BAYER INDIA LTD. Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) The appellants who are manufacturers of Agrochemicals Textile Chemicals etc. and dealers in such products, also manufacture fungicide under the brand name 'Dithane M -45' falling under CET 3808.10 by diluting 'Mancozeb Technical 85%' imported by them from M/s. Rohm and Haas Company, France (herein after referred to as R&H). They commenced manufacture of the above mentioned products from 1996. Prior to that period, M/s. Indofil Chemicals Ltd. were importing Mancozeb Technical 85% from R&H and manufacturing Fungicide in India under the brand name Dithane M -45. In November, 1995, the appellants entered into an agreement with R&H for import and distribution of Dithane M -45 in India and started importing Mancozeb T -85% from R&H since Feb. 1996 at the following prices:

(2.) SHOW cause notice dated 25.1.2001 was issued to the appellant' company proposing to recover alleged differential duty of Rs. 7,19,84,692/ - under the proviso to Section 28(1) of the Customs Act, 1962 (by applying the value @ US 2.85 per kg. at which M/s. Indofil Chemical Company was importing the same product from R&H) together with interest, proposing confiscation of goods under Section 111(m) and proposing penal action against the company under the provisions of Section 112(a)/or under Section 114A of the Customs Act. Penalty was also proposed on the officers of the company. The show cause notice interalia alleged that the appellants and R&H are related to each other, that the agreement between the two was a sole distributor agreement, that the two are interested in the activity of each other in view of the financial transactions between them and that this relationship has influenced the price of imported Mancozeb T -85%, that the sale between the appellants and the R&H is not a sale where the buyer and seller are not interested in the business of each other and the price is the sole consideration for the same as the sale of the same product is ordinarily offered for sale by R&H during the course of international trade at US 2.85 per kg, the price at which M/s Indofil was importing the product from R&H, that the price of Dithane M -45 sold by the appellant has systematically risen and similarly sale price of the identical products sold by M/s. Indofil (who started manufacturing indigenously since 1996) had also systematically risen, that the appellants connived with R&H to mis -declare the value of the goods. The notice invoked the provisions of Rule 5 of the Customs Valuation Rules 1988, The appellants denied the allegations in the notice which was adjudicated by the Commissioner by rejecting transaction value as per invoice by confirming demand raised thereunder for the period Feb. 1996 to March 2000 together with interest under Section 28AB, imposing penalty equal to duty on the importer under Section 114A, penalties of Rs. 10 lakhs each on two Executive Vice Presidents of the company and penalties of Rs. 5 lakhs each on the Product Registration Manager and on International Trade Manager of the company under Section 112(a). Hence these appeals.

(3.) WE have heard both sides. Rule 10A of the Central Excise Valuation Rules 1988 which has been invoked by the Revenue cannot be invoked merely on the ground that identical goods have been imported into India at a higher price and can be invoked only if there is a doubt as to the genuineness of the transaction value between the exporter and the importer such as in the event of extra remittance by the importer to the exporter. Otherwise, the valuation of imported goods for the purposes of customs duty on the basis of transaction value becomes meaningless. The fact that transaction value cannot be rejected for the reason that identical goods have been imported into India at a higher price has been accepted by the Tribunal as seen from its decision in Finolex Industries Ltd. v. CC 2004 (174) ELT 341, Mark Auto Industries v. CC , Devika Trading v. CC 2004 (167) ELT 758 and Gujarat Ambuja Cement . The value of same goods imported from the same supplier on the same day at a varying price is legally acceptable, provided that the price is arrived at on commercial consideration.