Custom, Excise & Service Tax Tribunal
Samson Maritime Ltd vs Cc(I), Mumbai on 30 May, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. C/87135, 87136, 87137/13 [Arising out of Order-in- Original No. 22/2013/CAC/CC(I)/AB/GR.VB dated 15/2/2013 passed by the Commissioner of Customs(I), Mumbai] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) Honble Mr. C.J. Mathew, Member(Technical) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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Samson Maritime Ltd
Mohan Samant
Laksminarayan Iyer
:
Appellant
VS
CC(I), Mumbai
:
Respondent
Appearance
Shri. S.N. Kantawala, Advocate for the Appellants
Shri. D.S. Maan, Asstt. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr Ramesh Nair, Member(Judicial)
Honble Mr. C.J. Mathew, Member(Technical)
Date of hearing: 30/5/2016
Date of decision: /2016
ORDER NO.
The appellants had imported a new self propelled tug Ocean Zircon. For the said import they signed Memorandum of Agreement (MOA) dated 28/3/2011 with POET Shipbuilding & Engineering Pte Ltd, Singapore(seller). As per the MOA the purchase price was USD 5180000.00. The place of delivery of the Tug was shown as Jiangsu Suyang Marine Shipyard, China. The appellant filed Bill of Entry No. 3919442 dated 28/6/2011 at New Custom House, Mumbai and presented the invoice No. 01 dated 3/5/2011 showing value USD 5258397.64(CIF) before the Customs for assessment of the duty. The Tug was assessed the duty on the basis of value USD 5258397.64(CIF) declared by the appellant extending the benefit of exemption Notification No. 21/2002-Cus DATED 1/3/2002. The Tug was classified under CTH 89040000 The DRI has investigated the case on the basis of statements of various persons such as Shri. Mohan Samant, Managing Director of the appellant company, Shri. Laxminarayan Iyer, President (Commercial), Shri. Karunakar Venkat Poojary, General Manager of M/s. GAC Shipping (I) Pvt Ltd Mumbai were recorded. In the investigation it was revealed that the value of USD 5258397.64(CIF) declared is CIF Mumbai. In the investigation it was found that the delivery of the Tug was China and Tug was self propelled from China to Singapore. However in the declared value, insurance freight and other expenses born for voyage of the Tug from China to Singapore was not included in the declared value. A show cause notice was issued wherein the Revenue applying the rule 10(2(a)(i) of Customs Valuation (determination of price of imported goods)Rules, 2007 proposed loading of 20% of FOB value on account of cost of transport and also insurance premium shown in the Marine Hull policy. Accordingly on the enhanced value including the aforesaid element, differential duty of Rs. 68,30,153/- was confirmed, penalty of equal amount under Section 114A was imposed. Penalty of Rs. 5 lacs each were imposed upon Shri. Mohan Samant and Shri. Laksminarayan Iyer under Section 112(a) and further, penalty of Rs. 2.5 lacs each were imposed upon Shri. Mohan Samant and Shri. Laksminarayan Iyer under Section 114AA of the Customs Act, 1962 and amount of Rs. 20 lacs already paid was appropriated. Aggrieved by the impugned order, the appellants are before us.
2. Shri. S.N. Kantawala, Ld. Counsel for the appellants submits that as regard the dispute of valuation, the appellant have admitted that there is a mistake in declaring the value for the reason that as per the advice of the CHA they submitted the invoice which CIF Mumbai from Singapore that means insurance freight from Singapore to Mumbai was included in the value, however the Tug was transported from China to Singapore on its own propulsion therefore expenses on account of transport from China to Singapore was not included in the invoice therefore the same was escaped while declaring the price. He submits that there was no malafide intention on the part of the importer in declaring the value. He submits that dispute remained the only the quantum of loading in the value. The adjudicating authority despite giving him actual expenses on account of freight and other expenses straight away loaded 20% of the FOB value as freight and insurance cost was added on the basis of premium of Marine Hull Policy. He submits that the appellant during the adjudication have submitted the actual details of the expenses incurred during the transportation of the Tug from China to Mumbai via Singapore. Since Singapore to Mumbai value was undisputedly CIF value, only actual expenses incurred from China to Singapore was liable for differential duty. He submits that as per Rule 10(2)(a)(i) of Customs valuation Rules, 2007, 20% can be added as freight only in case where the actual cost of the freight is not available. The actual cost of the transportation, insurance and other expenses pertaining to the transport of Tug from China to Singapore was submitted alongwith all the relevant and supporting invoice. The adjudicating authority has discarded on the flimsy reasons. He submits that the issue involved in the present case is only minor