Custom, Excise & Service Tax Tribunal
Bhambhani Shipping Ltd vs Commissioner Of ... on 18 January, 2022
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH
CUSTOMS APPEAL NO. 87423 OF 2014
(Arising out of Order-in-Original No. 07/2014/CAC/CC(I)/AB/GR.VB dated
24.02.2014 passed by the Commissioner of Customs (Import), Mumbai Zone-I)
M/s. Bhambhani Shipping Ltd. ....Appellant
Meera Niwas, Plot No. 206,
Opp. Dhanlaxmi Building,
Near Telephone Exchange,
SVP Nagar, Mhada, Andheri (W),
Mumbai- 400053
Versus
Commissioner of Customs (Import), ....Respondent
Mumbai
2nd Floor, New Customs House,
Ballard Estate, Mumbai- 400001
AND
CUSTOMS APPEAL NO. 87424 OF 2014
(Arising out of Order-in-Original No. 07/2014/CAC/CC(I)/AB/GR.VB dated 24.02.2014
passed by the Commissioner of Customs (Import), Mumbai Zone-I)
Shri Hari Bhambhani ....Appellant
Managing Director,
M/s. Bhambhani Shipping Ltd.,
Meera Niwas, Plot No. 206,
Opp. Dhanlaxmi Building,
Near Telephone Exchange,
SVP Nagar, Mhada, Andheri (W),
Mumbai- 400053
Versus
Commissioner of Customs (Import), ....Respondent
Mumbai
2nd Floor, New Customs House,
Ballard Estate, Mumbai- 400001
APPEARANCE:
Shri Anupam Dighe, Advocate for the Appellant
Shri Ramesh Kumar, Authorized Representative for the Respondent
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P.ANJANI KUMAR, MEMBER (TECHNICAL)
Date of Hearing: September 02, 2021
Date of Decision: January 18, 2022
2
C/87423-87424/2014
FINAL ORDER NO. A/85025-85026/2022
JUSTICE DILIP GUPTA:
Customs Appeal No. 87423 of 2014 has been filed by
1
M/s. Bhambani Shipping Ltd to assail the order dated February
24, 2014 passed by the Commissioner of Customs(Import),
Mumbai Zone-I2, by which the declared 'Cost, Insurance and
3 4
Freight' value of the barge "Halani Star" , imported and sought to
be cleared through a Bill of Entry dated August 25, 2011, under
rule 12 of the Customs Valuation (Determination of Value Of
Imported Goods)5 has been rejected and it has been re-
determined under rule 9 of the 2007 Valuation Rules. The Barge
has also been confiscated under section 111(m) of the Customs
Act 19626 with an option to the importer to redeem it under
section 125 of the Customs Act on payment of redemption fine of
Rs.3.5 crores. The order also seeks to confirm the demand of
customs duty of Rs.5.11 crores leviable on the Barge with
equipments, spare parts and accessories. The order further
appropriates customs duty of Rs.5.15 crores and imposes a
penalty under section 114A of the Customs Act.
2. Customs Appeal 87424 of 2014 has been filed by Hari
Bhambhani, Managing Director of M/s. Bhambhani Shipping Ltd. to
assail the aforesaid order dated February 24, 2014 to the extent it
1. the appellant
2. the Commissioner
3. CIF
4. the Barge
5. 2007 Valuation Rules
6. the Customs Act
3
C/87423-87424/2014
imposes a penalty of Rs.1.75 crores upon him under section
112(a) of the Customs Act.
3. The appellant is engaged in offshore activities, like providing
tugs, accommodation barges and supply vessels. It purchased the
second-hand non-propelled accommodation Barge with all standard
equipments and accessories from M/s. Halani International Ltd.,
Dubai7 for a transaction value of US Dollars 60 lakhs 'Free on
Board'8, to be paid directly to the bank account of the seller, as
detailed in the Memorandum of Understanding and the Agreement
signed in Mumbai on August 12, 20109. The Bill of Sale was
executed on July 05, 2011, and the seller issued an invoice dated
July 05, 2011 wherein the FOB value was declared to be US Dollars
6,000,000.00+ Insurance US Dollars 29657.00+ Freight US Dollars
5000.00, thus totaling to US Dollars 6,034,657.00 (CIF),
equivalent to Rs.26,97,49,167/-.
4. Earlier, the Barge was on charter to M/s. Afcons Gunanusa
Joint Venture, who had imported it and cleared it under a Bill of
Entry dated October 22, 2010. The value declared was about
Rs.23.41 crores, and it was re-exported under a Shipping Bill
dated May 25, 2011, before being delivered to the appellant.
5. As per the above MOU, dated August 12, 2010 the Barge
was to be delivered in Mumbai, but the venue was changed to
Sharjah to avoid any further delay in getting delivery, since the
Barge had to be first re-exported from India by the earlier
importer, M/s. Afcons Gunanusa Joint Venture. The Barge was
7. Halani
8. FOB
9. MOU
4
C/87423-87424/2014
towed into India from Sharjah by Tug "Halani III", belonging to the
appellant.
6. As there was a statutory requirement, a detailed survey/
inspection of the Barge was conducted on July 21, 2011 by the
Chartered Engineer of M/s. Intertek Testing Services India Pvt.
Ltd., which is a Government approved Inspection and Certification
Agency. The Inspection Agency issued a Certificate dated July 22,
2011 and at point 8.5 relating to Valuation certified that:
"Taking into consideration the condition of the equipment,
expected residual life and the enquiry in market, the fair and
reasonable price in our opinion is US Dollar 6,000,000.00(FOB) [US
Dollars Six Million only]."
