Machinery imported is found to be in damaged condition on examination but damage could not be ascertained ,whether refund is to be granted ?

PJ/CASE LAW/2015-16/2671

Case-COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI-I Versus ESCORTS MAHLE LTD.

Citation-2015 (316) E.L.T. 253 (Tri. - Mumbai)

Brief Facts-The respondent M/s. Escorts Mahle Ltd. imported a machinery vide Bill of Entry No. 6215, dated 18-2-1997 and paid duty as per the value assessed. Subsequently during examination, the goods were found to be in damaged condition. Therefore, the respondent filed a refund claim of the duty paid by them under Sections 27 & 22 of the Customs Act, 1962. However, since damage could not be ascertained, no refund was granted. Subsequently the damaged goods were sent to Germany for repair and re-import on payment of duty on the value of repair charges plus to and fro freight charges and the appellant filed a refund claim for the duty paid second time on the repair and freight charges. This appeal was allowed by the lower appellate authority on the ground that since the duty has been paid twice on the same goods and the extent of damage is repair charges and freight charges, the original assessment for the damaged goods should have been on these charges and, therefore, the appellant is rightly eligible for the refund of the duty paid second time. Accordingly, he allowed the claim of the respondent. Aggrieved of the same, the Revenue is before the tribunal.

Appelants Contention-The learned Deputy Commissioner (AR) appearing for the Revenue reiterates grounds urged in the appeal memorandum i.e. In their appeal memorandum, the Revenue urged that sub-section (3) of Section 22 of the Customs Act provides the method of ascertaining value of damaged/deteriorated goods and the methods prescribed are - value of such goods shall be determined by the proper officer, or if such goods are sold in public auction or by tender, or with the consent of the owner in any other manner, the gross sale proceeds shall be deemed to be the value of such goods. Therefore, if the value could not be ascertained as per these methods, the question of allowing any abatement towards damage would not arise. Therefore, it is prayed that impugned order is unsustainable in law.

Respondents Contention-None appeared for the respondent.

Reasoning Of Judgement-The tribunal have carefully considered the submissions. Section 22(1) of the Customs Act provides for abatement of duty on damaged or deteriorated goods and provides that such damaged goods shall be chargeable to duty in accordance with the provisions of sub-section (2). Sub-section (2) states that duty to be charged on the goods referred to in sub-section (1) shall bear the same proportion to the duty chargeable on the goods before the damage or deterioration which the value of the damaged or deteriorated goods bear to the value of the goods before the damage or deterioration. In other words, the law provides that duty shall be charged on a proportionate basis. Sub-section (3) provides for ascertaining the value of the damaged or deteriorated goods by two ways :-
(i) The value of such goods may be ascertained by the proper officer, or
(ii) Such goods may be sold by the proper officer by public auction or by tender, or with the consent of the owner in any other manner, and the gross sale proceeds shall be deemed to be the value of such goods.
In the present case second option has not been followed by the department; therefore, the only option available is ascertainment by the proper officer, which the proper officer did not do. Subsequently the goods were exported by the appellant for repairs abroad and brought back and the lower appellate authority held that the repaid charges + cost of transportation to and fro including insurance can be considered as extent of damage and accordingly, he allowed the refund of the duty paid on the repair charges + freight charges. The ascertainment of damage has been done after the repairs were undertaken as equal to the cost of repair charges. Therefore, there is nothing wrong or unreasonable in the findings of the lower appellate authority. So long as Revenue has received the duty on the full value without any abatement towards damage, the Revenue cannot have any cause for grievance. Therefore, tribunal do not find any merit in the Revenue’s appeal and accordingly, the same is dismissed.

Decision-Appeal dismissed

Comment-The crux of the case is that when the machinery imported is found to be in damaged condition on examination but damage could not be ascertained then refund is not granted. It can be ascertained either by the proper officer or by tender, or with the consent of the owner in any other manner. And, when such goods are exported back to abroad for repair and brought back by paying the duty on the repair charges + freight charges then refund is granted as the damage is ascertained after repair which is equal to cost of repair.

Prepared By-Neelam Jain

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PJ/CASE LAW/2015-16/2671

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