By TIOL News Service

MUMBAI, AUG 13, 2014: THE facts of the case go thus -Initially the goods were shipped by M/s. Intercon Holdings Ltd., Hong Kong to some importers in India declaring the price @ USD 938 PMT in the month of September 2008.Those importers did not take the delivery of the goods and no payments towards the supply of the goods were made by the importers. Thereafter, the supplier of the goods entered into the agreements with the appellants on 06.11.2008 to supply the said goods on the price prevailing in the international market. Thereafter, they reached an agreement for purchase of the goods in question @ USD 442 PMT or USD 445 PMT. The appellants were required to pay demurrage charges on the goods as till the date of contract these demurrage charges were payable by the supplier of the goods being owner of goods. While filing bills of entry the appellant declared the transaction value @ USD 442 PMT or USD 445 PMT for clearance of goods.

The assessing authority objected to the price declared as the original importer had imported the goods at price of USD 938 PMT. The said matter was referred to SIIB (Import). The goods were allowed to be released provisionally as these goods were incurring heavy demurrage charges.

During the pendency of the final assessment, the importers approached the Settlement Commission under 127C of the Customs Act, 1962. The Settlement Commission ordered a refund of the excess duty paid by the importer by determining the value of the imported goods as the transaction value declared plus demurrage charges. The said order was challenged before the High Court of Bombay, who set aside the Settlement Commission's order and directed the department to carry out the assessment proceedings in accordance with law. Therefore, the bills of entry were assessed finally at the rate of USD 938 PMT.

The said orders were challenged by the appellants before the Commissioner (Appeals) who rejected the appeals and, therefore, the appellants are before the CESTAT.

After hearing the extensive arguments made by both sides sprinkled with case laws, the Bench observed –

++ The Adjudicating Authority rejected the transaction value and sought to load the value as per the contemporaneous imports of the said goods initially imported in India by the importers in the month of September 2008. Admittedly in this case, the goods were imported by the appellants in the month of November 2008 through a contract dated 06.11.2008 on the prevailing international market price at that time. These facts are not in dispute. Therefore, the value adopted by the Adjudicating Authority to assess the goods in question is not correct as the value of the imported goods at the time of importation by the appellant is lower than the price at which the Adjudicating Authority has relied.

++ The transaction value will be the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation.

++ In this case, there is no doubt that there was no transfer of possession from the shipper to the earlier consignee to arrive at the decision that goods were delivered. As the documents of title were returned back by the earlier importer to the supplier accepted and unpaid, the agreement to sale could not become sale as per Section 4(4) of the Sale of Goods Act, 1930. Therefore, the said price was neither paid nor payable. In these circumstances, the said price cannot be said to be the price of the goods in question.

++ As per Rule 10(1)(e) of the Valuation Rules, 2007, the amount which is paid over and above the invoice price is required to be added to assessment. As discussed above also, the transaction value is the price actually paid or payable to the supplier. In this case, the transaction value is the price paid by the appellant to the supplier plus the demurrage charges till 06.11.2008 paid by the appellant on behalf of the supplier for importation of the goods in question.

++ The bulletin price at the time of entering into contract by the appellants with their foreign supplier was near USD 500 PMT. This fact has not been controverted by the revenue, and the appellants have imported the impugned goods at the price of USD 442 PMT to USD 445 PMT through the agreements dated 06.11.2008, the said agreements are not doubted by the revenue. In these circumstances, the invoice price is required to be accepted in the light of the decision of the Apex Court in the case of Rai Metal Works Ltd.

++ No prudent businessman in the circumstances, where the goods are available at lower price shall buy goods and be ready to pay duty on higher value, therefore, it is observed that the appellant have no extra benefit/gain in importing goods on the declared value.

++ It is very much clear that the value is to be the transaction value which is paid or payable for import of goods in India when sold for delivery at the time and place of importation. Therefore, sale, time of delivery and place of importation are necessary ingredients to determine the value of the goods. All the three ingredients have to be read in conjunction. There must be a sale for delivery at the time and place of importation and contemporaneous prices of the time cannot be ignored. In this case, the time of entering into contract by the appellants with their foreign supplier is very much relevant to determine the transaction value of the goods. Therefore, as the invoice price at the relevant time has not been disputed by the revenue that same is not correct as per prevailing market price during that time, the transaction value cannot be rejected.

++ Although, the revenue does not want to include demurrage charges in the transaction value, but as per Section 14 of the Customs Act, 1962, in the facts and circumstances of this case, the correct assessable value is invoice Price plus demurrage charges accumulated till 06.11.2008.

In fine, the appeals were allowed with consequential relief.

(See 2014-TIOL-1494-CESTAT-MUM)