By TIOL News Service

MUMBAI, JAN 13, 2017: THE fact of the case is that the appellant M/s. Jharsanya Logistics Pvt. Ltd were importing the goods and selling them on High Sea Sale basis. The goods so purchased on High Sea Sale were being cleared from the Customs by declaring the transaction value as CIF value +2% rather than declaring actual High Sea Sale contract price, which was more than declared CIF value +2%.

On demand by the investigation agency, appellant submitted a chart showing breakup value of prices shown in their tax invoice. As per the chart, the difference between Bill of Entry value and the tax invoice value was revealed as duty paid, LC charges, transportation charges, clearing bill and administrative expenses.

Based on the above information, the adjudicating authority allowed deduction of custom duty, transportation charges, port charges and other clearing charges but held that the L.C. Charges, administrative expenses do not merit deduction from the composite value.

The differential duty computed as above was confirmed by the adjudicating authority. The Commissioner (Appeals) set aside the redemption fine but other confirmations by the original authority was maintained.

The appellants are before the CESTAT and submit that the expenses such as L.C. charges and administrative charges are on the same footing as the other charges which were allowed as deduction, therefore, the demand cannot survive. It is also submitted that the demand is time barred. Reliance is placed on a host of judgments cited as - 2014-TIOL-2514-CESTAT-MUM, 2013-TIOL-13-SC-CUS, 2002-TIOL-235-SC-CX , 2002-TIOL-266-SC-CX, 2006-TIOL-97-SC-CUS, 2006-TIOL-1482-CESTAT-MUM, 2011-TIOL-60-SC-CUS.

The AR while justifying the demand submitted that as per the Board Circular 32/2004-Cus dated 11-5-2004 in case of High Sea Sale, the CIF value + 2% notional High Seas Sale commission is acceptable only in case where actual contract price is not available; that in the present case the appellants have raised tax invoice for higher value as compared to the value i.e. CIF value + 2%, therefore, the value declared in the Bill of Entry is clearly not acceptable in terms of above circular; that LC charges are related to pre-clearance of imported goods as LC is opened before import of the goods, therefore, being pre import activity, LC charges is includible in the value for the purpose of High Sea Sale;that as regards administrative charges since appellant could not produce any evidence for what purpose these administrative charges were collected, the same is nothing but part and parcel of High Sea Sale commission and correctly includible in the assessable value. Reliance is also placed on the decisions cited as - 2002-TIOL-31-SC-CUS, 2002-TIOL-529-CESTAT-DEL-LB.

After considering the submissions, the Bench inter alia observed –

On Merits:

+ we do not agree with the Counsel that in each and every case of High Sea Sale, CIF value + 2% notional high Sea commission should be taken for assessment of Bill of Entry. As per Board Circular No. 32/2004-Cus this method has to be adopted only in case where actual contract value is not available.

+ in the present case, the tax invoice raised by the High Sea seller to the High Sea buyer clearly disclosed that value charged is over and above the CIF Value + 2%, therefore, method of valuation i.e. CIF Value + 2% will not be applicable in the present case. As regard the LC charges, we are of the view that since LC charges are borne during the course of import as L.C. is opened pre-import of the goods, all the expenses which are borne pre-clearance of the imported goods shall be includible in the assessable value.

+ as regard the administrative charges, which appellant claimed that it is on account of various services such as assistance in erection and installation of machine, we find that appellant could not produce any evidence in this regard either before the adjudicating authority or before the Commissioner (Appeals). Even when the matter was heard by us, no evidence was produced regarding the nature of the administrative charges, therefore so-called administrative charges, in our view, is nothing but Sales profit only of the High Sea seller … Therefore, the same is clearly includible in the assessable value...

On limitation:

+ we find that the appellant have submitted High Sea Sale agreement, according to which the consideration was shown as CIF Value + 2% notional High Sea Sale commission, whereas in the tax invoice the value was shown on higher side, therefore, the value in the High Sea Sale contract was mis-declared and fact was suppressed from the department. In these circumstances extended period of demand was rightly invoked.

Concluding that the differential duty demand confirmed by the Original Adjudicating authority and upheld by the Commissioner (Appeals) is absolutely legal and correct, the appeals were dismissed.

(See 2017-TIOL-117-CESTAT-MUM)