Can transaction value be rejected on account of reduced price as the import was already cleared provisionally?

PJ/Case Laws/2012-13/1318

Case:- M/s BINANI CEMENT LTD Vs COMMISSIONER OF CUSTOMS, JAMNAGAR

Citation:- 2012-1101-1587-CESTAT-AHM

Brief Facts:- This is application for waiver of pre deposit of Rs.42,15,584/-.The appellants are importing non coking coal under the contract with the suppliers which interalia has a condition about price adjustment for quality. The imported goods did not conform to the specifications agreed and this fact was found on testing the said goods after import. As a result, negotiations took place between the importer and the supplier, wherein, as a special case, the goods were agreed to be accepted subject to reduction in the price. The Adjudicating authority confirmed the demand rejecting the transactional value and the same was also upheld by the first appellate authority. Appellant has filed appeal before tribunal.

Appellant Contentions:- The Appellant submitted the contract entered into by the appellant and also the negotiation entered as the said goods that were imported i.e. Non-Coking Coal, was not as per the specification laid down and agreed to in the contract. They submitted that on subsequent testing of the said goods, it was found that the imported goods are not up to the standard and they had informed the supplier of rejecting the consignment. Subsequent to such letter, negotiation took place with the supplier and the rate negotiated was less than the rate originally agreed upon. The adjudicating authority as well as the first appellate authority has not considered the negotiation as correct negotiation and has discarded the negotiated price and applied the price which was declared by the assessee in respect of an identical consignment which was imported by the appellant earlier. The Appellant relied on judgment of the Hon'ble Supreme Court in the case of Chaudhary Ship Breakers vs. Commissioner of Customs Ahmedabad covering the issue in favour of the assessee.

Respondent Contentions:- The Respondent submits that the original order which was placed by the appellant was for a particular specification of goods. The Respondent also submits that the Clause of the contract wherein there is a price negotiation Clause for the goods which are imported but do not conform to the specifications. The respondent further submits that the consignment which was imported was liable to be rejected as there is Clause in the contract to reject such consignment. The Respondent would rely upon the decision of the Hon'ble Supreme Court in the case of Udayani Ship Breakers vs. CCL Rajkot for the proposition that once the import has taken place, subsequent price negotiation in reduction of transaction value cannot be accepted as per the provisions of sub-Section 1 of Section 14 of the Customs Act, 1962.

Reasoning of Judgment:- The Tribunal has perused the case-laws cited and the Tribunal finds that the goods which were imported did not conform to the specification given by the importer to the supplier. The importer has written a letter to the supplier about rejection of the consignment. Subsequent to such letter, negotiation took place between the importer and supplier that the goods were agreed to be accepted subject to reduction in the prices. This price negotiation or the specification of the consignment is not doubted by the Revenue. Tribunal relied on the recent judgment of the Hon'ble Supreme Court in the case of Chaudhary Ship Breaker (supra) and held that prima-facie the case cited covers the issue in favour of the assessee as there is no reason in the show cause notice for doubting the negotiated price entered into by the appellant importer with the supplier. The Tribunal finds that the appellant has made out a prima facie case for the waiver of pre-deposit of amounts involved. Accordingly, the application for waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till disposal of the appeal.

Decision: - Appeal allowed.

Comment:The analogy drawn from this case is that there should be a strong and valid reason for the Revenue to reject the transaction value.

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PJ/Case Laws/2012-13/1318

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