2023 (10) TMI 757 - AT - Customs

Refund claim on account of price rebate granted by overseas supplier - rejection level of Fe content in the iron ore fines was amended - reduction in export price - HELD THAT - The Appellant has executed a contract dated 14.04.2011, as per which the agreed price of Iron Ore was US 153 per DMT. The Appellant have paid export duty amounting to Rs.4,22,58,967/-on the basis of this agreed price. As per Clause 9 of the Contract, Intertek India Pvt. Ltd., the authorized surveyor submitted the Certificate of weight and Certificate of Quality vide its letter dated 23.05.2011. As per this certificate, the Fe content was 59.11%. As per the agreement, if the Fe content is less than 60%, then the contract is liable to be rejected. Since the chemical composition of Fe was not within the guaranteed limits of 60%, the Contract price was required to the adjusted in the light of clause-5 of the Contract. Accordingly, Addendum No. 3 dated 31.5.2011was signed on mutual agreement. The method adopted by the Commissioner (Appeals) is not proper. In the original contract dated 13.04.2011, there was a provision for reducing the price when the Fe content is less than 61%. However, this contract in total will be rejected when the Fe content is less than 60%. In this case as per the Certificate issued by Intertek, the Fe content was 59.11%. Accordingly, the original contract dated 13.04.2011, was liable to be rejected and the terms of arriving at the revised price as per the original contract no longer exists. In view of the Report from Intertek, the agreement was reworked and Addendum 3 dated 31.05.2011 was mutually accepted. As per this Addendum, the revised price agreed was USD 125, wherein the contract will be rejected if the Fe content is less than 58%. If the buyer and seller are not related and if the price is the sole consideration, the transaction value at the time and place of export will be the assessable value. Thus, the contention of the Appellant is agreed upon that the assessable value of the goods exported with 59.11% Fe content would be USD125. Accordingly, the Appellant was liable to pay export duty on the basis of assessable value of USD 125 Per MT. Since the Appellant has already paid export duty by adopting USD 153 per MT, they are eligible for refund of the excess duty paid. Since the Appellant are eligible for the excess customs duty, the department's appeal challenging the partly allowed refund is not sustainable. Accordingly, the department's appeal is liable to be rejected. Appeal of appellant allowed.

Summary

Issues Involved:
1. Timeliness of the refund application under Section 27(I) of the Customs Act, 1962.
2. Reassessment of the shipping bill post self-assessment introduction.
3. Determination of the 'transaction value' for export duty calculation.
4. Eligibility for refund based on revised contract terms and actual Fe content.

Summary:

Issue 1: Timeliness of Refund Application
The Asst Commissioner, Paradeep rejected the refund claim on the grounds that the application was not filed within one year of payment of duty as required under Section 27(I) of the Customs Act, 1962. The date of payment of duty was 11.05.2011, whereas the complete application was filed on 23.11.2012, which is beyond the stipulated one-year period.

Issue 2: Reassessment of Shipping Bill
The shipping bill dated 09.05.2011, filed after the introduction of self-assessment in Customs w.e.f. 08.04.2011, was not reassessed by the exporter despite changes in value and quantity of the export goods. The refund claim was filed directly after three months, which was deemed improper.

Issue 3: Determination of 'Transaction Value'
The appellant argued that the valuation of export goods attracting ad valorem rate of export duty should be done in accordance with Section 14 of the Customs Act, 1962, which states that the value of export goods shall be the 'transaction value', i.e., the price actually paid or payable for the goods. The Ministry of Finance's Circular No. 37/2007-Cus dated 09.10.2007 and Circular No. 18/2008-Cus dated 10.11.2008 clarified that 'transaction value' is the primary basis for valuation of export goods.

Issue 4: Eligibility for Refund
The appellant contended that the export price was reduced to USD 125 per MT as per Addendum No. 3 dated 31.05.2011 due to the Fe content being 59.11%, below the guaranteed limit of 60%. The Commissioner (Appeals) partially allowed the refund, but the Tribunal observed that the method adopted by the Commissioner (Appeals) was not proper. The Tribunal agreed with the appellant that the assessable value of the goods exported with 59.11% Fe content would be USD 125 per MT.

Final Judgment:
The Tribunal held that the appellant was eligible for a refund of the excess duty paid, as the revised price agreed upon was USD 125 per MT. The department's appeal challenging the partially allowed refund was rejected. The Tribunal allowed the appeal filed by the appellant and rejected the department's appeal.