Full Judgment Text
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CASE NO.:
Appeal (civil) 2338 of 2001
PETITIONER:
M/s. Udayani Ship Breakers Ltd
RESPONDENT:
Commnr. of Customs & Central Excise, Rajkot
DATE OF JUDGMENT: 08/02/2006
BENCH:
ASHOK BHAN & P.K. BALASUBRAMANYAN
JUDGMENT:
J U D G M E N T
BHAN, J.
The assessee-appellant has filed this appeal under Section
130(E) of the Customs Act, 1962 (for short "the Act") against
the final Order No.C-I/II/WZB/2000 dated 2.1.2001 in
Appeal No.C/533-V/99/Bom passed by the Customs Excise
and Gold (Control) Appellate Tribunal, West Zonal Branch at
Mumbai (hereinafter referred to as "the Tribunal") whereby the
Tribunal reversed the order in appeal passed by the
Commissioner of Central Excise on 8.3.1999 and held that the
appellant could not be granted abatement of the duty.
Briefly stated the facts of the case are:-
M/s. Priya Blue Industries Pvt. Ltd., Plot No.V-1, Sosiya
(hereinafter referred to as "the importer") hold import export
code number and also Central Excise Registration. It imported
vessel MV VLOO ARUN under OGL for the purpose of breaking.
The vessel weighing 40,017 LDT had been purchased for US$
68,49,839.00 i.e. @ US$ 167 per Long Ton. Importer got a
letter of Credit bearing No.58 IDC 21.97 dated 12.8.1997
opened in favour of Ruby Enterprise Inc., 2018, Antwerp,
Belgium, the foreign sellers for US$ 68,49,839.00 which
amount was remitted by the Vysya Bank Ltd., Mumbai to the
beneficiaries on 12.8.1997 itself. The importer had thereafter
sought and been granted permission for beaching the vessel at
the designated plot by the proper officer of Customs. On
account of heavy current and storm the vessel got dragged
towards Plot No. V-5 Sosiya and got grounded there. The
importer vide its application dated 24.6.1997 requested the
Assistant Commissioner of Central Excise Division, Bhavnagar
for extension of time for filing the Bill of Entry for home
consumption in respect of the aforesaid vessel. The requisite
permission was granted by the jurisdictional
Assistant Commissioner. The importer, however did not file the
Bill of Entry and sought further extension of time which was
declined by the Assistant Commissioner, Bhavnagar. The
importer thereafter entered into a memorandum of
understanding on 10th September, 1997 with Udyani Ship
Breakers Ltd. ("the appellant" herein) who are the owners of
Plot No.V-5, Sosiya in front of which the vessel was grounded
for sale of the ship for Rs.12,01,00,000/-. An agreement to
sell was executed on 11th September, 1997 and the sale was
effected by Bill of sale on 26th December, 1999.
The appellant also holds import export code number as
well as Central Excise Registration for ship breaking. The
appellant presented a Bill of Entry bearing No.SBY-III/59/97-
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98 dated 12.9.1997 before the Superintendent of Customs,
SBY-Alang. The price declared by the appellant was
Rs.12,01,00,000/-. As the price declared by the appellant was
abnormally low a reference was made to the appellant for
making a correct declaration with regard to the price.
Importer and the respondent produced copies of the
following documents:-
(a) the original Memorandum of Agreement dated
2.6.1997 entered into between the foreign seller and
the importer,
(b) a copy of the commercial invoice issued by the
foreign seller in favour of the importer,
(c) Letter of Credit opened in favour of the foreign seller
for the amount of US$ 68,49,839.00 by Vysya Bank
Ltd., Mumbai on behalf of the importer.
(d) a copy of the Memorandum of Agreement between
the importer and the respondents, and
(e) a copy of the Letter of Credit bearing
no.KHG/ILC/103/97 dated 12.12.1997 for
Rs.12,01,00,000/- issued by Dena Bank, Bhavnagar
by the respondents on Dena Bank, Mumbai in favour
of the importer.
(f) a copy of the commercial invoice in their favour
issued by the importer to the respondent.
Thus, the facts which emerge from the above are:
Importer entered into an agreement of memorandum with the
foreign seller on 2.6.1997. On 4.6.1997 the importer took
physical delivery of the ship. On 24.6.1997 the importer
requested time for filing the Bill of Entry. On 12.8.1997 LC was
opened and on the same day the amount was remitted to the
foreign seller. Thereafter importer sought and was given
permission for beaching the vessel. The agreement of sale
between the importer and the appellant was executed on
11.9.1997. The appellant presented the Bill of Entry on
12.9.1997 and the price was stated to be Rs. 12,01,00,000/-.
On 9.6.1997 itself the vessel had started drifting. The importer
transferred the title to the buyer in pursuance to the
memorandum of understanding and the agreement of sale
entered into between them on 26.12.997 by executing the bill of
sale in favour of the appellant on "as is where is" basis for a
consideration of Rs. 12,01,00,000/- i.e. after the passing of the
assessment order dated 23.12.1997.
