# PERNOD RICARD INDIA (P) LTD v. COMMISSIONER OF CUSTOMS, ICD TUGHLAKABAD

- **Citation:** [2010] 8 S.C.R. 996
- **Court:** Supreme Court of India
- **Decided:** 2010-07-26
- **Case number:** Civil Appeal No. 5840 of 2008
- **Bench:** D.K. Jain, T.S. Thakur
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pernod-ricard-india-p-ltd-v-commissioner-of-customs-icd-tughlakabad-26826
- **Pages:** 29

## Headnote

Customs Act, 1962: s.130E - Statutory appeal filed
C before Supreme Court u/s. 130E against the order of tribunal
- Challenging the applicability of rule 6 of 1988 Rules -
Dismissal of appeal by Supreme Court by a non-speaking
order - Held: Dismissal of appeal by Supreme Court was in
exercise of appellate jurisdiction - Doctrine of merger would
D be attracted and the appellant is estopped from raising the
issue of applicability of Rf.lie 6 - Doctrine of merger -
Estoppel - Appeal before Supreme Court.
Customs Valuation (Determination of Prices of Imported
E Goods) Rules, 1988 - Rule 5(1)(c) - Transaction value -
"adjustment" in terms of Rule 5(1 )(c) for determination of value
of goods imported - Tribunal's direction with regard to the
adjustment on account of volume of the goods imported by
the importer @ 20% in the price difference between each
F variety of its imported goods and the corresponding import
of the competitor - Held: Not justified - Adjustment can be
granted only on production of evidence which establishes the
reasonableness and accuracy of adjustment and higher
volumes of goods imported would not be sufficient to justify
G an adjustment - A commercial practice is not a conclusive
evidence for determining real price of a consignment - In the
absence of some documentary evidence indicating that any
rebate/discount was given to the importer by the supplier,
adjustments under Rule 5(1)(c) cannot be justified.
H
996
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER 997
OF CUSTOMS, ICD TUGHLAKABAD
Appeal: Dismissal of statutory appeal vis-a-vis dismissal
A
of special leave petition by non speaking order - Distinction
between.
Appellant, a manufacturer of spirits, imported
Concentrate of Alcoholic Beverages (CAB). The appellant
8
was a related person to the supplier. Two show cause
notices were issued against the appellant proposing
demand of differential custom duty in respect of imports
for the period January 1995 to June ~000 and July 2000
to May 2001. Against the first show cause notice, the
C
appellant filed a writ petition before High Court. The High
Court directed that the notice issued under Section 28 of
the Customs Act, 1962 should be treated as notice for
finalisation of th·e provisional assessment. The
Commissioner of Customs adjudicated up6n both the
show cause notices and confirmed the demand of D
Rs.40.37 crores as against the proposed demand of
Rs.50.04 crores. Appellant filed appeal before tribunal.
By order dated 25th March 2003, while accepting the
claim of the appellant that CAB should be classified
E
under heading 2808.10, the Tribunal rejected the plea of
the appellant that in spite of the fact that the supplier was
a "related person", the value declared by them should be
accepted in terms of Rule 4(3)(b) of the Customs
Valuation (Determination of Prices of Imported Goods)
F
Rules, 1988. The Tribunal remanded the matter to the
adjudicating authority for a fresh consideration on the
question of applicability of Rule 6.
The appellant challenged the order before Supreme
Court by way of appeal under Section 130E of the Act G
which was dismissed on 21st November, 2003.
Pursuant to the order of the Tribunal, dated 25th
March 2003, the Commissioner passed a fresh order
3.
(1988) 4 sec 409.
H
998
SUPREME COURT REPORTS
(2010) 8 S.C.R.
A dated 29th August 2003 and held that Rule 6 was
applicable on the facts of the instant case. He
accordingly, confirmed the demand of duty of customs
amounting to Rs.39.96 crores. The said order was again
challenged by the appellant in the tribunal, mainly on the
B ground that the value of imported CAB could not be
determined under Rule 6. In the alternative, it was
pleaded that even the quantification of the value under
Rule 6 was seriously flawed. The tribunal observed that
the applicability of Rule 6 was left to the adjudicator in
c the remand order and no appeal was filed thereagainst.
The Tribunal again set aside the order of adjudication by
the Commissioner and remanded t

## Text

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A
B
[2010] 8 S.C.R. 996
PERNOD RICARD INDIA (P) LTD.
v.
COMMISSIONER OF CUSTOMS, ICD TUGHLAKABAD
(Civil Appeal No. 5840 of 2008)
JULY 26, 2010
[D.K. JAIN AND T.S. THAKUR, JJ.]
Customs Act, 1962: s.130E - Statutory appeal filed
C before Supreme Court u/s. 130E against the order of tribunal
- Challenging the applicability of rule 6 of 1988 Rules -
Dismissal of appeal by Supreme Court by a non-speaking
order - Held: Dismissal of appeal by Supreme Court was in
exercise of appellate jurisdiction - Doctrine of merger would
D be attracted and the appellant is estopped from raising the
issue of applicability of Rf.lie 6 - Doctrine of merger -
Estoppel - Appeal before Supreme Court.
