Sandip Agarwal v. Collector Of Customs

The Judgment of the Court was delivered by

Ajit Kumar Sengupta, J.:— This appeal is directed against the judgment and order dated 5th July, 1991, passed by the Court of the first instance. The facts leading to this appeal are stated hereafter:

2. The appellant carries on business of importation, amongst others, of diverse kinds of trawler parts and components. In terms of the proforma invoice of Entre Ltd. 891 Finchley Road, London, N.W 118 RR (hereinafter referred to as the foreign supplier), the appellant placed order for one container of spares for Perkins p-6-354 Diesel Engine fitted on Trawler FILTERED ELEMENTS containing 42,500 pieces (hereinafter referred to as the said goods) on or about 12th December, 1990. The said contract was entered into by and between the appellant and the said foreign supplier at the rate of £ 0.23 per piece C & F Calcutta by sea amounting to UK £ 9,775.00

3. Pursuant to the said contract the foreign supplier shipped the goods on board on 24th February, 1991, and raised an invoice in respect of the said goods bearing No. 12421.EA 41897 dated 9th March, 1991. In the usual course of business the appellant insured the said goods with New India Assurance Co. Ltd. on 18th April, 1991, for which he paid the premium of Rs. 1,637/-. The Clearing Agent of the appellant M/s. B.B Bose & Sons filed the Bill of Entry for home consumption on or about 18th April, 1991, in respect of the said goods with the Customs authorities and the same was noted by a Noting number 922 on 18th April, 1991, on which date the appellant for the first time came to learn that the said goods had arrived at the Port of Calcutta on or about 21st March, 1991, per vessel ‘TIGERSTREEM’, under Rotation 167/91 Line No. 3. The Appraiser of the concerned group i.e Group 5A took steps for getting the Bill of Entry assessed but for reasons unknown to the appellant the respondent No. 2 had not assessed the Bill of Entry till the last week of May, 1991. In the meantime the respondents were making undue delay in assessing the said Bill of Entry in spite of copious correspondence made to them. The appellant through the said Clearing Agent addressed a letter on 10th May, 1991, to the respondent No. 2, inter alia, requesting him to allow the said goods to be warehoused under Section 49 of the Customs Act, 1962 without payment of duty as the goods were incurring huge demurrage for no fault of the appellant. In spite of requests for warehousing the said goods under Section 49 without payment of duty no steps were taken by the respondent No. 2 for warehousing the said goods. The respondent No. 2, however, informed the appellant's said Clearing Agency that the Bill of Entry filed on behalf of the appellant had been referred to the Assistant Collector of Customs, Special Investigation Branch for reasons best known to him. In the meantime the appellant was suffering huge demurrage which was also brought to the notice of the respondent authorities.

4. On the facts and in the circumstances as aforesaid, the appellant moved a writ petition in this Court on 31st May, 1991, Several interim orders were made in the writ proceedings. After the affidavits had been completed, the matter came up for final hearing before a learned Judge of the first court.

5. The case made out by the respondents in the affidavit filed in the Court below is that the Customs House had received a letter from the Directorate of Revenue Intelligence bearing File No. 50/11-1 N/V/91 dated 13/14th February, 1991, wherein it was mentioned that certain motor vehicle parts of LUCAS-make were being imported from the UK by various importers and were being heavily under-invoiced in general. It was further stated that the items of Filter in particular were being subject to extraordinary under-invoicing. The Unit FOB price of LUCAS CAV FILTER No. 7111296 according to the Directorate of Revenue Intelligence was indicated to be £ 3.73 (30% less for export and bulk orders) against the price of £ 0.23 indicated by the appellant in the invoice. In terms of the aforesaid letter from the Directorate of Revenue Intelligence, an alert notice bearing No. 8/91 S.I.B was issued by the Customs House and the said Bill of Entry was forwarded to the Special Investigation Branch since it was an alleged instance of gross under-invoicing and warranted a thorough and complete investigation.

6. It was also the case of respondents made in the affidavit that the valuation of the impugned goods was far higher than £ 0.62 per unit as provided for the quotation of LUCAS CAV in the year 1989.

7. The said writ application was disposed of by the learned Judge by the following order:—

“In this case, I cannot ignore the fact that since the Bills of Entry relied upon by the petitioner dated August, 1990 and October, 1990 were cleared by the respondents, the respondents have received further intelligence/material relating to goods such as those imported by the petitioner. While it is true that strictly speaking the letters of the Director Revenue Intelligence Alert notice and the letter of the High Commission in London would not amount to evidence of the facts contained therein; nevertheless it cannot be said that the Customs authorities had no material whatsoever to depart from the earlier stand taken by them. The Bill of Entry and invoices are sufficiently proximate in time to the petitioner's import to be relevant to the determination of value. It may be that upon a final determination it is found that the import transaction relied upon by the respondents was not a representative transaction justifying a finding as to the value of the goods. At this stage, however, those documents cannot be discarded nor written off as irrelevant. There is, therefore, some material which prima facie would justify the Customs authorities in not releasing the goods imported by the appellant at the rate declared.”

8. In that view of the matter, I dispose of the writ application by the following order:—

(a) The petitioner will be at liberty to clear the imported goods after payment of the admitted duty and depositing with the Collector of Customs in cash 60 per cent of the tentative shortfall claimed by the respondents and after securing the balance 40 per cent of such tentative shortfall by way of a bank guarantee.

(b) The Bank guarantee must be in favour of the Collector of Customs, Calcutta and must be of a Nationalised Bank. The Bank guarantee must be kept renewed pending the final assessment that may be passed by the respondents in respect of such goods.

