2019 (9) TMI 536 - AT - Customs

Valuation - duty on remnant Aviation Turbine Fuel (ATF) in the Aircraft at the time of its conversion from international sector to domestic sector - Determination of insurance, freight and landing charges required to be added to the IOC price (the basis for payment of duty) for determination of assessable value of remnant ATF in the aircraft at time of conversion from international to domestic run - demand of differential duty alongwith interest and penalty - Scope of Rule 10(2) of the Custom Valuation (Determination of Price of Imported Goods) Rules, 2007- Scope of Rule 10(2) of the Custom Valuation (Determination of Price of Imported Goods) Rules, 2007 - extended period of limitation - Confiscation - contrary views. HELD THAT - Since there are contrary views to the view earlier taken by the coordinate benches of tribunal, we refer the matter to the President for constitution of larger bench to determine Whether the value of cost and services as specified in rule 10(2) of the Customs Valuation (Determination of Price of Imported Goods) Rule, 2007, specifically the value towards freight charges is required to be added to the value of ATF determined on the basis of sale price of IOC of ATF to Air India/Indian Airlines for their foreign going aircrafts? Matter referred to President for placing the above question before a larger bench.

Issues Involved:
1. Addition of insurance, freight, and landing charges to the IOC price for determining the assessable value of remnant ATF.
2. Scope of Rule 10(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007.
3. Admissibility of exemption under Notification No. 151/94-Cus.
4. Applicability of the extended period of limitation under Section 28 of the Customs Act, 1962.
5. Justification for interest under Section 28AA and penalty under Section 114A.
6. Liability of goods for confiscation under Section 111(m) of the Customs Act, 1962.

Detailed Analysis:

1. Addition of Insurance, Freight, and Landing Charges:
The appellants argued that freight and insurance should not be included in the assessable value of remnant ATF since no transportation/insurance cost is involved in the import of stores/consumables/shipping containers/aircrafts. They cited previous tribunal decisions in their favor, such as Interglobe Aviation Limited [2017 (9) TMI 926 CESTAT] and others. However, the tribunal referred to the Supreme Court's decision in Wipro Ltd [2015 (319) ELT 177 (SC)], which emphasized that the assessable value must include costs and services as per Rule 10(2) of the Customs Valuation Rules, 2007. The tribunal noted that the sale price of IOC cannot be considered fully loaded and must be adjusted for freight and insurance charges. The tribunal disagreed with the appellant's claim that freight charges are ascertainable as zero and suggested that the freight charges should be equivalent to the actual extra baggage charges for the carriage of fuel.

2. Scope of Rule 10(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007:
The tribunal highlighted that Rule 10(2) mandates the addition of freight, insurance, and landing charges to the assessable value. If actual charges are not available, notional values must be applied. The tribunal found that the Commissioner’s instruction, which did not include freight charges, was not consistent with Rule 10(2).

3. Admissibility of Exemption under Notification No. 151/94-Cus:
The appellants claimed entitlement to exemption under Notification No. 151/94-Cus, which the Commissioner denied due to non-fulfillment of conditions and lack of supporting documents. The tribunal did not address this issue in detail, as the primary focus was on the valuation matter.

4. Applicability of Extended Period of Limitation:
The appellants argued that the extended period of limitation should not apply as there was no suppression of facts. The tribunal did not delve into this issue, as it referred the primary valuation issue to a larger bench.

5. Justification for Interest and Penalty:
The appellants contended that since the demand for duty was not sustainable, the interest and penalty could not be justified. The tribunal deferred this issue pending the larger bench's decision on the valuation matter.

6. Liability of Goods for Confiscation:
The appellants argued that the goods were not liable for confiscation under Section 111(m) since no bill of entry was filed. The tribunal did not address this issue in detail, pending the larger bench's decision.

Referral to Larger Bench:
The tribunal referred the matter to the President for the constitution of a larger bench to determine whether the value of freight charges should be added to the IOC price of ATF for determining the assessable value. The larger bench will address the following question of law: “Whether the value of cost and services as specified in rule 10(2) of the Customs Valuation (Determination of Price of Imported Goods) Rule, 2007, specifically the value towards freight charges is required to be added to the value of ATF determined on the basis of sale price of IOC of ATF to Air India/Indian Airlines for their foreign going aircrafts?”

Conclusion:
The tribunal deferred final decisions on other issues until the larger bench resolves the primary valuation question. The order was pronounced in the open court on 28.06.2019.

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