M/S. Chaudhary Ship Breakers vs Commissioner of Central Excise, Ahmedabad

.... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ...

11. I rely on the observation of the Tribunal in the case of Atam Manohar (supra)and hold that the appellant has not produced any evidence to show that the vessel was not the same as was offered to them vide MoA dated 19.11.97. They have failed to produce any cogent reason for reduction in price from the MoA."

9. Aggrieved by the said order, the appellant carried the

matter in further appeal to the Tribunal. Distinguishing

the decision of the Tribunal in the case of Atam

Manohar (supra), on which reliance was placed by the

1 2003 (156) E.L.T. 151 (Tri.-Mumbai) 2 2003 (157) E.L.T. 277 (Tri.-Mumbai)

5 appellant, the Tribunal dismissed the appeal, holding

thus:

"In the present case there is no provision in the Memorandum of agreement for reduction of price on any account. We find that Tribunal in the case of Guru Ashish Ship Breakers (supra) held that in absence of any provision in the memorandum of agreement regarding variation in price, the reduction in price after import is not sustainable. In the present case as discussed above, the price was revised after import and in the absence of any provisions regarding price variation in the memorandum of agreement, we find no merit in the appeal."

10.Hence, the present civil appeal by the importer.

11. Mr. Pawan Shree Agrawal, learned counsel appearing for

the appellant, while assailing the impugned order,

strenuously urged that since under Section 14 of the Act

the value of the goods is deemed to be the price at which

such or like goods are ordinarily sold in the course of

international trade, the price that was actually paid by

the appellant in terms of addendum dated 8th December

1997, is to be adopted as the "transaction value" in terms

6 of Rule 3 read with Rule 4(1) of the Customs Valuation

(Determination of Price of Imported Goods) Rules, 1988

(for short "the 1988 Rules") for the purpose of levy of

customs duty under the Act. Learned counsel

commended us to the GATT Customs Valuation Code,

which, inter-alia, contemplates that if the parties agree

upon a price adjustment promptly, even if there is

nothing in writing between them on the subject, the

Customs should accept the adjusted price as the basis for

transaction value.

12. Per contra, Mr. V. Shekhar, learned senior counsel

appearing for the revenue, supported the order of the

Tribunal. Learned counsel emphasised that in the

absence of any stipulation in the MOA for reduction in

the agreed price, the revised price mentioned in the

addendum is of no consequence for the purpose of

Section 14 of the Act.

13. At the outset, we may note that the decision of the

Tribunal in Atam Manohar (supra) was questioned by

the revenue before this Court in Civil Appeal No.146 of

7 2004. While allowing the appeal and setting aside the

order of the Tribunal primarily on the ground that the

addendum was a self-serving document, the Court

observed thus:

"We may also point out that in this case we are basically concerned with the genuineness of the addendum to the MoA dated 13th April, 1999. If one looks at the said addendum, we find that the date on which the said addendum stood executed is not given. Further, when did the addendum stand incorporated in the MoA. We do not find the date on which the clause stood inserted in the MoA. Further, the said addendum does not give any reason for reduction in the price from US $ 9,70,960.23 to US $ 8,70,960.23. Further, the most clinching factor to be seen is that the said addendum appears to have been executed at the request of the buyer. In our view, this is a self- serving document. In this connection, it may also be noted that the MoA dated 13th April, 1999 states that the vessel is bought on "as is where is"

basis. If that be the case, we do not know on what basis the value of the vessel stood reduced from US $ 9,70,960.23 to US $ 8,70,960.23. Lastly, it is stated on record that one of the items was not in a working condition and by way of damages, the price stood reduced. It is not so stated in the addendum. If it is the case of damages, then, surely it would have been so stated in the addendum."

14. It is manifest that the Court expressed the view that

where the price of the vessel had been reduced by way of

an addendum to the original agreement, the acceptance

8 of the revised price would depend on the genuineness of

the said addendum. In other words, the Court laid

greater emphasis on the genuineness or otherwise of the

addendum and not on the factum of absence of a

provision in the original agreement for reduction of price

for the reasons stated in the addendum, as held in the

case of Guru Ashish Ship Breakers (supra), relied upon

by the Tribunal in the present case.

15. According to Section 14(1) of the Act, assessment of

customs duty under the Customs Tariff Act, 1975 is to be

made on the value of the goods imported. Unless the

value of the goods is fixed under the sub-section (2) of

Section 14, the value has to be determined under sub-

section (1) of the said Section. The value, as per Section

14(1), as it stood prior to its amendment with effect from

10th October 2007, 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

- in the course of international trade. The word

"ordinarily" is clarified in the Section itself, which

9 describes an "ordinary" sale as one "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...".

According to Section 14(1A) price of imported goods is to

be determined in accordance with the Rules framed in

this behalf. Under Rule 3(i) of the 1988 Rules, the value

of the imported goods shall be the "transaction value".

Transaction value has been defined in Rule 2(f) as

meaning the value determined in accordance with Rule 4.

Rule 4(1), in turn, states that "the transaction value of

the imported goods shall be the price actually paid or

payable for the goods when sold for export to India,

adjusted in accordance with the provisions of Rule 9 of

these Rules." It is clear from a conjoint reading of Rule

3(i) and Rule 4(1) that the adjudicating authority is bound

to accept the price actually paid or payable for the goods

as the transaction value, except where exceptions

enumerated in Rule 4(2) are attracted, which is not the

case here. It is, therefore, manifest that both Section

14(1) and Rule 4 provide that in the absence of any of the

10 special circumstances indicated in Section 14(1) and

particularised in Rule 4(2) of the 1988 Rules, the price

paid by an importer to the seller in the ordinary course of

commerce is to be taken as the transaction value for the

purpose of valuation of goods.

16. Having regard to the afore-stated legal position, the

controversy at hand narrows down to the question

whether the transaction value of the vessel is to be price

mentioned in the original MOA or the reduced price

indicated in the addendum. We are of the opinion that in

light of the statutory provisions, the factum of actual

payment of the price in terms of the addendum cannot be

ignored while determining the value of the vessel under

Section 14 of the Act. We may, however, hasten to add

that in such a situation the genuineness and the necessity

of reduction in the price are required to be scrutinised

very carefully.

17.As afore-stated, in the instant case, the Tribunal has not

examined the genuineness of the addendum, and has

proceeded to reject the appeal of the appellant on the

11 short ground that there was no provision for price

variation in the original MOA. We may, however, add

that the Commissioner (Appeals) did examine the

cogency of the reasons for price reduction though he was

not convinced to accept the same.

18. For all these reasons, we are of the opinion that the

Tribunal needs to examine the matter afresh.

Accordingly, the appeal is allowed; the impugned order is

set aside, and the matter is remitted back to the Tribunal

for fresh consideration, particularly in relation to the

genuineness of the addendum entered into between the

appellant and the supplier on 8th December 1997.

19.Parties to bear their own costs throughout.

...........................................J. (D.K. JAIN)

............................................J. (H.L. DATTU) NEW DELHI;

OCTOBER 22, 2010

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