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PJ/CASE LAW/2016-17/3045

Whether custom duty is to be paid on the price agreed at the of import when there is a reduction in consideration after export
Case: INTERNATIONAL STEEL CORPORATION INTERNATIONAL STEEL CORPORATION Vs COMMR. OF CUS., JAMNAGAR (PREV)

Citation: 2015 (325) E.L.T. 881 (Tri. - Ahmd.)

Issue: Whether custom duty is to be paid on the price agreed at the of import when there is a reduction in consideration after export

Brief Facts: M/s. Madhav Industrial Corporation, Bhavnagar imported an old vessel M.V. Dimitriy Mendeleev for a consideration of US $ 9,54,044 under Memorandum of Agreement (MoA) dated 26-4-2001. The Customs Officer had boarded the Vessel on 1-5-2001. Subsequently, IGM was amended to substitute the appellants’ name, and declared consideration of US $ 8,45,000 as per MoA dated 3-5-2001 with the foreign seller M/s. Dragon, Navigation Inc., Liberia.
A show cause notice dated 22-3-2005 was issued proposing the value for the purpose of assessment of the subject vessel should be US $ 9,54,044 as per first MoA dated 26-4-2001. It has been alleged that the price initially agreed US $ 9,54,044 when it was arrived on 30-4-2001 would be accepted and there is no reason to consider the value as per second MoA on 3-5-2001, as it was finalised after importation. The adjudicating authority finally assessed the Bill of Entry No. SBY/22/2001-2002, dated 8-5-2001 and confirmed the demand of differential duty of Rs. 13,82,097.00 along with interest. The Commissioner (Appeals) upheld the adjudication order and dismissed the appeal filed by the appellant.
Appellant’s Contention: The learned Advocate on behalf of the appellant crew the attention of the Bench MoA dated 3-5-2001 between the foreign seller and the appellant. It is revealed from the agreement that the lump sum price of US $ 8,45,000 was fixed. It is submitted that the earlier buyer have cancelled the MoA and thereafter survey was conducted and on the basis of the survey report dated 15-5-2001 the transaction value was ascertained. There is no dispute that the declared value is genuine transaction value and therefore, the value on the basis of earlier MoA cannot be sustained. He particularly submits the Hon’ble Supreme Court in the case of Chaudhary Ship Breakers v. CC, Ahmedabad - 2010 (259)E.L.T. 161 (S.C.) on the identical situation held that price actually paid or payable acceptable as transaction value. He also relied upon the decision of the Tribunal in the case of Jai Jagdish Ship Breakers Pvt. Ltd. v. CC., Jamnagar - 2004 (177)E.L.T. 928 (Tri. - Del.) held that value mentioned in the addendum of MoA cannot be rejected.
Respondent’s Contention: The learned Authorised Representative on behalf of the Revenue reiterates the findings of the Commissioner (Appeals). He submits that the price as available at time of the importation as per earlier MoA would be transaction value. It is further submitted that price would be determined prevailing at the time of importation on 30-4-2001 and the subsequent agreement dated 3-5-2001 is domestic sale which cannot be transaction value. He particularly relied upon the decision of the Larger Bench of the Tribunal in the case of Commissioner of Customs, Bhavnagar v. Lucky Steel and Others - 2007 (2) LCX 429. He also filed compilation of case laws.

Reasoning of Judgement: After hearing both the sides and on perusal of records, they find that M/s. Madhav Industrial Corporation entered into agreement with the foreign seller by MoA dated 26-4-2001 to purchase the old Vessel for a consideration of US $ 9,54,044 and the vessel was arrived on 30-4-2001. After importation of the goods, the foreign seller sole the goods to the appellant as per MoA dated 3-5-2001 and the value was reduced to US $ 8,54,044.
They find that the value was available at the time of importation is US $ 9,54,044 as per MoA dated 26-4-2001. There is no reason available for reduction of price in the subsequent MoA dated 3-5-2001. The appellant filed the Bill of Entry on 8-5-2001. They agree with the submission of the learned Authorised Representative or the Revenue that the transaction value would be, as declared at time of importation of goods. Hence, the adjudicating authority rightly determined the value of US $ 9,54,044 as per first MoA. The Larger Bench of the Tribunal in the case of Lucky Steel Industries and Others (supra) has held that the price mutually agreed upon by the parties at time of import will be relevant and taken into consideration for the purpose of assessment under Section 14 of the Customs Act, 1962. The reduction of price after the date of import shall not be taken into consideration for the purpose of determining assessable value. The relevant portion of the said decision is reproduced below :
“In a nutshell it is it is held that any reduction in price mutually agreed upon by the parties to the contract prior to the date of import will be relevant and taken into consideration for the purpose of determining assessable value under Section 14 of the Customs Act, 1962. However, if there is any variation in price after the date of import the same shall not be relevant for the purpose of determining assessable value under Customs Act unless the reduction is on account of facts that the goods are not the ones which have been contracted for or that there has been serious breach of the terms of the contract which makes the contract void/voidable, in the latter case the new/reduced price under the new/revised contract will admissible.”
 
In view of the above discussions, they do not find any reason to interfere the order of the Commissioner (Appeals). Accordingly, appeal filed by the appellant is rejected. The application for extension of the stay order is dismissed as infructuous.

Decision: Appeal Dismissed

Comment: The gist of the case is that the assessable value at the time of import will be relevant and taken into consideration for the purpose of assessment under Section 14 of the Customs Act, 1962. Hence reduction in agreed price after import of goods is not relevance for the purpose of computation of custom duty.
 
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