2003(03)LCX0138

IN THE CEGAT, SOUTH ZONAL BENCH, CHENNAI

Smt. Archana Wadhwa, Member (J) and Shri Jeet Ram Kait, Member (T)

KAILASH ENTERPRISES

Versus

COMMISSIONER OF CUSTOMS, CHENNAI

Final Order No. 211/2003, dated 6-3-2003 in Appeal No. C/36/2003-Md.

CASES CITED

Basant Industries v. Addl. Collector — 1995(01)LCX0005 Eq 1996 (081) ELT 0195 (S.C.) — Relied on ................ [Para 6]

Eicher Tractors Ltd. v. Commissioner — 2000(11)LCX0436 Eq 2000 (122) ELT 0321 (S.C.) — Relied on........ [Paras 3, 6]

Mirah Exports Pvt. Ltd. v. Commissioner — 1998(02)LCX0061 Eq 1998 (098) ELT 0003 (S.C.) — Relied on....... [Paras 3, 6]

Sushil Kumar Kayan Ltd. v. Assistant Collector — 1992(08)LCX0061 Eq 1993 (068) ELT 0537 (Cal.) — Relied on [Paras 3, 6]

REPRESENTED BY :   Shri A.K. Jayaraj, Advocate, for the Appellant.

Shri C. Mani, DR, for the Respondent.

[Order per : Jeet Ram Kait, Member (T) (Oral)]. - This appeal is directed against the order-in-original No. 153/2003, dated 6-2-2003 passed by the Commissioner of Customs (Exports), Chennai under which he has enhanced the value of the goods viz. Mercury imported by the importers-appellants to US $ 93 per flask (CIF) and classified the goods under CTH 2805.40 of the CTA 1975. He has also confiscated the goods with option to redeem the same on payment of fine of Rs. 4,00,000/- besides imposing penalty of Rs. 50,000/- on the appellants under Section 112(a) of the Customs Act, 1962. The goods are under the custody of the department and has not been redeemed.

2. Brief facts of the case are that the appellant-importers have filed BE No. 415078, dated 2-8-2002 under DEPB scheme through their CHA M/s. Sri Pavithra Enterprises, Chennai for clearance of 500 flasks Parada (Crude Drugs) totally weighing 17,237.46 Kgs (net) valued at USD 19,000/- (C&F). The goods were classified by them under CTH 1211.90 and CETH 1211.90. The importers filed the relevant invoice packing list, certificate of origin showing the country of origin of the goods as USA, bill of lading and DEPB slip, etc., as required and also subscribed to the declaration. 100% examination of the goods was conducted by the officers of the SIIB and it was found that consignment was supplied by two manufacturers viz. Bethlehem Apparatus Co. USA and Corrosive 8. On the Pallet supplied by Bethlehem Apparatus Co. it was indicated that the mercury was quadruple distilled 99.99995% virgin mercury. Statement was recorded from Kailash Chand Jain, proprietor of the appellant-Company on 18-2-2002 wherein he has stated, inter alia, that the company is engaged in the manufacture of camphor tablets and also trading in various items and that they are not manufacturing any Ayurvedic or Unani medicines and he was not aware about the use of mercury in any medicines. During investigation, the department found that mercury is known as mercury or quick silver or hydrargyrum, and is available in grades like technical, virgin, distilled and ACS and finds applications in several industrial uses and also used in the Ayurvedic and Unani medicines. The department took the view that mercury imported is correctly classifiable under 2805.40 of the CTH of Schedule to the CTA, 1975. The department also drawn up a comparative chart showing quantity and CIF value of similar goods imported at different ports as under -

The department also found that according to London Bulletin the contemporaneous quotations to mercury varied between USD 145 to 165 during the period for the minimum purity of 99.99%. The department also found that importation was made from M/s. Bethlehem Apparatus Co. Inc. USA by another importer at USD 155/- per flask (CIF). In the circumstances proceedings were initiated against the appellants by issue of show cause notice and the proceedings culminated in the order impugned as aforesaid. The appellants challenge the impugned order on the following grounds :

(a)     The goods imported is nothing but mercury which is classifiable under CTH 12311 and CETH 1211.90 and the DGFT has also issued Circular No. 22 (RE-20000) 97-02, dated 25-8-2000 classifying Parada under Exim Code 1219026.10 and hence the goods imported is classifiable under 1211.90.

