2023 (4) TMI 669 - AT - Customs

Final assessment of bills of entry - Reduction in price after negotiation - import of Steam (Non-coking) Coal in bulk - re-negotiation of price by parties (at lower side, as the coal supplied by the exporter was not as per the quality standards specified in the purchase order) - whether the final assessment of imported Coal should have been done as per the reduced price US 86 PMT re-negotiated by the parties to the contract after completion of imports in question? - HELD THAT - In light of the statutory provisions, the factum of actual payment of the price in terms of the contract/ agreement cannot be ignored while determining the value of the goods under Section 14 of the Act. Further the fact are not disputed in this matter that in respect of the quality of coal consignment actually arrived in India was different. In support of this, appellant also produced the analysis report. We also observed that disputed price adjustment is due to quality and rejection clause mentioned in the purchase agreement. As per the purchase agreement dtd. 22.08.2008, the price originally decided for the coal having the specified quality standards. However the quality analysis report clearly held that the coal supplied does not fulfil the specification as laid down in the purchase order. The said fact nowhere disputed by the revenue in the present matter. We may, however, hasten to add that in such a situation the genuineness and the necessity of reduction in the price are required to be scrutinised very carefully. In the instant case, the Ld. Commissioner (appeals) has not examined the genuineness of the price reduction, and has proceeded to reject the appeal of the appellant. It is, however, added that the Commissioner (Appeals) did properly examine the cogency of the reasons for price reduction though he was not convinced to accept the same. Thus, if there was a genuine cause for reduction in the price of the imported goods and the seller was also convinced that there is need for reduction in the price earlier agreed and accordingly accepted the lower price negotiated between the seller and the importer. Section 14 of the Customs Act, 1962 also talks of the price which is either paid or payable to the seller. In such situation it will be improper if importer is asked to pay customs duty on an amount more than what was the consideration for the transaction. The actual transaction value paid is required to be accepted for assessment purpose, particularly when the genuineness of the reduction is not under dispute. The assessment authority needs to examine the matter afresh. Accordingly, the appeal is allowed; the impugned order is set aside, and the matter is remitted back to the original authority for fresh consideration, particularly in relation to the verifying genuineness of transaction of appellant and foreign supplier and their payment particulars, agreement, purchase order, invoice, quality inspection reports, actual transaction value etc. related to the disputed transactions - appeal allowed by way of remand.

Summary

Issues involved:
The issues involved in this case are related to the valuation of imported goods for the purpose of paying customs duty under Section 14 of the Customs Act, 1962. The main contention revolves around whether the final assessment of imported Coal should have been done as per the reduced price negotiated by the parties after completion of imports, considering the quality discrepancies between the goods actually imported and those intended for purchase.

Valuation of Goods:
The appellant argued that the valuation of goods for customs duty purposes should be based on the price actually paid or payable for the goods at the time and place of importation. They contended that the original price specified in the purchase agreement did not apply to the goods actually imported, which were of lower quality, and thus the reduced price of USD 86 per metric ton (PMT) should be considered the transaction value for customs assessment.

Quality Discrepancy and Price Adjustment:
The appellant presented evidence that the coal supplied did not meet the quality standards specified in the purchase agreement, leading to rejection of the consignment. They emphasized that the price reduction to USD 86 PMT was agreed upon due to the discrepancy in quality between the actual goods imported and those intended for purchase. The appellant argued that the valuation should be based on the price at which the payment was finally made, taking into account the quality differences.

Legal Precedents and Authorities:
The appellant cited various legal decisions to support their argument regarding the valuation of imported goods for customs duty assessment. They referenced cases such as Universal Commercial Corpn. Vs. Collector of Customs, Delhi and Commissioner Vs. Pushpanjali Silks Pvt. Ltd. to establish the principle that the actual transaction value should be considered for valuation, especially in cases of quality discrepancies leading to price adjustments.

Judgment and Remand:
After considering the submissions from both sides and analyzing the facts of the case, the Tribunal concluded that the assessment authority needed to reexamine the matter afresh. The Tribunal allowed the appeal, set aside the impugned order, and remitted the case back to the original authority for fresh consideration. The original authority was instructed to verify the genuineness of the transaction between the appellant and the foreign supplier, including payment details, agreements, purchase orders, quality inspection reports, and actual transaction values related to the disputed transactions. The Tribunal emphasized the need for compliance with the principles of natural justice and granted the appellant an opportunity for a personal hearing before making a decision on the valuation issue.