MR. ZAFAR IQBAL, MEMBER (TECHNICAL).-(1). This appeal has been filed against the order dated 23-5-2001 passed by the Collector of Customs (Adjudication), Karachi-I, whereby he rejected the claim of the appellant that the price transacted by them for the import of Microwave Ovens was the actual transactional value. The said authority also imposed a fine equivalent to 100% of the amount of evaded tax against the appellant.
2. According to the facts available on record, the appellant did import "Microwave Ovens D.W.161H" at a unit price of US$ 70 per piece and model "D.W.121M" at a unit price of US$ 63 per piece. The goods were accordingly cleared on the basis of declaration made by the appellant.
3. In a post import scrutiny, the customs noticed that the said goods had been imported previously at a unit price of US$ 94.50 per piece and at a unit price of US$ 81.50 per piece respectively.
Accordingly, the customs concluded that a duty amounting to Rs. 8,86,991 had been short levied.
4. The customs accordingly believed that the importer did deliberately and knowingly and with a mala fide intention to evade duty and taxes manipulated documents by showing unit value on the lower side. It was claimed that the documents produced were fake. It was customs belief that by committing the said act the appellant did make an effort to deprive the Government of its legitimate revenue amounting to Rs. 8,86,991.
The said act attracted the provision of sections I6 and 32(3) of the Customs Act, 1969.
5. Accordingly, the Customs Authorities issued a show-cause notice to the appellant asking them to explain that as to why penal action under the aforesaid provision of law be not taken against them. The appellant contested the vires of the show cause notice on the ground that the price declared by the importer was the actual transacted price and that all the import documents presented before the Customs were genuine.
6. The learned Adjudicating Officer did not agree with the importer's point of view and passed the impugned order. The said order has now been challenged before us through this appeal.
7. We have heard the parties at length. From their pleadings we concluded that parties are at variance on the following issues:
(i) Whether or not sufficient material exists to reject the transactional value of the appellant?
(ii) On what basis the department claims that the appellant has manipulated documents showing the unit value of the imported goods on the lower value?
(iii) Whether or not there is sufficient evidence to prove the mens rea i.e. Guilty mind exists against the appellant?
8. In order to appreciate the said issues, the first important instrument containing the relevant rule for determination of value of the imported goods in section 25(1) of the Customs Act, 1969. As per said section, the value of goods is the transactional value i.e., the price actually paid or payable for the goods when sold for exports to Pakistan. It is evident that the goods of the appellant do not fall within any of the exceptions contained in clauses (a) to (d) to the proviso to the subsection (1) of section 25. The Adjudicating Officer did base the impugned order on the plea that the department is in possession of an evidential invoice of identical goods, and difference in price is around 22% to 25%.
9. Law relating to identical goods is provided in subsection
(5) of section 25 of the Customs Act, 1969. This subsection only comes into effect when the value cannot be determined under section 25(1). Where a case does not fall in any of the four exceptions to section 25(1), it cannot be assumed that the value of imported goods cannot be determined under that subsection. The burden of proof in this respect would be on the Department.
10. The general principle of interpretation of statutes is that a , rule cannot override the statutory requirement, therefore, the ! Presumption under a deeming clause has to be read within the j parameters of subsection (1) of section 25 of the Customs Act, j g 1969. Further, the fact that the seller may have given a greater ! Concession to buyer, who was now becoming a repeat customer j has been completely ignored in the present case. It would be I appropriate to refer the case of Banaras IGA South Asia Ltd. V. Commissioner of Customs, New Delhi reported as 2000 (126) E.L.T., 1008 a similar issue arose, and it was the opinion of the presiding Judge that:-- "............ Invoice clearly shows that appellant was given pilot discount of 40%. It also shows that spare parts were supplied alongwith machine. When Bill of Entry was filed on 25-9-1992 actual discount of 40% mentioned in the Invoice was omitted to be mentioned. In the Bill of Entry spare parts were shown as tariff item 8438.9001 but wrongly classified under customs tariff heading 4016.99. These mistakes were immediately brought to the notice of the Assistant Commissioner of Customs by letter dated 8-10-1996, long prior to the order of assessment. Exporter from Nederland sent a telefax message dated 15-10-1996 stating that special discount of 40% is an export discount which includes VAT refund and that spare parts package consists of essential spare parts for the normal working of the oven.