Customs Valuation (Determination of Prices of Imported
E Goods) Rules, 1988 - Rule 5(1)(c) - Transaction value -
"adjustment" in terms of Rule 5(1 )(c) for determination of value
of goods imported - Tribunal's direction with regard to the
adjustment on account of volume of the goods imported by
the importer @ 20% in the price difference between each
F variety of its imported goods and the corresponding import
of the competitor - Held: Not justified - Adjustment can be
granted only on production of evidence which establishes the
reasonableness and accuracy of adjustment and higher
volumes of goods imported would not be sufficient to justify
G an adjustment - A commercial practice is not a conclusive
evidence for determining real price of a consignment - In the
absence of some documentary evidence indicating that any
rebate/discount was given to the importer by the supplier,
adjustments under Rule 5(1)(c) cannot be justified.
H
996
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER 997
OF CUSTOMS, ICD TUGHLAKABAD
Appeal: Dismissal of statutory appeal vis-a-vis dismissal
A
of special leave petition by non speaking order - Distinction
between.
Appellant, a manufacturer of spirits, imported
Concentrate of Alcoholic Beverages (CAB). The appellant
8
was a related person to the supplier. Two show cause
notices were issued against the appellant proposing
demand of differential custom duty in respect of imports
for the period January 1995 to June ~000 and July 2000
to May 2001. Against the first show cause notice, the
C
appellant filed a writ petition before High Court. The High
Court directed that the notice issued under Section 28 of
the Customs Act, 1962 should be treated as notice for
finalisation of th·e provisional assessment. The
Commissioner of Customs adjudicated up6n both the
show cause notices and confirmed the demand of D
Rs.40.37 crores as against the proposed demand of
Rs.50.04 crores. Appellant filed appeal before tribunal.
By order dated 25th March 2003, while accepting the
claim of the appellant that CAB should be classified
E
under heading 2808.10, the Tribunal rejected the plea of
the appellant that in spite of the fact that the supplier was
a "related person", the value declared by them should be
accepted in terms of Rule 4(3)(b) of the Customs
Valuation (Determination of Prices of Imported Goods)
F
Rules, 1988. The Tribunal remanded the matter to the
adjudicating authority for a fresh consideration on the
question of applicability of Rule 6.
The appellant challenged the order before Supreme
Court by way of appeal under Section 130E of the Act G
which was dismissed on 21st November, 2003.
Pursuant to the order of the Tribunal, dated 25th
March 2003, the Commissioner passed a fresh order
3.
(1988) 4 sec 409.
H
998
SUPREME COURT REPORTS
(2010) 8 S.C.R.
A dated 29th August 2003 and held that Rule 6 was
applicable on the facts of the instant case. He
accordingly, confirmed the demand of duty of customs
amounting to Rs.39.96 crores. The said order was again
challenged by the appellant in the tribunal, mainly on the
B ground that the value of imported CAB could not be
determined under Rule 6. In the alternative, it was
pleaded that even the quantification of the value under
Rule 6 was seriously flawed. The tribunal observed that
the applicability of Rule 6 was left to the adjudicator in
c the remand order and no appeal was filed thereagainst.
The Tribunal again set aside the order of adjudication by
the Commissioner and remanded the matter to him with
certain directions by order dated 29th June, 2005.
Pursuant thereto, the Commissioner passed a fresh
0 adjudication order on 20th June 2006, confirming a total
differential duty of Rs.40.37 crores.
The appellant challenged the said order by preferring
yet another appeal to the Tribunal. The Tribunal upheld
the decision of the Commissioner in determining the
E value of the imports under Rule 6. However, partly
accepting the appeal, the tribunal directed adjustment @
20% in the price difference between each variety of CAB
of the appellant and the corresponding CAB of the
competitor on account of higher volume of imports by the
F appellant for determining the value of import of CAB.
Dissatisfied with the direction/order of Tribunal both the
parties filed the appeals.
Disposing of the appeals, the Court
G
HELD: 1. Having carefully perused the orders of
H
remand passed by the Tribunal on 25th March 2003 and
29th June 2005 the issue with regard to the applicability
of Rule 6 of the Customs Valuation (Determination of
Prices of Imported Goods) Rules, 1988 for valuation of
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER 999
OF CUSTOMS, ICD TUGHLAKABAD
CAB had attained finality on the summary dismissal of the
"\
appellant's appeal by this Court by order dated 21st
November 2003. It is clear from a bare reading of the
observations of the Tribunal in its order dated 25th March
2003, that remand to the Commissioner for fresh
adjudicatio.Q was confined only to the errors committed
B
while determining the assessable values based on the
transaction value of "similar goods". Thus, in principle,
the Tribunal proceeded on the premise that the valuation
was to be done as per the procedure laid down in Rule
6. This was also evident from appellant's pleadings when c
they challenged the order of remand contending in their
appeal under Section 130E of the Act that Rule 6 had no
application on the facts of their case and the value of
imported CAB by them had to be determined as per Rule
4(3)(b) of the 1988 Rules. The appeal was, however, . 0
dismissed in limine. Once a statutory right of appeal is
invoked, dismissal of appeal by the Supreme Court,
whether by a speaking order or non speaking order, the
doctrine of merger does apply, unlike in the case of
dismissal of special leave to appeal under Article 136 of
E
the Constitution by a non-speaking order.In the present
case, the appellant preferred statutory appeal under
Section 130E of the Act against order of the Tribunal
dated 25th March 2003 and, therefore, the dismissal of
appeal by this Court though by a non-speaking order,
was in exercise of appellate jurisdiction, wherein the
F
merits of the order impugned were subjected to judicial
scrutiny. In the instant case, the doctrine of merger would
be attracted and the appellant is estopped from raising
the issue of applicability of Rule 6 in their case. Moreover,
the issue with regard to the applicability of Rule 6 had
G
attained finality for yet another reason. It is manifest from
the Tribunal's order dated 29th June 2005, that the scope
and purpose of remand to the Commissioner was limited.