(c) The Bank guarantee must contain a clause that in the event the petitioner does not renew the Bank guarantee the Bank will of its own and forthwith deposit the entire guaranteed amount with the Collector of Customs.

(d) If the petitioner deposits the 60 per cent of the tentative shortfall as directed above, the Collector of Customs will keep such amount in a fixed deposit amount with any nationalised Bank subject to any final assessment order in respect of the concerned goods.

(e) Subject to the petitioner paying the admitted duty and depositing 60 per cent of the tentative difference claimed and furnishing a Bank guarantee, as directed in this order the respondent will allow clearance of the imported goods within 72 hours thereafter.

(f) The Customs authorities will assess the goods within 6 weeks from date after giving the petitioner an opportunity of being heard and disclosing to the petitioner all documents upon which the customs authorities wish to rely at least 48 hours before the hearing. The petitioner will also disclose all documents sought to be relied upon by him at least 48 hours before the hearing to the Customs authority.

(g) The period of 6 weeks is subject to extension by mutual consent of the parties. If the petitioner does not appear before the assessing officer in spite of notice, the assessing officer will be at liberty to proceed ex parte.

(h) If the final assessment order is against the petitioner the Customs Department will be at liberty to enforce the Bank guarantee and encash the fixed deposit receipt and appropriate the sums together with all interest accrued on the fixed deposit towards the dues of the Customs authorities 15 days after a copy of the assessment order has been served on the petitioner and subject to any order that the petitioner may obtain from any competent authority under the Customs Act, 1962.

(i) If, on the Other hand, the final assessment is in favour of the petitioner, the respondents will make over the amount covered by the fixed deposit together with all interest accrued thereon and also discharge the Bank guarantee to the petitioner 15 days after the final assessment order is communicated to the prosecuting officer of the department and s???bject to any order that the Customs Department may obtain from any competent authority under the said Act.

(j) In default of the Customs authorities completing the assessment within the specified time or within such extended time as may be mutually agreed to, the respondent will discharge the Bank guarantee and make over the amount in the fixed deposit together with all interest accrued thereon to the petitioner. It is made clear that this Court has not determined any question on merit. The assessing authority will decide the matter independently and uninfluenced by any observation made in this judgment. The respondent will be at liberty to raise all points taken in the writ petition before the appropriate authority.

There will be no order as to costs.”

9. As indicated earlier, the appeal has been preferred against the said judgment and order.

10. During the pendency of this appeal, the appellant was served with a show-cause notice dated 12th August, 1991, by the Collector of Customs (Judicial) to explain why (i) the Bill of Entry in question should not be assessed on the basis of the value at the rate of £ 0.66 per piece FOB UK as per invoice C-564869 dated 15th October, 1990; (ii) why they should not produce import licences for a value of Rs. 11,54,060/-, the enhanced value on the basis of the above invoice; (iii) why the goods should not be liable to confiscation under Section 111(d) and (m) of the Customs Act, 1962, for improper importation and mis-declaration of value and (iv) why penal action should not be taken against them under Section 112(a) of the Customs Act.

11. The Collector of Customs (Judicial) passed an order after hearing the appellant on 20th August, 1991. By the said order, the Collector confiscated 42,500 pieces of goods valued at Rs. 11,54,060/- under Section 111(d) and (m) of the Customs Act, 1962. The appellant, however, was given the option to clear the goods for home consumption upon payment of Rs. 11,50,000/-. The Collector also imposed a penalty of Rs. 16,00,000/- under Section 112(a) of the said Act.

12. In the said order, the Collector, inter alia, held as follows:—

(a) In the absence of valid import licence covering the importation the goods are liable to confiscation under Section 111(d) of the said Act;

(b) The charge of under-valuation has been proved. The importer has mis-declared the value of the goods. The goods are, therefore, liable to confiscation under Section 111(m) of the Act;

(c) For the above acts of commission and omission, the importer is liable to personal penalty under Section 112(a) of the Act.

13. After the said order was passed by the Collector of Customs (Judicial), stay application filed against the judgment and order dated 5th July, 1991 passed by the learned Judge of the first court came up before this Bench for hearing. In course of the hearing, leave was prayed for on behalf of the appellant to challenging the said order of the Collector of Customs (Judicial) dated 20th August, 1991, in this proceeding by a supplementary affidavit. Such leave was granted. Thereafter, the matter came up for hearing before this Bench.

14. It has been contended by Mr. P.K Dutta, learned Advocate for the appellant, that the finding of the Collector of Customs (Judicial) in his order dated 28th August, 1991, in respect of Import Trade Control Violation is perverse. It is also his contention that the Collector of Customs (Judicial) was not right in holding that Sl. No. 40(4) of Appendix 6 in terms of ITC PN dated 6th November, 1990, only such spares of trawlers as are specifically and individually included in one of the lists of Appendix 6 are entitled to be imported under OGL. Mr. Dutta has also urged that since spares of trawlers fall under the specific items appearing under Sl. No. 40(4) of Appendix 6 of the relevant Import Policy, it cannot fall under the generic entry under Paragraph 730 of Appendix 3, Part-A as amended by the Public Notice. He has also challenged the determination made by the Collector. According to him, the Collector committed grave error of law in discarding two Bills of Entry in determining the valuation or determining the question of under-invoicing and as such his findings are perverse. Mr. Dutta has also contended that the Customs authorities cannot ignore the decision of the Tribunal and come to a contrary finding on an identical issue. He has also submitted that there has been complete non-consideration of material facts and as such the finding is perverse.

15. On the other hand, the learned Advocate appearing for the Customs authorities has supported the findings and conclusions of the Collector of Customs (Judicial).

