2023 (6) TMI 1200 - AT - Customs

Finalization of provisional assessment (at higher side) - Valuation - import of old and used ships/vessels for breaking purpose - existence of allegation or evidence of extra consideration having been paid to the seller over and above the declared value or not - HELD THAT - It can be seen from clause 1 of the MOA dated 28.7.2011, that parties have agreed a lump sum purchase price of USD 5,815,747; there is no reference to LDT made for arriving at the purchase price by the parties to the agreement, in other words purchase price agreed between the parties is not in proportion to the LDT. Further, it is not the case of revenue that any consideration over and above the agreed purchase price has been paid by the importer to the foreign seller. Revenue has sought to assess higher duty only on the basis of commercial invoice submitted vide letter dated 4.7.2011 wherein details of additional LDT of 401.323 MT is mentioned. There is otherwise no corroboration whether LDT mentioned in the MOA and survey report is inclusive of 401.323 MT or otherwise. It is observed that parties have agreed upon a lump sum price of USD 5,815,747 for the ship as a whole and absent any allegation or evidence of extra consideration having been made by the importer over and above the said price, transaction value as declared by the importer has to be accepted. Lower authorities clearly erred in loading the assessable value entirely based on the LDT when the LDT is irrelevant for assessment of duty. The said issue is already decided by this Tribunal in the decision of JRD. INDUSTRIES VERSUS COMMISSIONER OF CUSTOMS, JAMNAGAR 2010 (8) TMI 437 - CESTAT, AHMEDABAD , where it has been held that LDT gained importance for the period prior to 2003 and was required to be correctly arrived at, as duty was ad valorem Rs 1400/- per Light Displacement Tonnage. In the present case the duty is not relatable to LDT. The memo of agreement arrived at between the two parties also does not refer to any fact showing that the price of the ship is proportionate to LDT of the said ship. The impugned order cannot be sustained and appeal of the appellant is required to be allowed.

Summary

Issues involved:
The issues involved in the judgment are the assessment of import duties based on the Light Displacement Tonnage (LDT) of a vessel, the determination of assessable value in proportion to the LDT as per the Customs Valuation Rules, and the acceptance of transaction value declared by the importer.

Assessment of Import Duties based on LDT:
The appellant, engaged in importing old and used ships for breaking, declared the LDT of a vessel in the Bill of Entry. The department proceeded to recover differential duty when the LDT was found higher than initially declared. The reason cited was the increase in assessable value in proportion to the price per LDT as per the Memorandum of Agreement (MOA). The final assessment order was passed based on this reasoning, which was upheld by the impugned order.

Determination of Assessable Value in Proportion to LDT:
The appellant contended that the approach taken by the revenue authorities was contrary to the mandate of the Customs Act, as the transaction value should not be disturbed without evidence of extra consideration paid. The appellant argued that the contract price was a lump sum and not in proportion to the LDT of the vessel. The Tribunal noted that the purchase price agreed between the parties was a lump sum and not based on LDT. Without evidence of extra consideration paid, the transaction value declared by the importer had to be accepted. The Tribunal referenced a previous decision to support this conclusion.

Acceptance of Transaction Value Declared by Importer:
The Tribunal found that the authorities erred in loading the assessable value based solely on LDT, which is irrelevant for duty assessment. The decision highlighted that the value of the ship was a lump sum agreed upon by the parties, and there was no evidence of extra payment to the seller. The Tribunal emphasized that LDT was not a relevant factor for determining the assessable value, especially when the price was not based on per unit of LDT. Relying on a previous decision, the Tribunal allowed the appeal, setting aside the impugned order and directing the appeal to be allowed.