The Tribunal categorically declined to go into the issue
of the appropriateness of Rule 6, with the result that the
H
1000
SUPREME COURT REPORTS
[2010] 8 S.C.R.
A finding of the Commissioner in his order passed
pursuant to Tribunal's earlier order dated 29th August
2003, regarding applicability of Rule 6 remained
undisturbed and in fact attained finality, in as much as,
the appellant did not question the correctness of the
B remand order passed by the Tribunal on 29th June 2005.
The Tribunal erred in re-opening and examining afresh
the question as to whether or not the value of CAB could
be determined by applying Rule 6 and, therefore, the
objection of the revenue in that regard is accepted.
c [Paras 22, 24, 26] [1013-F-G; 1014-A-D; 1017-8-D]
2.1. Rule 6 (2) provides that the provisions of clauses
(b) and (c) of sub-rules (1) to (3) of Rule 5 of these rules
shall mutatis mutandis also apply in respect of similar
goods. A similar stipulation appears in Interpretative note
D (2) to Rule 6. Rule 5(1 )(c) provides that where no sale
referred to in clause (b) of sub-rule (1) of this rule, is
found, the transaction value of identical goods sold at
different commercial level or in different quantities or
both, adjusted to take account of the difference
E attributable to commercial level or to the quantity or both
shall be used, provided that such adjustments shall be
made on the basis of 'demonstrated evidence', which
clearly establishes the reasonableness and accuracy of
the adjustments. Interpretative Note 4 to Rule 5 reiterates
F that such adjustment, whether it leads to an increase or
a decrease in the value, be made only on the basis of
'demonstrated evidence' that clearly establishes the
reasonableness and accuracy of the adjustment. One
such evidence could be a valid price list containing
G prices referring to different levels or different quantities.
(Para 31) (1021-F-H; 1022-A-BJ
Commissioner of Central Excise, Jaipur v. Rajasthan
SPG. & WVG. Mills Ltd. & Anr. (2007) 13 SCC 129; Mirah
Exports Pvt. Ltd. v. Collector of Customs (1998) 3 SCC 292;
H
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER1001
OF CUSTOMS, ICD TUGHLAKABAD
Basant Industries Nunhai, Agra v. Additional Collector of A
Customs, Bombay 1995 Supp (3) 320 - referred to.
2.2. Bearing in mind the object behind the provision
for "adjustment" in terms of Rule 5(1 )(c), the fine
distinction between the words "adjustment" and
'discount' sought to be brought out by the appellant is
of no relevance to the controversy at hand. The provision
B
is clear and unambiguous, meant to provide some
adjustment in the price of identical goods, imported by
two or more persons but in different quantities. It is plain
C
that such "adjustment" may not necessarily lead to a
decrease in the value. It rnay result in an increase as well.
Reference to the word 'discount' in the interpretative note
is by way of an illustration to indicate that a seller's price
list is one of the relevant pieces of evidence to establish
the factum of quantity discount by the seller. It is manifest D
that "adjustment" in terms of Rule 5(1 )(c) of 1988 Rules,
for the purpose of determination of value of an import,
can be granted only on production of evidence which
establishes the reasonableness and accuracy of
adjustment and higher volumes of imports per se, would
not be sufficient to justify an adjustment, though it may
be one of the relevant considerations. Therefore, in so far
as the question of "adjustment" in terms of Rule 5(1 )(c)
E
is concerned, the revenue having accepted the order of
remand dated 29th June 2005, cannot turn around and
contend that no adjustment whatsoever is warranted.
Similarly, there may also be some substance in the
observation of the Tribunal that generally when the
transactions are in large volumes over a long period,
grant of discount is a normal commercial practice but G
again a commercial practice, per se, cannot be treated as
conclusive evidence for determining real price of a
consignment. Therefore, in the absence of some
documentary evidence indicating that any rebate/
discount was given to the appellant by the supplier,
F
H
1002
SUPREME COURT REPORTS
[2010] 8 S.C.R.
A adjustments under Rule 5(1)(c) cannot be justified. In the
present case, it is evident from the impugned order that
though the Tribunal had felt that requisite evidence to
establish the range of adjustment was lacking and for that
purpose, according to it, the matter was required to be
s remanded to the Commissioner but being influenced by
the fact that there had already been three rounds of
appeals to the Tribunal, it undertook the exercise itself.