16. We have considered the rival contentions.

17. The first question which calls for determination is whether the spares of trawlers would come within the ambit of SI. No. 40(4) of Appendix 6 of the Import and Export Policy, 1990-93. By the Public Notice dated 6th November, 1990, two amendments have been effected. Firstly, the existing sub-para (3) of Para 76 in Chapter VI of the Policy has been substituted. The original sub-para (3) and the substituted sub-para (3) are as follows:—

“(3) Permissible spares arc those which do not appear individually in Appendices 2, 3, 8 or 10.”

“(3) Permissible spares are those which are specifically listed in Appendix 6 of the Import Policy.”

18. By the said Public Notice of 6th November, 1990, a new entry being Entry No. 730 has been added in Appendix 3, Part-A which reads as follows:—

“730 Engineering and allied items other than those listed in Appendices 2, 5, 6, 8 and 10.”

19. Relying on the said Public Notice and the amendments made thereby, it has been contended on behalf of the respondents that the subject goods will be governed by the said Entry.

20. The contention that the subject goods would be covered by the new Entry No. 730 in Appendix 3, Part-A covering engineering and allied items other than those listed in Appendices 2, 5, 6, 8 and 10 in view of the further amendment made in Chapter VI, paragraph 76, sub-paragraph (3) cannot be accepted. Sub-para (3) of Paragraph 76 provides that permissible spares are those which are specifically listed in Appendix 6 of the Import Policy. Since the subject goods are specifically listed i.e appearing in Appendix 6 Sl. No. 40(4) thereof being the spares of trawlers, the said amendment will have no application to the instant case. The word ‘listed’ appearing in the said Public Notice dated 6th November, 1990, cannot by any stretch of imagination, refer to lists 1 to 11 of Appendix 6. The word ‘listed’ in the said Public Notice can only mean ‘appearing’. The word ‘listed’ in Entry No. 730, Appendix 3A cannot signify lists Nos. 1 to 11 of Appendix 6 or in Appendices 2, 5, 8 or 10 inasmuch as in the Import Policy, apart from lists Nos. 1 to 11 of Appendix 6, the word ‘list’ appears under Appendix 2 (list of banned items), in Appendix 5 (‘list’ of canalised items), and in Appendix 10 (list of equipment/machinery allowed as spares on a restricted basis) but the word ‘list’ does not appear under Appendix 8 which only states scientific and measuring instruments - items restricted for import. In other words, it would be clear that the word ‘list’ appearing in the said Public Notice cannot refer to the word ‘list’. The word ‘list’, therefore, could only connote ‘appearing’. Therefore, the amended provisions of Chapter VI, Paragraph 76, sub-paragraph (3) could only be read as permissible spares are those which are specifically listed i.e appearing in Appendix 6 of the Import Policy. So also is the amendment in Paragraph 730 of Appendix 3, Part-A which reads as engineering and allied items other than those listed i.e appearing in Appendices 2, 5, 6, 8 and 10.

21. We have not been able to persuade ourselves to hold that the net effect of the amendment brought by Public Notice dated 6th November, 1990, is to shift the unlisted items from the OGL to the list of limited permissible items under Appendix 3, Part-A of the Policy. We are also unable to accept the contention that while interpreting Sl. No. 40(4) of Appendix 6 in terms of the said Public Notice dated 6th November, 1990, only such spares of trawlers as are specifically and individually included in one of the lists of Appendix 6 arc entitled to be imported under OGL is similarly misconceived.

22. In our view, even after the Public Notice dated 6th November, 1990, had been issued, the subject goods i.e spares of trawlers fall under Sl. No. 40(4) of Appendix 6 of the Import and Export Policy, 1990-93. The amendment of the said Policy by the said Public Notice dated 6th November, 1990, has no manner of application so far as the subject goods are concerned. Item SI. No. 40(4) of Appendix 6 of the said Import Policy also lays down, inter alia, that spares, except those included in Appendices 2, 3, Part-A, 8 and 10 of trawlers could be imported by all persons as they come under categories of eligible importers. If the goods imported are specifically covered under the provisions of Appendix 6, Item Sl. No. 40(4) as Part of spares of trawlers, the question of the said items appearing at Sl. No. 730 of Appendix 3 Part-A cannot arise, inasmuch as Item No. 730 covers only those engineering and allied items other than those listed in Appendices 2, 5, 6, 8 and 10.

23. Even assuming that the subject goods are covered by the said amendment made in the Open General Licence by the said Public Notice dated 6th November, 1990, such action on the part of the respondents is without the authority of law and contrary to the decision of the Supreme Court in East India Commercial Co. Ltd., Calcutta v. Collector of Customs, Calcutta, reported in AIR 1962 SC 1893 : 1983 (13) E.L.T 1342 (SC), wherein it has been held that orders issued under Section 3 of the Imports and Exports (Control) Act, 1947, have statutory force, whereas public notices are policy statement administratively made by the Government for public information. Public notices are issued periodically without repealing or modifying the earlier notices or notifications. In such circumstances, the Public Notice cannot amend the provisions of the OGL Order. The amendment sought to be made by the Public Notice is, therefore, without the authority of law and is liable to be struck down.

24. There is another aspect of this issue. Spares of trawlers is a specific item appearing at Sl. No. 40(4) of Appendix 6 of the said Import Policy. It cannot, therefore, fall under the generic entry under Paragraph 730 of Appendix 3, Part-A as amended by the said Public Notice. In Bharat Forge and Press Industries (P) Ltd. v. Collector of Central Excise, reported in 1990 (45) E.L.T 525 (SC), the Supreme Court held that unless the department can establish that the goods in question can, by no conceivable process of reasoning, be brought under any of the tariff items, resort cannot be had to the residuary items. The aforesaid view has been approved by the Supreme Court in Indian Metals & Ferro Alloys Ltd. v. Collector of Central Excise, reported in 1991 (51) E.L.T 165.

