2023 (10) TMI 756 - AT - Customs

Valuation of imported goods - fuel oil (FO) and diesel oil (DO) used during the coastal run of the vessel - vessel converted from foreign run to coastal run for carriage of coastal cargo - consumption during coastal run to be treated as import or not - inclusion of the elements freight, insurance and handling charges in the assessable value. Whether the value should be on the basis of contemporaneous import value or on IOCL sale price to bunkers to vessel plus notional freight, insurance and loading landing charges? HELD THAT - When IOCL sells the goods the elements of freight and insurance are already added. Hence, these elements need not be added again to arrive the assessable value for the purpose of charging duty on the Fuel Oil and Diesel Oil used by the vessel during its coastal run - this method of valuation is supported by the decision of the Tribunal in the case of M/S SICAL LOGISTICS LTD. VERSUS CCEX, CUS. S. TAX, BBSR I 2019 (2) TMI 777 - CESTAT KOLKATA . The method of valuation of the Revenue is not proper. The elements of freight and insurance and Landing charges need not be added again as the same have already been included in the selling price of IOCL. Accordingly, the assessable value is to be re-determined based on the selling price of IOCL, without including freight, insurance and landing charges. Excess payment of customs duty, if any, needs to be refunded to the Appellant along with interest. Appeal allowed.

Summary

Issues Involved:
1. Valuation of fuel oil (FO) and diesel oil (DO) used during the coastal run.
2. Inclusion of freight, insurance, and handling charges in the assessable value.

Summary:

Valuation of Fuel Oil (FO) and Diesel Oil (DO) Used During Coastal Run:
The Appellant, acting as an agent for a chartered vessel, filed a Bill of Entry (B/E) for duty payment on bunkers, provisions, and stores consumed during the vessel's coastal run. The assessment was finalized based on the price at which Indian Oil Corp. Ltd. (IOCL) sells such goods to ships in India, plus additional charges for freight, insurance, and landing. The Appellant argued that the value should be determined under the Customs Valuation Rules, 2007, specifically through the 'Residual Method' under Rule 9(1), as no transaction value or value of 'identical goods' or 'similar goods' was available. The Appellant contended that the contemporaneous import value should be used for valuation.

Inclusion of Freight, Insurance, and Handling Charges in the Assessable Value:
The Appellant submitted that the inclusion of notional freight, insurance, and handling charges in the assessable value is not permissible, as these elements are already included in the IOCL selling price. This position was supported by previous decisions, including the Appellant's own case and other judgments such as M/s. Sical Logistics Ltd. v CCEx, Cus & STax, BBSR-I and CC(Airport & Admin), Kolkata v M/s. Jet Airways. The Tribunal agreed with the Appellant, stating that when IOCL sells the goods, the elements of freight and insurance are already included, and thus, should not be added again to the assessable value.

Conclusion:
The Tribunal held that the method of valuation by the Revenue was not proper. The assessable value should be re-determined based on the IOCL selling price without including additional freight, insurance, and landing charges. Any excess payment of customs duty should be refunded to the Appellant along with interest. The appeal was allowed with consequential relief as per law.