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2024 (12) TMI 542 - AT - CustomsRejection of appellant s appeals against 70 self-assessed Bills of Entry - entitlement to the benefit of the fifth proviso to Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - inclusion of air freight incurred to the extent of 20% of FOB value in the assessable value - determination of FOB value. Entitlement to the benefit of the fifth proviso to Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - HELD THAT - The Distribution Agreement does not restrict it to sale only on CFR New Delhi airport. Therefore, the submission of the learned authorised representative is not correct.In fact, if the submission of the learned authorised representative that the additional amount paid by the appellant to its supplier is not for freight is accepted, then this amount cannot be included in the assessable value at all because nothing has been brought on record by the Revenue to show that this amount is relatable to some other costs which are includable in the assessable value. It must be noted that only such costs and services as are covered by rule 10 of the Valuation Rules can be included in the assessable value. The additional amount paid by the appellant is towards air freight according to it. Revenue has neither any contrary assertion or evidence regarding the nature of this amount paid by the appellant but its assertion is that it is not for freight. If that be so, it is not includable in the assessable value and it will result in lowering the assessable value and the duty liability far below what the appellant is claiming and he appellant will be entitled to much larger amount as a refund. Whether, based on the documents available on record, it can be said that the amount of freight is ascertainable so as to bring the assessment of these Bills of Entry within the ambit of the fifth proviso to rule 10(2) (a) of the Valuation Rules? - HELD THAT - The explanation of the appellant is that Add.Recov.Freight referred to is the additional recovery towards air freight. There is no assertion by the Revenue as to what this amount pertains to and how it is includable in the assessable value - During the relevant period, the CPT value per unit is indicated as Rs. 696.54 which is only slightly higher than the FOB value for the subsequent period. Based on these documents, we are satisfied that the CPT values for the relevant period were for transport by ship or rail. Air transport is far more expensive. Whether the contention of the appellant that the amount shown in the invoices as Add.Recov.Freight is the cost of air freight is correct or to accept the contention of the Revenue that it is not for air freight? - HELD THAT - If the contention of the Revenue is accepted that it is not towards air freight and air freight has already been included in the CPT price, then, this amount cannot be included in the assessable value at all as there is no assertion by either side that it represents some other cost which is includable in the assessable value as per rule 10. This will reduce the duty payable on the goods - it is convincing that this amount represents the air freight incurred by the appellant and of this only an amount equal to 20% of the FOB value can be included in the assessable value. How to determine the FOB value since the invoices were raised on CPT basis? - HELD THAT - According to the appellant, this value on CPT basis was for transport by ship and although the goods were not transported by ship but were flown through air cargo for which an additional amount was paid, the appellant had paid the full amount indicated as CPT for the cigarettes to PMSA. If that be the case, the price has effectively been increased and the so called CPT price has become the defacto FOB price. The addition of the amount shown under Add.Recov.Freight in the assessable value may be restricted to 20% of the CPT value shown in the invoices. The matter remanded to the original authority for re-determining the duty payable on all the Bills of Entry in the manner indicated - appeal allowed by way of remand.
Issues Involved:
1. Entitlement to the benefit of the fifth proviso to Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 2. Inclusion of "Add. Recov. Freight" in the assessable value. 3. Determination of FOB value for the purpose of customs duty assessment. Issue-wise Detailed Analysis: 1. Entitlement to the Benefit of the Fifth Proviso to Rule 10: The primary issue is whether the appellant is entitled to the benefit of the fifth proviso to Rule 10 of the Customs Valuation Rules, which limits the inclusion of air freight to 20% of the FOB value in the assessable value. The appellant argued that they imported cigarettes on a CPT basis, expecting them to be shipped by sea. However, due to disruptions caused by the COVID pandemic, they were forced to import the goods by air, incurring additional freight costs. The appellant contended that only 20% of the FOB value should be included in the assessable value for air freight, as per the rule. The Tribunal found that the appellant's claim was valid, as the additional freight costs were indeed incurred due to the change from sea to air transport. The Tribunal concluded that the appellant was entitled to the benefit of the fifth proviso, allowing only 20% of the FOB value to be included in the assessable value. 2. Inclusion of "Add. Recov. Freight" in the Assessable Value: The appellant included an amount termed "Add. Recov. Freight" in the value declared in the Bills of Entry. This amount was an additional cost incurred due to air freight. The Revenue argued that this amount was not solely for freight and could not be limited to 20% of the FOB value. The Tribunal examined the invoices and found that the "Add. Recov. Freight" was indeed related to the additional air freight costs. The Tribunal rejected the Revenue's contention that this amount was not for freight, stating that if it were not for freight, it should not be included in the assessable value at all. The Tribunal determined that this amount should be limited to 20% of the FOB value for duty assessment purposes. 3. Determination of FOB Value: The Tribunal addressed the challenge of determining the FOB value since the invoices were raised on a CPT basis. The appellant argued that the CPT value was intended for sea transport, and the additional air freight cost was an unforeseen expense due to the pandemic. The Tribunal accepted the appellant's explanation and decided that the CPT value effectively became the FOB value due to the circumstances. The Tribunal instructed that the assessable value should be recalculated by restricting the inclusion of the "Add. Recov. Freight" to 20% of the CPT value shown in the invoices, thereby determining the duty payable correctly. Conclusion: The Tribunal allowed all the appeals, remanding the matter to the original authority to reassess the duty payable on all the Bills of Entry in accordance with the findings. The Tribunal's decision emphasized the proper application of the Customs Valuation Rules, ensuring that only the permissible amount of air freight is included in the assessable value, thus granting the appellant relief from excess duty payments.
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