2024 (4) TMI 47 - AT - Customs

Valuation of the export goods on which duty has to be paid - case of the Department is that the contract price entered into by the appellant and its overseas buyer should be determined as per the test report of the Chemical Examiner of CRCL - inclusion of additional consideration for sale or not. Can the transaction value between the buyer and seller be modified by the Customs based on the test report of the chemical examiner of CRCL when the price should be finalised as per the test report of CIQ as per the agreement between the buyer and seller? - HELD THAT - In this case the transaction value as per the agreement has an adjustment clause which provided that the value shall be re-determined as per the test report of CIQ. The Customs officers cannot change this transaction value or the stipulation of the test report of CIQ being the determinant of the transaction value. The report of Chemical examiner CRCL is irrelevant to the transaction value. It will be a different matter if the testing has to be done for some Customs purpose say to determine the nature of the goods or if the availability of the exemption notification depended on the Fe content of the export goods etc. Then the customs officers can rely on the CRCL s test report. Thus the impugned order re-determining the transaction value based on the CRCL test report is not correct and cannot be sustained. The decision of this tribunal in KIMMI STEELS PVT. LTD. VERSUS COMMISSIONER 2019 (11) TMI 741 - SC ORDER upheld by the Supreme Court has been relied on by the Revenue. That case was completely different although the goods were iron ore fines in that case as well. During the relevant period in that case export duty was chargeable on weight with a partial exemption notification if the Fe content was below a certain threshold. There were conflicting test reports regarding the Fe content and in the absence of clarity regarding the entitlement to the exemption notification it was denied. This question is answered in favour of the exporter and against the Revenue. Can the US 10 per MT be added as additional consideration for sale in the case? - HELD THAT - As is evident from the proviso to sub-section (1) of Section 14 and the Export Valuation Rules unlike in case of import valuation Commissions paid cannot be added for the purpose of determining the value in case of exports even if it was paid by the exporter - The case of the Revenue however is that the amount paid by the buyer to M/s. Reliance Hong Kong the agent is an additional consideration for sale as this amount which was to be paid by the exporter was instead paid by the importer and thereby the transaction value was reduced. Therefore according to the Revenue price was not the sole consideration for sale in this case. If indeed the price was not the sole consideration for sale the transaction value can be rejected under Rule 8 of the Export Valuation Rules and then it must be redetermined sequentially through Rules 4 to 6. Rule 4 provides for determining the value based on the transaction value of goods of like kind and quality exported at or about the same time. Rule 5 provides for valuation based on a computed value including cost of production manufacture or processing of export goods charges if any for the design or brand and an amount towards profit. Rule 6 is a residual Rule to be applied if Rules 4 and 5 do not apply. None of these Rules provide for addition of an amount as additional consideration for sale - this amount of US 10 per MT cannot be added as additional consideration for sale to the export price. If there was additional consideration for sale the proper course would have been to the officer to reject the transaction value and re-determine the value under Rule 4 or Rule 5 or Rule 6 sequentially. Both the questions are answered in favour of the appellants and against the Revenue - appeal allowed.

Summary

Issues Involved:

1. Modification of transaction value based on test reports.
2. Addition of extra commission as additional consideration for sale.

Summary:

Modification of Transaction Value Based on Test Reports:

The appeals involved the determination of the value of iron ore fines exported by The Kutch Salt & Allied Industries Ltd. The exporter argued that the transaction value should be based on the test report of CIQ as per the agreement with the buyer, while the Department insisted on using the Chemical Examiner of CRCL's test report. The Tribunal held that the transaction value is the price negotiated and agreed upon by the buyer and seller and cannot be altered by Customs officers. The impugned order re-determining the transaction value based on the CRCL test report was found to be incorrect and unsustainable. The Tribunal emphasized that the Customs officers have no right to modify the conditions of the contract between the buyer and seller.

Addition of Extra Commission as Additional Consideration for Sale:

The Department also added an amount of US$ 10 per MT paid by the overseas buyer to M/s. Reliance, Hong Kong, as an additional consideration for sale. The Tribunal noted that according to the Customs Export Valuation Rules, commissions paid cannot be added to the value of the goods for export valuation. The proper course for the officer would have been to reject the transaction value and re-determine it under the relevant rules if the price was not the sole consideration for sale. Therefore, the addition of US$ 10 per MT as additional consideration for sale was not permissible.

Conclusion:

The Tribunal answered both questions in favor of the appellants, set aside the impugned order, and allowed the appeals with consequential reliefs to the assessee.