variations of valuation which is not with intention to evade custom duty but the mistake is occurred inadvertently on the part of the appellant this has been accepted by the appellants representative in their statements recorded under Section 108. Moreover show cause notice was issued within one year period from the date of bill of entry. Therefore the show cause notice is covered under Section 28(a)(i) and there is no case of collusion, willful misstatement or suppression of facts. In such case the penalty imposed on the appellant company as well as director and employee of the appellant company are not sustainable. He further submits that appellant has calculated and presented before the adjudicating authority the differential duty of Rs. 12 lacs approximately for which not only the actual cost of freight and insurance but all other actual expenses were taken into account for arriving at differential duty. The adjudicating authority discarded the same on the ground that invoice in respect of expenses are of the subsequent dates i.e. after Tug started its journey from China to Singapore. He submits that invoice were subsequently raised by Singapore for which there is no dispute as the seller has office at Singapore, genuineness of these invoice were not disputed, only date of issue of invoices were questioned which has no relevance so long these expenses were born by the appellant and accounted in their books of accounts. The payment of such invoices of the expenses were admittedly paid. As regard insurance, the appellant have added actual premium paid for the period of voyage though the higher premium was mentioned in the policy but total premium mentioned in the policy cannot be added as the said amount as the same was neither paid by the appellant nor entire is related to transit period of Tug till it arrive in India, therefore adjudicating authority made serious error by adding entire insurance premium in the assessable value. In support, he placed reliance on this Tribunals decision in the case of Prince Marine Transport Services Pvt Ltd & Others Vs. Commissioner of Customs(Imports), Mumbai[2014-TIOL-2438-CESTAT-MUM]
3. Shri. D.S. Maan, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both sides and perused the records.
5. The fact of the case is not much in dispute except the quantum. The Tug was delivered to the appellant at China Port and the same was transported on its own propulsion from China to Singapore and thereafter Singapore to Mumbai. The dispute raised was that appellant has not included the expenses such as cost of transportation, insurance incurred during the transportation of Tug from China to Singapore. However the declared value is CIF value from Singapore to Mumbai. The insurance freight and other expenses for the transportation of Tug from port of delivery that is China to Singapore was not added in the value. On pointing out by the department, the appellant admitted mistake and deposited lump sum amount of Rs. 20 lacs however during the adjudication, the appellant have given the actual details of the expenses the same is reproduced below:
Particulars of Expenses Amount in USD(1 USD =INR 45.65) Amount in INR (Actuals) Invoice No. 1-Repatriation of crew 44,375.00 20,25,719.00 Invoice No. 2 Medical Expenses Dr. Jayant Rele 78.86 3,600.00 Invoice No. 3. Manning Cost 66,244.99 30,24,084.00 Invoice No. 4- Invoice for Vicualling/Provissions from Avalontec for SGD 1143.68 (Actual SGD 1143.68 converted to USD@ 1 USD= 1.206SGD) 948.48 43,298.00 Invoice No. 5 colly:
Poet Shipbuilding & Engineers Pte Ltd RMB42236 Poet Shipbuilding & Engineers Pte RMB 17400 (actual RMB 59.636 converted to USD @ 1USD -6.25 RMB) Poet Shipbuilding & Engineers Pte USD 113475.60 Poet Shipbuilding & Engineers Pte USD73073.98 1,96,096.34 89,51,798.00 Invoice No. 6- Insurance Policy for Hull and Machinery Rs. 242,044 from 15.05.2011 to 14.08.2011 i.e. 242.044/91 days *43 days(i.e. from 15.5 to 26.6.11) 2,732.29 1,24,729.00 Invoice No. 7-P&I Insurance USD 1660.48 from 15.5.11 to 14.8.11 i.e. USD 1660.48 equivalent to Rs. 74677 74677/91 days *43 days(i.e. from 15.5. to 26.6.2011) 765.00 34,922.00 Invoice No. 8 Port Charges etc (Actual SGD 4972.43 converted to USD @ I USD=1.267 SGD) 3,687.79 1,68,348.00 Total (A) 3,14,929.00 1,43,76,498.00 LESS Items on board, declared in the Bill of Entry for Home Consumption:-
Marine Gas Oil Lubricating Oils Grease Paints Total of expenses already declared in the B/L 37,102.81 11,141.76 163.50 413.00 48,821.07 16,93,743.00 5,08,621.00 7,464.00 18,853.00 22,28,081.00 Freight AND insurance considered in CIF value as per Bill of Entry:
