Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of C. Ex. And Cus. vs Udayani Ship Breakers Ltd. on 2 January, 2001
Equivalent citations: 2001(74)ECC686, 2001(129)ELT387(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (T)
1. This appeal has been filed by the department against the decision of the Commissioner of Central Excise & Customs (Appeals), Ahmedabad made in Order in Appeal No. 158/99(32-CCP)CUS/COMMR.(A)/AHD dated 8-3-1999 wherein he ordered assessment at the value declared by the appellant namely Rs. 91,14,315/- and granted abatement of duty of Rs. 90,30,311/- reversing the assessment order passed by the Superintendent of Customs and Central Excise, Alang, made in order dated 23-12-1997.
2. M/s. Priya Blue Industries Pvt. Ltd. imported under OGL one vessel "MV VLOO ARUN" for breaking. It was admitted by both sides that on 4-6-1997 the said Priya Blue Industries Pvt. Ltd. took physical delivery of the vessel. On 24-6-1997 the said company requested time for filing bill of entry. On 12th August, 1997 the bankers of the said company remitted to the seller of the vessel full value of the LC opened by the said Priya Blue Industries Pvt. Ltd. of the value US $ 68,49,839/- equivalent to Rs. 24 crores approximately. This said company being the importer after physical delivery was taken by it sought permission from the proper authorities for beaching the vessel at Plot No. V-I and the same was permitted by the proper officer of the Customs at Alang. The vessel under the guidance of the Port Officer Alang drifted at Sousiya shore and dragged towards the Plot No. V-5 of Sousiya and grounded there and Plot No. V-5 Sousiya was held by Udayani Ship Breakers, the appellant before us. Thus the ship could not be beached at the importer's plot (Plot No. V-I) due to heavy sea current and storm. Therefore the importer vide its application dated 24-6-1997 requested the Assistant Commissioner for extension of filing bill of entry for home consumption; so that they could pull the ship to their plot. The permission was granted by Assistant Commissioner and directed the importer to file bill of entry at the earliest. As the vessel could not be moved an inch another extension was sought by the importer which was not granted. On 11-9-1997 an agreement for sale of the ship was entered into by the importer Priya Blue Industries Pvt. Ltd., and the Respondent assessee for purchase of the ship on "as is where is" basis for Rs. 12,01,00,000/- on HIGH SEAS basis. On 12-9-1997 the Respondent in the appeal before us, filed bill of entry for Rs. 12,01,00,000/-. The Respondent opened L/C for Indian Rs. 12,01,00,000/- in favour of the importer and the survey report dated 14-7-1997 was obtained by Priya Blue Industries Pvt. Ltd., FROM M/s. J.B. Boda Offshore Surveyors and Adjusters Pvt. Ltd., (page 13 to 20 of the paperbook) in which it was said that the ships salvage/refloating technically was not feasible and in order to refloat the vessel it would be necessary to carry extensive repairs and it was not technically feasible to undertake such extensive repairs. The commercial invoice was issued on 18-10-1997 for the said sum of Rs. 12,01,00,000/-. In the said commercial invoice, it was stated that memorandum of agreement was entered on 10-9-1997 whereas it was agreed only 11-9-1997. The bill of sale was entered into between Priya Blue Industries Pvt. Ltd and the Respondent on 26th December, 1997 and on that date the sale was completed inasmuch as the transfer of title was made by Priya Blue Industries Pvt. Ltd. in favour of the Respondent. The Respondent wrote on 7-9-1997, 24-9-1997,17-11-1997, 8-12-1997 and 26-12-1997 to Superintendent and assessment was demanded. In one of the letters it was pointed out that if no steps were taken within one week the loss or damage that may be caused to the Respondent due would be to the personal responsibility of the Superintendent of Customs. On 23-9-1997 the assessment was made by the Superintendent directing the assessee to pay duty @ Rs. 24,78,27,175/- being the value on the date of filing of bill of entry on 12-9-1997.
3. The adjudicating officer on the basis of the amount paid on the purchase order of the vessel viz. Priya Blue Industries Limited which was at US $ 68,49,839/-, and that was held to be the transactional value in terms of Section 4. The bill of entry was not filed by the original importer but by its purchaser, the Respondent before us. The value for the purpose of assessment was only the transactional value i.e., between the sellers and the purchaser/importers Priya Blue Industries Pvt. Ltd. They only imported the goods. The Superintendent refused to accept the value claimed made by the Respondent namely at Rs. 12,01,00,000/-. The assessing officer have taken the price offered and charged for by the foreign seller in the ordinary course of international trade on the importer as it was an admitted fact that the commercial invoice confirmed the value and it was an admitted fact that no duty was discharged on this value, US $ 68,49,839/- and goods after it was imported and before it was cleared for home consumption. Against this order an appeal was filed by the Respondent.
