2016 (11) TMI 137 - AT - Customs

Demand of differential duty - Penalty - Valuation - Notification No. 21/2002-Cus DATED 1/3/2002 - Rule 10(2(a)(i) of Customs Valuation (determination of price of imported goods)Rules, 2007 - Held that - the details given which is supported by relevant invoices, the actual cost of transportation expenses was ascertained, therefore Ld. Adjudicating authority should not have resorted to proviso (i) of Rule 10(2)(a) accordingly there was no need to add 20% of FOB value - On the basis of actual expenses shown by the appellant the actual cost of transportation stands established therefore 20% as provided under proviso (i) of Rule 10(2)(a) of Customs Valuation Rules, 2007 cannot be applied. As regard insurance the Adjudicating authority straight way picked up premium amount mentioned in the Hull Marine Policy and added in the value, whereas appellant has shown on the basis of the documentary evidence of insurance company M/s. HDFC Ergo, General Insurance that the total premium of Rs, 2,63,962/- was paid in respect of Tug, however Ld. Adjudicating authority added entire premium of ₹ 8,51,175/-, actual insurance premium born by the appellant can only be added in the FOB value to arrive at assessable value - From the documents submitted by the appellant there is no dispute that actual premium paid by the appellant is ₹ 2,63,962/- and not ₹ 8,51,175/-. As regard the penalties imposed on the appellant company, as well as Director and employee of the appellant company, we find that from the overall facts and circumstances of the case, we do not see any malafide intention of the appellant to evade Custom duty of ₹ 12 lacs where they had discharged huge amount of customs duty amounting to ₹ 3.67 crores - It is only inadvertent mistake occurred on the part of the appellant in not including cost of transportation, insurance and other expenses for the voyage of the Tug from China to Singapore - Appeal allowed

Summary

Issues Involved:
1. Dispute over the valuation of the imported tug.
2. Inclusion of transportation and insurance costs in the declared value.
3. Imposition of penalties on the appellant company and its directors/employees.

Issue-wise Detailed Analysis:

1. Dispute over the valuation of the imported tug:
The appellants imported a self-propelled tug, 'Ocean Zircon', and declared its value as USD 5258397.64 (CIF) in the Bill of Entry. The Customs assessed the duty based on this declared value. However, the Department of Revenue Intelligence (DRI) found that the declared value did not include the transportation and insurance costs from China to Singapore. The appellants admitted the mistake and provided actual expense details during adjudication. The adjudicating authority, however, added 20% of the FOB value for transportation and insurance costs, which was contested by the appellants.

2. Inclusion of transportation and insurance costs in the declared value:
The appellants argued that the actual costs of transportation and insurance from China to Singapore were ascertainable and supported by relevant invoices. According to Rule 10(2)(a)(i) of the Customs Valuation Rules, 2007, 20% of the FOB value should only be added if the actual costs are not available. The adjudicating authority erroneously added 20% despite the availability of actual costs. The Tribunal found that the actual costs were indeed ascertainable and supported by invoices, thus, the 20% addition was not justified. The Tribunal upheld the actual differential duty of ?12,98,198/- calculated by the appellants.

3. Imposition of penalties on the appellant company and its directors/employees:
Penalties were imposed on the appellant company and its directors/employees under Sections 114A, 112(a), and 114AA of the Customs Act, 1962. The appellants contended that there was no malafide intention to evade duty, and the mistake was inadvertent. The Tribunal noted that the show cause notice was issued within one year, and there was no evidence of willful misstatement or suppression of facts. Consequently, the penalties under Sections 114A, 112(a), and 114AA were not sustainable. Instead, a penalty of ?50,000/- was imposed under Section 117 for the inadvertent mistake.

Conclusion:
The Tribunal upheld the differential duty of ?12,98,198/- and imposed a penalty of ?50,000/- under Section 117 on the appellant company. The penalties under Sections 114A, 112(a), and 114AA were set aside, and the appeals of the directors/employees were allowed.

Order:
(a) Appeal No. C/87135/13 of M/s. Samson Maritime Ltd: Differential duty of ?12,98,198/- upheld, remaining demand set aside, and a penalty of ?50,000/- imposed under Section 117. Penalty under Section 114A set aside.
(b) Appeal No. C/87136, 87137/13 of Shri. Mohan Samant and Shri. Laksminarayan Iyer: Allowed.

(Order pronounced in Court on 02/09/2016)