2010 (10) TMI 160 - SC - Customs

Valuation transaction value price of the vessel has been reduced by an addendum to the original agreement - acceptance of the price must turn on the genuineness of the addendum - Held that - Tribunal, no dispute that what had been imported was different from what had been agreed to be imported and there was no provision in the agreement to take note of the difference - price of the vessel had to reflected in the addendum - no fault can be found with the impugned orders of the Tribunal Appeal is dismissed

Summary

Issues:
Determining transaction value of ships/vessel imported on "as-is/where is" basis under Customs Act for levy of customs duty.

Analysis:
The common issue in these civil appeals under Section 130E(b) of the Customs Act, 1962 relates to the determination of transaction value of ships/vessel imported by each respondent on "as-is/where is" basis under Section 14 of the Act for the purpose of levy of customs duty under the Customs Tariff Act, 1975. The appeals involve imported ships for breaking purposes under Memorandums of Agreements (MOA) on a lump sum price, with subsequent addendums reducing the negotiated price due to shortcomings and missing parts. The key controversy is whether the reduced price in the addendum affects the determination of the ship's value for customs duty assessment. The facts of one case (Civil Appeal No. 147/2004) are used as an example, with reference to material details in other appeals.

The importer, in this case, imported an old vessel under an MOA with a purchase price agreed upon at US $ 5,09,190.50. An addendum was later made to the MOA, reducing the price to US $ 4,88,072 due to discrepancies in the generator. The importer filed the bill of entry disclosing the reduced price, citing the generator issue as the reason for the price reduction. The Commissioner (Appeals) accepted the reduced price as the transaction value for assessment, which was upheld by the Tribunal despite the revenue's appeal.

The Tribunal's decision was based on the genuineness of the addendum and the importer's reasons for the price reduction, which were not rebutted by the revenue. The Tribunal observed that what was imported differed from the original agreement, with no provision in the MOA to account for such differences. The Tribunal found the difference in price justified, noting that the genuineness of the addendum was not questioned by the revenue. Therefore, the price of the vessel as per the addendum had to be considered. The Supreme Court, in line with these findings, held that the appeals had no merit and deserved dismissal, with no order as to costs.

In conclusion, the issue of determining the transaction value of imported ships/vessels for customs duty assessment under the Customs Act was settled in favor of the importers based on the genuineness of addendums reducing the price due to discrepancies, which were not disputed by the revenue. The Tribunal's decisions were upheld by the Supreme Court, dismissing the appeals for lack of merit.