25. It is well settled that when there is a conflict between general provision and special provision in the same Act or Rules, special provision must prevail over the general provision. In other words the general provision must yield to the special provision. Accordingly, spares of trawlers being a specific item must be governed by Sl. No. 40(4), Appendix 6 of the Import Policy and not by the general provision relied on by the respondent.

26. It is then contended that Deputy Chief Controller of Imports & Exports by letter dated 13th August, 1991, addressed to the Collector of Customs, Calcutta clarified that importation of certain trawler parts are not permissible by all persons after the aforesaid amendment. Accordingly the said clarification will govern this case and no other interpretation is permissible. The said letter of clarification records as follows:—

“It is confirmed that the ‘listed’ in the entry at Sl. No. 730 Appendix 3A refer to the items covered by the specified lists (Nos. 1 to 11) in so far as Appendix 6 is concerned, and, therefore, with effect from 6-11-1990, the scope of Sl. No. 40 of Appendix 6 would be interpreted and restricted accordingly. Thus, if certain trawler parts are not specifically listed in any of the lists attached to Appendix 6 or in Appendicies 2, 5, 8 or 10, these parts would get covered by the newly inserted entry at Sl. No. 730 of Appendix 3, Part-A and their import under OGL cannot be claimed any longer under Sl. No, 40(4) of Appendix 6 by all persons.”

27. The argument advanced on the basis of the said letter of clarification cannot, however, be accepted for more than one reason. Firstly, Deputy Chief Controller is not the authority who can issue such clarification. Secondly, in any event the interpretation of the amendment does not depend on what the Deputy Chief Controller thought of it. In terms of sub-paragraph (4) of paragraph 27 of the Import Policy, clarification on any provision in the Import Policy and Procedures or on any item-wise entry could only be obtained from the Chief Controller of Imports and Exports, New Delhi which is also required to be given in consultation with the concerned Technical Authority or the Headquarters Clarification Committee. The said Paragraph 27 of the Import Policy is set out hereunder:—

“27(1) Clarification on the scope of an item, technical specification size covered by such item or whether a particular item allowed for import is a raw material, component, consumables, capital goods or a consumer item banned for import, may be obtained from the DGTD (Import and Export Policy Division), Udyog Bhawan, New Delhi. For Iron and Steel Items, ore/concentrates of iron, Manganese and Chromium, clarification is to be obtained from the Department of Steel. Clarification in respect of electronic items is to be obtained from the Department of Electronics.

(2) In case where imports have been effected in exact conformity with a prior clarification obtained from the concerned technical authority as above, any problem faced by the importer in that respect at the time of clearance may be referred to the policy cell at CCI & E Headquarters, New Delhi. Pending resolution of interpretation of the policy, Customs may be advised by CCI & E, in special cases, to allow clearance of that particular consignment.

(3) Clarification on any item-wise entry may be obtained by Actual Users from the Regional licensing authorities at Delhi (CLA), Bombay, Calcutta and Madras. Clarification will be given in consultation with the concerned technical authority or the Regional Clarification Committee, wherever considered necessary.

(4) Clarification on any provision in the Import Policy and Procedures or on any item-wise entry may be obtained from the CCI & E, New Delhi. Clarification will be given in consultation with the concerned technical authority or the Headquarters Clarification Committee, wherever considered necessary.

(5) In all cases of clarification, complete details in the prescribed proforma given in Appendix-II-K of the Hand Book of Procedures (Volume-I) are required to be furnished for each item separately. While seeking a clarification on item-wise import Policy, pertinent information, technical specifications as well as literature should be furnished.”

28. The said clarification obtained by the Customs authorities has been signed by the Deputy Chief Controller of Imports and Exports himself and not on behalf of the Chief Controller of Imports and Exports, New Delhi. Sub-paragraph (4) of paragraph 27 of the said Policy Book confers authority and/or jurisdiction only on the Chief Controller of Imports and Exports, New Delhi to give any clarification on any provision in the Import Policy and procedures or any item-wise entry in consultation with the concerned technical authority or the Headquarters Clarification Committee. In other words, sub-paragraph (4) of paragraph 27 expressly excludes the jurisdiction of all other authorities whether it be the Deputy Chief Controller of Imports and Exports or any other authority other than the Chief Controller of Imports and Exports, New Delhi. In such circumstances, the purported clarification sought to be issued by the Deputy Chief Controller of Imports and Exports which has been obtained by the Customs authorities cannot be relied upon while interpreting the provisions of the said Policy.

29. At this stage, we may record that the respondents for the first time in the purported show-cause notice alleged that there has been an Import Trade Control violation in the instant case. In the affidavit filed before the Court of the first instance or before this Bench, the Customs authorities did not make any whisper of the alleged Import Trade Control violation. This is a clear afterthought. As a matter of fact, the learned Counsel appearing for the respondents has very fairly submitted that the allegation of Import Trade Control violation cannot be sustained. In any event, in view of our finding that the goods imported by the appellant come within the purview of Item Sl. No. 40(4) of Appendix 6 specifically allowing import of spares except those included in Appendices 2, 3 Part-A, 8 and 10 of trawlers, there cannot be any Import Trade Control violation.

30. The main contention urged on behalf of the appellant is that the finding of the Collector of Customs (Judicial) as regards under-invoicing is perverse. This contention has to be carefully examined in the light of the facts found and/or admitted and the provisions of the Act and the Rules. In terms of Section 14 of the Customs Act, 1962, the value of imported goods shall be deemed to be the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and; place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale.

