A.N.Sen, J. - (1.) The validity of certain orders passed by the Assistant Collector of Customs (Valuation Section), respondent No. 1 herein, forms the subject-matter of challenge of this writ petition.
(2.) The petitioner acts as the sole distributor in India of various foreign companies manufacturing scientific instruments. As such sole selling agent or distributor, the petitioner has to work for promoting in India the sale of the said products of its principals and the petitioner is also bound to handle the servicing contracts with the purchasers in India and has to keep stock of necessary parts for maintenance works. Wherever there is a warranty against defective workmanship and/or material, when the instrument is replaced by the principals abroad, the petitioner is also to handle the installation and testing. The petitioner mainly deals in scientific instruments and the scientific instruments which are manufactured by the principals of the petitioner abroad and which are imported into India by the petitioner as the sole distributor or agent of the foreign principals in India are liable to Customs Duty. The petitioner has been carrying on its business for a number of years. In 1964 in the matter of assessment of duty payable by the petitioner on the goods imported, a dispute arose and the Assistant Collector of Customs, the respondent No. 1 herein, sought to disallow trade discount altogether and he changed the basis of determination of assessable value of the goods from Section 14 (1) (b) to Section 14 (1) (a) of the Customs Act, 1962 (hereinafter referred to as the Act) Against the said order of the Assistant Collector of Customs, the petitioner preferred an appeal, and in the appeal, the contention of the petitioner was accepted by the Appellate Collector who by his order dated 8-12-1965, allowed the appeal end directed that in the matter of determination of assessable value for computing the duty payable by the petitioner, Section 14 (1) (b) of the Act should be applied. On the basis of the order of the Appellate Authority, determination of the assessable value was being made in accordance with the provisions contained in Section 14 (1) (b) of the Act. On the 25th April, 1970, the Assistant Collector of Customs addressed a letter to the petitioner asking the petitioner to show cause why in the matter of determination of the assessable value Section 14 (1) (a) should not be applied and by the said letter the Assistant Collector of Customs held that according to him Section 14 (1) (a) was applicable and he also stated in the letter that the said letter should be treated as a demand for the amount of duty short levied and in terms of the proviso to Section 28 (1) of the Act. The petitioner sent a reply to the said letter of the Assistant Collector of Customs on the 3rd June. 1970, and in the said letter the petitioner dealt with the contentions raised in the letter of the 25th April, 1970, and the petitioner denied and disputed that there could be any change in the basis of the determination of the assessable value from Section 14 (1) (b) to Section 14 (1) (a) of the Act. On the 11th September, 1970, the Assistant Collector of Customs after considering the representations made by the petitioner, in his letter dated 3rd June. 1970, passed an order holding that Section 14 (1) (a) of the Act was applicable and determination of the assessable value should be on the basis of the provisions contained in Section 14 (1) (a) of the Act. In paragraph 8 of the order passed by the Assistant Collector of Customs on the 11th September, 1970, he has held. " I have carefully considered the submissions made by you, written as well as oral. Whatever might be the circumstances for direct importation by third parties, the fact remains that because of such importations you ceased to be the sole importer of the agency products, you are not, therefore, eligible for assessment under Rule 5 (a) of the Customs Valuation Rules read with Section 14 (1) (b) of the Customs Act, 1962. The provisions of Section 14 (1) (a) take precedence over Section 14 (1) (b)." Against the said order of the Assistant Collector of Customs (Valuation Section) the petitioner preferred an appeal on 9-11-1970. The said appeal filed by the petitioner was disposed of by the Appellate Collector on 12-1-1972. It is necessary to set out the order of the Appellate Collector of Customs. "ORDER S/Shri A. N. Baneriee and J. N. Roy, Advocates were heard on behalf of the appellant firm. They referred to their representation during the hearing before my predecessor that loading in the valuation has been done arbitrarily as the Valuation Rules provide a certain percentage of the discount which is set off against post importation charges. In no circumstances can the post importation charges be loaded in the value. Even if there is one or two solitary importations of the products, they hold sole agency m India and they get their discounts from their principals. The appellants, therefore, requested that this may be examined when the Valuation Rules provide for consideration for setting off the post importation charges a certain percentage of the discount should be allowed to them. Besides above and what had been stated in the written appeal Shri Roy said that he had two more points to put up for my attention. First, he referred to Section 14 (1) (a) of the Customs Act and stated for the purpose of valuation it is not only the place of importation but also the time of importation which is relevant and, therefore, any services rendered for which certain post importation charges