2019 (12) TMI 196 - AT - Customs

Valuation of imported goods - High Seas Sale - inclusion of service charges in the assessable value - canalizing agent or not - Revenue was of the opinion that the transaction in question amounts to high sea sales of coal between respondent and M/s NTPC and therefore the service charges of ₹ 34/- per MT received by the respondent should be included in the assessable value under Section 14 of the Customs Act, 1962 - HELD THAT - From the facts of the case and the agreement entered into between the respondent and M/s NTPC, it is clear that M/s NTPC required coal and entered into an agreement with the respondent for its import and supply. Nowhere does the agreement mention that the respondent is a canalizing agent for import of coal. The agreement only states that the respondent carries on the business, amongst others, of importing and selling coal. It is true that the respondent has imported coal for supply to NTPC only but they have imported it on their account and in turn sold it to M/s NTPC. It is also true that the price at which coal was sold to NTPC has been agreed to as per the formula, viz., the cost of coal, taxes, expenses etc. plus ₹ 34.00 per MT towards service charges of the respondent - In terms of Section 14 of the Customs Act, 1962, as amended w.e.f. 2007, the transaction value of the goods i.e. the price actually paid or payable for the goods when sold for export to India shall form the assessable value. In this case, such transaction value is the price at which the overseas supplier has supplied the goods to the respondent - There is nothing on record to show that the respondent has passed on ₹ 34.00 per MT which they received as service charges for their services, either directly or indirectly, to the overseas suppliers. In fact, there is no such allegation at all in the order of the original authority - there is no evidence in the first place that the respondent had acted as a canalizing agent. In fact, coal is also imported routinely by various private parties also. The agreement only shows that it is a sale deed on principal to principal basis between NTPC and the respondent. There is nothing on record to show that any portion of the service charges have been passed on to the overseas supplier of coal - There is nothing in the submissions made by the revenue which would substantiate that service charges received by the respondent after importation for their services is includable in the assessable value under any provision of Section 14 of the Act or the Customs Valuation Rules. There are no evidence on record to show that MMTC is the canalising agency for import of coal as per the EXIM Policy during the relevant period or that the coal was sold in High Sea Sales basis. The agreement between the MMTC and NTPC is for supply of coal as NTPC requires it and MMTC imports and supplies it. The sale of goods was not a high sea sales which was affected after clearing from the Customs. Otherwise, NTPC, the buyer would have filed the Bill of Entry and cleared the goods - The mere fact that the bids for import were finalised by the respondent (MMTC) after approval of NTPC, would not change the nature of transaction. There is no evidence that there is any privity of contract between the overseas supplier of coal and M/s NTPC. It is true that the definition of Importer under Section 2 includes the owner of the goods or anyone who holds himself out to be the importer but in this case no evidence is brought out that M/s NTPC are either the owner or have held themselves out to be the importer. This contention of the Revenue is completely baseless. The service charges paid to the respondent by M/s NTPC cannot, therefore, be included in the assessable value - appeal dismissed.

Summary

Issues:
Revenue's appeal against inclusion of service charges in the assessable value under Section 14 of the Customs Act, 1962.

Analysis:
1. The respondent, a Government of India Undertaking, imported and sold coal to M/s NTPC as per an agreement. Revenue contended that the service charges of &8377; 34/- per MT should be included in the assessable value as high sea sales. The Asst. Commissioner issued an order for this inclusion.
2. The first appellate authority set aside the order, leading to the Revenue's appeal. Grounds included the alleged mischaracterization of service charges, the canalizing agent role of the respondent, and the ownership of goods till delivery to NTPC.
3. The respondent argued that the sale was not high sea sales, and service charges were not to be included as per Customs Valuation Rules. The agreement between the parties did not establish the respondent as a canalizing agent.
4. The Tribunal analyzed the agreement and found no evidence of the respondent acting as a canalizing agent or passing on service charges to overseas suppliers. The transaction was deemed a principal-to-principal sale, not high sea sales.
5. The Tribunal highlighted the distinction between high sea sales and the actual transaction in this case, where the respondent filed the Bill of Entry and cleared the goods before selling to NTPC. The absence of evidence supporting the Revenue's claims led to the rejection of the appeal.
6. The Tribunal upheld the impugned order, concluding that the service charges paid to the respondent by NTPC should not be included in the assessable value. The appeal by the Revenue was rejected based on the lack of substantiating evidence and misinterpretation of the transaction nature.