VOLTAS LTD (M/S) Vs. J&K GOVT

JUDGEMENT

(1.) M /S Voltas Limited, the sole distributors of Mack Trucks and Dumpers manufactured by Mack Truck Inc. New Jersey USA entered into an agreement on August 7, 1962, with the State of Jammu and Kashmir for supply of 7 (Seven) number 11 Cu. yd. Mack Model M -18 X Rear Dumpers at the price and on the terms and conditions contained in the agreement. Clauses (6) and (7) of the said agreement provided as follows : "6. Import and Customs Duty. The prices referred to above are inclusive of import and customs duty at the rate of 35% on CIF value. Any statutory variation in the current rate of this duty or in the basis of assessing duty shall be to the Governmentâ„¢s account. 7. Any other taxes or duties. Any other taxes or duties if levied by the Central Government or the State Government of J & K or any other local authority in India on the transaction of the machines shall be paid as actuals by the Government." Asserting that they had to pay extra customs duty amounting to Rs.20,852.85 on the basis of assessment made on loading charges of 3.5% under the provisions of the Customs Act, 1962, read with Customs ËœValuation Rules 1963, that the said amount was paid by them on account of variation in the basis of assessment of duty made by the Central Government in exercise of the powers conferred on it by the Customs Act, 1962, read with Customs Valuation Rules, 1963, and that the aforesaid extra customs duty of Rs.20,852.85 on account of loading the CIF value constituted a statutory variation in the basis of assessing customs duty and the State Government was liable to pay the amount under clause (6) of the agreement, M/S Voltas Ltd. called upon the State Government to reimburse them for the said amount. In doing so M/S Voltas Ltd. further contended that the State Government was liable to pay the amount even under clause (7) of the agreement. The claim was rejected by the State Government as untenable.

(2.) A dispute having thus arisen between M/S Voltas Ltd. and the State Government in respect of payment of the aforesaid customs duty, the same was referred for arbitration to Shri G. M. Karra, the President of the Bar Association, Srinagar, in terms of clause (15) of the aforesaid agreement dated August 7, 1962. Before the arbitrator it was contended by the State that the claim of M/S Voltas was based on mis -conception of the provisions of the agreement and mis -representation of the facts and rules. The State further contended that the claim was unjustified and untenable as the so called increase in duty due to the loading of invoices by the customs authorities for assessment purposes was not a statutory variation of the customs duty, that the procedure of loading C.I.F. value (which signified the price which includes costs, insurance and freight as shown in invoice) was in vogue even prior to the corning into force of the Customs Act, 1962, and the prior to February 1, 1963, such loading of C.I.F. (invoice) value was also done under the provisions of Section 30(b) of the Sea Costums Act, 1878.

(3.) HOLDING that the extra payment made and claimed by M/S Voltas Limited was due to statutory variation as a result of the coming into force of the Customs Act, 1962 and the Customs Valuation Rules, 1982 which came into force with effect from Febuary 1, 1963, and that the claim was also justified on the basis of Section 64 -A of the Sales of Goods Act, 1893, the arbitrator by his award dated January 8, 1972, up -held the claim of M/S. Voltas Ltd. and adjudicated that the State was liable to pay the aforesaid amount of Rs.20,852.85. In imposing this liability on the State, the arbitrator inter -alia relied upon letter No. S/9 -26/64 -SVB dated February 3, 1966, addressed by the Assistant Collector of Customs, Special, Valuation Branch, to the Financial Advisor and Chief Accounts Officer, Flood Control Branch and Major Hydel Projects, Jammu and Kashmir, Srinagar, wherein it was inter -alia stated. "If the invoice values were accepted for imports made during the period prior to 1 -2 -1963 it was because M/S Voltas Ltd. were the sole importers of agency goods besides being sole Distributors. Such acceptance of invoice value was in conformity with the Central Board of Revenueâ„¢s instructions then in force. With the introduction of the Customs, Act, 1962, the position has changed as the sole Agents are required to be treated on a par with any other independent third party importer irrespective of the consideration as to whether the sole Agents are the sole importers or not." On an application of M/S Voltas Ltd. praying that the arbitrator be directed to file the award and the same be made a rule of the court, the arbitrator filed the aforesaid award of which the parties took due notice.