POLYOLEFINS INDUSTRIES LTD Vs. CC

JUDGEMENT

(1.) THE appellant was, at the relevant time, an importer of various plastic goods, mainly manufactured by Hoechst AG West Germany. It was also at the same time an indenting agent of M/s. Chemie Export Kontor GmbH, West Germany (Chemexco for short) for the sale in India, Nepal and Bhutan of products made by Hoechst. The appellant was entitled to an agent's commission of 2% on all sales of the product mediated by it between Chemexco and the buyer. There is no dispute that the appellant was not getting this commission on goods which it imported directly from Chemexco for stock and further sale. The Department came to know that the appellants entered into a collaboration agreement with Hoechst for manufacture of high density polyethylene in India. The agency agreement for supply of product manufactured by Hoechst for the appellant through Chemexco was already registered with the Special Valuation Branch of the Custom House and that consequent on coming to know of the collaboration for manufacture the records of imports by it were placed under scrutiny. According to the department, this showed that despite the appellant being specifically instructed by letter 3rd November, 1987 to ensure provisional assessment of imports made by it from Chemexco the goods were finally assessed.

(2.) NOTICE was issued to the appellant following scrutiny. The notice alleged that the failure to indicate in the bills of entry filed for import that the appellant was an agent of the supplier showed wilful suppression of the fact of the relationship, which led to the appraising group finally assessing the bills of entry. The notices further alleged that the difference in price between the goods imported by the appellant and those by others amounted to as much as 11.2%. It therefore proposed to increase the value of the goods of the appellant to this extent to recover duty accordingly, based upon the invoices for imports made between 1986 and 1989. Notice also proposed imposition of penalty. The importers raised various contentions in reply. It said that it was not related to either Chemexco or Hoechst and that there was therefore no suppression in its mentioning in the bills of entry that it was not a related person, the notice was therefore barred by limitation having been issued beyond six months from the relevant date. It further contended that there was no evidence to show that the difference of 11.2% related to the period when the imports was made. It pointed out that the notice cited instances of imports of 1986 to 1989, either prior to or after the period during the appellant imported the goods.

(3.) THE Collector, in his order, did not accept the contention that the notice was barred by limitation. He said that but for the appellant's failure to declare in the bills of entry that it was a related person, the goods would not have been finally assessed. He found the appellant to be related person with Chemexco in view of the provisions of the agreement between Chemexco and the appellant. Therefore, he said that the price will have to be determined not under Clause (a) of Sub -section (1) of Section 14 but under Clause (b) of Sub -section read with Clause (a) of Rule 3 of the Valuation Rules for the period prior to 16th August, 1988. He found that for the period after 16th August, 1988 the transaction value was not acceptable because the appellant and Chemexco were directly or indirectly controlled by Hoechst. Therefore he said that the transaction value is required to be adjusted under Rule 9(1)(a)(i) of the Customs Valuation Rules. He accepted the contention that the notice did not cite instances of imports at higher prices during the relevant period by other buyers and that therefore 11.2% additional proposed could not be made. He said however that since the price at which the appellant imported the goods were lower than the prices at which others imported by 2% which was the agent's commission which was paid by in the case of other imports but not paid in by the appellant for its own imports. He therefore enhanced the assessable value by 2%. He also imposed a penalty of Rs. 1.00 lac. Hence this appeal.