2005 (5) TMI 209 - AT - Customs

Import Second hand vessel - Valuation (Customs) - Transaction value - Breaking up of the ship - reduction in price - HELD THAT - It is quite clear from the facts of the Jalyan Udyog 1993 (9) TMI 108 - SUPREME COURT that the decision of the Supreme Court was rendered in the context of the proviso to the exemption notification and therefore its ratio has no application in the present case in which admittedly all the ships were old and imported for the purpose of breaking up and it is not as if any one of them was imported as an ocean-going vessel and thereafter a decision was taken to break/scrap it. The learned Appellate Commissioner has therefore misapplied the ratio of Jalyan Udyog and Salim Abbas Bhai 1997 (7) TMI 147 - SC ORDER to the facts of these cases. The Appellate Commissioner while setting aside the impugned orders of assessment and allowing the appeals with consequential relief has overlooked that after the provisional assessment a final assessment was required to be made and therefore it should have been left to the assessing officer to make the final assessment orders u/s 18 in all these matters. Under Section 18 of the said Act the proper officer is empowered to direct that the duty leviable on the subject goods may pending the production of the relevant documents or furnishing of information or completion of the test or enquiry be assessed provisionally if a security is furnished as deemed fit by the proper officer for the deficiency if any. Under sub-section (2) of Section 18 the duty leviable on the goods in question is required to be assessed finally in accordance with the provisions of the Act. In the present matters while setting aside the final assessment order on the ground that the reduced price reflected the correct transaction value the Commissioner has overlooked the aspect that the final assessment was required to be made by the assessing officer u/s 18(2) of the said Act. We therefore while dismissing all the appeals for the reasons mentioned above direct that the assessing officer will now make the final assessment orders u/s 18(2) of the Act and in the light of this judgment. All the appeals stand disposed of accordingly.

Issues Involved:

1. Legitimacy of the price reduction in the Memorandum of Agreement (MOA) for imported vessels.
2. Applicability of Section 14 of the Customs Act, 1962 for valuation of goods.
3. Determination of the date of importation for assessing customs duty.
4. Requirement for final assessment under Section 18 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Legitimacy of the Price Reduction in the MOA for Imported Vessels:

The respondents imported old vessels for breaking from various sellers, with the original prices stipulated in the MOAs subsequently reduced through addendums before taking delivery. The Customs authorities were not satisfied with the reasons for the price reductions and issued show cause notices demanding differential duty based on the original prices. The adjudicating authorities confirmed these demands, rejecting the respondents' plea for assessment based on the reduced prices.

The Appellate Commissioner, however, found that the price reductions were mutually agreed upon by the parties due to breaches of conditions in the MOAs by the sellers, which could have led to the contracts' frustration. The Commissioner relied on the Tribunal's decision in Mineral & Metals Trading Corporation of India and the Supreme Court's decisions in Union of India v. Jalyan Udyog and Collector of Customs v. Salim Abbas Bhai, holding that the revised prices should be accepted as they were agreed upon to avoid contract frustration. The Commissioner also noted that there was no evidence of clandestine remittances or that the contracts were not genuine.

2. Applicability of Section 14 of the Customs Act, 1962 for Valuation of Goods:

Section 14 of the Customs Act, 1962, relates to the valuation of goods for assessment purposes, deeming the value to be the price at which such goods are ordinarily sold in international trade. The Customs Valuation Rules, 1988, provide that the transaction value should be the price actually paid or payable for the goods when sold for export to India, provided the conditions in Rule 4(2) are satisfied.

The Tribunal noted that Section 14 does not mandate that the value of imported goods be the transaction value but allows Customs authorities to determine the value, which can be more or less than the purchase price. The Supreme Court in Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai emphasized that the transaction value should be accepted unless it falls under exceptions specified in Rule 4(2). Since no attempt was made to show that these exceptions applied, the transaction value should be accepted.

3. Determination of the Date of Importation for Assessing Customs Duty:

The Appellate Commissioner misapplied the ratio of the Supreme Court's decisions in Jalyan Udyog and Salim Abbas Bhai, which dealt with ocean-going vessels subsequently broken up. These decisions held that the date of breaking up should be considered the date of importation for assessing customs duty. However, in the present cases, the vessels were imported specifically for breaking up, and the original prices were altered before delivery. Therefore, the Tribunal held that the date of importation should be the date of delivery, not the date of breaking up.

4. Requirement for Final Assessment under Section 18 of the Customs Act, 1962:

The Tribunal noted that the Appellate Commissioner overlooked the requirement for final assessment under Section 18 of the Customs Act, 1962. Section 18 allows for provisional assessment pending the production of relevant documents or completion of enquiries, with final assessment to be made thereafter. The Tribunal directed that the assessing officer should now make the final assessment orders under Section 18(2) in light of the judgment.

Conclusion:

The Tribunal dismissed the appeals, upholding the Appellate Commissioner's findings that the reduced prices reflected the correct transaction values. However, it directed the assessing officer to make final assessment orders under Section 18(2) of the Customs Act, 1962, considering the judgment's findings.

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