31. Section 14 of the Act has to be read along with Rule 4 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to as the said Rules). Under the said Rules, only in case it is not possible to arrive at the transaction value, then other method provided by the said Rules has to be followed. In this connection Rules 2(f), 3 and 4 of the said Rules are set out hereunder:—

“2. Definitions. - (1) In these rules, unless the context otherwise requires,—

……………………

(f) “transaction value” means the value determined in accordance with Rule 4 of these rules.

3. Determination of the method of valuation.-For the purpose of these rules,—

(i) the value of imported goods shall be the transaction value;

(ii) if the value cannot be determined under the provisions of clause (i) above, the value shall be determined by proceeding sequentially through Rule 5 to 8 of these rules.

4. Transaction value. — (1) the transaction value of imported goods shall be the price actually paid or payable for the goods sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules.

(2) The transaction value of imported goods under sub-rule (1) above shall be accepted, provided that—

(a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which—

(i) are imposed or required by law or by the public authorities in India;

(ii) limit the geographical area in which the goods may be resold; or

(iii) do not substantially affect the value of the goods;

(b) the sale or price is not subject to same condition or consideration for which a value cannot be determined in respect of the goods being valued;

(c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of Rule 9 of these rules; and

(d) the buyer and seller arc not related, or where the buyer and seller are related, that transaction value is acceptable for Customs purposes under the provisions of sub-rule. (3) below.

3 (a) Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price.

(b) In a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time:—

(i) the transaction value of identical goods or of similar goods, in sales to unrelated buyers in India;

(ii) the deductive value for identical goods or similar goods:

Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of Rule 9 of these rules and cost incurred by the seller in sales in which and the buyer are not related;

(c) substitute values shall not be established under the provisions of clause (b) of this sub-rule.”

32. The normal principle for arriving at a price is to ascertain the transaction value in terms of the provisions of Section 14(1) of the Customs Act, 1962. The said Valuation Rules provide for the method of valuation. The value of the imported goods shall be the transaction value. The said Rules, inter alia, lay down that if it is not possible to arrive at a transaction value then the other rules of the said Valuation Rules which are framed thereunder are to be followed sequentially. Rule 4 of the said Valuation Rules, 1988 deals with transaction value. The transaction value means the value determined in accordance with the provisions of Rule 4 of the said Rules. According to Rule 4, the transaction value of the imported goods shall be the price actually paid or payable for the goods when sold and it also provides that the transaction value shall be accepted. Therefore if the transaction, value is available i.e the price actually paid or payable is available, then assessable value shall be determined by accepting the price actually paid or payable unless it is found to be not genuine. In the instant case since there is no evidence whatsoever of any contemporary imports of identical goods of identical quantity at higher rate and since there is no evidence that the appellant remitted to the foreign supplier any amount clandestinely more than the amount the appellant actually paid the transaction value under the provisions of Rule 4 is available and as such the same has to be accepted by the authority concerned.

33. The facts of this case would clearly demonstrate that criteria laid down in Rule 4 have not been satisfied. As the adjudicating authority found that Rule 4 was not applicable to the facts of this case, he proceeded to determine the valuation under Rule 5 of the said Rules. The contention is that even assuming that Rule 5 has been correctly followed, the provision of Rule 5 should have been made applicable in its entirety

34. Rule 5 reads as follows:—

“Transaction value of identical goods:

(1)(a) Subject to the provision of Rule 3 of these rules the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about the same time as the goods being valued.

(b) In applying this Rule the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods.

(c) Where no sale referred to clause (b) of sub-rule (1) of this rule is found, the transaction value of identical goods sold at a different commercial level or in different quantities or both, adjusted to take account of the difference attributable to commercial level or to the quantity or both, shall be used, provided that such adjustments shall be made on the basis of demonstrated evidence which clearly establishes the reasonableness and accuracy of the adjustments, whether such adjustment leads to an increase or decrease in the value.,

(2) Where the costs and charges referred to in sub-rule (2) of Rule 9 of the rules are included in the transaction value of identical goods, an adjustment shall be made, if there are significant differences in such costs and charges between the goods being valued and the identical goods in question arising from differences in distances and means of transport.

(3) In applying this rule, if more than one transaction value of identical goods is found, the lowest such value shall be used to determine the value of imported goods.”

Rule 2(1)(c)

Definition. - Identical goods means imported goods—

(i) which are the same in all respects, including physical characteristics, quality and reputation as the goods being valued except for minor differences in appearance that do not affect the value of the goods;

(ii) produced in the country in which the goods being valued were produced and

(iii) produced by the same person who produced the goods or where no such goods are available, goods produced by a different person but shall not include imported goods when engineering, development work, art work, design work, plant or sketch undertaken in India were completed directly or indirectly by the buyer on these imported goods free of charge or at a reduced cost for use in connection with the production and sale for export of these imported goods.”

35. The aforesaid definition makes it clear that for the purpose of determining the transaction value of identical goods, the goods must be the same in all respects including physical characteristics, quality and reputation and must be produced in the country in which the goods being valued were produced. In applying Rule 5, the transaction value of identical goods in a sale at the same commercial level and in substantially the same quantity as the goods being valued shall be used to determine the value of imported goods.

36. The facts of the case would demonstrate unmistakably that the value of the imported goods was not determined in accordance with the said Rules. Here comes the question of perversity. Firstly, adjudicating authority misdirected himself in not valuing the goods in terms of Rule 4. Again Rule 5 which was applied, was not adhered to fully.

