2024 (3) TMI 934 - AT - Customs

Valuation of imported goods - Cement Carrier ship - rejection of transaction value - redetermination of value - inclusion of handling charges, transportation, cost of insurance and landing charges in assessable value - failure to declare the value of Bunkers on board at the time of delivery at Colombo. Mis-declaring the value of ship by not adding value of transportation, cost of insurance and lending charges - failure to declare the value of Bunkers on board at the time of delivery at Colombo - HELD THAT - In the present case, though the invoice value of Rs. 26,91,00,000/- was declared at the time of import, as per the prevailing practice, at the request of appellant, it was subject to valuation by Chartered Engineer and as per the valuation report, chartered engineer assessed the value of ship as Rs. 27,00,00,000/- and based on the above said value, it was allowed to clear on payment of proper Custom duty. Now in addition to that, adjudicating authority is adding 20% as cost of transportation, handling charges of 1.125% and 1% of assessable value for confirming demand of Rs. 30,31,174/- - The inclusion of freight and insurance in the assessable value in commercial parlance, is designated as CIF in transactions. The vessel, ever coursing the seas and oceans, does not take on additional insurance merely for the purposes of movement to a destination for registration and the cost of self-propulsion does not add to the value of the vessel. Moreover as per the estimated voyage cost produced by the appellant, they have added cost of Rs. 1,70,595/- towards cost of voyage and other expenses for the fuel from Colombo to Mangalore Port and paid customs duty. Consequently, the enhancement of assessable value beyond the value assessed by Chartered Engineer fails on every count. Adding the cost of Bunkers, based on the balance quantity of Bunkers at Mangalore port - HELD THAT - The issue is squarely covered by the judgment of the Hon ble Supreme court in the matter Mangalore Refinery Petrochemicals Ltd. Vs. CC, Mangalore, 2015 (9) TMI 245 - SUPREME COURT where it is held that the quantity actually received into the shore tank in port in India should be the basis for payment of Customs duty, being the goods imported into India. Considering the law laid down by the apex court, demand of duty for the balance quantity of Bunkers available in Colombo at the time of delivery of the ship cannot be added towards the cost of Bunkers. Regarding value, as per the request of the appellant, Chartered Engineer carried out survey and as per the report No. AR/016/2011-12 dated 09.05.2011, value assessed the as Rs 27 Crores. Hence this appeal is allowed by accepting the assessable value of the goods as Rs. 27 Crores and additional demand of customs duty against cost of transportation, insurance and handling charges as demanded in the impugned order is set aside - Since there is no suppression of fact, confiscation of the ship and fine and penalty imposed by the adjudicating authority is set aside. The impugned order modified to the extent of confirming assessable value as Rs. 27 Crores. Appeal allowed in part.

Summary

Issues Involved:
1. Valuation of imported Cement Carrier ship.
2. Demand of differential duty on the ship.
3. Demand of Customs duty on bunkers.
4. Imposition of fine and penalty.

Summary:

1. Valuation of Imported Cement Carrier Ship:
The Appellant, M/s KC Maritime, imported a Cement Carrier ship through Mangalore port, declaring the value as USD 5,98,00,000 (equivalent to Rs. 26,91,00,000/-) and claimed exemption from Basic Customs Duty, paying an additional duty of 5%. The adjudicating authority rejected the transaction value and re-determined the value of the ship as Rs. 27 crore, adding 20% of the FOB value as the cost of transportation, resulting in a final value of Rs. 33,06,48,750/-. The Appellant argued that the value declared in the B/E is the transaction value based on the purchase invoice and Chartered Engineer's certificate, and the additional cost of transportation at 20% is unjustifiable.

2. Demand of Differential Duty on Ship:
A Show Cause Notice (SCN) was issued on 08.01.2012, alleging undervaluation and demanding Rs. 71,15,715/- as short payment with interest u/s 28(1)/28(4) of the Customs Act, 1962. The Appellant contended that the demand is unsustainable as it is barred by limitation, with the SCN served two days late. The adjudicating authority confirmed the demand of Rs. 30,31,174/- with interest on the vessel, adding freight, insurance, and handling charges. The Tribunal found the inclusion of 'freight' and 'insurance' unjustifiable, relying on the judgments of Wipro Ltd and Sachin Kshirsagar, and concluded that the enhancement of 'assessable value' beyond the Chartered Engineer's assessment fails on every count.

3. Demand of Customs Duty on Bunkers:
The adjudicating authority demanded Rs. 40,83,901/- for the bunkers, re-determining the transaction value based on the quantity at the time of delivery in Colombo. The Appellant argued that the duty should be based on the quantity received in India, supported by the judgment of Mangalore Refinery & Petrochemicals Ltd. The Tribunal agreed, stating that the duty should be based on the quantity received at the Mangalore port, making the additional demand unsustainable.

4. Imposition of Fine and Penalty:
The adjudicating authority imposed penalties of Rs. 71,15,075/- u/s 114A and Rs. 10 lakhs u/s 114AA of the Customs Act, 1962. The Appellant argued there was no suppression of facts to justify the penalties. The Tribunal set aside the fine and penalties, noting that the Appellant made a true declaration in the Bill of Entry and there was no intent to evade duty.

Conclusion:
The appeal is partially allowed, with the assessable value of the ship confirmed as Rs. 27 crores. The additional demands for customs duty on transportation, insurance, handling charges, and bunkers are set aside. The confiscation of the ship and the imposition of fines and penalties are also set aside. The order is modified to reflect these changes, with consequential relief granted in accordance with the law.