2021 (12) TMI 970 - AT - Customs

Valuation of imported goods - aircraft engine - vehicle expressly imported for a limited period and for stop gap fitment during the overhaul of the regular engines by the provider of the imported replacement - according to the importer, the amount actually paid to the overseas supplier at the time of import is the transaction value on which duty was to be levied while Revenue contends that the value is to be ascertained as for an engine brought into the country permanently - extended period of limitation - HELD THAT - The replacement value denominated in the agreement is contingent upon occurrence of certain circumstances which are farthest from the intent of the two contracting parties; this is evident from the prompt dispatch of the replacement engine in terms of the agreement. For that to crystallize within the purview of transaction value , the contingent circumstances must arise - Owing to non-conformity with any method of valuing the transaction per se, the plea of Revenue for adoption as assessable value fails for lack of conformity with the scheme of valuation. The methodology of customs authorities in United States of America for valuing leased goods in terms of rental charges will not be consistent with the assessment under Customs Act, 1962 as elaborated supra with proportionate attribution afforded by notification no. 27/2002-Cus dated 1st March 2002 amended by 27/2008 dated 1st March 2008. In the context of declared value not being the transaction value envisaged in Customs Act, 1962 and the replacement value , sought to be validated in the appeal of Revenue, not being in conformity with the Rules, an assessable value is necessary. The impugned order has adopted a base value to which additions have been made and, in the process, utilized a notional price in the agreement that is neither price paid nor price payable which is a necessary qualification for transaction value of imported goods , identical goods or similar goods in rule 3, 4 and 5 of Customs Valuation (Determination of Value of Imported Goods Rules), 2007. Likewise rule 7 and 8 of the said Rules specify the circumstances that validate appraisal. Extended period of limitation - HELD THAT - The show cause notice, issued on 4th November 2010 in relation to goods imported on 1st August 2009 and beyond the normal period of limitation in section 28 of Customs Act, 1962, vests jurisdictional competence only by recourse to extended period of upto five years from the relevant date. The demand has been crystallized by discarding the declared value and re-determination of assessable value by recourse to rules framed under the authority of section 14 of Customs Act, 1962. Such recourse may be, but is not always, consequent to one the taints enumerated in section 28 for invoking the extended period having been established - Customs authorities cannot, claim to have been hoodwinked by misrepresentation or suppression of facts as there is a statutory obligation on their part to determine the value in accordance with the Rules. Intention to retain goods only for a limited period on lease was not suppressed from customs authorities at the time of import and the invoice submitted along with the bill of entry made this abundantly clear. Furthermore, it was only at the time of export of the leased engine that customs authorities nudged themselves awake even though the two engines of the aircraft had been entered for export and import on separate occasions and assessment of the imports on repair value would have been permitted, and indeed tolerated, only upon production of the said agreement which incorporated the provision for temporary allocation of the impugned engine. The adjudicating authority has ignored these vital facts in deciding upon the validity of the demand traversing beyond the normal period of limitation. Delegation of that statutory responsibility upwards will only encourage irresponsible adjudication. As appellate authority, it devolves upon the Tribunal to enforce respect for the law and the restrictions that the law places upon executive authority. Such evaluated decision making is not a luxury appropriated by magnanimous appellate authorities but is the obligation to be internalized by adjudicating authorities without exception. It would, therefore, be appropriate to direct the original authority to arrive at its conclusion afresh by application of these facts to the law on empowerment in section 28 of Customs Act, 1962 for invoking the extended period of limitation. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Valuation to be adopted on 'aircraft engine' imported for a limited period.
2. Determination of assessable value.
3. Applicability of the extended period for recovery of differential duty.
4. Validity of the demand beyond the normal period of limitation.

Detailed Analysis:

1. Valuation to be adopted on 'aircraft engine' imported for a limited period:
The core issue revolves around the appropriate valuation of an aircraft engine imported temporarily by M/s Futura Travels Ltd for use during the overhaul of their regular engines. The importer claimed the transaction value should be the amount paid to the overseas supplier at the time of import, while Revenue argued for a value as if the engine was brought in permanently. The adjudicating authority rejected the declared value of US$ 25,000, citing it as a refundable security deposit, and instead adopted the purchase option price, adding freight, insurance, and landing charges, resulting in a revised value of ?82,05,112.36.

2. Determination of assessable value:
The Tribunal noted that the transaction value must pertain to a 'sale,' which the temporary importation was not. Therefore, the assessable value must be determined according to the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Tribunal found that neither the declared value, the replacement value proposed by Revenue, nor the value adopted by the adjudicating authority conformed to these rules. Consequently, the Tribunal directed the original authority to re-determine the assessable value using reasonable means consistent with the principles and general provisions of the valuation rules.

3. Applicability of the extended period for recovery of differential duty:
The Tribunal examined whether the extended period for recovery of differential duty under section 28 of the Customs Act, 1962, was applicable. The show cause notice was issued beyond the normal period of limitation, and the Tribunal emphasized that invoking the extended period requires establishing one of the taints enumerated in section 28. The Tribunal found no evidence of misrepresentation or suppression of facts by the importer, as the temporary nature of the import and the security deposit were clearly declared.

4. Validity of the demand beyond the normal period of limitation:
The Tribunal criticized the adjudicating authority for ignoring vital facts and failing to respect the statutory limitations on executive authority. It noted that customs authorities were aware of the temporary importation and the terms of the agreement at the time of import. The Tribunal directed the original authority to re-evaluate the applicability of the extended period of limitation based on these facts and the law.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter back to the original authority for fresh determination of the assessable value and re-evaluation of the demand's validity within the statutory limitations. The Tribunal emphasized the need for adherence to legal principles and the proper exercise of statutory responsibilities by adjudicating authorities.