Very low price cannot be transaction value
EXPERT EYE
| There have been several instances where the declared transaction value on the basis of the invoice has not been accepted by the revenue department on the ground that the database of similar importation reveals a normal price, which is somewhat higher or lower. |
| In such cases the courts have rejected such a contention on the ground that slightly higher or lower price is no ground to discard transaction value. |
| But obviously too much of a higher price declared as a transaction value on the basis of the invoice compared to the normal value will also not be acceptable. |
| On the other extreme, there are cases where the transaction value on the basis of the invoice value is declared as ridiculously low. Such price cannot also be taken as transaction value. |
| In a recent judgement in the Gira Enterprises vs Commissioner of Customs, Ahmedabad, case, 2006 (194) ELT 92 (Tri-Mumbai), the tribunal laid down the principle that if the declared invoice value was claimed as the transaction value it could not be accepted if it was found to be ridiculously lower than the value of the similar goods found from the database. |
| In this case, certain chemicals of Chinese origin were imported from some traders of Dubai, who invoiced it at a price, which was far lower than the prices of exactly the same chemicals directly imported from China. |
| The declared invoice price was $750 per metric tonne, whereas the prices of same goods directly imported from China in a large number of cases was $1860 to $1950 per metric tonne. Thus the invoice value declared as the transaction value was 40 per cent of the normal value, the value of the same or similar goods sold contemporaneously. In other words, it is ridiculously low. |
| The tribunal held that such a ridiculously low price could not be accepted as a transaction value as the invoice did not correctly reflect the transaction value. |
| The transaction value has been defined in Section 14(1) of the Customs Act as the actual price paid or payable. The declared value on the basis of invoice price may not represent the transaction value in every case. |
| The main task is to find out when it does not represent the transaction value. When the declared value is ridiculously low or ridiculously high compared to the ordinary competitive price of comparable goods contemporaneously imported, such declared values cannot be adopted as transaction value for customs valuation. |
| This view finds support from the Supreme Court judgement in the Rajkumar Knitting Mills (P) Ltd vs Collector of Customs, Bombay, case, 1998 (98) ELT 292 (SC), where the apex court interpreted the words "ordinarily sold or offered for sale". |
| The apex court said for the purpose of assessing the value, it was necessary to ascertain the price at which the same or like goods were sold or offered for sale for delivery at the time and place of importation in the course of international trade. |
| A very high discount of, let us say 60-70 per cent is permissible only in extreme circumstances where the discounted price relates to, may be, disposal goods, old stocks and goods with slight defect as allowed in the Eicher Tractors Ltd vs Commissioner of Customs, Mumbai, case, 2000 (122) ELT 321 (SC). |
| Thus transaction value declared on the basis of invoice price cannot be lightly rejected by the revenue department just because it is different from the normal value at which the goods are ordinarily sold or offered for sale. But it can be rejected if the declared transaction value is far too high or far too low compared to the normal price and there are no extraordinary circumstances. |
| (The author is a former member of Central Board of Excise & Customs) |