ALL INDIA GLASS MANUFACTURERS' FEDERATION, NEW DELHI versus COLLECTOR OF CUSTOMS, BOMBAY

Citation: [1991] 3 S.C.R. 513 · Decided: 13-08-1991 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed
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Judgment (excerpt)

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ALL INDIA GLASS MANUFACTURERS' FEDERATION, 
NEW DELHI 
v. 
COLLECTOR OF CUSTOMS, BOMBAY 
AUGUST 13, 1991 
[S. RANGANATHAN, M. FATHIMA BEEVI AND 
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N.D. OJHA, JJ.) 
Customs Act, 1962: Sections 22, 27-Jmport of goods as per 
contract-Clearance of goods paying customs duty-Detection of sup-
ply of infehor goods-Payment of compensation by sellers to 
importer-Whether amounts to reduction in price-Whether refund of 
customs duty can be claimed. 
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The appellant-Federation entered into a contract with a Soda 
Company of Kenya, for supply of 5000 metric tonnes of soda ash dense 
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and the consignment arrived at Bombay on 23.12.1981. The goods 
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were cleared on payment of customs duty of Rs.32,15,904.21. 
The appellant on distribution of the goods to various members of 
the Federation, received complaints that the soda ash which had been 
supplied was of sub-standard quality. When the sellers as well as their 
agents were approached, they sent a team of experts to examine the 
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goods and on inspection the goods were found defective; As per agree-
ment dated 9.2.1982, the sellers sent a credit note of US $ 2,40,000 as 
compensation on account of the defective goods. The amount remitted 
on account of the import made was only US $ 5,35,000 as against the 
earlier contracted amount of US $ 7, 75,000 . 
Io view of such reduction, the appellant filed a refund application 
before the Customs Department to the tune of Rs.9.95,892.65. The 
Assistant Collector rejected the refund application as he was not 
satisfied to the extent of deterioration of the goods before clearance as · 
provided by Section 22 of the Customs Act. 
The appeal preferred was rejected by the Collector of Customs on 
the reasoning that the damage wad discovered after the goods were out 
of customs control. 
The further appeal to the Tribunal was rejected holding that the 
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alleged inferior nature of goods was discovered after clearance. 
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513 
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514 
SUPREME COURT REPORTS 
[1991] 3 S.C.R. 
Under Section 130E of the Customs Act, 1962, present appeal was 
made to this Court, contending that the goods supplied were not in 
accordance with the contractual specification, the defects being inhe-
rent in nature resulted in diminution in the real value of the goods and 
what had been agreed upon by the foreign seller was reduction in price 
on account of the defects, and daimed that it would be entitled to 
refund of customs duty under Section 22 of the Act. 
On the question, whether the appellant was entitled to the refund 
of customs duty on account of the compensation given by the seller to 
the appellant on supply of goods, dismissing the appeal, this Court, 
HELD: 1.01. When the value is assessed on the basis of the invoice 
and the goods are cleared, the implication is that no remission is 
allowed and no abatement has been occasioned. There is no express 
provision which enables the proper officer to make a re-assessment for 
the purpose of remission on the ground that the goods at the time of 
their importation or at the time of the clearance was sub-standard or 
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damaged and the invoice price does not represent the real value. [S211E-F] 
1.02. Any error in the assessment of the value by itself does not 
enable the importer to claim re-assessment or refund. It has necessarily 
to be shown that on account of the damaged or deteriorated condition of 
the imported goods before or during the unloading of the goods in 
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India, the duty to be charged on the goods was proportionate to the 
value of the damaged or deteriora~ed goods. [520G-521A] 
J.03. The question of redetermining the value of the imported 
goods can arise only in a case where such damage or deterioration 
before the clearance is proved to the satisfaction of the proper officer. 
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When there had been no indication of any such condition and the duty 
has been assessed on the basis of the invoice value and duty is paid, the 
assessment would be binding. The importer on finding the goods 
cleared and distributed not to his entire satisfaction may have a claim in 
contract against the seller for providing sub-standard, damaged or 
deteriorated goods for the value in the invoice, and it may be open to the 
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buyer to realize from the seller such damages as he would in law be 
entitled to. That claim for damages cannot have any bearing to the 
assessment at the time of the clearance. The price at which the goods 
has been sold is represented by the invoice pri
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