37. Secondly, in making the valuation, the relevant evidence was ignored and irrelevant evidence or material was considered. Thus, the conclusion of the adjudicating authority is vitiated being unreasonable and perverse. The position will be crystal clear from the following facts:

38. Firstly, the Bill of Entry for warehousing filed on behalf of M/s. Lucas TVS Ltd., Madras was only for 3,000 pieces whereas the goods imported by the appellant was for a much higher quantity of 42,500 pieces. In the premises, the unit price shown in the Bill of Entry of Lucas TVS Ltd., Madras could not, in any manner be comparable with the unit price of the goods imported by the appellant.

39. Secondly, where quantities of goods imported are vastly different at different prices, difference in price cannot be taken as sufficient proof of under-valuation or mis-declaration. It is well settled principle of law that burden squarely lies on the department to prove under-valuation. Value cannot be determined on inference and in the absence of mutuality of interest between importer and supplier, invoice value cannot be enhanced.

40. Thirdly, the importation of M/s. Lucas TVS Ltd., Madras is not a contemporaneous import, the date of invoice of M/s. Lucas TVS Ltd. is October 15, 1990 whereas invoice in respect of the goods imported by the appellant is dated March 19, 1991 (Annexure “B” to the writ petition).

41. Fourthly, the Bill of Entry for warehousing of M/s. Lucas TVS Ltd., Madras sought to be relied upon by the Customs authorities was provisionally assessed with an endorsement by the authority concerned to the effect that the value was to be verified, whereas the Bill of Entry for home consumption of similarly placed importers who have already cleared their goods which were relied upon by the appellant in the writ petition have been finally assessed. Thus, there is no justification nor any basis to compare the price applicable for significantly much lower quantity shown in the Bill of Entry for warehousing which has been provisionally assessed for the purpose of showing that there has been an under-invoicing in the instant importation.

42. Fifthly, M/s. Lucas Export Services Ltd., U.K who are the manufacturers of the goods imported are the collaborators of M/s. Lucas TVS Ltd., Madras for the purpose of manufacturing Fuel Injection Equipments including Fuel Filter Elements under the registered trade mark ‘Lucas’ in India. Accordingly, M/s. Lucas, U.K and M/s. Lucas TVS Ltd. Madras are in fact, related parties and have interest in the business of each other as envisaged under Section 14 of the Customs Act and the price at which the goods sold or offered for sale by M/s. Lucas, U.K to M/s. Lucas TVS Ltd., Madras and the time and place of Importation cannot be deemed to be the price in course of international trade. As a matter of fact, in his order, the Collector of Customs has specifically admitted that M/s. Lucas Export Services Ltd., U.K and M/s. Lucas TVS Ltd., Madras are related parties.

43. Sixthly, the value of the goods declared in the Bill of Entry, as it appears, is in accordance with the invoice given by the foreign supplier and the same is based on transaction in which the foreign supplier and the appellant had no interest in the business of each other.

44. Seventhly, the charge of under-valuation was sought to be established on the basis of the letter dated 15th January, 1991 written by the High Commission of India, London addressed to Mr. P.K Kapoor, Director General, Directorate of Revenue Intelligence showing the unit price of £ 3.73 Apart from the fact that the Revenue changed its stand frequently, this unit price of £ 3.73 is not relevant for the purpose of valuation, as the price would be much less when sale is on a wholesale basis.

45. On the other hand, the appellant has also relied on a letter dated 9th August, 1990 written by Lucas, U.K to S.P.E.I, London, inter alia, advising that the prices quoted to a company in India are indicative only. It was also pointed out in the said letter that as the company purchase in bulk in the U.K and as a long term customer of theirs, they receive special and substantial discounts and favourable-terms. It was further pointed out that the records indicate that supplies to India for those items were made through U.K Export House and they do not think that supplies had been made direct to traders in India for at least 12 months. This evidence would go to show that the unit price declared by the appellant in the Bill of Entry filed before the authority concerned is the correct unit price. Even otherwise the Customs authorities did not proceed on the basis of the said letter dated 15th January, 1991 on which heavy reliance was placed. They have enhanced the valuation on the basis of invoice value of M/s. Lucas Export Services Ltd. in favour of M/s. Lucas TVS Ltd., Madras at £ 0.66 which is based on special discount. Such unit price, therefore, cannot be the basis for determining the value of the imported goods.

46. The value of the goods declared in the Bill of Entry, as it appears, is in accordance with the invoice given by the foreign supplier and the same is based on transaction in which the foreign supplier and the appellant had no interest in the business of each other.

47. In the premises, the unit price declared by the appellant in the Bill of Entry filed before the adjudicating authority ought to have been accepted as correct unit price and the adjudicating authority should have assessed the price in terms of provisions of Section 14 of the Customs Act, 1962 and Rule 4 of the Valuation Rules. Even assuming Rule 4 of the said Valuation Rules has no application in the matter of assessment of the imported goods and even assuming that the adjudicating authority is entitled to rely upon the said Madras Bill of Entry for consideration of the valuation in the instant case, then in that event, it is incumbent on the adjudicating authority under Rule 5(3) to consider the lowest of the transaction value of identical goods as contained in the Bill of Entry being Annexure ‘G’ to the writ petition, inasmuch as the transaction value shown therein is the lowest in comparison that the transaction value shown in the Bill of Entry for M/s. Lucas TVS Ltd., Madras.

48. As a matter of fact, the Bill of Entry relied on by the appellant were in respect of identical goods of identical quantity imported by a similarly placed importer which should have been considered for the purpose of arriving at the transaction value.

