Page 207 - ELT_15th August 2020_Vol 373_Part 4

2020 ] IFFCO LTD. v. PRINCIPAL COMMISSIONER OF CUSTOMS, JAMNAGAR 541

Interpretative Note to Rule 10 defines “buying commissions” to mean fees paid
by an importer to his agent for the service of representing him abroad in the pur-
chase of the goods being valued.
26. It has, therefore, to be examined whether the amount of Rs. 17/- per
MT paid by the Government of India to the STE can be termed as “buying com-
mission” because in that event it will not be included in the ‘transaction value’.
To examine this, it has to be seen whether the STE has represented the Govern-
ment of India abroad in the purchase of the goods being valued. Urea being a
canalised item under the Foreign Trade Policy, import can only be made through
canalising agencies called the STEs. As noticed above, the two communications
dated 12th November, 1991 and 2nd February, 2015 leave no manner of doubt
that urea is imported on Government Account on behalf of the Ministry of
Chemical and Fertilizers in the Government of India. Though, the terms used in
the aforesaid communications refer to “service charges”, but in fact they are
“buying commissions” as was also observed by the Tribunal in Anand Textiles.
Paragraph 9 of the decision of the Tribunal is reproduced below :
“Rule 9 of the Custom Valuation Rules clearly permits exclusion of buying
commission and note to Rule 9(I)(a)(i) also clarifies the term buying com-
mission as “fees paid by an importer to his agent for the service of repre-
senting him abroad in the purchase of the goods being valued”. On going
through the judgment of the Hon’ble Supreme Court in the case of Apollo
Tyres Ltd. (supra) we find that the facts of the present case are substantially
the same as facts of the said case. Therefore, we hold that the amount of
about 10% of the value paid by the appellant to the Singapore based party
is in the nature of buying commission only. It appears to be a case of differ-
ence in nomenclature in describing the said commission as documentation
and services charges by the Singapore based agent. We, therefore, hold that
the said amount is eligible to be excluded in arriving at the assessable value
of the imported goods.”
27. The Principal Commissioner has, however, relied upon the decision
of the Supreme Court in Hyderabad Industries Ltd. to arrive at a conclusion that
the payment of Rs. 17/- per MT paid by the Government of India to STE cannot
be treated as “buying commission” since the relationship between the Govern-
ment of India and STE cannot be treated as between a principal and an agent.
28. It will, therefore, be necessary to examine the factual position in
Hyderabad Industries Ltd. The question that arose for consideration before the Su-
preme Court was whether the service charges payable to MMTC by the Appel-
lant Hyderabad Industries Ltd. for the import of raw asbestos could be included
in the assessable value of import as provided for in the Customs Act and the
Customs Valuation (Determination of Price) Rule 1988. The Appellant was a
manufacturer of asbestos cement products for which it used raw asbestos that
was mainly imported from foreign countries. Under the provisions of the Export
and Import policy of the Government of India, MMTC was designated as a cana-
lising agency. MMTC imported raw asbestos in bulk from foreign sellers and
then entered into sale agreements on High Sea Sale basis with various users of
raw asbestos. The consideration paid by the purchasers of the raw asbestos from
MMTC, including the Appellant, is the purchase value incurred by MMTC and
an additional sum equivalent to 3.5% of the CIF value of the imports as service
charges. The Supreme Court concluded from these facts that there was no
EXCISE LAW TIMES  15th August 2020  207