2023 (9) TMI 967 - AT - Customs

Benefit of exemption from customs duty - conversion from foreign going vessel to coastal vessel - Interpretation of Statute - Sr. No. 462 of the Notification No 12/2012-Cus dated 17.03.2012, granting partial exemption to imports made by conversion of foreign run vessels to domestic run vessels - import of M V Dubai Faith, M V Athena M V Star Masaya - whether by deeming fiction the coastal conversion was considered as import of vessels? - HELD THAT - A perusal of the conditions prescribed in the notification clearly shows that the notification gives two options to the importers. The first option is to pay the customs duty on the full lease or contract value in case of charter party contracts. The second option is to pay one by one hundred and twentieth of the applicable duty for each month or part thereof stay in India of coastal run - the applicable duty is to be calculated at any percentage of the value of goods then such duty will be calculated at that percentage of the value of the imported articles. It is the option of the importer to pay duty either in terms of clause (a) of the condition 82 of the notification or in terms of clause (b) Condition 82 of the notification. Ideally the original Adjudicating Authority, should have sought option from the importer and acted accordingly to assess either under Clause (a) of the Condition 82 or Clause (b) of the condition 82 of the Notification 12/2012- Cus dated 17.03.2012. Secondly, it is noticed from the impugned order that the value of the vessel declared in the insurance certificate has been taken and no opportunity has been granted to the appellants to refute or challenge the said value. In case the appellants wish to assess the goods under Clause (b) of the Condition 82 of the notification then they may be given opportunity to participate in determination of correct value of the vessels for the purpose of assessment. Thus, it is open to the appellants to seek assessment either under Clause (a) or Clause (b) of the Condition 82 of the Notification 12/2012-Cus dated 1703.2012. In case they opt for assessment under Clause (b) then duty will be calculated on the total assessment value of the ships determined in terms of Section 14 read with Custom Valuation Rules - the contention of the appellant that there is no mechanism under the customs valuation rules to determine the value in such circumstances as the said rules take care of all eventualities to reach the valuation in such circumstances, is rejected. Matter remanded to the original Adjudicating Authority for fresh assessment.

Summary

Issues Involved:
1. Interpretation of Sr. No. 462 of Notification No. 12/2012-Cus dated 17.03.2012.
2. Calculation of customs duty based on contract value versus insurance value.
3. Assessment period for calculating duty.

Summary:

Issue 1: Interpretation of Sr. No. 462 of Notification No. 12/2012-Cus dated 17.03.2012
The core issue is the interpretation of Sr. No. 462 of the Notification No. 12/2012-Cus, which provides partial exemption for imports by converting foreign-run vessels to coastal vessels. The notification offers two options for duty payment: (a) full lease or contract value, or (b) 1/120th of the applicable duty for each month or part thereof of stay in India as a coastal vessel. The term "applicable duty" is defined as the Additional duty of Customs under Section 3(1) of the Customs Tariff Act, 1975.

Issue 2: Calculation of Customs Duty Based on Contract Value Versus Insurance Value
The appellant argued that the customs duty should be calculated based on the contract value rather than the insurance value. They cited that the conversion to coastal run vessels is typically under a lease agreement or contract. The Deputy Commissioner, however, used the insurance value for the final assessment, which the appellant contested as a violation of the Customs Valuation Rules, 2007. The tribunal noted that the original adjudicating authority should have sought the appellant's option for assessing under Clause (a) or (b) of Condition 82.

Issue 3: Assessment Period for Calculating Duty
The appellant highlighted an error in the duty calculation for MV Athena, where the duty was calculated for two months instead of one, despite the vessel being converted to a coastal run and back to a foreign run vessel within the same month. The tribunal directed that this fact should be verified.

Conclusion:
The tribunal held that the appellants have the option to seek assessment under either Clause (a) or Clause (b) of Condition 82 of Notification 12/2012-Cus. If opting for Clause (b), the duty will be calculated on the total assessable value of the ships determined under Section 14 read with the Customs Valuation Rules. The tribunal rejected the appellant's contention that there is no mechanism under the customs valuation rules to determine the value in such circumstances. The impugned order was set aside, and the matter was remanded to the original adjudicating authority for fresh assessment, allowing the appellants to present evidence regarding the value of the ships. The option of simultaneous benefit of Clause (a) and (b) cannot be availed for any single import.