This approach of the Tribunal was not in order and
therefore, in the absence of any demonstrated evidence,
c its direction for ad-hoc adjustment @ 20%, cannot be
sustained. The order of the Tribunal under appeal, in so
far as it pertains to the applicability of Rule 6 of 1988
Rules, is affirmed, however, the direction with regard to
the adjustment on account of volume of imports of CAB
0 by the appellant @ 20% in the price difference between
each variety of CAB imported by the appellant and the
corresponding CAB of the competitor, is set aside. [Paras
33-36] [1023-D-H; 1024-A-G]
Metal Box India Ltd. v. Collector of Central Excise,
E Madras (1995) 2 SCC 90; Kunhayammed & Ors. v. State of
Kera/a & Anr. (2000) 6 SCC 359. V.M. Sa/gaocar & Bros. Pvt.
Ltd. v. Commissioner of Income Tax (2000) 5 SCC 373;
Supreme Court Employees· Welfare Association v. Union of
India & Anr. (1989) 4 SCC 187; Commissioner of Central
F Excise, Jaipur v. Rajasthan SPG. & WVG. Mills Ltd. & Anr.
(2007) 13 SCC 129, Mirah Exports Pvt. Ltd. v. Collector of
Customs (1998) 3 SCC 292; Basant Industries Nunhai, Agra
Vs. Additional Collector of Customs, Bombay 1995 Supp (3)
320 - referred to.
G
Case Law Reference:
(1995) 2 sec 90
referred to
Para 17
(2000) s sec 359
referred to
Para 23
H
(2000) 5 sec 373
referred to
Para 25
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER1003
OF CUSTOMS, ICD TUGHLAKABAD
(1989) 4 sec 187
referred to
Para 25
(2007) 13 sec 129
referred to
Para 32
(1998) 3 sec 292
referred to
Para 32
1995 Supp (3) 320
referred to
Para 32.
(2001) 13 sec 129
referred to
Para 32
(1998) 3 sec 292
referred to
Para 32
1995 Supp (3) 320
referred to
Para 32
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
· 5840 of 2008.
A
8
c
From the Judgment & Order dated 25.06.2008 of the
Customs, Excise & Service Tax Appellant Tribunal (CESTAT),
New Delhi in Custom Appeal No. 559/2006.
D
WITH
C.A. No. 1110 of 2009.
8. Bhattacharya, ASG, V. Lakshmi Kumaran, R.
Parthasarthy, L. Sadri Narayan, Alok Yadav, M.P. Devanath,
Rupesh Kumar, Arijit Prasad, Debashis Mukherjee, Satish
Agarwal, Ajay Singh, Nishant Patil, B.K. Prasad, Anil Katiyar,
R. Parthasarthy for the appearing parties.
The Judgment of the Court was delivered by
D.K. JAIN, J. 1. These two appeals under Section 130E
E
F
of the Customs Act, 1962 (for short "the Act") by the importer
(hereinafter referred to as "the appellant") (C.A. No. 5840 of
G
2008) as well as by the revenue (C.A. No. 1110 of 2009) arise
from the final order dated 25th June 2008, passed by the
Customs, Excise and Service Tax Appellate Tribunal, Principal
Bench, New Delhi (for short "the Tribunal"), in Custom Appeal
No.559 of 2006. By the impugned order, while upholding the
H
1004
SUPREME COURT REPORTS
[2010) 8 S.C.R.
A decision of the Commissioner of Customs in determining the
value of the "Concentrate of Alcoholic Beverages" ("CAB" for
short}, imported by the appellant, under Rule 6 of the Customs
Valuation (Determination of Prices of Imported Goods) Rules,
1988 (for short "the 1988 Rules"), the Tribunal has directed the
B jurisdictional Commissioner to redetermine the customs duty
liability of the appellant after making certain adjustments in the
manner indicated in the order.
c
2. As both the appeals call in question the same order,
these are being disposed of by this common order.
3. The case has had a chequered history and, therefore,
in order to appreciate the controversy, it would be necessary
to narrate the facts in detail.
D
The appellant (formerly named and styled as Seagrams
India Pvt. Ltd.) is a wholly-owned subsidiary of the Seagram
Company Ltd., Canada, established for manufacturing/blending
of non-molasses based spirits. The appellant imported CAB
from M/s Joseph E Seagram and Sons Ltd., Scotland, a whollyE owned subsidiary of Seagram Company Ltd., Canada. The
strength of CAB imported was about 60%. It is not in dispute
that the appellant is a "related person" to the supplier and this
fact was disclosed to the Customs Authorities. The import of
CAB was of four varieties, each one meant for manufacturing
four brands of scotch whiskies, namely "100 Pipers",
F "Passport", "Something Special" and "International Malts"
(Royal Stag; Oaken Glow; Blenders Pride and Imperial Blue).
The import of CAB was in wooden barrels and their value was
declared separately for assessment. The appellant diluted the
imported CAB by adding demineralised water and reduced the
G strength to 42.8% v/v; packed them in bottles under respective
brands; paid State excise duty and sold these to the dealers
for ultimate sales to the consumers.