This message was also made available to the Customs Authorities. Chamber of Commerce, Nederland sent declaration dated 18-11-1996.
It reads:- 'The undersigned Authority certifies that the special 'pilot' discount of 40% on Order No. 964395 (i.e. The order mentioned in the Invoice) is an export discount which includes 17.5% VAT'.
These documents did prove beyond doubt that transaction value was as shown in the Invoice with special pilot discount of 40%. We do not find any reason to disallow 40% discount to the importer.
40% discount was inclusive of 17.5% VAT discount. Actually the exporter was giving only a discount of 22.5%..."
11. We also observe that an invoice price cannot be routinely discarded except on the strength of a clear evidence that the invoice is not genuine and it does not show the real price as has been transacted between the importer and foreign supplier, and that something else has passed clandestinely between the importer and foreign supplier. This view gains support from the case of Commissioner of Customs, Calcutta V. Chem Crown (I) Ltd. Reported as 1998 (I0O) E.L.T. 126.
12. In the case of S. C.J. Master Batches v. Commissioner of Customs, New Delhi reported as 2001
(127) E.L.T. 585, it was observed that transactional value discarded by customs by placing reliance mechanically on a contemporary invoice showing in higher value without considering; (a) the importers' plea that they were an old customer of the supplier; (b) that they had placed order for four machines instead of one; (c) and on that basis negotiated a somewhat lower price, was not correct; and the Commissioner's order loading their invoice value and imposing fine and penalty was erroneous.
13. A transactional value cannot be rejected because there are some contemporaneous imports at higher price. It has to be shown that invoice price is not genuine and does not show the real price paid for the imports. In the present case, the appellant had produced the copies of L.Cs. Opened and amended in consequence of revised agreement to the Customs Authorities.
These documents clearly indicated the transactional value and actual price paid. The department has not been able to rebut this evidence. No evidence has been produced to justify any enhancement of the invoice value of imported goods either, hence the plea of enhancement is not tenable.
14. Having said that we now examine the order of the; Collector of Customs Adjudication. The said order has been passed on the following assumptions
(a) presence of an invoice of the identical goods of the same source;
(b) no money has been spent on promotional activity; and
(c) the documents produced to the customs are not genuine.
15. We are afraid, if these grounds are relevant in the new system of determination of value. The new system treats each and individual transaction of sale of goods as a peculiar transaction having no relationship with any other transaction. In order to reject the transaction, there must be evidence to show that the transaction relied upon is fraudulent and is based on untrue statement in material particulars. No evidence to show that the disputed transaction is false or is an outcome of a fraudulent activity has been produced by the customs. The customs have only relied upon a previous transactional value having no relationship with the changed scenario between the importer and exporter. Furthermore, no evidence exists to reject the commercial documents represented by the appellants. In these circumstances the order of the learned Collector Adjudication is not tenable.
16. The appellant has also been penalized for the violation of clauses (9) and (14) of section 156(1) read with section I6 of the Customs Act, 1969, there is no material on record to substantiate that an offence of illegal import or of -making an untrue statement in material particular. There was, therefore, no justification for imposing the fine or penalty. Even the charge of misstatement cannot be substantiated on the basis of available record.
17. It may be pointed out that the concept of valuation under GATT Code is entirely different from that of BDV. In the later concept there used to be a notional value to maintain an equilibrium in the market economy. In the GATT concept it is the transaction which has been protected unless evidence can substantiate a fraudulent transaction. This is why that in the GATT system, it is the post import investigation which is more important than passing a value judgment on assumptions at the time of import.
18. We are, therefore, of the opinion that impugned order suffers from serious illegalities. The same is accordingly set aside. The case is remanded back to the appropriate authority to decide the issue of valuation in accordance with the governing principles of GATT's valuation principles.