2007 (5) TMI 468 - AT - Central Excise

Summary

Issues:
Import of coal; Assessment of customs duty based on moisture content determined by Customs laboratory; Revising quantity of import based on third-party report; Dispute regarding assessment between parties; Applicability of transaction value for duty assessment.

Analysis:
The judgment by the Appellate Tribunal CESTAT, NEW DELHI pertains to two appeals concerning the import of coal by the appellant. The contract between the foreign supplier and the appellant importer specified that the unit sale price would be based on 12% moisture in the coal consignment, with price relief available if moisture exceeded this level. The quantity was to be determined by a mutually agreed Inspection Agency based on moisture content. Despite relief granted by the seller and payment made accordingly, Customs laboratory tests showed lower moisture levels, leading to a revision of the import quantity by the Customs authorities and a demand for customs duty on the higher quantities, resulting in a duty demand of approximately Rs. 2,37,000 under the impugned order.

The appellant argued that the moisture levels determined by the Customs laboratory were irrelevant for assessment purposes, emphasizing that since the duty was ad valorem and the total price paid for the consignments was undisputed, the assessment should be based on the prices paid. They contended that revising the import quantity based on a third-party report was unjustified, as the relevant quantity was determined by the agreed Inspection Agency report. The appellant also highlighted a similar dispute in another consignment where the Commissioner had ruled against revising the quantity or value based on a Customs laboratory report.

The Appellate Tribunal found merit in the appellant's argument, stating that duty was payable on an ad valorem basis on the transaction value, making the difference in quantity based on moisture levels irrelevant. They noted that the duty was being paid on the full transaction value at the appropriate rate, consistent with the Commissioner's view in other cases. Consequently, the Tribunal allowed the appeals, setting aside the impugned orders and ruling in favor of the appellant.

In conclusion, the judgment clarifies that in cases where duty is assessed on an ad valorem basis using transaction value, the quantity revision based on moisture levels from a third-party report is not sustainable. The decision emphasizes the importance of adhering to the agreed terms between parties for determining import quantities and duty assessments, ultimately leading to the allowance of the appeals in this matter.