4. In the year 1999, the Directorate of Revenue Intelligence
H commenced investigation into the imports of CAB by the
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER1005
OF CUSTOMS, ICD TUGHLAKABAD [D.K. JAIN, JJ
appellant, which resulted in the issuance of two show cause
A
notices. The first show cause notice dated 19th December
2000 was issued proposing demand of differential duty of
customs amounting to Rs.37,96,70,451/- in respect of imports
relating to the period from January 1995 to June 2000 and the
second show cause notice dated 16th August 2001 was issued
B
demanding differential duty of customs of Rs.12,08,42,462/-
relating to imports during the period July 2000 to May 2001.
Penal action was also proposed in. both the show-cause
notices.
5. Against show-cause notice dated 19th December 2000, c
the appellant filed a writ petition before the High Court of Delhi.
Vide its order dated 27th August 2001, the High Court directed
that the notice issued under Section 28 of the Act be treated
as notice for finalization of the provisional assessment in terms
of Section 18(2) of the Act. While disposing of the petition, the
D
High Court observed that the authorities were free to decide
as to whether any notice in terms of Section 111/124 of the Act
was warranted. At the same time, the High Court granted liberty
to the appellant to seek its remedy as per law in the event of
issuance of such a show cause notice.
E
6. The Commissioner of Customs adjudicated upon both
the show cause notices by a common order dated 31st May
2002, finalizing the assessments and confirming the demand
of Rs.40.37 crores as against proposed demand of Rs.50.04
F
crores. The Commissioner classified the imported CAB under
the Chapter heading 2808.30 as whisky as against the claim
of the appellant under the Chapter heading 2808.10.
7. Being aggrieved by the order of adjudication, the
appellant filed an appeal before the Tribunal. Vide order dated
G
25th March 2003, while accepting the claim of the appellant that
CAB should be classified under heading 2808.10, the Tribunal
rejected the plea of the appellant that in spite of the fact that
the supplier was a "related person", the value declared by them
should be accepted in terms of Rule 4(3)(b) of the 1988 Rules.
H
1006
SUPREME COURT REPORTS
[2010] 8 S.C.R.
A Nevertheless, the Tribunal remanded the matter to the
adjudicating authority for a fresh consideration on the question
of applicability of Rule 6 as it felt that the appellant had not been
granted adequate opportunity to put forth their case against the
proposal to apply Rule 6. The Tribunal, however, permitted the
B Commissioner to proceed under Rule 7 or 8 in the event of his
accepting the appellant's plea that Rule 6 could not be applied.
Relevant portion of the order is extracted be" ... We are also of
the view that while working out the provisions of Rule the
Commissioner has not taken into consideration all the relevant
c
factors. While fixing the value under Rule 6, the authority has
to look into the definition of the term 'similar goods' under Rule
2(e) and that the conditions contained therein are satisfied.
Clauses (b) and (c) of sub-rule (1 ), sub-rule(2) and sub-rule(3)
of Rule 5 are made applicable to Rule 6 also. We find that there
0
is no proper consideration of the above provisions by the
Commissioner while arriving at the ,value under Rule 6. The
appellant is justified in complaining· that comparison was not
made with the transaction of similar goods sold for export to
India and imported at or about the time as the goods being
E valued, especially in the case of the goods covered by the
second show cause notice dated 16th September, 2001.
Comparison is made with imports which had taken place in
January 1999, May 1999 and December 1998 for valuing the
goods imported during the period July 2000 to May 2001."
F
8. The appellant challenged the said order before this
Court by way of an appeal under Section 130E of the Act, which
was dismissed on 21st November2003. The appellant pleaded
that invocation of Rule 6 by the ·:commissioner in the final
adjudication order was beyond the scope of the show cause
G notice, in as much as, in the show cause notice itself it was
observed that Rule 6 could not be applied because of nonavailability of requisite data for adjustments required to be
made under the said Rule. It was asserted that the value of CAB
imported had to be determined as per Rule 4(3)(b) of 1988
H Rules.
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER1007
OF CUSTOMS, ICD TUGHLAKABAD [D.K. JAIN, J.]
9. Pursuant to the order of the Tribunal, dated 25th March
A
2003, the Commissioner passed a fresh order dated 29th
August 2003 and held that Rule 6 was applicable on the facts
of the instant case. He accordingly, confirmed the demand of
duty of customs amounting to Rs.39.96 crores. The said order
was again challenged by the appellant in the Tribunal, mainly
B
on the ground that the value of imported CAB could not be
determined under Rule 6. In the alternative, it was pleaded that
even the quantification of the value under Rule 6 was seriously
flawed.
10. Accepting the alternative submission of the appellant
C
relating to the errors committed by the Commissioner while
determining the assessable value of CAB on the basis of the
transaction value of "similar goods", by its order dated 29th
June 2005, the Tribunal again set aside the order of
adjudication by the Commissioner and remanded the matter
D
back to him with certain directions. Since the observations of
the Tribunal contained in paragraphs 7 and 13 have some
bearing on the merits of the rival stands on behalf of the parties,
these are extracted hereunder:
"7. We are not going into the above mentioned issue about
the appropriateness of Rule 6 for two reasons. Firstly, we
E
had left this Rule open to the adjudicator in our remand
order and no appeal had been filed against that order.