7. The appellant filed a Home Consumption Bill of Entry on
August 25, 2011 under section 46 of the Customs Act seeking
clearance under First Check Examination procedure, as applicable
to the imported old and used second hand machinery. The value
declared in the said Bill of Entry was US Dollars 6,034,657.00
(CIF), equivalent to Rs.26,97,49,167/-. This value, according to
the appellant was based on the Invoice, MOU, Bill of Sale,
Insurance and Chartered Engineer Certificate. The customs duty
was calculated to be Rs.4,12,70,061/-.
8. The First Check Examination Order was given with an
instruction to conduct an examination under the supervision of
Officers of SIIB (Import), who had gathered information that the
said vessel was under invoiced to evade customs duty.
9. The Barge was examined by the Dock staff in the presence of
SIIB Officers, who observed that considering the number of people
that could be accommodated on the Barge and the accessories,
5
C/87423-87424/2014
equipments on board the vessel, the vessel appeared to be grossly
under invoiced.
10. On the basis of this observation, further inquiry proceedings
were launched and in the said process, statement of the Managing
Director was recorded under section 108 of the Customs Act on
September 30, 2011.
11. In the light of the aforesaid observations of the Officers of
SIIB (Import) and the statement of Hari Bhambhani, a re-
inspection of the Barge was carried out by the same Chartered
Engineer along with SIIB Officers on October 06, 2011.
Thereafter, a revised Chartered Engineer Certificate was issued on
October 12, 2011, which amended the FOB value from US Dollars
6,000,000.00 to US Dollars 7,385,000.00, with a remark that
during the re-inspection, they gathered complete vessel particulars
which had not been made available during their initial inspection
regarding capacities, Year of Manufacture & other technical
specifications of equipments, such as cranes, generators,
compressors WMP and STP.
12. The Barge, along with the equipments, accessories and
spares was placed under seizure under Panchnama on October 19,
2011 under section 110 of the Customs Act on the charge that on
re-survey, it came on record that the value of the equipments,
amounting to US Dollars 1,385,000.00 was left out while
considering the value of the Barge, and the importer had admitted
to the mis-declaration of freight.
13. The appellant requested for provisional release of the Barge
under section 108A of the Customs Act. The Commissioner, by
6
C/87423-87424/2014
order dated October 10, 2011, allowed the provisional release of
the Barge under section 110 A of the Customs Act, subject to full
payment of customs duty on the ascertained value of US Dollars
7,478,657.00 CIF (Rs 33,42,95,968.00), and submission of a Bond
equivalent to 100% of the Assessable Value, a Bank Guarantee of
Rs.65.00 Lakhs (10% of the differential Assessable Value) and an
unconditional undertaking not to dispute the identity of the goods
under seizure.
14. The appellant, through a letter dated April 16, 2012,
deposited the customs duty amounting to Rs 5,15,62,600/- and
submitted a Bond of 100% of the freshly ascertained Assessable
value of Rs. 33,76,38,928/-, a Bank Guarantee of Rs 65.00 Lakhs
and an unconditional undertaking for not disputing the goods
under seizure. The customs duty was deposited on April 19, 2012
and the Barge was then provisionally released.
15. A show cause notice dated December 28, 2012 was
thereafter, issued to the appellant and the Managing Director
under section 124 read with section 28 of the Customs Act. The
allegations contained in the show cause notice were denied by the
appellant and the Managing Director. An order dated February 24,
2012 was, thereafter, passed by the Commissioner redeterming
the value of the Barge and the relevant observations and findings
are as follows:
"20. The basic issue to the considered in the instant case is
as to whether the "Work accommodation Barge" named "Halani
Star" (hereinafter referred to as the "impugned barge") imported
by M/s Bhambani Shipping Ltd. vide Bill of Entry
No. 4460906 dated August 25, 2011 was willfully misdeclared
in terms of value owing to suppression of facts. As a
corollary thereof it is also to be decided as to whether the
declared value is to be enhanced and duty demanded and
7
C/87423-87424/2014
confirmed on the value so enhanced. The liability to
confiscation of the impugned barge on account of misdeclaration of
value, if any and the consequent penal provisions to be invoked on
the notices are the remaining issues which need consideration.
xxxx xxxx xxxx
24. From the above, it is evident that the value of the
equipments, which were not accessories of the barge, had
not been included in the value of the impugned barge.
Further, the freight component had also been mis-declared
by M/s Bhambani Shipping Ltd., as admitted by Shri Hari
Bhambani, Managing Director of M/s Bhambani Shipping
Ltd, in his statement recorded under section 108 of the
Customs Act, 1962 and detailed in para 22 above. Therefore, I
hold that the declared CIF value of Rs 26,97,49,1677- of the
Impugned Barge "Halani Star" imported and sought to be cleared
vide Bill of Entry No. 4460906 dated 25/08/201 is liable for
rejection under Rule 12 of Customs Valuation (Determination of
Value of Imported Goods) Rules 2007 (hereinafter referred to as
'Customs Valuation Rules, 2007').
25. Having rejected the declared, the same is required to be
re-determined as per the provisions of the Customs
Valuation Rules, 2007. Once transaction value is rejected the
value shall be determined by proceeding sequentially through Rule
4 to 9 of the Customs Valuation Rules, 2007. xxxxxxxxx
Accordingly the value is to be determined in terms of Rule 9
of the Customs Valuation Rules, 2007 read with Finance
Ministry (CBEC) Circular No.4/2008-Customs (F.No.467/34/2006-
Cus.V) dated 19.11.1987, on the basis of value suggested in
the fresh inspection report dated 12.10.2011. xxxxxxx I find
that M/s Intertek Testing Services Pvt Ltd, in their detailed
valuation report dated 12th October, 2011, estimated the FOB value
of the Barge along with the equipments to USD 7385000. The
value of the Equipments as per its specifications and capacity was
estimated to USD 1,385,000. The Importer had already admitted
the amount of freight charges to USD 64,000.00. Hence the actual
CIF value of the Vessel alongwith the all the accessories and
equipments was ascertained to USD 7,478,657.00 CIF i,e. FOB
value USD 7385000+freight USD 64,000+insurance USD 29657.