49. The appellant has also relied on a certificate dated 29th March, 1990 given by M/s. Lucas, U.K inter alia, advising that the price list PS 150 are those which are based on suggested U.K retail and that generally do not reflect on prices charged to Export customers. It was also stated in that certificate that prices for export are essentially lower for larger quantities and may vary from territory to territory which can be caused by competitive circumstances and on fast moving parts are generally nett. Special prices are often quoted and from time to time may be subject to stock clearance.

50. The facts and circumstances as narrated hereinbefore would make it evident that the adjudicating authority has excluded relevant materials and has not applied its mind to all the relevant materials and has not considered the same in coming to the conclusion. The adjudicating authority committed a grave error of law in discarding two Bills of Entry being cogent and relevant evidence. As a matter of fact, the adjudicating authority has come to the conclusion by considering the material which is irrelevant. Accordingly, the finding of the adjudicating authority as regards the under-invoicing is erroneous and perverse and cannot be sustained.

51. There is one very important aspect of the matter ignored by the adjudicating authority that although the appellant was charged with under-valuation, the adjudicating authority failed to take into a crucial fact that the same Collectorate had cleared the identical goods of identical quantity at the identical price in case of similarly placed importers like that of the appellant.

52. In Kajaria Exports Ltd. v. Collector of Customs reported in (1986) 1 CLJ 231 wherein it has been held that in order to arrive at a decision of under-invoicing the concerned authority must act fairly and reasonably and in accordance with known principles of law. The authority must not act as a mere tax gatherer by any means. There must be a reasonable basis for such belief supported by cogent evidence and no fanciful ideas that importers are out to lake advantage over the authorities and thereby deprive the Exchequer. It has also been held therein that the fact that self same authority having cleared the very same articles a few months earlier ought not to have been ignored. Giving a go-by to the evidence at hand and relying upon something which does not have a direct bearing on the concerned subject does not speak of a non-harassive attitude.

53. In Ghanshyam Chejaria v. Collector of Customs, reported in 1989 (44) E.L.T P 202 and in Trident Television Private Limited v. Collector Of Customs, reported in 1990 (45) E.L.T P 24, it has been held by the Court that when the Customs authorities have cleared identical goods at identical price in the past, they are bound by their own precedents. This is an age old concept which is being followed from the case of Mercantile Express Co. Ltd. v. Assistant Collector of Customs, reported in AIR 1958 Cal. P. 630 : 1978 (2) E.L.T (J 552) (Cal.) and the same has been reiterated also by the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd., Bombay v. Union of India, reported in1 [(1989) 80 E.L.T 172].

54. That apart, the adjudicating authority did not take into consideration the decisions of the Tribunal on the identical issue. Reliance has also been placed in Ghanshyam Chejaria (supra) and Trident Television (P) Ltd. (supra) on behalf of the appellant for driving home the point that the Customs authorities cannot ignore the decisions of the Tribunal and come to a finding contrary to the decision of the Tribunal.

55. An importer has the right to arrange its affairs on the basis of the view taken consistently by the Tribunals. The order of the Appellate Authority is binding on the subordinate authorities even in the subsequent proceedings. It appears to us that while passing the order of adjudication the Collector of Customs (Judicial) has not cared to take into consideration the decisions of the Tribunal on the identical issue and as such the order suffers from infirmity. The Collector of Customs (Judicial) had no jurisdiction to by-pass the orders of the Tribunal on the identical issue. The judicial decorum demands that a subordinate quasi-judicial authority must act in conformity with the orders passed by the higher judicial authority. If for any reason the Collector of Customs (Judicial) was of the view that any of the decisions of the Tribunal cited before him was not applicable or was not on point, he ought to have mentioned the same in his order. He cannot simply overlook those orders only to come to his own finding contrary to the principles laid down by the Tribunal in the orders cited before him. The taxing authority are bound by their own decisions in administering taxing statute and cannot modify their own decisions at their own sweet will. In that view of the matter, the order of the Collector of Customs (Judicial) cannot be sustained being arbitrary and unreasonable and perverse.

56. It has also been submitted on behalf of the appellant, in our view rightly, that non-application of mind is writ large on the face of the said adjudication order which would be borne out from the fact that the Collector while imposing a fine of Rs. 11,???0,000/- has imposed a personal penalty which is much more than the amount of the fine i.e Rs. 16,00,000/-. The said order smacks of arbitrariness as no reason has been given why in such a case personal penalty should exceed the fine; that apart, no fine or penalty is imposable in this case because the order of the adjudicating authority is itself not sustainable being otherwise perverse.

57. As a matter of fact, the learned Counsel for the respondents has not seriously disputed that the penalty imposed is shockingly disproportionate to the offence charged and allegedly proved.

58. It has been next contended on behalf of the appellant that no reliance should be placed on the affidavit-in-reply (to the supplementary affidavit) of Shri Samir Ranjan Dutta affirmed on 16th December, 1991 as the same purports to adduce or introduce new grounds and/or fresh reasons for the first time to validate the adjudicating order which is otherwise not sustainable in law. This contention has substance.

59. In the affidavit, reliance is now placed in one invoice of Lucas Export Services Ltd., England and a letter dated 13th August, 1991 written by the Deputy Chief Controller of Imports and Exports to the Collector of Customs annexed to the affidavit of the Customs authorities. The Collector of Customs (Judicial) did not refer to the said letter or invoice while passing the said order dated 28th August, 1991. In the said affidavit, reliance has also been placed on the alert notice which was also not before the adjudicating authority. In paragraph 9 of the said affidavit, it has been stated that the transaction value has been correctly taken for the purpose of assessment in the instant case under Rule 4(3) of the Customs Valuation Rules, 1988. This is contrary to the finding made in the impugned order. In the impugned order the Collector of Customs has taken recourse to Rule-5 of the Valuation Rules for the purpose of valuing the subject goods and not Rule 4.

