2003 (3) TMI 781 - AT - Customs

Summary

Issues Involved:
1. Determination of the cost of transportation for customs valuation.
2. Alleged mis-declaration of freight by EGL.
3. Applicability of the extended period of limitation.
4. Imposition of penalties under Section 112 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Determination of the Cost of Transportation for Customs Valuation:

The primary issue was to ascertain what constitutes the "cost of transportation" under Rule 9(2) of the Customs Valuation Rules, 1988, for determining the assessable value of imported goods. The Tribunal held that the cost of transportation should only include expenses directly related to the carriage of goods from the place of exportation to the place of importation. It was emphasized that the "freight ascertained" in the show cause notice represented adjustments/reimbursements made by EGL to ESL for hiring vessels on a time charter basis and not the actual cost of transport. The Tribunal concluded that only the actual cost of transport, as envisaged by Rule 9(2)(a), should be included in the assessable value, and not the total payments made by EGL to ESL, which exceeded the cost of transport due to additional charges unrelated to the transportation of the imported goods.

2. Alleged Mis-Declaration of Freight by EGL:

The Customs authorities alleged that EGL had mis-declared the cost of transportation to evade customs duty. The Commissioner of Customs confirmed the duty demand, holding that EGL had mis-declared the cost of transportation by declaring different freight amounts for different shipments despite using the same mode of transport. The Tribunal, however, found that EGL had disclosed that freight was payable as per charter party agreements and that the proper officer had accepted the declared freight. The Tribunal noted that the freight certificates issued by ESL were not disproved by the department, and the burden to establish the incorrectness of these certificates was not discharged by the department. Consequently, the Tribunal set aside the duty demand, holding that there was no mis-declaration by EGL.

3. Applicability of the Extended Period of Limitation:

The Tribunal examined whether the extended period of limitation under the proviso to Section 28(1) of the Customs Act, 1962, was applicable. The Commissioner had invoked the extended period, alleging mis-declaration and suppression of facts by EGL. The Tribunal, however, found that EGL had disclosed the existence of charter party agreements and that the proper officer had accepted the declared freight. The Tribunal held that there was no suppression or wilful mis-declaration by EGL, and the proper officer should have made further inquiries if needed. Therefore, the Tribunal concluded that the extended period of limitation was not applicable, and the demand was time-barred.

4. Imposition of Penalties under Section 112 of the Customs Act, 1962:

The Commissioner had imposed penalties on EGL, ESL, and their officers under Section 112 of the Customs Act, 1962, for alleged mis-declaration of value. The Tribunal, however, set aside the penalties, holding that the charge of mis-declaration of value fell to the ground. The Tribunal emphasized that since the duty demand was not sustainable, the penalties imposed for contravention of provisions of Section 111(m) were also required to be set aside.

Conclusion:

The Tribunal allowed the appeals, setting aside the duty demand and penalties imposed by the Commissioner. The Tribunal held that the cost of transportation for customs valuation should only include expenses directly related to the carriage of goods, and not the total payments made for hiring vessels on a time charter basis. The Tribunal also found that there was no mis-declaration or suppression of facts by EGL, and the extended period of limitation was not applicable. Consequently, the penalties imposed under Section 112 were also set aside.