Therefore, I hold that the value of the barge is re-
determined as USD 7,478,657.00 CIF. (amounting to Rs
33,42,95,968/-) in terms of Rule 9 of the Customs Valuation
Rules, 2007 read with Finance Ministry (CBEC) Circular
No.4/2008-Customs (F.No.467/34/2006 Cus.V) dated
19.11.1987.
xxxxxxxxx
26.7. They have contended that the department has erred in
rejecting the Chartered Engineer Certificate without recording his
statement of cross examining him. Therefore, to pick holes in the
certificate of Chartered Engineer without cross-examining him is
not just and proper in law. Xxxxxxxxxx Thus, in this case the
Chartered Engineer who had earlier given the valuation on the
basis of the limited data made available to them had been
appointed, on the request of the notice themselves, to inspect and
verify the value of the equipments whose valuation had been left
8
C/87423-87424/2014
out in their report. Therefore, in the facts and circumstances of the
case the case law relied upon by the notice is not applicable."
(emphasis supplied)
16. Shri Anupam Dighe, learned counsel appearing for the
appellant made the following submissions:
i. The appellant had correctly declared the transaction
value as the assessable value for the purpose of
customs duty. It is not the case of the Department
that the assessable value declared by the appellant is
not the transaction value;
ii. The entire case of the Department is based on the
revised Valuation Report issued by the Chartered
Engineer. On comparing the two Reports dated
22.07.2011 and 12.10.11, it can be seen that the
vessel particulars, which had purportedly not been
made available during the first inspection, formed part
of the First Report and have been verbatim
reproduced in the Second Report. The appellant had
always provided the true and correct facts and details
about the Barge to the Chartered Engineer, which is
evident from the fact that the description of the Barge
and its equipment is identical in both the Valuation
Reports. The Chartered Engineer had also inspected
the Barge before issue of the First Report;
iii. The question of wilful suppression with intent to evade
payment of duty or mis-declaration of value on part of
the appellant does not arise. Even the impugned order
records a finding that it was the valuer who failed to
consider the value of equipment;
9
C/87423-87424/2014
iv. The Chartered Engineer had altered the valuation
without any sound reason. Hence, it was necessary to
record his statement and grant a cross examination to
the appellant. Infact, the appellant had made a specific
request for cross examination of the Chartered
Engineer but the respondent denied cross examination;
v. It is not the case of the Department that the appellant
had influenced the Valuation Report in any way.
Further, it is not the case of the Department that
additional consideration was paid by the appellant to
the seller of the Barge. Thus, the transaction value, as
declared by the appellant, was correct;
vi. The very same Barge was imported earlier by one M/s.
Afcons Gunanusa Joint Venture, Afcons House under a
Bill of Entry dated 22.10.2010, and the value of the
Barge was declared as Rs.23.41 crores approximately,
which was accepted by the Department. The appellant
had declared the value of the same Barge as Rs.26.82
crores. Therefore, the allegation that the Barge was
undervalued in order to pay a lesser customs duty
does not arise;
vii. The Respondent has not only failed to consider the
MOU and the invoice dated 05.07.2011 submitted
during investigation, but also erred in not giving any
finding or reasons to reject the value declared by the
appellant and the supplier in the documents. The sole
basis of rejection of value declared by the appellant is
10
C/87423-87424/2014
the Second Report of the Chartered Engineer, which
report is not free from serious doubts;
viii. When the goods are intercepted and seized prior to the
clearance of goods and final assessment of Bill of
Entry, the proceeding against the said goods can be
initiated only under section 124 of the Custom Act and
the goods can be confiscated under Section 125(1) of
the Customs Act. The goods of the appellant were
seized prior to assessment on 19.10.2011. The
provisional assessment was made and provisional
release of the Barge was granted only on 19.04.2012
when the appellant paid the customs duty of
Rs.5,15,62,600 and cleared the Barge. As such, it is
not a case of short payment or non-payment of
customs duty. In support of this submission reliance
has been placed on Sri. Amit Rajkumar Singhania
vs. Commissioner of Customs (ACC), Mumbai and
others10; and Surendra R. Choudhary vs.
Commissioner of Customs (Import), Nhava
Sheva11;
ix. As there was no attempt to mis-declare the value of
the Barge by the appellant, the goods cannot be liable
to confiscation under section 111(m) of the Customs
Act. As such, the confiscation and the consequent
redemption deserve to be set aside;
10. 2019-TIOL-2991-CESTAT-Mumbai
11. 2019 (369) ELT 1762 (Tri.-Mumbai)
11
C/87423-87424/2014
x. In any event, even if it is held that the Barge was liable
to confiscation on technical grounds, the redemption
fine should be nominal, considering the facts and
circumstances of the matter;
xi. Penalty under section 114 A should be set aside when
the duty purported to be demanded under section 28
itself does not survive;
xii. The jurisdiction to impose penalty under section 114A
can be assumed only if duty is confirmed under section
28 of the Customs Act and not under any other section.
In this connection reliance has been placed upon
Commissioner of Customs (Import and General)
vs. M/s. Care Foundation12 and Surendra R.
