2020 (3) TMI 772 - AT - Customs

Valuation of export goods - Claim of benefit of Cum-duty from FOB value - export of Iron Ore Fines - validity of assessments of the shipping bills before the first appellate authority - HELD THAT - When the goods are imported all costs up to the Indian Port include the transaction value of the goods (FOB) as well as the freight incurred and the transit risk in the form of transit insurance until the goods reach the Indian Port. In fact, even the landing cost i.e., costs involved in landing the goods etc. are also included in the assessable value in case of imports. Therefore, the value for the purpose of imports is CIF value plus cost of landing - The present case is of exports. In case of exports, the cost of freight and transit insurance are not part of the transaction value at the Port of export i.e. the Indian Port where the goods are exported. It includes only the Free on Board (FOB) value. This is the value for the purpose of Section 14 and export duty must be calculated on this FOB value. The argument of the appellant is that out of this FOB value, the element of duty also must be deducted to determine the assessable value. In other words, their argument is that the FOB must be taken as cum duty price and the assessable value must be calculated backwards so that whatever is charged by them from the overseas buyers must be treated as including the export duty. A plain reading of Section 14 would not show such a change in the valuation methodology is permissible under the law. The appellant cannot, on their own, claim a new valuation methodology for their exports when the law specifically lays down that transaction value at the place of export is the assessable value for determining the export duty. But, it appears that a wrong practice was in vogue of taking the FOB price as cum duty price upto 2008. An identical case in respect of the same appellant came up before the Tribunal, Kolkata in M/S. SESA GOA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX, BHUBANESWAR-I 2014 (4) TMI 658 - CESTAT KOLKATA in which it has been categorically held that the transaction value i.e. FOB price cannot be treated as cum duty price under section 14 of Customs Act, 1962 for the purpose of calculation of export duty. Appeal dismissed.

Summary

Issues:
- Dispute over the valuation methodology for export duty calculation based on FOB value.
- Interpretation of Section 14 of the Customs Act, 1962 regarding transaction value for export goods.
- Applicability of Circular No. 18/2008-Cus on valuation methodology.
- Precedent set by Tribunal Kolkata on treating FOB price as cum duty price.

Issue 1: Valuation Methodology for Export Duty Calculation
The appellant challenged the assessments of shipping bills, arguing that the amount received from customers on FOB basis should be considered as cum duty price, affecting the assessable value and duty calculation. The first appellate authority rejected this claim, leading to the current appeals.

Issue 2: Interpretation of Section 14 of the Customs Act
Section 14 of the Customs Act, 1962 specifies the transaction value for imported and exported goods, emphasizing the actual price paid or payable at the time and place of importation or exportation. The section excludes costs beyond the FOB value for exports, unlike imports where additional costs are included in the assessable value.

Issue 3: Circular No. 18/2008-Cus on Valuation Methodology
Circular No. 18/2008-Cus modified the export duty calculation practice, clarifying that the FOB price at the time and place of exportation should be the transaction value for duty calculation. This circular aimed to standardize the valuation methodology for export duty calculation.

Issue 4: Tribunal Kolkata Precedent
The Tribunal Kolkata in previous cases held that FOB price cannot be considered as cum duty price under Section 14 for export duty calculation. The decisions from the Kolkata Tribunal set a precedent for similar cases, reinforcing the correct interpretation of the valuation methodology under the Customs Act.

In conclusion, the Tribunal rejected the appeals, upholding the impugned orders and emphasizing that the FOB value should be the basis for export duty calculation as per Section 14 of the Customs Act. The decision aligned with the Circular No. 18/2008-Cus and previous rulings by the Tribunal Kolkata, establishing a consistent approach to valuation methodology for export goods.