2010 (8) TMI 747 - AT - Customs

Valuation demand - whether, under Section 14 of the Customs Act, the duty element was liable to be deducted from the FOB value of the export goods in determining the assessable value of the goods for the purpose of payment of export duty Held that - FOB price of iron ore exported by one of the present appellants was held to be cum-duty price and accordingly abatement of duty element from the FOB price was allowed to the assessee, appeal dismissed

Issues Involved:
1. Whether the duty element was liable to be deducted from the FOB value of export goods in determining the assessable value for payment of export duty under Section 14 of the Customs Act.
2. Interpretation of Section 14 of the Customs Act regarding the transaction value of export goods.
3. Applicability of principles from Central Excise and Service Tax cases to Customs valuation.
4. Binding nature of CBEC circulars on quasi-judicial authorities.

Issue-wise Detailed Analysis:

1. Deduction of Duty Element from FOB Value:
The primary issue was whether the duty element should be deducted from the FOB value of the export goods to determine the assessable value for export duty under Section 14 of the Customs Act. The appellants argued that including the duty element in the FOB value would mean levying tax on the duty itself, which is not provided for under Section 14. They relied on the Supreme Court's judgment in Commissioner v. Maruti Udyog Ltd. and the Tribunal's decision in Commissioner of Service Tax v. Prompt & Smart Security, which excluded the tax element in determining the taxable value.

2. Interpretation of Section 14 of the Customs Act:
The appellants contended that the transaction value should be the price actually paid or payable for the goods, excluding the duty element. They argued that the FOB price should be treated as cum-duty price, meaning the price inclusive of duty. The respondent, however, maintained that Section 14 clearly states that the transaction value is the price paid or payable at the time and place of export, which is the FOB price, and does not provide for any deduction of the duty element.

3. Applicability of Principles from Central Excise and Service Tax Cases:
The appellants sought to apply principles from Central Excise and Service Tax cases, where the tax element is excluded from the sale price or gross amount to determine the assessable value. The Tribunal, however, noted that Section 14 of the Customs Act stands on a different footing and does not incorporate provisions for abatement of the duty element, unlike Section 4 of the Central Excise Act or Section 67 of the Finance Act, 1994.

4. Binding Nature of CBEC Circulars:
The appellants argued that quasi-judicial authorities are not bound by departmental clarifications and should independently apply their minds. They challenged the reliance on CBEC Circular No. 18/2008-Cus., which clarified that export duty should be assessed on the transaction value as defined under Section 14. The Tribunal held that the circular was binding on subordinate authorities and correctly interpreted Section 14.

Judgment:
The Tribunal dismissed the appeals, sustaining the impugned orders. It held that the FOB price of the export goods is the transaction value under Section 14 and does not allow for the deduction of the duty element. The Tribunal emphasized that the statutory language of Section 14 is clear and unambiguous, and there is no provision for treating the FOB price as cum-duty price. It also rejected the applicability of principles from Central Excise and Service Tax cases to Customs valuation. Additionally, the Tribunal upheld the binding nature of the CBEC circular on quasi-judicial authorities within the department.

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