Choudhary vs. Commissioner of Customs
(Import), Nhava Sheva;
xiii. Penalty of Rs.1,75,00,000/- under section 112(a) on
the Managing Director of the Appellant should be set
aside as the Impugned Order is silent and does not
disclose existence of any of the ingredients for
imposing penalty under section 112(a). There is no
finding that the Managing Director personally indulged
in any commission or omission rendering the Barge
liable to confiscation under section 111 of the Customs
Act;
xiv. In any case, the entire case of alleged valuation has
arisen due to the improper valuation done by the
12. 2014-TIOL-537-HC-DEL-CUS
12
C/87423-87424/2014
Chartered Engineer while issuing his valuation report
and it is not the case of the Department that it was
done under instructions of the Managing Director;
xv. There are no findings in the Order that the Managing
Director was personally involved in any commission or
omission rendering the Barge liable to confiscation
under section 111 of the Customs Act. Hence, no
penalty can be imposed on the Managing Director; and
xvi. The Managing Director is not looking after day-to-day
operations of the business and as such also no penalty
can be imposed on the Managing Director.
17. Shri Ramesh Kumar, learned authorised representative
appearing for the Department however, supported the impugned
order and made the following submissions:
i. The valuation of the Barge was done on the maximum
amount of depreciation that can be claimed under the
Instructions dated 19.11.1987 issued for valuation of
second-hand machinery and fixation of scale of
depreciation;
ii. When there is mis-declaration, the transaction value
cannot be relied upon and the Department gets a right
to question the correctness of the valuation. In support
of this contention reliance has been placed upon the
decision of the Kerala High Court in Commissioner of
Customs vs. P.V. Ukkru International Trade13;
13. 2009 (235) E.L.T. 229 (Ker.)
13
C/87423-87424/2014
iii. As the Managing Director himself had made the
statement under section 108 of the Customs Act, the
Department was justified in adopting the value. In
support of this contention, reliance has been placed on
the decision of the Tribunal in Sangeeta Metals
(India) vs. Commr. of Customs (Import), Nhava
Sheva14;
iv. The value of the goods mentioned in the certificate
issued by the Chartered Engineer has to be relied
upon, since ignoring it would amount to a mistake
apparent on the record. In support of this contention,
reliance has been on the decision of the Tribunal in
Alfa Traders vs. Commissioner of Customs,
Cochin15;
v. The demand was raised under section 28(4) read with
section 125(2) of the Customs Act and the order has
also confirmed the demand under section 28(4) read
with section 125(2) of the Customs Act;
vi. Penalty was correctly imposed the Managing Director.
In support of this submission reliance has been placed
upon the decision of the Madras High Court in Commr.
of Cus. (AIR), Chennai vs. A.P. Pinherio16; and
vii. Where it is intended to recover or demand duty from
any person and also confiscate any offending goods
related to such proposed demand of duty along with
14. 2015 (315) E.L.T. 74 (Tri-Mumbai)
15. 2008 (233) E.L.T. 289 (Tri.-Bang.)
16. 2014 (306) E.L.T. 349 (Mad.)
14
C/87423-87424/2014
imposition of penalties provided in Chapter XIV, a
combined notice has necessarily to be issued invoking
provisions of both sections 28 and 124 of the Customs
Act. In support of this contention reliance has been
placed upon the decision of the Tribunal in Prince
Fortified Steels Pvt. Ltd. vs. Commissioner of
Cus., Tuticorin17.
18. The submissions advanced by the learned counsel for the
appellant and the learned authorized representative appearing for
the Department have been considered.
19. The issue that arises for consideration in these appeals is
regarding the valuation of the Barge. The value declared by the
appellant in the Bill of Entry filed on August 25, 2011 under section
46 of the Customs Act seeking clearance under First Check
Examination procedure was US Dollars 6,034,657.00 (CIF),
equivalent to Rs. 26,97,49,167/-. The appellant had mentioned
this value on the basis of the invoice, MOU, Bill of Sales, Insurance
and Chartered Engineer Certificate and paid customs duty to the
extent of Rs. 4,12,70,061/-. The certificate issued by the
Chartered Engineer mentions that the fair and reasonable price
would be US Dollars 6,000,000.00 (FOB) taking into consideration
the condition of the equipment, expected residual life and the
market enquiry. However, the Department believed that the vessel
was grossly under voiced and, therefore, re-inspection of the Barge
was carried out by the same Chartered Engineer, who this time
amended the value to US Dollars 7,385,500.00. A remark was
17. 2019 (369) E.L.T. 1228 (Tri.- Chennai)
15
C/87423-87424/2014
made that during the re-inspection, they gathered complete vessel
particulars, which had not been made available to them during the
first inspection.
20. The Barge with the equipments, accessories and spares was
seized under section 110 of the Customs Act. It was, however,
subsequently provisionally released on payment of customs duty of
Rs. 5,15,62,600/- as per the second report of the Chartered
Engineer.
21. The order passed by the Commissioner rejects the value
declared by the appellant under rule 12 of the 2007 Valuation
Rules and has re-determined the value.
22. Section 14 of the Customs Act deals with valuation of goods.
It was amended in 2007. Section 14, as it stood prior to its
amendment, is reproduced below:
"Section - 14 Valuation of goods --
(1) For the purposes of the Customs Tariff Act, 1975 (51 of
1975), or any other law for the time being in force whereunder a
duty of customs is chargeable on any goods by reference to their
value, the value of such 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 -
(a) where the seller and buyer have no interest in the business
of each other; or
(b) one of them has no interest in the business of the other,
and the price is the sole consideration for the sale or offer
for sale
Provided also that such price shall be calculated with reference to
the rate of exchange as in force on the date on which a bill of entry
is presented under section 46, or a shipping bill of export, as the
case may be, is presented under section 50.
