2023 (5) TMI 670 - AT - Customs

Valuation - enhancement of freight component for recovery of additional duty - non-inclusion of actual freight from Iran to Mumbai as prescribed in rule 10(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Place of origin - core of the allegation is that all four shipments were effected from Iran even as the bills of lading for methanol were issued from Oman backed by invoice from UAE while bills of lading and invoice were issued from UAE for toluene and mixed xylene with Taiwan as place of origin. Place of origin - HELD THAT - The sole evidence of goods not being of Taiwanese/Omani origin, as contained in the bills of lading, are the records of passage by MT Braveworth from Fujairah to Sohar en route to India having been interrupted by allegedly calling at Dayyer in Iran and of MT Chem Trader having called at Bander Imam Khamenei in Iran before arrival at Jebel Ali for the next voyage to Mumbai. There is no evidence on record, elicited through official channels, of the facts relating to the movement of the vessels. The impugned orders have placed emphasis on the statements recorded from the master of the respective vessels but, in the absence of official confirmation from authorities at Oman/UAE about the port clearance submitted for entry at Sohar/Jebel Ali where, acknowledgedly, the two vessels departed for arrival in Kandla/Mumbai, it cannot be concluded that such evidence can be relied upon to visit detriment upon importers who had no commercial engagement with the vessels or her masters. The assessments had been taken up on the value corresponding to that in the invoice with addition of purported freight from Iran to Mumbai. The invoices had been issued by M/s Trade Unity FZE on cost insurance freight (CIF) terms and by M/s Kriscon DMCC, Dubai on cost and freight (CFR) terms and having freight cost separately therein do not, of themselves, warrant invoking of rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 except on finding that the freight was payable by the importer to the carrier or that the freight had been absorbed by the seller - The freight that has been ascertained does not even pretend to be representative of the actual payment made, either by exporter or by importer, to the carrier. It is clear from the records that the adjudicating authority had arrived at a mathematical computation that had nothing to do with any payment made to the carrier. This is not the intent of adjustment necessitated by rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. For this reason, the enhancement, for the purposes of determining differential duty, in the impugned orders must be set aside. The examinations in the present case are done with deliberate intent, for demonstrating that it is obligatory on the part of adjudicating authority to evaluate the proposals put forth in the show cause notice on the basis of available facts and law and that any detriment, of duty or fine/penalties, visited upon an importer without examination of the role of the noticee on the circumstances leading to the conclusion of having breached Customs Act, 1962 is not only inappropriate but tantamount to executive overreach that rule of law abhors - Appeal allowed.

Summary

Issues Involved:

1. Non-inclusion of actual freight from Iran to Mumbai.
2. Confiscability of goods under Section 111(m) of Customs Act, 1962.
3. Attendant penalties on importers, shipowners, and masters of the vessels under Section 114/114AA of Customs Act, 1962.

Summary:

Issue 1: Non-inclusion of Actual Freight from Iran to Mumbai

The adjudicating authority enhanced the assessable value by adding purported freight from Iran to Mumbai, based on the assumption that the cargo was loaded during clandestine calls at Iranian ports. The invoices were issued on 'cost insurance freight (CIF)' and 'cost and freight (CFR)' terms, and there was no evidence of additional payments made by the importers to the carriers. The Tribunal found that the freight computation was not representative of the actual payment made, either by exporter or importer, to the carrier. Therefore, the enhancement for the purposes of determining differential duty was set aside.

Issue 2: Confiscability of Goods under Section 111(m) of Customs Act, 1962

The core allegation was that the shipments were effected from Iran, but the bills of lading indicated Oman and UAE as the last ports of call. The adjudicating authority relied on statements from the masters of the vessels, but there was no official confirmation from Oman/UAE authorities about the port clearance. The Tribunal concluded that the evidence was tenuous and could not be relied upon to visit detriment upon importers who had no commercial engagement with the vessels or their masters. The impugned orders of confiscation were thus set aside.

Issue 3: Attendant Penalties on Importers, Shipowners, and Masters of the Vessels under Section 114/114AA of Customs Act, 1962

The Tribunal noted that the adjudicating authority had not established that the last port of call of the vessels was other than those indicated in the documents filed with the bill of entry. There was no evidence of any additional payment made by the importers to the carriers. The Tribunal emphasized that any detriment, of duty or fines/penalties, imposed upon an importer without proper examination of the role of the noticee is inappropriate and tantamount to executive overreach. Consequently, the penalties imposed under Sections 114 and 114AA were also set aside.

Conclusion:

The Tribunal set aside the impugned orders and allowed the appeals, emphasizing the need for adjudicating authorities to evaluate proposals based on available facts and law. The order was pronounced in the open court on 11/05/2023.