Freight USD 77617.64 Insurance:USD 780 78,397.64 35,78,853.00 Total (B) 1,87,710.04 85,68,964.00 Differential duty as may be charged @ 15.15%-(C) 12,98,198.00 We find that as regard all the above mentioned details of expenses, the appellant have submitted the relevant invoices. As per Rule 10(2)(a) proviso (i) in case of cost of transport is not ascertainable then 20% of the FOB value of the goods shall be added as a cost of transportation. In the present case as per the details given above which is supported by relevant invoices, the actual cost of transportation expenses was ascertained, therefore Ld. Adjudicating authority should not have resorted to proviso (i) of Rule 10(2)(a) accordingly there was no need to add 20% of FOB value. The adjudicating authority has discarded this submission of the appellant merely for the reason that the invoice of fuel etc were issued subsequent to the start of journey of the Tug from China. In this regard appellants submission is that the invoice were issued by the seller at Singapore office therefore there is no reason for discarding the invoices. We find that merely because the invoice in respect of fuel etc. issued subsequently. The genuineness of the invoices cannot be disputed particularly when the Adjudicating authority did not find that invoice are invalid. When the invoices were accounted for by the appellant and the consideration there against were admittedly paid, only because invoice were issued subsequently the same cannot be disputed. On the basis of actual expenses shown by the appellant the actual cost of transportation stands established therefore 20% as provided under proviso (i) of Rule 10(2)(a) of Customs Valuation Rules, 2007 cannot be applied. As regard insurance the Adjudicating authority straight way picked up premium amount mentioned in the Hull Marine Policy and added in the value, whereas appellant has shown on the basis of the documentary evidence of insurance company M/s. HDFC Ergo, General Insurance that the total premium of Rs, 2,63,962/- was paid in respect of Tug, however Ld. Adjudicating authority added entire premium of Rs. 8,51,175/-, actual insurance premium born by the appellant can only be added in the FOB value to arrive at assessable value. From the documents submitted by the appellant there is no dispute that actual premium paid by the appellant is Rs. 2,63,962/- and not Rs. 8,51,175/- . In view of this factual matrix the quantification of the differential duty arrived at by the appellant as per the given chart is absolutely in order. Accordingly no duty over and above Rs. 12,98,198/- can be demanded from the appellant. This very same issue was considered by this Tribunal in the case of Prince Marine Transport Services Pvt ltd (supra), wherein it was held as under: 5.3 As regards the re-determination of value, we find that the Commissioner has adopted a rate of 21.125% of the cost towards freight and insurance. The appellant had given details of the expenditure incurred by them for the transport of the vessel from Dubai to India. In such a situation, the Commissioner could not have added freight and insurance @21.125%. Since the vessel had come on its own motion, only the actual cost of transportation incurred should have been added for determination of assessable value The above judgment directly supports the case in hand.
As regard the penalties imposed on the appellant company, as well as Director and employee of the appellant company, we find that from the overall facts and circumstances of the case, we do not see any malafide intention of the appellant to evade Custom duty of Rs. 12 lacs where they had discharged huge amount of customs duty amounting to Rs. 3.67 crores. It is only inadvertent mistake occurred on the part of the appellant in not including cost of transportation, insurance and other expenses for the voyage of the Tug from China to Singapore. Moreover show cause notice was issued well within one year period, therefore the proviso which is meant for the cases of willful misstatement, suppression of facts etc cannot be invoked, consequently appellant company cannot be liable for penalty under Section 114A. In our view at the most penalty can be imposed under the provision of Section 117. Accordingly, in our view invoking Section 117 penalty of Rs. 50,000/- is justified. As regard the penalty imposed on the director and employee of the company, as we expressed our view in aforesaid paras that there was no intention to evade customs duty by the appellant company consequently Director and employee of the company cannot be implicated for imposition of penalty under Section 112(a) and or 114 AA. We therefore set aside personal penalty imposed upon both the appellants i.e. Shri. Mohan Samant and Shri. Laksminarayan Iyer. As per our above discussion, we pass the following order:
(a) Regarding the appeal No. C/87135/13 of M/s. Samson Maritime Ltd, the demand of Rs. 12,98,198/- is upheld and remaining demand is set aside. Penalty of Rs. 50,000/- is imposed under Section 117 of the Customs Act, 1962. Penalty imposed under Section 114A is set aside. This appeal is partly allowed.
(a) Appeal No. C/87136, 87137/13 of Shri. Mohan Samant and Shri. Laksminarayan Iyer respectively are allowed.
(Order pronounced in Court on ______________ ) C.J. Mathew, Member(Technical) Ramesh Nair Member (Judicial) sk 12 C/87135, 87136, 87137/13