(1A) Subject to the provisions of sub-section (1), the price
referred to in that sub-section in respect of imported goods shall be
determined in accordance with the rules made in this behalf.
(2) Notwithstanding anything contained in sub-section (1) or
subsection (1A), if the Board is satisfied that it is necessary or
expedient so to do it may, by notification in the Official Gazette, fix
tariff values for any class of imported goods or export goods,
16
C/87423-87424/2014
having regard to the trend of value of such or like goods, and
where any such tariff values are fixed, the duty shall be chargeable
with reference to such tariff value.
*******"
23. Section 14 of the Customs Act, as amended on 10 October
2007, is as follows:
"Section 14.Valuation of goods. - (1) For the purposes of the
Customs Tariff Act, 1975 (51 of 1975), or any other law for the
time being in force, the value of the imported goods and export
goods shall be the transaction value of such goods, that is to say,
the price actually paid or payable for the goods when sold for
export to India for delivery at the time and place of importation, or
as the case may be, for export from India for delivery at the time
and place of exportation, where the buyer and seller of the goods
are not related and price is the sole consideration for the sale
subject to such other conditions as may be specified in the rules
made in this behalf:
Provided that such transaction value in the case of imported
goods shall include, in addition to the price as aforesaid, any
amount paid or payable for costs and services, including
commissions and brokerage, engineering, design work, royalties
and licence fees, costs of transportation to the place of
importation, insurance, loading, unloading and handling charges to
the extent and in the manner specified in the rules made in this
behalf:"
24. The Supreme Court in Wipro Ltd. vs. Assistant Collector
of Customs18 examined the provisions of section 14 of the
Customs Act as it stood prior to 2007 and also as it stood after the
amendment in 2007. It noticed that under the unamended
provision, the principle was to find out the valuation of goods "by
reference to the value" and it introduced a determining / fictional
provision by stipulating that the value of all the goods would be
the price at which such or like goods are "ordinarily sold".
However, under the amended provisions, the valuation is based on
the 'transaction' price namely, the price "actually paid or payable
for the goods". This change in the principle brought about in
section 14(1) of the Act was noticed by the Supreme Court in
18. 2015 (319) E.L.T. 177 (S.C.)
17
C/87423-87424/2014
paragraphs 22 and 23 of the judgment and they are reproduced
below:
"22. The underlying principle contained in amended sub-
section (1) of Section 14 is to consider transaction value of
the goods imported or exported for the purpose of customs
duty. Transaction value is stated to be a price actually paid or
payable for the goods when sold for export to India for delivery at
the time and place of importation. Therefore, it is the price
which is actually paid or payable for delivery at the time and
place of importation, which is to be treated as transaction
value. However, this sub-section (1) further makes it clear
that the price actually paid or payable for the goods will not
be treated as transaction value where the buyer and the
seller are related with each other. In such cases, there can be
a presumption that the actual price which is paid or payable for
such goods is not the true reflection of the value of the goods. This
Section also provides that normal price would be the sole
consideration for the sale. However, this may be subject to
such other conditions which can be specified in the form of
Rules made in this behalf.
23. As per the first proviso of the amended Section 14(1), in the
transaction value of the imported goods, certain charges are to be
added which are in the form of amount paid or payable for costs
and services including commissions and brokerage, engineering,
design work, royalties and licence fees, costs of transportation to
the place of importation, insurance, loading, unloading and
handling charges to the extent and in the manner which can be
prescribed in the rules. Sub-section (2) of Section 14, which
remains the same, is an overriding provision which empowers the
Board to fix tariff values for any class of imported goods or export
goods under certain circumstances. We are not concerned with this
aspect in the instant case."
(emphasis supplied)
25. Thus, what has to be seen under section 14(1) of the
Customs Act, as amended in 2007, is the transaction value of the
goods imported or exported for the purpose of customs duty and
transaction value is stated to be the price actually paid or payable
for the goods when sold for export to India for delivery at that time
and place of importation. Sub-section (1) of section 14 of the
Customs Act also makes it clear that the price actually paid or
payable for the goods will not be treated as 'transaction value'
where the buyer and the seller are related to each other. As per
the first proviso to the amended section 14 (1), certain charges
18
C/87423-87424/2014
are to be added to the transaction value of the imported goods. It
is, therefore, clear that while there was scope for addition of
notional charges in the assessable value under the un-amended
section 14 of the Customs Act, but after the actual sale price
concept was introduced in the year 2007 on the basis of GATT
guidelines and section 14 of the Customs Act was amended in
2007, any inclusion of notional charges seems to have lost its
relevance and only actual cost incurred by the buyer is required to
be considered.
26. In the present case, as noticed above, the Barge was earlier
on charter to M/s. Afcons Gunanusa Joint Venture who had
imported it under a Bill of Entry dated October 22, 2010 with the
declared value of Rs. 23.41 crores, which value was accepted by
the Department. The declared value of the Barge in the Bill of
Entry dated August 25, 2011 is US Dollars 6,000,000.00, freight
US Dollars 5,000 and insurance US Dollars 29,657.00 totaling US
Dollars 6,034,657.000 (CIF) equivalent to Rs. 26,97,49,167/-. It
needs to be noted that the appellant had purchased the said
second hand Barge with all standard accessories for a transaction
value of US Dollars 6,000,000.00 (FOB) to be paid directly to the
bank account of the seller and the Bill of Sale was executed on July
05, 2011. Earlier M/s. Afcons Gunanusa Joint Venture had
imported the said Barge under a Bill of Entry dated October 22,
2010, wherein the declared value was only Rs. 23.41 crores.
