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2021 (5) TMI 908 - AT - CustomsConfiscation - short payment of Customs Duty - valuation of this remnant ATF - cost of transportation - rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - HELD THAT - An amount should actually be agreed to be paid and a liability created is for such payment, irrespective of actual payment. The use of the word paid or payable means that it would cover those cases also where actual payment of the agreed amount for cost and services is deferred to be paid on a subsequent date - Even under rule 10(2) of the 2007 Rules, the cost of transport incurred in respect of the imported goods is required to be added to the value of imported goods only if the same has been incurred and does not already form part of the value of the goods that are imported. The first proviso to rule 10(2) of the 2007 Rules contemplates of a situation where the cost of transportation is not ascertainable and it is only in such a situation that 20% of the FOB value of imported goods can be added. It, therefore, follows that where transportation of goods is involved and cost is actually incurred or is liable to be incurred for such transportation, such cost has to be added to the transaction value, but where there is no transportation of goods nor there is any liability to incur the cost of such transport, the first proviso to section 14(1) of the Customs Act and rule 10(2) of the 2007 Rules would not be attracted. Transportation - whether the ATF which is filled in the fuel tank of an aircraft is actually being transported through an aircraft? - HELD THAT - The answer clearly is that the airlines are not transporting ATF for delivery to India. ATF which is filled in the fuel tank of the aircraft is actually required to fly the aircraft and is a consumable for the airlines. It cannot, in such circumstances, be urged that ATF is being transported through the aircraft. A different situation would, however, arise if an oil company specifically imports ATF in large containers/tanker as goods or as cargo, for the purpose of selling the same to airlines. There can be no doubt that in such a situation the cost of transportation for import of ATF would have to be included in the transaction value for the purpose of determining the customs duty liability - Thus, if there is no transportation of remnant ATF, the notional cost of freight cannot be included in the value of remnant ATF. Cost For Transportation - HELD THAT - If no cost of transportation is incurred/suffered by the airlines, no amount as cost is payable in towards transportation of the remnant ATF - In the instant case, it has been found as a fact that neither the ATF is transported nor any cost is incurred. The notional value of transportation under the proviso to rule 10(2) of the 2007 Rules cannot, therefore, be added to the transaction value. The transaction value has to be determined strictly in accordance with section 14(1) of the Customs Act and rule 10(2) of the 2007 Rules. Notional charges have to be included only in cases where actual invoice price for the remnant ATF is not available or such invoice price does not include the cost of transportation when actually incurred but the amount incurred is not ascertainable. The Instructions further provide that in the absence of such invoice price, the price at which Indian Airlines/ Air India purchase the ATF at the Mumbai Airport i.e. IOCL price for International flights should be taken into consideration. The Instructions do not mandate further addition of insurance charges when IOCL price is to be adapted, even when such charges are not incurred - thus, the inclusion of the cost of insurance or the cost of transport is dependent on the provision of section 14(1) of the Customs Act and rule 10(2) of the 2007 Rules and not on any practice followed by the Customs Authorities/Airlines. No amount towards alleged transportation cost is required to be included in the value of remnant ATF under rule 10(2) of the 2007 Rules for determining the transaction value under section 14(1) of the Customs Act - reference answered.
Issues Involved:
1. Valuation of remnant Aviation Turbine Fuel (ATF). 2. Inclusion of cost of transportation in the assessable value of remnant ATF. 3. Application of Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 4. Interpretation of Section 14(1) of the Customs Act, 1962. 5. Consideration of Supreme Court decisions and Tribunal precedents. Issue-wise Detailed Analysis: 1. Valuation of Remnant ATF: The primary issue in the appeal is the valuation of remnant ATF left in the fuel tanks of aircraft arriving in India. The appellant argued that the value of remnant ATF should be based on the transaction value, specifically the price paid or payable, and that no additional costs, such as transportation, should be added unless they are actually incurred. 2. Inclusion of Cost of Transportation: The Department contended that under Rule 10(2) of the 2007 Rules, the cost of transportation should be added to the value of remnant ATF. The proviso to Rule 10(2) was invoked, which states that if the cost of transportation is not ascertainable, it should be taken as 20% of the FOB value. The appellant argued that since there is no actual transportation of ATF as cargo, no transportation cost should be added. 3. Application of Rule 10(2) of the 2007 Rules: The Tribunal examined whether Rule 10(2) applies to the valuation of remnant ATF. It was determined that Rule 10(2) requires the inclusion of transportation costs only if such costs are actually incurred. If no transportation cost is incurred, the cost should be considered as nil, and the proviso to Rule 10(2) (20% of FOB value) should not be applied. 4. Interpretation of Section 14(1) of the Customs Act, 1962: Section 14(1) of the Customs Act was scrutinized, which defines the transaction value as the price actually paid or payable for goods when sold for export to India. The Tribunal emphasized that the term "payable" refers to an agreed amount that may be deferred but must exist. If no cost is incurred, the transaction value should not include any additional notional costs. 5. Consideration of Supreme Court Decisions and Tribunal Precedents: The Tribunal referred to several Supreme Court decisions, including Eicher Tractors Ltd. and Wipro Ltd., which clarified that only actual costs paid or payable should be included in the transaction value. The Tribunal also reviewed its own precedents, such as InterGlobe Aviation Limited, which held that notional transportation costs should not be added to the value of remnant ATF. Conclusion: The Tribunal concluded that no amount towards alleged transportation cost is required to be included in the value of remnant ATF under Rule 10(2) of the 2007 Rules for determining the transaction value under Section 14(1) of the Customs Act. The decisions in InterGlobe Aviation Limited and subsequent cases were upheld, establishing that remnant ATF is not transported as cargo and no transportation cost should be added to its value.
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