are incurred the value of such services should not be loaded on; and secondly he referred me to the Customs Valuation Rules, 1963 and stated that he particularly refers to Rule 3 (a) where the word "Ordinarily" has been used with reference to sale or offered sale to buyers in India under competitive conditions, he said in the present case a few instances of direct sales were found by the Customs but such sales should be deemed to be sales under special circumstances and not within the meaning of words "ordinarily sold or offered for sale etc." occurring in Rule 3 (a) of the Customs Valuation Rules. Further he said those direct sales were made under the Aid Licences and in terms of the conditions of the said Aid Licences to importers who have to directly negotiate by opening L/C and placing indents directly on the suppliers; that some such sales were made through Ford Foundation, Rockfeller Foundation and also W. H. O. that some purchases were made directly by Hospitals in India from the manufacturers themselves or under the Import Liberation Scheme: that in all such sales the manufacturers reserved the appellants' agency commission for the purpose of post importation services during the warranty period and that such agency commissions were remitted to the appellants in due course, he said that because the appellants are holding the agency the valuation should have been done in terms of Rule 5 of the Valuation Rules; that is only the services rendered prior to importation, such as, advertising correspondence, indenting etc., which only should be loaded and not the post importation service charges. The appellants as per record are the Sole Managing Agents of the principal in India and are entrusted with after sales service in respect of imports made by them or by other organisations. In all fairness there should be a consideration for such after sale services which are rendered free in India. It is observed that this aspect was not examined by the Original Side before disallowing the agency discount to the appellants. The order in original is therefore; annulled without prejudice to re-examination of merits and for determination as to what quantum of discount claim can be on account of after sales services or expenditure by the local sole agents. Sd/- R. N. Shukla, Appellate Collector of Customs, Calcutta. CAP 2108/70, D/- 25-4-1972. Copy to: (1) The Scientific Instruments Co. Ltd., 6. Tej Bahadur Sapru Road, Allahabad-1. (2) Shri J. N. Roy, Advocate. 32/1, Broad Street, Calcutta-19. Sd/- Illegible 22-4-1972 for Appellate Collector of Customs. Calcutta". On the basis of the order passed by the Appellate Collector of Customs annulling the order of the Assistant Collector of Customs and remanding the matter to the Assistant Collector of Customs the Assistant Collector of Customs has passed an order holding that determination of the assessable value should be on the basis of Section 14 (1) (a) of the Act and not on the basis of Section 14 (1)(b) and necessarily the petitioner was not entitled to any deduction. The final order was passed by the Assistant Collector of Customs on 5th March, 1973, and before passing the final order the Assistant Collector of Customs by his order dated the 3rd June, 1972, had directed and ordered that pending finalisation assessment would be made provisionally under Section 18 (1) of the Act read with Customs Provisional Assessment Regulations. 1963. It also appears that before passing the final order on the 5th March, 1973 the Assistant Collector of Customs sent a letter to the petitioner asking to show cause as to why on the basis of the statements contained in the said letter he should not pass a final order holding that Section 14 (1) (a) of the Act applied and Section 14 (1) (b) of the Act had no application. On the 12th January, 1973, a personal hearing was given by the Assistant Collector of Customs to the representatives of the petitioner, and as I have already noted, the Assistant Collector of Customs passed his final order on the 5th March, 1973. In this order the Assistant Collector of Customs has, inter alia, held. " In view of the above. I also do not find any necessity to consider the matter in the light of the orders of the Appellate Collector of Customs vide Order in Appeal No. 313/72 dated 12-1-1972, since I do not find any scope to apply the provisions of Section 14 (1) (b) of the Customs Act to this case. You are, therefore, advised to declare on all the Customs documents, the assessable values of your imports from your foreign principals, in accordance with the above decisions." The Assistant Collector of Customs has also held that Section 14 (1) (a) of the Customs Act was applicable and has further held "The suppression of these facts and changes has resulted in underassessment of your imports from these suppliers. You are, therefore, requested to furnish immediately the relevant Bills of Entry with invoices and price lists to this office for scrutiny and pay the extra duty through the assessing groups concerned. While formal demand orders will be issued by the assessing groups in due course, this letter may be treated as a demand notice in respect of all the under-assessed consignments, in terms of proviso to Section 28 (1) of the Customs Act." In this writ petition the validity of the order passed by the Assistant Collector of Customs on 25-4-1970. 11-9-1970, 3-6-1972, 2-12-1972 and 5-3-1973 have been questioned.
(3.) The real grievance of the petitioner, however, appears to be with regard to the final order passed by the Assistant Collector of Customs on 5-3-1973.;