(b)     The appellants have submitted all the documents such as sales confirmation, invoice, etc., to prove the correct value of the goods and there was no reason for the department to reject the same. The department cannot enhance the value relying upon the above listed imports which cannot be termed as contemporaneous.

(c)      The goods imported by the appellants in the present case is in bulk and they are entitled to the 50% discount.

(d)     The value fixed by the Commissioner under Rule 5 of the CVR is not correct without accepting the value declared by the appellants under Rule 4 of the CVR.

(e)     The chart of contemporaneous imports drawn by the Commissioner as reproduced above cannot be considered as contemporaneous and comparable for the simple reason that the import in the present case is 17,237.36 Kgs (500 flaks) valued at USD 19,000/- whereas the so called contemporaneous relied upon by the Commissioner varies from 60 kgs to 200 Kgs imported at different ports between July, 2002 and August, 2002.

3. Shri A.K. Jayaraj, learned Counsel for the appellants while reiterating the grounds of appeal submitted that there is no reason whatsoever to reject the transaction value declared by the appellants inasmuch as the appellants have produced all the relevant documents to prove the price declared by them and it is not the case of the Department that the appellants have withheld any information from the department in this regard. He further submitted that importation made by the appellants cannot be compared with the imports made at different ports as indicated above and relied upon by the department inasmuch as the importation in the present case is 500 flasks whereas the ones relied upon by the adjudicating authority, the maximum quantity involved was just 200 flasks as could be seen from the table drawn above. He has also cited various judgments of the Hon’ble Apex Court particularly the latest judgment on the subject in the case of M/s. Eicher Tractors Ltd. reported in 2000 (122) ELT 321 wherein it has been held that price list of the foreign supplier/manufacturer is not a proof of transaction value invariably and existence of the price list cannot be the sole reason to reject the transaction value and it does not preclude discounts which may be granted for a variety of reasons including stock clearance. It was also held therein that production of price list cannot discharge the onus on the Customs authorities to prove the existence of a special circumstances indicated in Section 14(1) of the Customs Act, 1962. He has also cited the judgment of the Apex Court in the case in the case of Mirah Exports Pvt. Ltd v. CC, reported in 1998(02)LCX0061 Eq 1998 (098) ELT 0003 (S.C.) wherein it has been held that it is not unusual for a foreign supplier to give a higher discount to an importer who is importing a much larger quantity and merely because such a discount has been given by the supplier after negotiation, it cannot be said that there was any under valuation in the invoice. He has also invited our attention to the judgment of the Hon’ble Calcutta High Court in the case of Sushil Kumar Kayan v. ACC reported in 1993 (068) ELT 537 wherein it was held that onus is on the department with sufficient evidence relating to comparable goods imported in comparable quantity from same country of origin and same supplier and at comparable time and place. In the circumstances, he sought for setting aside the order and allowing the appeal.

4. Shri C. Mani, learned JDR appearing for the department defended the order impugned and submitted that the learned adjudicating authority has discussed in detail the two issues i.e. classification of the item and the valuation of the goods in the order. The learned JDR in particular referred to para 12 of the order impugned wherein the Commissioner has discussed in detail the manufacturing process of Parada and came to a conclusion that mercury’ imported by the appellants and Parada contemplated in Ayurveda are not one and the same. He has correctly held the goods viz. Mercury imported in the present case, find a specific place under Chapter CTH 2805.40 and hence classifiable under that heading. As regards valuation adopted he submitted that the department has correctly relied upon contemporaneous imports in this case and enhancing the value to USD 93 per flask is reasonable and he sought for dismissal of the appeal.