Secondly, the present appeal can be disposed of after
F
considering the appellant's contentions in terms of Rule 6."
"13. As already noted we are not going into the
submissions made by the appellant against valuation under
(sic) Rule 6. Instead, the appeal is being disposed of after
considering the alternate submissions relating to errors
G
committed while determining the assessable values based
on the transaction value of similar goods."
The final direction by the Tribunal reads as follows:
H
1008
SUPREME COURT REPORTS
[2010] 8 S.C.R.
A
"From the above. it is clear that the valuation of the items
in question should be re-done by using lowest transaction
value of Find late rs for determining the price of 100 Pipers.
Further, due adjustments towards quantity difference and
retail price difference should be made wherever warranted.
B
In order to facilitate such revaluation, we set aside the
impugned order and remit the case to the Commissioner
for fresh adjudication. Both sides would be at liberty to
present data relevant to the above issues."
C
11. This decision of the Tribunal was not put in issue by
the appellant before a higher forum. Pursuant to and in
furtherance of the directions issued by the Tribunal in the said
order, the Commissioner passed a fresh adjudication order on
20th June 2006, confirming a total differential duty of Rs.40.37
crores, which happened to be more than the duty amount of
D Rs.39.96 crores as confirmed in the second adjudication order.
12. As expected, the appellant challenged the said order
by preferring yet another appeal to the Tribunal. lnter-alia,
observing that in the first remand order the question of
E applicability of Rule 6 was left to be decided by the adjudicator
and in the second remand order. dated 29th June 2005, the
Tribunal did not go into the applicability of the said rule and
allowed the appeal on the basis of alternative pleas of the
appellant, the Tribunal decided to go into the question of
F applicability of Rule 6 Upon re-consideration of the issue, the
Tribunal upheld the decision of the Commissioner in determining
the value of the imports under Rule 6. However, partly accepting
the appeal. the Tribunal held that the appe!lant will be entitled
to further adjustments in the value of CAB determined on the
G basis of the value of similar goods, on account of: (i) imports
of substantially higher volumes of CAB: and (ii) where the retail
price of bottled whisky was substantially lower than those of the
comparable brands. It was, however, clarified that once the
assessable value was determined for any brand by following
the above method. the assessable value shall not be enhanced
H
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER1009
OF CUSTOMS, ICD TUGHLAKABAD [D.K. JAIN. J]
till a higher import price of the similar goods was noticed. The
A
Tribunal also laid down the following methodology fur making
the adjustments on account of difference in volume of imports
and the retail price:-
"The price difference between each variety of CAB of the
B
importer (say Pl - Price of Import) and the corresponding
CAB of competitor (say PC -
Price of Comparable
goods) shall be arrived at first as PC-Pl; thereafter value
of the import of CAB of each brand shall be determined
as Pl+80% of (PC-Pl). In other words, instead of adding
C
the entire difference it shall be restricted to 80% i.e. by
reducing the difference by 20%.
We direct that the adjustments on account of difference in
retail prices shall be made in the manner prescribed
below. The percentage of difference between the retail
D
price of any brand of the appellant with the corresponding
brand being compared shall be arrived at and to that
extent the value of CAB of the competitor's import shall be
reduced to arrive at the assessable value for CAB
imported by the appellant.
E
The above determination is subject to the following
conditions:-
(a)
The value of any brand to be adopted shall
not _be higher than the value adopted by the
F
Commissioner in his second order dated
28.09.2003.
(b)
The value of any brand to be adopted shall
not be lower than the value declared by the
G
importer."
13. Being dissatisfied with the order/directions of the
Tribunal, as stated above, both the parties are before us in this
appeal.
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1010
SUPREME COURT REPORTS
[2010] 8 S.C.R.
A
14. We have heard Mr. V. Lakshmikumaran, learned
counsel appearing for the appellant and Mr. B. Bhattacharya,
learned Additional Solicitor General for the revenue.
15. Learned counsel for the appellant strenuously urged
B that both the authorities below have committed a serious error
of law by holding that the value of the imported CAB is to be
determined as per the procedure prescribed in Rule 6 of the
1988 Rules. It was argued that having regard to the fact that
scotch whisky is a specialty goods and is not commercially
interchangeable, the CAB imported by the appellant and by
C others cannot be said to be 'similar goods' as defined in Rule
2(1 )(e) of the 1988 Rules. It was submitted that determination
of similarity in terms of Rule 2(1 )(e) by the Commissioner and
affirmed by the Tribunal is fallacious for the reasons: -
(i) in
specialty goods, the comparison of goods on the basis that
D such goods broadly contain the same components is
misleading in as much as while all scotch whiskies are made
from malt, have an age of at least three years and sold at the
same concentration at the retail level yet such comparisons
obliterate the inherent differences on the basis of which
E consumer preferences are decided. Different scotch whiskies
have different tastes depending on the casks in which the
scotch whisky is aged, the temperature during the ageing
process, water used for making the scotch, the ingredients used
etc. Additionally, blended scotch whiskies are blends of other
F scotch whiskies and blending formulae are kept secret, making
each blended scotch whisky a unique product in the market;
(ii) the CAB imported do not have the same quality, reputation
and trademark. The concentrate imported by the appellant has
a particular trademark i.e. 100 Pipers, Passport and
G Something Special 12 Years Old, which have certain quality
and very little reputation in the Indian market whereas the
concentrate imported by their competitors, having the trademark
of Black Dog 12 Years Old, Black & White and VAT 69 have
different quality and reputation as they are relatively very well
H known brands being sold in India for several decades and (iii)
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONERl 011
OF CUSTOMS, ICD TUGHLAKABAD [D.K. JAIN, J.]