The Assessing Authority in his assessment order dated
23.12.1997 held that the value declared by the appellant was
not the price in the course of international trade and
accordingly did not accept the price declared by the appellant
in the Bill of Entry and appraised the value of the vessel at the
price at which it had been purchased by the importer in the
course of international trade.
Aggrieved by the aforesaid assessment order the appellant
filed an appeal before the Commissioner of Customs (Appeals)
who vide its order dated 26.2.1999 allowed the appeal. It was
held that the appellant was entitled to the benefit u/s 22 of the
Act as the warehoused goods had been damaged after
unloading but before their examination u/s 17 on account of
accident not due to any wilful act, negligence or default of the
importer. It was also held that appellant had purchased the
vessel on high seas basis during the course of international
trade. Order in original was set aside with consequential relief.
Reliance was placed upon the decision of the Tribunal in the
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case of J.M. Industries Vs. Commissioner of Central Excise,
Rajkot, 1989 (39) ELT 109 (Tribunal).
The Revenue being aggrieved, filed an appeal before the
Tribunal which allowed the appeal and inter alia held that the
abatement of duty under Section 22 could not be granted as no
request to that effect had been made to the Assistant
Commissioner of Customs and that the Assistant
Commissioner was required to record its satisfaction that a
case had been made out under Section 22 for abatement of
duty on the damaged and deteriorated goods. The judgment in
the case of J.M. Industries (supra) was distinguished. It was
further held that transfer by execution of bill of sale between
the appellant and the importer was dated 26.12.1997 after the
arrival of the vessel in India in June 1997 and therefore the
appellant could not claim that it was a sale on high seas basis
as indicated in the agreement of sale dated 11.9.1997. The
entire action seems to be to evade the duty payable at proper
value and accordingly held the order passed by the
Commissioner of Customs (Appeals) to be wrong in law and
restored the order in original.
Counsel for the parties have been heard.
Section 22 of the Act reads:
"22. Abatement of duty on damaged or
deteriorated goods.-- (1) Where it is
shown to the satisfaction of the Assistant
Commissioner of Customs or Deputy
Commissioner of Customs\027
(a) that any imported goods had been
damaged or had deteriorated at any
time before or during the unloading of
the goods in India ; or
(b) that any imported goods, other
than warehoused goods, had been
damaged at any time after the
unloading thereof in India but before
their examination under section 17,
on account of any accident not due to
any willful act, negligence or default
of the importer, his employee or agent
; or
(c) that any warehoused goods had
been damaged at any time before
clearance for home consumption on
account of any accident not due to
any willful act, negligence or default
of the owner, his employee or agent,
such goods shall be chargeable to duty in
accordance with the provisions of sub-
section (2).
(2) The 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 bears to the
value of the goods before the damage or
deterioration.
(3) For the purposes of this section, the
value of damaged or deteriorated goods
may be ascertained by either of the
following methods at the option of the
owner:\027
(a) the value of such goods may be
ascertained by the proper officer, or
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(b) 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."
A reading of Section 22 shows that it is for the party
claiming the abatement to show to the satisfaction of the
Assistant Commissioner of Customs or Deputy Commissioner
of Customs that any imported goods had been damaged or
deteriorated at any time before or during the unloading of the
goods in India ; or that any imported goods, other than
warehoused goods, had been damaged at any time after the
unloading thereof in India but before their examination under
section 17, on account of any accident not due to any willful
act, negligence or default of the importer, his employee or agent
; or that any warehoused goods had been damaged at any time
before clearance for home consumption on account of any
accident not due to any willful act, negligence or default of the
owner, his employee or his agent. Thus to claim the benefit of
the abatement under Section 22, the party claiming the
abatement has to satisfy the Assessing Authority that a case
had been made out under Section 22 for abatement of duty on
damaged or deteriorated goods. In the absence of any claim
made under Section 22 in writing to the Assessing Authority
the appellant could not claim the abatement under Section 22
and the Assessing Authority did not record rightly its
satisfaction that the appellant was entitled to the abatement of
the duty. The Tribunal is right in holding that the
Commissioner (Appeals) had erred in giving benefit to the
appellant for abatement of duty under Section 22 of the Act.
The act of "Import" in this case was over as soon as the
letter of credit was opened by the importer in favour of the
foreign seller and remitted the sum of Rs. 24,78,27,175/- to the
foreign seller on 12.8.1997 in terms of the letter of credit
opened with the Vysya Bank Ltd., Mumbai through ABN Amro
Bank, N.V. Brussels. The term "import", "India", "Indian
customs water" have been defined under Clauses 23, 27 & 28
of Section 2 of the Act as under :-
(23) "import", with its grammatical variations and
cognate expressions, means bringing into India
from a place outside India;
(27) "India" includes the territorial waters of India;
(28) "Indian customs waters" means the waters
extending into the sea up to the limit of
contiguous zone of India under section 5 of the
Territorial Waters, Continental Shelf, Exclusive
Economic Zone and other Maritime Zones Act,
1976 (80 of 1976) and includes any bay, gulf,
harbour, creek or tidal river;
Section 14, which is the relevant provision for valuing the
vessel sold by the importer, reads:-
"Sec. 14 - Valuation of goods for
purpose of assessment.\027
(1) For the purposes of the Customs Tariff
Act, 1975 (51 of 1975) or any other law for
the time being in force where under a duty
of customs is chargeable on any goods by
reference to their value, the value of such
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goods shall be deemed to be the price at
which such or like goods are ordinarily
sold, or offered for sale, for delivery at the
time and place of importation or
exportation, as the case may be, in the
course of international trade, where the
seller and the buyer have no interest in
the business of each other and the price is
the sole consideration for the sale or offer
for sale."