5. We have carefully considered the rival submissions and gone through the case records and the various case laws cited by the learned Counsel for the appellants. We observe that the two issues that arise for consideration in the present appeal are (i) classification of the goods imported, and (ii) the valuation adopted by the department. Coming to the first issue i.e. classification, we observe that this issue has been discussed at length by the adjudicating authority and he has come to a conclusion that mercury and Parada are not one and the same. Further as rightly contended by the learned JDR for the department, it is an accepted principle of classification that a specific heading has to be preferred to a general heading or a residual heading. Mercury is specifically described under Heading 2805.40 of the CTH. Therefore, we do not find any reason to reject the classification adopted by the lower authority in this case classifying the goods under Heading 2805.40. We are, therefore, of the considered opinion that the view taken by the lower authority in this regard cannot be found fault with and we uphold the classification of the goods under 2805.40 as held by the lower authority.

6. Coming to the next issue i.e. valuation adopted by the department, we observe that the lower authority has relied upon five importation made at different ports in July, 2002 and August, 2002 which we have extracted under para 2 above. As could be seen from the above table the quantity imported in those cases ranged from a mere 60 flask to 200 flask and the price varied from 150.00 to 165 USD per flask whereas the quantity imported in the present case is 500 flasks. The countries from where those importations have been made are not found in the order impugned and so also the port from where those goods have been shipped. The department has also placed reliance on importation of identical goods made by one M/s. Bihar Caustics and Chemicals Ltd. at unit value of USD 155 per flask (CIF), but the quantity involved in that case was only 100 flask which was cleared at Kolkata. There can, therefore, be no doubt that in terms of the quantity imported and place of import in all those cases there can be no comparison with the import in the present case. The Hon’ble High Court of Calcutta in the matter of Sushil Kumar Kayan v. A.C., Customs reported in 1992(08)LCX0061 Eq 1993 (068) ELT 0537 (Cal.) has held that onus is on the department to prove with sufficient evidence relating to comparable goods imported in comparable quantity from same country of origin and at comparable time and place. Further, the Hon'ble Supreme Court in the case of Mirah Exports Pvt. Ltd. v. CC, reported in 1998(02)LCX0061 Eq 1998 (098) ELT 0003 (S.C.) has held that it is not unusual for a foreign supplier to give a higher discount to an importer who is importing a much larger quantity and merely because such a discount has been given by the supplier after negotiations, it cannot be said that there has been any under valuation. The Hon’ble Supreme Court in the case of Basant Industries v. Addl. Collector of Customs, Bombay reported in 1995(01)LCX0005 Eq 1996 (081) ELT 0195 (S.C.) has held that mere comparison of invoices received by the importer with the invoice of imports of same goods by other importer is not conclusive for determination the question of under valuation and the price offered to an old customer may be different from that offered to a totally new customer. In this case appellants have stated that they had informed the supplier that the price quoted by the supplier was not workable in India, and it was after negotiations with the supplier that the price has been agreed upon and sales confirmation had been received from the supplier. No doubt the discount in the present case works out to 76%. But it has to be viewed from the fact that the quantity involved is also bulk and much larger and certainly not comparable with the quantity and country from where the goods have been imported. The quantity relied upon by the department ranged from a mere 60 flasks to a maximum 200 flasks only from various countries and imported at various ports in India, whereas in the present case the quantity involved is 500 flasks. The Hon’ble Supreme Court in the case of Eicher Tractors Ltd. v. CC, Mumbai (supra) has held that a discount is a commercially acceptable measure which may be resorted to by a vendor for a variety of reasons including stock clearance. Further, in the present case, it is not the case of the Department that there was mutuality of interest and flow of any consideration to the importers to reach a point of conclusion that the transaction value declared by the importers should be rejected. In view of what has been discussed above, we are of the considered opinion that the department has not let in sufficient acceptable evidence to discard the value declared by the importers and hence rejection of the transaction value declared by the appellants was not correct. We, therefore, hold that the transaction value declared by the appellants has to be accepted and we order accordingly. Therefore, that portion of the impugned order enhancing the value of the goods, confiscation of the goods and levy of redemption fine and imposition of penalty is set aside. In the result, except for classification of the goods, the appeal is allowed. So far as classification is concerned, we uphold the view taken by the adjudicating authority that the goods are classifiable under CTH 2805.40.

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Equivalent 2003 (155) ELT 548 (Tri. - Chennai)