Per Shri P.C. Jain :

Short question involved in this Appeal is whether Rs. 3,31,000/- paid by the appellants herein to J. Mahabeer and Co. towards commission, installation and erection of the imported machine (off-set printing machine) and after-sales service for one year guarantee period is (i) buyer's agent's commission or seller's agents' commission, and (ii) if it is the latter whether the entire amount paid by the appellant would be liable to duty or a deduction towards services performed after importation of the goods has to be made before the duty liability is imposed.

2. Appellants have stated that they appointed J. Mahabeer & Co. as their agents for providing them with technical advice, assisting in erection and installation of the machine and with after sales service. But no agency agreement has been produced by the appellant that J. Mahabeer & Co. were their agents. On the other hand, the appellants themselves have admitted that they placed the order directly on the foreign supplier but they received the proforma-invoices through J. Mahabeer & Co. Statements of the personnel of Mahabeer & Co. referred to in the show-cause notice and the impugned order leave no doubt that J. Mahabeer & Co. are the sole selling agents of the foreign suppliers. Commission received by them is as an agent for the foreign supplier.

3. It has also come on record that the 20% commission paid by the appellant is compulsorily paid by them and they do not have the option to avail of the services of some-one else except J. Mahabeer & Co. for the purpose of post-importation services such as installation and erection and after sales service for the guarantee period. In other words, the price payable by the appellant for obtaining the imported goods in India was not only the price actually paid to the foreign supplier but also the sum paid by them to the local agent of the foreign supplier. In the face of admission of this fact, it is not necessary to go into the break-up of 20% total commission or charges (Rs. 3,31,000/-) locally paid by them as to how much of it was on three counts, namely, (i) commission, (ii) erection and installation charges and (iii) after-sales services; it had been vehemently contended by the ld. advocate that it comprised 5%, 7.5% and 7.5% respectively as per the verbal understanding between the appellants and J. Mahabeer & Co..

4. In view of the foregoing discussion, we hold that the duty is liable to be paid on the entire commission of Rs. 3,31,000/- paid by the appellant to J. Mahabeer & Co..

5. As regards penalty, we observe that the appellants have cited several other instances of import of such machineries and the duty was charged only on the price paid to the foreign supplier. These circumstances could generate a reasonable belief in the mind of the appellant for declaring the price actually paid to the supplier and not to declare the commission locally paid to the supplier's agent, J. Mahabeer & Co.. Accordingly, we are of the view that penalty is not warranted on the appellants in the facts and circumstances of the case. Hence we set aside the penalty of Rs. 25,000/- (Rupees twenty five thousand) imposed on the appellants.

6. Appeal disposed of in above terms.