Per Gowri Shankar :

Birla VXL Ltd., the appellant imported in Porbander a consignment consisting of 9784 tons of screened metallurgical coke in bulk. The coke was supplied by the Chinese Metallurgical Import and Export Corporation, Shanxi in the Peoples Republic of China. The purchase order dated 9.12.91 which is exported by the buyer provided for supply of coke from 25 mm to 50 mm screened size and laid down specification for the carbon sulphur and other content of the coke. Clause 13 laid down parameters with regard to the size. It provided "overall range of size outside 25-50 mm not to exceed 17.5% as mentioned above." Clause 7 (2) provided for determination of size. It provided that the buyer and seller must agree to nominate inspection agent "as per mutually agreed discharge".

2. After arrival of the goods in May 1992 it is stated that they were subjected to examination for determining the size of the particulars by representative of SGS India Pvt. Ltd., well-known survey agency. It is stated that about half of the survey was conducted inside the port and other outside the port in the appellant's factory. Sampling and sieve analysis report dated 11.6.92 submitted by SGS India only indicated that the analysis went on between 27.5.92 to 7.6.92 at Porbander port and buyer's factory premises. The average results that it contends shows that the percentage of coke less than 25mm and exceeding 50 mm would be 44.88%. Based on this information, the appellant took up the matter with its supplier and negotiation commenced. As a result of the negotiations, the supplier agreed to a reduction in price paid for the consignment from US$ 883984.40 by $ 240000. This fact is shown in the handwritten minutes drawn on 29.9.92 of the meeting between the representative of the appellant and those of the supplier.

3. The appellant therefore filed a claim for refund of part of the duty that it had paid, on the ground that the assessable value of the coke was the redetermined price arrived at after negotiations with the supplier. When the goods arrived they were assessed by the department provisionally. It is stated that this was required to find the outcome of the test for the sample for purpose of determining ash content apparently for the assessment of department. When the goods were cleared they were cleared in term of the provisional assessment. This assessment had not been finalised when the negotiation between the importer of the supplier resulted in the reduction in the price. Duty however, had been paid in entirety. The claim that the appellant filed was rejected as premature on the ground that the assessment was pending clearance. Subsequently after the assessment was finalised by taking the value at the figures declared in the invoice, the claim of the appellant was rejected. That rejection having been confirmed by the Commissioner (Appeals), the matter is before us.

4. The Asst. Collector has given the following reason for the rejection of the claim. The examination done by SGS was done without associating officers of the customs or without informing them of the examination. Discovery of the oversized and undersized particulars of coke arose as a result outside the customs area in the appellant's factory and after goods were delivered outside the customs charge. These results therefore cannot be relied upon. Further the contract itself did not provide for any negotiation of the price but only provided that the consignment would be rejected. These reasons have found favour with the Collector (Appeals).

5. The counsel for the appellant contends that as a result of the negotiation of the price between the supplier and the importer, it is the final determined price of US$ 640785.18 that is payable for the goods. The actual price paid or payable is the transaction value. We do not find it possible to accept this contention. The contract between the parties provided that the price that was to be paid was $ 83984.40. The contract, as the Asst.