27. An inspection was carried out by Chartered Engineer of a
Government Approved Inspection and Certification Agency, who
opined that the fair and reasonable price of the Barge would be US
19
C/87423-87424/2014
Dollars 6,000,000.00 (FOB). Later on, at the instance of the
Department, the Barge was again re-examined by the same
Chartered Engineer, who this time issued a revised certificate and
amended the FOB value from the Barge from US Dollars
6,000,000.00 (FOB) to US Dollars 7,385,500.
28. In paragraph 23 of the order, the Commissioner has noted
why there was a change in the CIF value of the Barge and the said
paragraph is reproduced below:
"23. It is evident from the Para 9.6 of the Chartered Engineer's
[M/s. Intertek Services] certificate dated 22.07.2011 submitted by
the importer for the clearance of the impugned barge, that the list
of items for which the CIF valuation had been considered were "Old
and Used Non Propelled Accommodation Barge "Halani Star",
spares, consumables, and Provisions on board". Further, it
appeared that the valuer had not considered the value of
the equipments such as the Crane of "American" brand
AMHOIST with a capacity of 225 Tones, three Power
Generators of Caterpillar Make with capacity of 1030
Kilowatt, 4 Winches with 8 drums (one set was non
functional and under repair), Water Maker with capacity
under Reverse Osmosis process for making 25 tons per day.
The value of the these equipments installed on the barge was
required to be included to arrive at the assessable value of the
barge under import. On being asked to state the value of the said
equipments, Shri Hari Bhambani, Managing Director of M/s
Bhambani Shipping Ltd requested that the said equipments may be
resurveyed by the same Chartered Engineers as they would verify
whether the value of some equipments had been left out and that
if the value was enhanced after the survey he would pay the
differential duty. Accordingly, as per the request of the importer,
the inspection of the impugned barge was carried out by the
Chartered Engineers, M/S Intertek Services, on 06.10.2011 in the
presence of the importer. M/s Intertek Testing Services Pvt Ltd
gave their valuation report vide their Ref No
SSA/CEC/VALUE/HALANI GROUP/HALANI STAR/REV-352/2011
2012 dated 12TH October, 2011. M/s Intertek Testing Services Pvt.
Ltd, in their detailed report on the barge estimated the FOB value
of the Barge along with the equipments to USD 7385000. The
value of the Equipments as per its specifications and capacity was
estimated to USD 1,385,000."
(emphasis supplied)
29. What has been noticed in the above paragraph of the Order
is that earlier the valuer had not considered the value of the
equipments such as crane, three power generators and water
20
C/87423-87424/2014
maker and the value of these equipments installed on the Barge
was required to be included to arrive at the assessable value of the
Barge.
30. The contention of the appellant is that it had correctly
declared the transaction value as the assessable value for the
purposes of customs duty and it is also not the case of the
Department that the assessable value declared by the appellant is
not the transaction value since the entire case of the Department
is based on the valuation report submitted by the Chartered
Engineer. The second report submitted by the Chartered Engineer
states that during their re-inspection, they had gathered complete
vessel particulars regarding capacities and other technical
specifications, which were not made available during the initial
inspection.
31. It is, therefore, necessary to reproduce the relevant portion
of the two reports. The relevant portion of the first report dated
July 21, 2011 is reproduced below:
"DATED: July 22, 2011
CHARTERED ENGINEER CERTIFICATE
With respect to the request for Halani Group, Mumbai, we carried out
detailed survey/inspection of the One Old, Used & Secondhand Non -
Propelled Accommodation Barge "HALANI STAR" while she lay afloat at
"V-3, Anchorage, Mumbai Port" on 21.07.2011. In regards we now
report as under:
1. Purpose and Object of : Whether the items/components are
Inspection new or used ones and re-conditioned
or not,
: Whether the items/components put
together will form a complete unit,
: To ascertain Year of
Built/Make/Model/Price in Year of
Built,
: To appraise the value of
items/components in the 'as is where
is basis'
21
C/87423-87424/2014
6. Details of Items Inspected
6.1 Technical : One Old, Used & Secondhand Non-
Specifications Propelled Accommodation Barge
"HALANI STAR" with related spares,
accessories, consumables & provisions
on-board.
6.2 Vessel Particulars :
Name of Vessel : "HALANO STAR"
Type : Non-Propelled Accommodation Barge
IMO no. : 8646616
Official No. : 10674
Port of Registry : Kingstown,
Builder : Chuan HUP Marine Ltd.,
Place of built : Singapore
Owner : Halani Industries Ltd.
Trust House, 1 12 Bandic Street,
Kingstown Saint Vincent
ABS - A1, Barge
Current Class : IRS - SU, Pontoon
Length : 91.440 Meters
Breadth : 27.430 Meters
Depth : 05.486 Meters
GRT : 5,608 Tons
NRT : 1,683 Tons
Summer Draft : 3.81 Meters
Dead Weight : 5,942.85 Tons
Light Ship : 3,141.52 Tons
Main Generator : 3 × 1,030 kw - Make Caterpillar
Model CAT - D - 399
Emergency Generator : 1 × 320 kw - Make Caterpillar
Model CAT - D - 34112
Compressors : 1 × Sullair 680 cfm & 1 × Ingersoll 350
cfm
Water Maker Reserve Osmosis S-64B-436
[1 × 25 tons/per day - 1 × 20 tons/per
day]
Accommodation : 222 persons including 21 crew member
Capacity
b. Vessel Particulars
Tank Capacities
Fuel Oil : 2 × 324 Cubic meters
Fresh Water : 2 × 642.56 Cubic meters
2 × 514.07 Cubic meters
Water Ballast : 3,018 Cubic meters
Clear Desk Space : 1,400 Square meters
Crane - 1 no. - Cap - : AMHOOIST 11750, Pedestal Crane 94 H
225 tons Tubular Boom - Boom length - 45 mtrs.
