MIS. EICHER TRACTORS LTD., HARYANA versus COMMISSIONER OF CUSTOMS, MUMBAI

Citation: [2000] SUPP. 4 S.C.R. 597 · Decided: 14-11-2000 · Supreme Court of India · Bench: AJAY PRAKASH MISRA · Disposal: Appeal(s) allowed

Judgment (excerpt)

MIS. EICHER TRACTORS LTD., HARYANA 
v. 
COMMISSIONER OF CUSTOMS, MUMBAI 
NOVEMBER 14, 2000 
[A.P. MISRA AND RUMA PAL, JJ.] 
Customs Act, 1962-Sections 14(1), 14(2), 14(/A)-Customs Valuation 
(Determination of Price of Imported Goods) Rules, 1988-Rules 2(j), 3(i), 
A 
B 
3(ii), 4(1), 4(2), 5, 6, 7, 7A, 8-Appellant importing a jive year old stock C 
of bearings from the foreign vendor at a discount of 77%-Assistant 
Commissioner of Customs holding that the 77% discount was not normal and 
instead, determined the price of the bearings based on the price list of the 
vendor by allowing a discount of 30% which was the maximum permissible 
discount according to the terms of agency between the vendor and its Indian 
agent-Tenability of-Held, when a discount is permissible commercially, D 
and there is nothing to show that the same would not have been offered to 
any one else wishing to buy the old stock, there is no reason why the 
declared value in question was not accepted under Rule 4(1)-The price 
paid by an importer to the vendor if! the ordinary course of commerce is to 
be taken as the value for the purpose of assessment of customs duty in the 
absence of any of the special circumstances indicated in Section 14(1) and E 
particularised in Rule 4(2)-ln the present case, production of the price list 
by the customs authorities neither indicated that the value as declared by 
the appellant was not· the 'ordinary' sale price of the bearings imported ~or 
implied the presence of any 'extraordinary' or special ' circumstances. 
The appellant being manufacturers of tractors and tractor engines in 
India, used to import bearings of spec~fic size for their tractors and tractor 
engines. The import of the aforesaid bearings was stopped when the appellant 
started utilizing bearings manufactured for them by an Indian Company. As 
a result, the foreign vendor was left with a stock of the bearings. Not finding 
F 
any customer for the bearings, the vendor's agent in India offered to sell the G 
stock of bearings to the appellant at a discount of 77%. The appellant found 
the offer competitive and agreed to buy the bearings from the vendor at the 
price offered. On the arrival of the bearings in India, the appellant filed the 
Bill of Entry together with the invoice with the Custom authorities. 
The Assistant Commissioner of Customs noted that the declared price H 
597 
598 
SUPREME COURT REPORTS (2000) SUPP. 4 S.C.R. 
A was only 23% of the vendor's list price and was of the view that the 77% 
discount allowed to the appellant by the vendor was not normal and could not 
be accepted for the purpose of determining the price of the bearings under 
Section 14 of the Customs Act, 1962 and Rule 4 of the Customs Valuation 
(Determination of Price of Imported Goods) Rules, 1988. The Assistant 
B Commissioner determined the price of the bearings based on the list price of 
the vendor and deducting 30% on account of discount, which according to 
the terms of agency between the vendor and its Indian agent, was the maximum 
permissible discount allowable. 
Against the aforesaid order of the Assistant Commissioner, the appellant 
C preferred an appeal before the Commissioner of Customs (Appeals) which was 
allowed. Thereafter, the respondent preferred an appeal before the Customs, 
Excise and Gold (Control) Appellate Tribunal which was allowed by the Tribunal 
holding that specially quoted price was not acceptable in preference to the 
ordinary price in the course of international trade. Hence the present appeal. 
D 
On behalf of the appellant, it was contended that giving of discounts was 
a normal incidence of commerce and given the circumstances of the case, a 
discount of77% was perfectly justified; that Rule 8 of the Customs Valuation 
(Determination of Price of Imported Goods) Rules could not have been relied 
on by the Assistant Commissioner without determining the value of the 
bearings under Rule 4; that the reason given by the Assistant Collector for 
E not accepting the actual price paid for the bearings as the true value of the 
transaction was erroneous particularly when there was no allegation of under-
valuation. 
On behalf of the respondent, it was contended that the principle for 
F valuation of imported goods was to be found in Section 14(1) of the Customs 
Act which provided for the determination of the value on the basis of an 
international sale price; that the use of the words 'price payable' in Rule 4 
meant the market v

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