D.N. Lal, Member (T)

1. Briefly the facts of the case are that the appellants imported two old re-conditioned printing machines of East German origin through M/s. Induscandia Erikson Co. AB, a party from Sweden. A partner of the appellants' firm specifically went abroad to see the machines and to conduct negotiations for purchase of the same The negotiated price for the two machines was S.Kr. 2,00,000 for both the machines. In pursuance of this deal, a proforma invoice No. LG/GI 83100, dated 3-1-1983 was sent by the supplier.' The said invoice had been prepared with reference to the negotiated price, namely, S.Kr. 2,00,000. A letter of credit was opened by the appellants on 28-2-1983 with Grindlays Bank p.l.c, New Delhi. As the importation was being effected under Open General Licence under 1982-83 Import Policy, as per the requirement of the OGL, a certificate was furnished by the foreign supplier giving specifications of the two machines and certifying that the machines were not more than 10 years old and had expected residual life of 10-12 years at the time of importation. A home consumption bill of entry was filed by the appellants showing therein the c.i.f. value of Rs. 2,64,534. The Custom House did not accept the valuation of the goods and also questioned the importation being valid in term of the OGL. However, issue of show cause notice was waived at the appellants' request as they were anxious to take early delivery of the goods. After affording the appellants an opportunity of personal hearing, which was attended by Shri Rakesh Bagai, a partner of the appellants firm, the Collector vide his order dated 16-1-1984 adjudicated the case. After examination of certain evidence with regard to another importation of like goods made sometime earlier, the Collector held that the appellants had under-valued the goods. He directed that the declared value of Rs. 2,64,534 be enhanced to Rs. 8 lakhs. He further held that the goods in question had been imported in contravention of ITC Regulations and ordered confiscation of the two machines under Section 111(d) of the Customs Act, 1962 (hereinafter referred to as 'Act') read with Section 3 of the Imports and Exports (Control) Act, 1947. The appellants were however, given an option to redeem the goods on payment of a fine of Rs. 2 lakhs.

2. Shri Narasimhan, the learned counsel for the appellants submitted that the Collector had fixed the appraised value of the appellants' goods in an arbitrary manner and without assigning any valid reasons. The entire gamut of transactions proved the bona fide character of the importation. Full documentary evidence relating to the importation had been made available to the lower authorities and the same had been rejected without adducing any cogent reasons. It was also not the finding of the Collector that the appellants had remitted to the foreign supplier any amount other than what was shown in the invoice, the letter of credit and other supporting documents.

3. Apart from the arbitrary manner in which the value of the goods had been enhanced, it was not clear from the adjudication order as to what provisions of Law had been applied while doing so. Shri Narasimhan submitted that taking the relevant portion of the Collector's order dealing with the valuation aspect, one could only presume that he had fixed the valuation for the machines in terms of Rule 8 of the Customs Valuation Rules, 1963 (hereinafter referred to as Rules). It was not understood as to why resort to the Rules was necessary without first discussing as to why the appellants' goods could not be valued under provisions of Section 14(l)(a) of the Act. Even if Rule 8 was called to aid, it was incumbent upon the adjudicating authority to first discuss and rule out the applicability of Rules 3 to 7. This was a legal requirement which had not been followed by the Collector. For fixing the value of the machines imported by the appellants, the Collector had compared the invoice value of