Engine: Cummins VT 1710 - C524, 515
HP
c. Year & Place of : 1982, Singapore
Built
d. Price of New : USD 20,000,000.00 Approx.
Vessel in (YOM)
Detailed Specifications, Certificate of Ownership attached herewith for
"HALANI STAR".
7. Nature of inspection
7.1 Whether Inspected in : Yes
Working Condition
(Yes/No)
7.2 Technical Details of : All equipments were found to be
Tests Carried Out working in good condition and as
per their respective stated
capacity.
22
C/87423-87424/2014
7.3 National/International : There is no specific
Standards Followed for National/International Standard
Inspection for the inspection of these
equipments. This type of
machinery is well known and
proven internationally for various
applications.
8.5 Comments on Valuation
Taking into consideration the condition of the equipment, expected
residual life and the enquiry in market, the fair and reasonable price
in our opinion is USD 6,000,000.00[FOB] [US Dollars Six Million
Only].
9.6 CIF valuation of Non - Propelled Accommodation Barge
"HALANI STAR" as per Invoice:
One Old, Used & Secondhand Non - USD 6,000,000.00
Propelled Accommodation Barge
"HALANI STAR" with related spares,
accessories, consumables & provisions
on-board
Add. Freight USD 5,000.00
Add. Insurance USD 29,657,00
CIF valuation of Accommodation Barge USD 6,034,657.00
"HALANI STAR"
32. In the second report dated October 12, 2011, the following
changes appear:
"During our re-inspection on board vessel along with Customs
Officials, we have gathered complete vessel particulars which were
not made available during our initial inspection/documentation
regarding capacities, YOM & other technical specifications of
equipments such as cranes, generators, compressors WMP, STP
etc. and against the following commercial details, we now amend
our earlier certificate as under:
********
9.5 CIF valuation of Non - Propelled Accommodation Barge "HALANI STAR" as under:
One Old, Used & Secondhand Non - USD 6,000,000.00 Propelled Accommodation Barge [FOB] "HALANI STAR".
Add. On account of cost of on board spares, USD 1,385,000.00 consumables, accessories, provisions [FOB] & Equipment on board with their respective capacities, YOM & other technical specifications of equipments such as cranes, generators, compressors WMP, STP etc. Add. Freight USD 5,000.00 Add. Insurance USD 29,657,00 CIF valuation of Accommodation Barge USD 7,419,657.00 "HALANI STAR"23
C/87423-87424/2014
33. A comparative study of the two certificates dated July 22, 2011 and October 12, 2011 issued by the Chartered Engineer is reproduced below:
COMPARATIVE STUDY TABLE CERTIFICATE DATED 22.07.2011 CERTIFICATE DATED 12.10.2011
1. In column 6.2 b of Certificate: 1. In column 6.2 b of Certificate: Crane - 1 no. -Cap-225 tons: Crane - 1 no. -Cap - 225 tons:
AMHOOIST 11750, Pedestal AMHOOISST 11750, Pedestal
Crane 94 H Crane 94 H
Tubular Boom-Boom length- Tubular Boom-Boom length -
45 mtrs. 48 mtrs.
Engine: Cummins VT 1710 - Engine: Cummins VT 1710 -
C524, 515 HP C524, 515 HP
2. In column 6.2 of Certificate: 2. In column 6.2 of Certificate:
Main Generator: Main Generator:
3 x 1,030 kw - Make Caterpillar 3 x 1,3030 kw - Make Caterpillar
Model CAT - D - 399 Model CAT-D - 399
Emergency Generator: Emergency Generator:
1 x 320 kw - Make Caterpillar 1x 320 kw - Make Caterpillar
Model CAT-D-34112 Model CAT - D - 34112
3. In column 6.2 of Certificate: 3. In column 6.2 of Certificate:
Compressors: Compressors:
1 x Sullair 680 cfm & 1 x Sullair 680 cfm &
1 x Ingersoll 350 cfm 1 x Ingersoll 350 cfm
4. In column 6.2 of Certificate: 4. In column 6.2 of Certificate:
Water Maker: Water Maker:
Reverse Osmosis S-64B-436 Reverse Osmosis S-64B-436
[1 x 25 tons / per day- [1 x 25 tons / per day -
1 x 20 tons/ per day) 1 x 20 tons / per day]
5. In column 9.6 of Certificate: 5. In column 9.6 of Certificate:
CIF Valuation FOB Valuation
One Old, Used & Secondhand One Old, Used & Secondhand
Non-propelled Accommodation Non-propelled Accommodation
Barge "HALANI STAR" with related Barge "HALANI STAR" with related
spares, accessories, consumables spares, accessories, consumables
& provisions on board & provisions on board
Value as per Invoice
US D 6,000,000.00 Invoice Value: 6,000,000.00
Freight USD 5,000.00
Insurance US D 29,657.00
-------------------- Present Assessed
CIF value US D 6,034,657.00 Value US D 7,385,000.00
6. In column 8.5 of Certificate: 6. In column 8.5 of Certificate
Comments on Valuation Comments on Valuation
Taking into consideration the Taking into consideration the
condition of the equipment, condition of the equipment,
24
C/87423-87424/2014
expected residual life and the expected residual life and the
enquiry in market, the fair enquiry in market, the fair
and reasonable price in our and reasonable price in our
opinion is USD 6,000,000.00 [FOB] opinion is USD 7,385,000.00
[US Dollars Six Million Only). [FOB] [US Dollars Seven Million
Three Hundred Eighty Five
Thousand Only]
7. In column 9.4 of Certificate: 7. In column 9.4 of Certificate
Deck Machinery, compressors, Add: On account of cost of on
Workshop Equipments, Winches, board spares, consumables,
Discharge Pumps, Radio & Naviga- accessories, provisions &
tional & Safety Equipments was Equipment on board with their
Inspected.....(This is missing in respective capacities, YOM &
Cert. dt. 12.10.11, but shown as other technical specifications
"Add:" Valued at USD 1,385,000.00 of equipments such as cranes
(FOB] generators, compressors WMP.
