goods under the relevant contract did not have any effect on the determination of the assessable value. It was not legally permissible for the Collector to ignore the contract entered into by and between the petitioner and the foreign supplier and the prices charged by the foreign supplier and to determine the assessable value on the basis of an assumed contract on notional basis assumed to have been entered into one month prior to the date of shipment. There was no violation of Sections 111(m) and 111(d) of the Customs Act on the part of the petitioner on the facts and in the circumstances of the instant case. No penalty could be levied upon the petitioner under Section 112 of the Customs Act.

Issues: 1. Whether the contract dated 16-9-1987 entered into by and between the writ petitioner and the foreign supplier and its amendment were genuine and as to whether the goods in question were imported under the said contract? 2. What was the prevailing international market price of the said goods at the relevant time? 3. Whether the instances of other imports referred to in the show cause notice are relevant in the instant case and if so, what is the effect thereof? 4. What would be the effect, if any, of the delay on the part of the foreign supplier in supplying the goods under the relevant contract? 5. Whether, on the facts and in the circumstances of the case, it was legally permissible for the Collector to ignore the contract entered into by and between the writ petitioner and the foreign supplier and the prices charged by the foreign supplier and to determine the assessable value on the basis of an assumed contract on notional basis assumed to have been entered into one month prior to the date of shipments? 6. Whether there has been any violation of Sections 111(m) and 111(d) of the Customs Act on the part of the writ petitioner on the facts and in the circumstances of the instant case? 7. Whether, on the facts and in the circumstances of the instant case any penalty could be levied upon the writ petitioner under Section 112 of the Customs Act?

Ratio Decidendi: 1. The contract entered into between the petitioner and the foreign supplier was genuine and the goods in question were imported under the said contract. 2. The prevailing international market price of the said goods at the relevant time was US $ 745 to 755 per MT. 3. The instances of other imports referred to in the show-cause notice were not relevant in the instant case. 4. The delay on the part of the foreign supplier in supplying the goods under the relevant contract did not have any effect on the determination of the assessable value. 5. It was not legally permissible for the Collector to ignore the contract entered into by and between the petitioner and the foreign supplier and the prices charged by the foreign supplier and to determine the assessable value on the basis of an assumed contract on notional basis assumed to have been entered into one month prior to the date of shipment. 6. There was no violation of Sections 111(m) and 111(d) of the Customs Act on the part of the petitioner on the facts and in the circumstances of the instant case. 7. No penalty could be levied upon the petitioner under Section 112 of the Customs Act.

Final Decision: The order passed by the Collector and the order passed by the Collector impugned in this proceedings were set aside. The Joint Special Officers were directed to refund the sum lying in their hands within four weeks from the date of communication of this order along with the accrued interest thereon, after retaining their remuneration fixed at 250 G.Ms, each, to the writ petitioner.