the variation in price is largely due to the branding and individual
A
preferences and, therefore, some goods command a premium
price as compared to others, which is the case with regard to
scotch whisky market also. The appellant and their competitors
spend significantly on branding for differentiating their products
and such branding, coupled with individual preferences, render
B
such goods as not similar. Similarity cannot be determined on
the basis of similarity in the prices at which the goods
manufactured out of the imported goods are sold in the retail
market in as much as retail price of the same brand can, in fact,
be more or less in different States when compared with c
competitors' brand.
16. Learned counsel then submitted that even if the goods
in question are treated as similar goods, Rule 6 cannot be
applied because no suitable adjustments can be made for
quantity difference. According to the learned counsel, apart from
D
the fact that any goods, such as scotch whiskies, which are
specialty goods, the variations in consumer preferences and
the value of trademark and reputation are difficult to ascertain
and adjust, there cannot be "demonstrated evidence" for
quantifying such differences and, therefore, Rule 6 cannot be
E
applied.
17. Learned counsel for the appellant also urged that the
formula devised by the Tribunal, directing loading of the price
of imports with 80% of the price differential owing to the
F
differential in quantity imported is arbitrary. It was urged that
since the quantity imported by the appellant is 500% to 1500%
of the quantity imported by the identified brands, an adjustment
of at least 40% from the price of such identified brands should
have been allowed by the Tribunal. In support of the proposition
G
that deduction to the extent of 50% in cases of whole sales were
allowed, reliance was placed on a decision of this Court in
Metal Box India Ltd. Vs. Collector of Central Excise, Madras1•
It was, thus, pleaded that the order of the Tribunal, approving
1.
(1995) 2 sec 90.
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1012
SUPREME COURT REPORTS
[2010] 8 S.C.R
A
the application of Rule 6 deserves to be set aside. In the
alternative, it was urged that if this Court comes to the
conclusion that Rule 6 is to be applied for determining the value
of CAB, comparison should be made for each year with the
lowest price of other imports during the year with at least 40%
B
reduction from the list price to take care of quantity differences.
18. Per contra, Mr. Bhattacharya, while supporting the
decision of the Tribunal, in so far as the question of applicability
of Rule 6 was concerned, submitted that the Tribunal committed
a serious error of law in re-examining the said question. It was
C
contended that apart from the fact that second remand order
dated 29th June 2005, whereby the Tribunal had directed the
Commissioner to apply Rule 6 and re-determine the value of
CAB after making adjustments wherever warranted, was not
questioned by the appellant, in view 'of the dismissal of their
D
appeal by this Court against Tribunal's order dated 25th March
2003, the said issue had attained finality and the appellant was
estopped from raising it before any forum.
19. In support of revenue's appeal. learned counsel
E
submitted that the direction by the Tribunal to the Commissioner
to give adjustment of 20% while determining the value of the
imported CAB is vitiated because no evidence in this behalf
was produced by the appellant before the Commissioner.
' F
Referring to para 4 of the interpretative note to Rule 5 of the
1988 Rules, learned counsel asserted that no adjustment on
account of difference in quantity can be granted unless there
is "demonstrated evidence" on the basis whereof
reasonableness and accuracy of the adjustment could be
established.
G
20. In rejoinder, Mr. V. Lakshmikumaran argued that the
appellant was fully justified in agitating before the Tribunal the
issue with regard to the applicability of Rule 6. It was submitted
that since the applicability of Rule 6 had been left to the
adjudicator to decide in the first remand order, the question of
H
applicability of Rule 6 arose before the Tribunal only in the
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER1013
OF CUSTOMS, ICD TUGHLAKABAD [D.K. JAIN, J.)
second round. In second round again, appellant's appeal having
A
been disposed of on their alternative submissions regarding
Rule 6, the appellant's submission on applicability of Rule 6,
in fact, came up for consideration before the Tribunal for the
first time in the third round of appellant's appeal before the
Tribunal. It was, thus, argued that filing or non filing of an appeal
B
against the two earlier orders of the Tribunal is irrelevant.
21. The questions arising for determination are:-
(i)
Whether the Tribunal was justified in reexamining the question qf applicability of C
Rule 6?
(ii)
If the answer to question (i) is in the
affirmative, then whether the value of the
CAB for the purpose of levying duty of D
customs is to be determined as per the
procedure prescribed in Rule 6 or in terms
of some other Rule?
