2003 (6) TMI 49 - AT - Customs

Valuation (Customs) - Price re-negotiation - determination of value of a ship - HELD THAT - We agree that, if the change in the capacity of the generator really took place after the ship has arrived, different consideration would apply because in that situation what has been imported is, what had been contracted for. However, whereas in this case there is no dispute that what has been imported is different material from what had been agreed to be imported and there is a provision in the agreement to take note of this material difference. The difference in value is justifiable. We, therefore, do not find any ground for interference. We must, at the same time, address ourselves to the department's concern. It is possibly with regard to any unscrupulous attempt to utilise grounds for reducing the price. However, that could happen in the case of import of any goods and the cases of undervaluation are known and brought to light as a case of misdeclaration. The possibility that the importer may misdeclare the value or misutilise a concession or procedures by itself is no ground to strike down the concession or procedure at its root, particularly a commercial procedure which is generally internationally followed as well as locally.

Summary

Issues involved: Determination of value of a ship imported for breaking up, acceptance of reduced prices post-arrival, interpretation of Customs Valuation Rules, 1988, consideration of discrepancies between contracted goods and actual goods imported.

Summary:
The Appellate Tribunal CESTAT, Mumbai considered five appeals involving the valuation of ships imported for breaking up. The common issue was the renegotiation of prices due to defects noticed post-arrival, leading to disputes with the customs department. The department rejected the reduced prices indicated in the bills of entry, arguing that post-arrival price reductions cannot be accepted. The Tribunal noted that the Commissioner (Appeals) had accepted the reduced prices as the transaction value. The agreements for ship sale had clauses emphasizing acceptance "as is" and exceptions to representations or warranties.

The Tribunal analyzed Rule 4 of the Customs Valuation Rules, 1988, emphasizing that the transaction value must reflect the goods actually imported. It highlighted the importance of matching the contracted goods with the imported goods for accurate valuation. The Tribunal rejected the department's argument that the original price should be considered, emphasizing the need to account for variations between contracted and actual goods. It noted that salvageable parts could be removed before breaking up the ship, affecting the final valuation.

Regarding a previous Tribunal decision on a similar issue, the Tribunal distinguished the cases based on the specific discrepancies in the imported goods. It emphasized the need to consider material differences between contracted and actual goods for valuation purposes. The Tribunal addressed the department's concerns about potential price reduction abuses, stating that such issues are common in import cases and should be addressed through proper enforcement rather than changing valuation procedures.

In conclusion, the Tribunal upheld the acceptance of reduced prices for the imported ships based on the material differences between contracted and actual goods. It emphasized the need for accurate valuation based on the goods actually imported and rejected the department's appeal for interference.