2021 (12) TMI 853 - AT - Customs

Mis-declaration of value of imported goods - non-inclusion of certain elements of cost incurred for the import of two tugs, Nancy 3 and Greenville 11, and of attempt to import Nancy 3 without declaration - Confiscation - penalty - HELD THAT - Unlike goods , as conventionally understood, deployment of conveyances in the territory of the country of import does not erase its identity. Conveyances , by reason of their very existence, are subject to control of the State while in use, commencing with registration, and till scrapping. Indeed, it is the compulsion of the registration statutes that triggers the transformation of foreign going vessel or aircraft from conveyance to goods for that very purpose - The Flying Dutchman and Mary Celeste are stuff of legend that commercial consideration of contemporary shipping can acknowledge only at the cost of bottom line. The appellant-company stands to be deprived all commercial flows by non-declaration of intent to import and, hence, it would appear that the impugned order is in error for concluding so after withholding permission to amend the manifest. Confiscation under section 111(f) of Customs Act, 1962, as well as attendant penalty on the appellant-directors under section 112 of Customs Act, 1962, is unwarranted. Alleged undervaluation in the declaration pertaining to Nancy 3 for which, in addition to quantification of duty liability, the vessel has been confiscated under section 111(m) of Customs Act, 1962 - HELD THAT - Conceptual commotion is manifest in this salmagundi of statutory provisions invoked by the Commissioner of Customs; while finalizing assessment, in exercise of authority conferred under section 18 of Customs Act, 1962 on the proper officer , the duty so assessed has been ordered for recovery under section 28 of Customs Act, 1962. It is also seen from the record that, by the time the bill of entry was permitted to be filed on 27 th November 2009, the appellant-company had, on 31st October 2009 deposited ₹ 45,00,000 as the estimated duty liability on the payment of US 1,020,000 effected to the seller against two invoices which was appended to the bill of entry - it would appear that full value of both invoices were declared in the entry, made under section 46 of Customs Act, 1962 and, thus, precluding any scope for suggesting, let alone alleging, that importer had misrepresented or suppressed any material fact that offers the ingredient for invoking section 114A of Customs Act, 1962. The enhancement of declared assessable value is based on examination of the vessel and the reported improvements and additions during dry docking in August 2009. There is nothing on record to suggest that this work was undertaken at the instance of the appellant-company or that the cost, even if accurately estimated, was borne by, or on behalf of, the appellant to justify inclusion in assessable value - It may not be out of place to draw the attention of customs officers to the empowerment under rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, to be invoked to discard the value declared in the bill of entry, does extend to rejection of value in the invoice which is a commercial engagement between a buyer and seller under the law of contract. Uninformed approach to the provisions of law, manifest in inappropriate phraseology, does not reflect well on the professional credibility of the tax administration. Suffice it to say that the enhancement of 15% in the assessable value is arbitrary and not tenable. No evidence is on record that the any payment over and above the contracted, and declared, price was made to the seller. The allegation hinges on the said transaction price being on Free on Board (FOB) terms while duties of customs are to be computed on value appraised on Cost Insurance Freight (CIF) terms. The authority for adoption of the base arises from rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 which is not a consequence of rejection of declared value attended upon by re-determination through rule 4 to rule 9 of the said Rules. Recourse to confiscation under section 111(m) of Customs Act, 1962 is, therefore, not tenable in law. Appeal is allowed to the extent of setting aside the duty liability on Nancy 3 beyond that leviable on the value of the two invoices - appeal disposed off.

Summary

Issues Involved:
1. Mis-declaration of value and non-inclusion of certain cost elements for the import of two tugs, Nancy 3 and Greenville 11.
2. Confiscation of Nancy 3 under sections 111(f) and 111(m) of the Customs Act, 1962.
3. Confiscation of Greenville 11 under section 111(m) of the Customs Act, 1962.
4. Redetermination of assessable value and consequent duty liability for Nancy 3 and Greenville 11.
5. Imposition of penalties under sections 114A and 112 of the Customs Act, 1962.

Detailed Analysis:

1. Mis-declaration of Value and Non-inclusion of Cost Elements:
The appellant was accused of not including bunkering costs, manning charges, and insurance premiums in the declared value of Greenville 11. For Nancy 3, the declared value did not include the mobilization advance and costs of painting/refurbishing. The Tribunal noted that the appellant had admitted to these omissions, but the statutory provisions must be applied to the specific facts of the case.

2. Confiscation of Nancy 3 under Sections 111(f) and 111(m) of the Customs Act, 1962:
The Tribunal found that Nancy 3 was declared as a conveyance en route from Colombo to Singapore. The appellant's explanation that possession was transferred only after arrival in Mumbai was not discredited by the competent authority. The Tribunal held that the non-declaration as goods upon arrival was not conclusive evidence of intent to smuggle and that the confiscation under section 111(f) was unwarranted.

3. Confiscation of Greenville 11 under Section 111(m) of the Customs Act, 1962:
The Tribunal found no evidence that any payment over and above the contracted price was made to the seller. The allegation of undervaluation was based on the transaction price being on FOB terms rather than CIF terms. The Tribunal concluded that the recourse to confiscation under section 111(m) was not tenable in law.

4. Redetermination of Assessable Value and Consequent Duty Liability:
The Tribunal noted that the full value of both invoices for Nancy 3 was declared in the bill of entry, precluding any scope for alleging misrepresentation or suppression. The enhancement of the declared assessable value by 15% was found to be arbitrary and not tenable. For Greenville 11, the appellant had voluntarily discharged the duty liability arising from the addition to cost before the issue of notice.

5. Imposition of Penalties under Sections 114A and 112 of the Customs Act, 1962:
The Tribunal held that the penalty under section 114A was not sustainable as there was no misrepresentation or suppression by the appellant. The confiscation of Nancy 3 and the penalties on the appellant-directors under section 112 were also set aside.

Conclusion:
The appeal was allowed to the extent of setting aside the duty liability on Nancy 3 beyond the value of the two invoices. The confiscation of both vessels and the penalties imposed under section 114A were set aside. The appeals of Mr. Nitin Kshirsagar and Mr. Sachin Kshirsagar were also allowed.