2004 (10) TMI 487 - AT - Customs

Summary

Issues Involved:
1. Determination of the correct transaction value for the imported vessel.
2. Validity of the reduction in the declared value based on subsequent agreements.
3. Applicability of Customs Valuation Rules in determining the assessable value.

Detailed Analysis:

1. Determination of the Correct Transaction Value for the Imported Vessel:
The primary issue revolves around determining the correct transaction value for the vessel imported for breaking at port Alang, Gujarat. The respondents presented Bills of Entry declaring the value based on a Memorandum of Agreement (MOA) dated 5-9-2000 with M/s. Cane Shipping and Trading S.A., Liberia, which indicated a value of US $7,465.55 L.T. @ US $167.00/LDT. However, the Revenue contended that the value should be US $12,80,341.80 for 7,465.55 L.T. @ US $171.50/L.T. as per an earlier MOA dated 17-8-2000 between M/s. Wild Shipping Ltd., Malta, and M/s. Cane Shipping and Trading S.A., Liberia.

2. Validity of the Reduction in the Declared Value Based on Subsequent Agreements:
The Commissioner (Appeals) observed that the first MOA dated 17-8-2000 satisfied the requirements of Section 14 of the Customs Act and Rule 4 of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988. The value mentioned in the first MOA was considered the assessable value unless the importer could justify the reduction in price with evidence. The Commissioner further noted that the MOA would be considered an invoice only when it clarified that the vessel was sold for export to India. The Tribunal found that the vessel was indeed sold for export and delivery to Port Alang, India, as per the first MOA dated 17-8-2000.

3. Applicability of Customs Valuation Rules in Determining the Assessable Value:
The Tribunal emphasized that the price of US $12,80,341.80 as per the first MOA dated 17-8-2000 should be the transaction value under Rule 4 of the Customs Valuation Rules, 1988. The Tribunal referred to a previous case (Sai Baba Ship Breakers) where it was held that price reduction after the importation of the vessel into India could not be considered. The Tribunal found no change in the vessel's description between the two MOAs and concluded that the transaction value as per the first MOA should be the assessable value.

The Tribunal also addressed the issue of a 3% buying commission considered by the Commissioner (Appeals) in the price offered in the first MOA. The Tribunal found that such a reduction was not permissible under the Customs Valuation Rules.

Conclusion:
The Tribunal found sufficient merit in the Revenue's submissions and set aside the order of the lower authorities. The appeal by the Revenue was allowed, and the original MOA dated 17-8-2000 was upheld as the basis for determining the transaction value. The Tribunal concluded that the assessable value should be based on the first MOA, and any reduction in value based on subsequent agreements was not tenable under the Customs Valuation Rules.