2024 (2) TMI 683 - AT - Customs

Valuation of imported goods - Sludge/Sediments found in the vessel imported for breaking - value should be USD 120 per MT or USD 420 per MT? - lubricating oil or not - case of appellant is department could not establish that the sludge/sediments found in the vessel imported for breaking is a lubricating oil - HELD THAT - For valuation of the item in dispute referred as sludge/sediment, one cannot compare the value of sludge/sediment being declared by other importers at the material time. It is found that during first round of litigation, department had produced two bills of entry - No. SBY-III/24/98-99 dated 29.05.1998 filed by M/s. G. N. Ship Breakers, Bhavnagar and No SBY-III/22/98-99 dated 28.05.1998 filed by M/s Kothi Ship Breaking Industries, Bhavnagar, wherein the respective importers had shown Sludge Oil and valued the same @ USD 120 PMT. However, as discussed above, this price cannot be taken to be value of the goods in question - the two importers viz. M/s. G. N. Ship Breakers as well as M/s. Kothi Ship Breaking Industries have declared the value of Lubricating Oil at USD 420 PMT in their respective bills of entry and therefore, the SCN has taken that value for calculating the demand amount on the oil (so called sediment/sludge). However, the noticee has contended that since it contains impurities, the same cannot be valued at the price of Lubricating Oil. No material evidence was adduced by the department to come to conclusion beyond doubt that the goods found in the vessel was lubricating oil and not the sludge/sediments. Therefore, without any evidence, applying the value of USD 420 MT which is of lubricating oil is on assumption and presumption basis. In the finding itself, it was admitted that the value of the sludge oil is USD 120 per MT. It is also fact that the department could not establish conclusively that the goods claimed by the appellant as sludge/sediments is lubricating oil. Therefore, applying the price of the lubricating oil i.e. USD 420 per MT, is without any basis. Hence, the same cannot be sustained - adjudicating authority must reconsider the entire case and bring any evidence, if available, to establish that the goods found in the vessel is Lubricating Oil and not sludge/sediment and thereafter matter may be decided a fresh - Appeal allowed by way of remand.

Summary

Issues involved:
The valuation of sludge/sediments found in an imported vessel for breaking, whether it should be USD 120 per MT or USD 420 per MT.

Issue 1: Valuation of sludge/sediments
The appellate authority concluded that the sludge/sediments found in the vessel should be valued at USD 420 per MT, considering it as lubricating oil. The appellant argued that the department failed to prove that the sludge/sediments are indeed lubricating oil, and hence, the valuation based on this assumption is unsustainable.

Issue 2: Adjudicating authority's findings
The adjudicating authority noted that the sludge/sediments in question contained only 45% water and sediment, suggesting it was not typical sludge/sediment. The quantity found was significantly higher than usual, indicating it may be a marketable item used for industrial purposes after recycling. The authority also highlighted that expert opinions differentiated the substance from tank bottom crude oil sludge. Despite this, the department relied on the valuation of lubricating oil without concrete evidence that the substance was not sludge/sediment, leading to a decision based on assumption and presumption.

Issue 3: Lack of conclusive evidence
Both the Commissioner (Appeals) and the department failed to provide substantial evidence proving beyond doubt that the substance in the vessel was lubricating oil and not sludge/sediments. The absence of concrete evidence to support the valuation of USD 420 per MT as lubricating oil renders the decision baseless and unsustainable.

In conclusion, the appellate tribunal set aside the impugned order and remanded the case to the adjudicating authority for reconsideration with the requirement to present evidence establishing whether the substance found in the vessel is indeed lubricating oil and not sludge/sediments.