[Emphasis supplied]
The price of the vessel in the course of international trade
was the price [US$ 68,49,839.00] paid by the importer to the
Ruby Enterprises Inc., Belgium in terms of the Memorandum of
Agreement dated 2.6.1997 in terms of sub-Section (1) of Section
14 of the Act. The transaction between the importer and the
respondent in terms of the Memorandum of understanding
dated 10.9.1997 cannot be described as the transaction of
purchase and sale during the course of international trade. Any
sale of goods after the act of "import" within the meaning of the
Act is over, can only be described as a sale in the course of
domestic trade and not a sale in the course of international
trade.
Under sub-Section (1) of Section 14 of the Act the
imported goods are required to be assessed at the price
ordinarily charged for them in the course of international trade.
As pointed out hereinabove the sale price of the aforesaid vessel
during the course of international trade which has actually
been paid was US$ 68,49,839.00 equivalent to Rs.
24,78,27,175/-. The reduction in the price to Rs.
12,01,00,000/- was not during the course of international trade
but domestic trade. The reduced price, therefore, cannot be
accepted for determining the value under sub-Section (1) of
Section 14 of the Act.
Introduction of the Customs Valuation (Determination of
Price of Imported Goods) Rules, 1988 with effect from
16.8.1988 does not alter the above position as under Rule 3 of
the aforesaid Rules it is provided that the value of the "imported
goods" shall be transaction value thereof. The transaction
value in terms of sub-Rule (1) of Rule 4 of the aforesaid Rule is
the price actually paid or payable for the goods when sold for
export to India. Such transaction value in this case is US$
68,49,839.00 and has actually been paid by the importer to the
exporter abroad. No other price can be taken into
consideration for determining the assessable value in this case
either in terms of the main definition of the term "value" given
under sub-Section (1) of Section 14 of the Act or in terms of
sub-Rule (1) of Rule 4 of the aforesaid Rules.
This apart, no application was made by the buyers i.e.
importer in this case to the Assistant Commissioner of
Customs, Bhavnagar for any abatement of duty on the
damaged goods as the importer has not come forward for the
clearance of the aforesaid vessel. The appellant i.e. buyer who
had purchased the vessel in the course of domestic trade was
not entitled to seek any abatement of duty on the ground on
which it claimed before the Appellate Authority. No such case
had been made out before the Assessing Authority before the
goods were actually cleared. Adoption of two different values
for the same goods for the purpose of charging duty of customs
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under Section 12 of the Act and Section 3 of the Customs Tariff
Act, 1975 is not only unprecedented but also patently illegal.
The Memorandum of Understanding was executed
between the importer and the appellant on 10.9.1997 which
provided :
"The sellers shall deliver vessel to buyers
within 1 (one) day i.e. upon receipt of full
purchase price and buyer shall accept the
vessel "as is where is" at Sosiya".
The bill of sale executed by the importer in pursuance to
the MOU entered between the parties on 10.9.1997 and the
agreement of sale dated 11.9.1997 on 26.12.1997 whereby the
importer transferred the title of the vessel to the appellant
purely on "as is where is" basis for a consideration of
Rs.12,01,00,000/-. The said bill of sale stated as follows :-
"TO HAVE AND TO HOLD the said vessel
and appurtenances there into belonging
upto the buyer, its successors and assign
for ever. Seller hereby transfers title to
vessel to buyer outright ’as is where is’ in
standard condition and warrants that the
said vessel is free of all debts, loans, taxes
encumbrances and litigation and maritime
lines and other claims whatsoever".
Memorandum of understanding dated 10.9.1997, the
agreement to sell dated 11.9.1997 as well as the bill of sale
dated 26.12.1997 are after the goods had arrived in India in
June, 1997. Under the circumstances, the appellant could not
claim the sale in its favour on High Seas basis as indicated in
the agreement of sale dated 11.9.1997. The Tribunal was right
in observing that from the conduct of the parties it cannot be
ruled out that the action seemed to be to evade the duty
payable at the proper value.
It is interesting to note that the bill of sale was executed
by the importer on 26.12.1997. Thus the title to the goods
passed to the appellant on 26.12.1997, i.e., after the order in
original passed by the assessing authority on 23.12.1997.
For the reasons stated above, we do not find any
merits in this appeal and dismiss the same with costs.