STP etc.
[FOB] US D 1,385,000.00
34. It is clear from a comparison of the two reports that the vessel particulars, which purportedly had not been made available during the first inspection report, form part of the first report and have also been reproduced in the second report. The description of the Barge and its equipment is same in both the valuation reports and the Chartered Engineer had also inspected the Barge before the first report was submitted.
35. What also needs to be noted is that the appellant had purchased the Barge at US Dollars 6,000,000.00 (FOB) and earlier the same Barge was imported by M/s. Afcons Gunanusa Joint Venture under a Bill of Entry dated October 22, 2010 for Rs. 23.41 crores, which value was accepted by the Department. The value of the Barge was mentioned as Rs. 26.82 crores in the Bill of Entry dated August 25, 2011 submitted by the appellant.
36. Learned counsel for the appellant also submitted that since the Chartered Engineer had changed the valuation, the appellant had made a request for cross examination of the Chartered Engineer but this request was rejected by the Commissioner for 25 C/87423-87424/2014 the sole reason that it was the Managing Director of the appellant who had stated that the same Chartered Engineer should re- inspect the Barge. The relevant portion of the order of the Commissioner is reproduced below:
"26.7 They have contended that the department has erred in rejecting the Chartered Engineer Certificate without recording his statement or cross examining him. Therefore, to pick holes in the certificate of Chartered Engineer without cross-examining him is not just and proper in law. They have cited the case law of the Big Apple Manufacturing Vs. Commissioner of Cus. & C. Ex. (A), Hyderabad, Mumbai [2009 (237) E.L.T. (Tri. Bang.)] ******* Thus, in this case the Chartered Engineer who had earlier given the valuation on the basis of the limited data made available to them had been appointed, on the request of the noticee themselves, to inspect and verify the value of the equipments whose valuation had been left out in their earlier report. Therefore, in the facts and circumstances of the case the case law relied upon by the noticee is not applicable."
37. It may be that the Managing Director of the appellant had made a request for re-inspection of the Barge by the same Chartered Engineer, but this cannot be made a ground to reject the cross examination claimed by the appellant, more particularly when a specific averment had been made by the appellant that all the vessel particulars had been made available to the Chartered Engineer earlier and the first report had been submitted on that basis after inspection of the Barge and that the description of the Barge and the equipments mentioned in both the valuation reports is the same. It was, therefore, necessary on the part of the Department to have examined the Chartered Engineer and also to have permitted the appellant to cross examine him.
38. Such a requirement is necessary is clear from the observations made by the Allahabad High Court in Commissioner 26 C/87423-87424/2014 of Central Excise vs. Kurele Pan Products Pvt. Ltd.19, wherein, it was held that documents cannot be relied upon if permission to cross examine the author of the documents has not been provided. The relevant portion of the judgment is reproduced below:
"6. It is a settled principle of law that if the authority wants to rely upon the statement of any witness, the opportunity of cross-examination ought to have been given to enable the party to prove its case. Non-providing of the opportunity of cross-examination amounts to violation of the natural justice and in absence of denial of natural justice, such documents cannot be relied upon. In the case of Basudev Gard v. Commissioner of Customs [2013 (294) E.L.T. 353 (Del.), the Division Bench of the Delhi High Court has held that the statement against the assessee cannot be used without giving them opportunity of cross-examination. Cross-examination is valuable right of the accused/noticee in quasi-judicial proceeding which can have adverse consequences for them."
(emphasis supplied)
39. Thus, cross examination is a valuable right available to an assessee and it cannot be denied in an arbitrary manner. In the present case, as noticed above, the Commissioner has rejected the request made by the appellant for cross examination of the Chartered Engineer only for the reason that the appellant had stated that the Barge may be re-inspected by the same Chartered Engineer. If the report was found to be faulty by the appellant, the Department should have recorded the statement of the Chartered Engineer and also permitted the appellant to cross examine him, so as to determine the correct facts.
40. In such circumstances, when neither the Chartered Engineer was examined nor the appellant was not permitted to cross examine the Chartered Engineer, the second report submitted by the Chartered Engineer cannot be relied upon.
19. 2014 (307) E.L.T. 42 (All.) 27 C/87423-87424/2014
41. Thus, the value declared by the appellant should have been treated as a transaction value and no reliance could have been placed on the second report of the Chartered Engineer for enhancing the value of the Barge. It is also not the case of the Department that any additional consideration was paid by the appellant to the seller of the Barge.
42. In this view of the matter it is not necessary to examine the other contentions raised by learned counsel for the appellant regarding the infirmities committed by the Commissioner while passing the order.
43. Thus, for all the reasons stated above, the order passed by the Commissioner cannot be sustained and is set aside. The declared value of the Barge cleared through the Bill of Entry dated August 25, 2011, therefore, deserves to be accepted. The appeals are, accordingly, allowed.
(Order Pronounced on 18.01.2022) (JUSTICE DILIP GUPTA) PRESIDENT (P.ANJANI KUMAR MEMBER (TECHNICAL) Archana/JB/Shreya