60. The validity of the order of a quasi-judicial authority must be decided on the basis of the reasons disclosed while passing the order. In Mohinder Singh Gill v. Chief Election Commissioner, reported in (1978) 1 SCC 405 : AIR 1978 SC 851, the Supreme Court held that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise, otherwise an order which was bad in the beginning may, by the time it goes to the Court on account of a challenge, get validated by additional grounds later brought out.

61. It has also been contended that no reliance should be placed on the affidavit filed on behalf of the Customs authorities by the Assistant Collector of Customs, Special Investigation Branch, being the respondent No. 3. According to the verification made by the deponent of the said affidavit, the statements made in paragraphs 1 to 29 of the said affidavit have been verified as true to his knowledge. The said document sought to justify the adjudication order by new evidence which was not before the adjudicating authority. He could not have any personal knowledge how the order was passed and what was taken into account. He could have only verified the facts appearing from the records. It is unfortunate that the responsible officer like Assistant Collector not only acted beyond his jurisdiction in bringing new materials and new facts and evidence which were not relied on by the adjudicating authority in support of his order but he also sought to give impression to this Court that he was at liberty to improve upon the order passed by his superior officer. The reason for verification of the affidavits is to enable the Court to find out which facts can be said to be proved on affidavit evidence of rival parties. Allegations may be true to knowledge or allegations may be true to information received from persons or allegations may be based on records. The importance of verification is to test the genuineness and authenticity of allegations and also to make the deponent responsible for such allegations. In essence verification is required to enable the Court to find out as to whether it will be safe to act on the said affidavit evidence. In absence of proper verification facts cannot be admitted in evidence. Reference may be made in this connection to the decision of the Supreme Court in A.K.K Nambiar v. Union of India, reported in (1969) 3 SCC 864 : AIR 1970 SC 652. In our view, apart from the infirmities mentioned hereinbefore, no reliance can also be placed on the said affidavit affirmed on behalf of the respondent.

62. Another contention has been raised that the judgment under appeal cannot also be sustained. The learned Judge observed that the respondents have received further intelligence/material relating to goods such as those imported by the appellant which cannot be ignored in spite of the fact that the Bill of Entry relied on by the appellant dated August, 1990 and October 1990 were cleared by the respondent. As a matter of fact, the Collector of Customs (Judicial) while passing his order did not place any reliance whatsoever on the said intelligence report stated to have been received by the Customs authorities. It also appears that the documents relating to the price of Lucas Madras was subsequently introduced at the lime of final hearing of the writ petition. The adjudicating authority, even after admitting that Lucas TVS, Madras and LUCAS CVS, U.K arc related parties relied on the Bill of Entry of Lucas TVS, Madras which was otherwise also provisionally assessed. Reliance on the said Bill of Entry by the adjudicating authority is mis-placed inasmuch as in terms of Section 14 of the Customs Act, as well as Rule 5(3) of the Customs Valuation Rules, 1988, no reliance on such evidence can be placed. The learned Judge, in our view, fell in error in holding that the Bill of Entry and invoices are sufficiently proximate in time to the import made by the appellant and this is relevant to the determination of the value. However, as we have indicated, the learned Judge did not take into consideration the fact that the quantity of goods in the M/s. Lucas TVS., Madras and that of the instant case were substantially different i.e 3,000 pieces in our case and 42,500 pieces in the other have been imported which would have relevant bearing on the determination of the value. Further, the transaction between LUCAS CVS Ltd., U.K and Lucas TVS, Madras as we have indicated, was admittedly between related parties while in terms of Rule 5(3) of the Valuation Rules, the lowest of the value should be used to determine the value of the imported goods when there are more than one transaction value of identical goods. Further, the very same Customs House have earlier released identical goods consisting of identical quantity and, therefore, they could not deviate from their earlier practices.

63. To sum up, a transaction cannot be held not to be genuine only because the foreign supplier did not charge the price prevalent at the time of shipment. In order to arrive at a decision of under-valuation, the authority concerned must act fairly and reasonably and in accordance with well known principles or the law. The authority must not act as a mere tax-gatherer and there must be some reasonable basis for such belief supported by cogent evidence and not fanciful ideas that the importers are out to take advantage over the authorities and thereby would deprive the exchequer. A higher quotation would not by itself without there being any other materials or evidence justify the inference of under-invoicing. Where the transaction is at arm's length and price is the sole consideration for sale or offer for sale and there is no evidence of any clandestine remittance made over and above, the invoice value should be the value of assessing the goods imported. The burden to prove misdeclaration of prices in the Bill of Entry lies on the department and cannot be discharged by mere suspicion and the charge of under-invoicing has to be supported by the evidence of prices of contemporaneous imports of like kind goods. There has been no evidence to show that there has been any clandestine remittance of amount towards the cost or the goods imported over and above what has been declared in the import documents. In our view on the facts and in the circumstances of the case, it is evident that the authority concerned has passed the purported order of adjudication in the matter of confiscation of the subject goods under Sections 111(d) and 111(m) of the Customs Act mechanically and without any application of mind and in almost arbitrary and discriminatory manner. The provisions of Section 111(d) and 111(m) of the Customs Act have no manner of application in the facts and circumstances of the case. In the premises, both the redemption fine and personal penalty imposed by the authority concerned are totally unjustified and should be quashed and/or set aside. For the foregoing reasons, the order under appeal is set aside. The order passed by the adjudicating authority is set aside and quashed. Let the fixed deposit receipt(s) be returned to the appellant forthwith.

Shyamal Kumar Sen, J.:— I agree.