(iii)
Whether the direction by the Tribur.al
regarding adjustment to the tune of 20% in
the price difference between CAB of the
appellant and the corresponding CAB of the
competitor, on account of volume of imports,
is justified?
22. Having carefully perused the orders of remand passed
by the Tribunal on 25th March 2003 and 29th June 2005, we
are of the opinion that the issue with regard to the applicability
E
F
of Rule 6 of the 1988 Rules for valuation of CAB had attained
finality on the summary dismissal of the appellant's appeal by
G
this Court vide order dated 21st November 2003. It is clear
from a bare reading of the observations of the Tribunal in its
H
1014 SUPREME COURT REPORTS
[2010] 8 S.C.R.
A order dated 25th March 2003, extracted in para 11 supra that
remand to the Commissioner for fresh adjudication was
confined only to the errors committed while determining the
assessable values based on the transaction value of "similar
goods". Thus, in principle, the Tribunal proceeded on the
B premise that the valuation had to be done as per the procedure
laid down in Rule 6. This is also evident from appellant's
pleadings when they challenged the order of remand inter-a/ia,
contending in their appeal under Section 130E of the Act that
Rule 6 had no application on the facts of their case and the
c value of imported CAB by them had to be determined as per
Rule 4(3)(b)of the 1988 Rules. The appeal was, however,
dismissed in limine. In our opinion, once a statutory right of
appeal is invoked, dismissal of appeal by the Supreme Court,
whether by a speaking order or non speaking order, the
0 doctrine of merger does apply, unlike in the case of dismissal
of special leave to appeal under Article 136 of the Constitution
by a non-speaking order.
23. The nature, concept and logic of doctrine of merger
was explained elaborately in Kunhayammed & Ors. Vs. State
E of Kera/a & Anr. 2 . Speaking for a bench of three learned
Judges, R.C. Lahoti, J. (as His Lordship then was) observed:
(SCC p. 370, para 12)
F
G
"12. The logic underlying the doctrine of merger is that
there cannot be more than one decree or operative orders
governing the same subject-matter at a given point of time.
When a decree or order passed by an inferior court,
tribunal or authority was subjected to a remedy available
under the law before a superior forum then, though the
decree or order under challenge continues to be effective
and binding, nevertheless its finality is put in jeopardy. Once
the superior court has disposed of the lis before it either
way -
whether the decree or order under appeal is set
aside or modified or simply confirmed, it is the decree or
H 2.
c2000) 6 sec 359.
PERNOD RICARD INDIA (P) LTD. v. COMMISSIONER1015
OF CUSTOMS, ICD TUGHLAKABAD [D.K. JAIN, J.]
order of the superior court, tribunal or authority which is the
A
final, binding and operative decree or order wherein
merges the decree or order passed by the court, tribunal
or the authority below. However, the doctrine is not of
universal or unlimited application. The nature of jurisdiction
exercised by the superior forum and the content or subjectB
matter of challenge laid or which could have been laid shall
have to be kept in view."
The Court further observed:
"41. Once a special leave petition has been granted, the
C
doors for the exercise of appellate jurisdiction of this Court
have been let open. The order impugned before the
Supreme Court becomes an order appealed against. Any
order passed thereafter would be an appellate order and
would attract the applicability of doctrine of merger. It would
D
not make a difference whether the order is one of reversal
or of modification or of dismissal affirming the order
appealed against. It would also not make any difference if
the order is a speaking or non-speaking one. Whenever
this Court has felt inclined to apply its mind to the merits
of the order put in issue before it though it may be ir1clined
to affirm the same, it is customary with this Court to grant
leave to appeal and thereafter dismiss the appeal itself
(and not merely the petition for special leave) though at
times the orders granting leave to appeal and dismissing
the appeal are contained in the same order and at times
the orders are quite brief. Nevertheless, the order shows
the exercise of appellate jurisdiction and therein the merits
of the order impugned having been subjected to judicial
scrutiny of this Court."
24. In the present case, the appellant preferred statutory
appeal under Section 130E of the Act against order of the
Tribunal dated 25th March 2003 and, therefore, the dismissal
of appeal by this Court though by a non-speaking order, was
E
F
G
in exercise of appellate jurisdiction, wherein the merits of the
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1016
SUPREME COURT REPORTS
[2010] 8 S.C.R.
A order impugned were subjected to judicial scrutiny. In our
opinion, in the instant case, the doctrine of merger would be
attracted and the appellant is estopped from raising the issue
of applicability of Rule 6 in their case.
B
25. In the view we have taken, we are fortified by a decision
of this Court in V.M. Salgaocar & Bros. Pvt. Ltd. Vs.
Commissioner of Income Tax, 3 wherein the Court was called
upon to consider the effect of dismissal of an appeal under
Section 261 of the Income Tax Act, 1961 by a non speaking
order. Speaking for the Bench, D.P. Wadhwa, J. while drawing
C distir:ction between an order dismissing in limine a special
leave petition under Article 136 of the Constitution and. an
appeal under Article 133, and drawing support from the
decision of this Court in Supreme Court Employees' Welfare
Association Vs. Union of India & Anr., 4 held that former case
does not but the latter does attract the doctrine of merger.