4. In the appeal the Commissioner (Appeals) took note of Section 22 of the Act for abatement of the duty and also referred to the judgment of the Tribunal in J.M. Industries v. CCE -1989 (39) E.L.T. 109 and held for the purpose of assessment the value would be the price paid by the Respondent to the original buyer M/s. Priya Blue Industries Pvt. Ltd., namely Rs. 12,01,00,000/-. He also granted Modvat of CVD of Rs. 1,09,68,898/-. He held in the impugned order that as regards the basic customs duty and special duty the bill of entry, which was assessed at Rs. 91,14,315/- being the value of the ship declared by the assessee Respondent in the bill of entry. The abatement of duty of Rs. 90,30,311/- was sanctioned to the Respondent. Hence the present appeal.
5. At the outset we would like to place on record the excellent arguments made by learned DR Shri A.K. Chatterjee on behalf of the department and learned Counsel Shri V.M. Doiphode for the Respondent. Shri Chatterjee, the learned SDR invited our attention to the review order and at the outset argued that the appellate authority has erred in following the judgment of the Tribunal in J.M. Industries' case supra. He stated that there are many distinct different features between the instant case and the J.M. Industries' case. Shri Chatterjee emphasised the fact here that even in that case Rs. 50 lakhs fetched by way of auction was considered to be the proper value because in that case vessel was arrested and sold by Sheriff of Bombay by orders of the High Court and that value was therefore upheld by the Tribunal as well as Supreme Court in an appeal before it in the Civil Appeal No. 2026/89. The judgment passed by the Court on 22-3-1995 is reported in Court Room Highlights 1995 (77) E.L.T. A105.
6. Shri V.M. Doiphode, the learned Counsel for the Respondent here with equally marked ability argued before us that the order of the appellate authority cannot be questioned. He stated in a vehement and forceful way that the Respondent had given various letters and also surveyors certificates and if that could not be accepted then what else could the respondent do. He stated that at all material times the Customs have been kept in picture when the parties have signed the agreement between themselves. He refers to the various correspondences by letters dated 7th September, 1997; and on 24th September, 1997. He states that the party had again wrote a letter that the sale was on principal to principal basis. Again they wrote on 17th November, 1997 for assessment of bill of entry. He relied on the third and fourth sentences of the judgment rendered in J.M. Industries' case. "The question now is on what value the goods should be assessed. The appellants have cited the provisions of Sections 13,22 and 23 of the Customs Act to plead that valuation has to be of the ship in its damaged condition. We have no quarrel with this proposition. In fact, the Collector (Appeals) too accepted it when he gave 20% reduction for pilferage and further reduction of Rs. 2 lakhs for salvage expenses." He therefore stated that in this case also there has been an existence of supervening accidents, which forced the ship to change from one plot to another plot. Their letter dated 17th November, 1997 the Respondent had already given the true picture to the Superintendent about the precarious condition. He also cited the judgment of the Tribunal in Collector of Customs v. Sundaram Fasteners Limited - 1996 (86) E.L.T. 49 where under similar circum-stances the Court accepted the abatement.
7. We have considered the rival submissions. It is useful for us to address the facts of the case. On 4-6-1997 the original importer Priya Blue Industries Pvt. Ltd. took physical delivery of the ship. On 24-6-1997 the importers requested time for filing Bill of Entry. On 12-8-1997 LC was opened and it was paid on that day itself. The importer thereafter sought and had been granted permission for beaching the vessel. The Respondent presented the bill of entry on 12-9-1997 and prices was stated to be Rs. 12,01,00,000/-. The memorandum of agreement between the foreign seller and the importer was dated 2-6-1997. These are all revealed in the review order. The agreement between the importer and the Respondent was made on 11-9-1997. On 9th June, 1997 itself the vessel started drifting. Page 10 of the paperbook indicates that the payment for the vessel was made on 26th December, 1997 by the respondent and the seller Priya Blue Industries Pvt. Ltd. transferred the title to the buyer purely on 'as is where is' basis for a consideration of Rs. 12,01,00,000/-. In fact in the said bill of sale itself stated as follows :
"TO HAVE AND TO HOLD the said vessel and appurtenances thereinto belonging unto the buyer, its successors and assigns for ever. Seller hereby transfers title of vessel to buyer outright 'as is where is' in stranded condition and warrants that the said vessel is free of all debts, loans, taxes encumbrances and litigation and maritime liens and other claims whatsoever."
8. From the survey report dated 7th July, 1997 as well as 14-7-1997 the ship could not be repaired. It is stated that a memorandum of agreement was made on 10th September, 1997 and the payment was made on LC as reflected in Clause (4) of the said agreement. In fact the said Clause says inter alia as follows:
"The sellers shall deliver the vessel to buyers within 1 (one) day i.e., upon receipt of full purchase price and buyers shall accept the vessel "as is where is" at Sosiya."
The document at page 10 says that the payment was made on 26th December, 1997. The title to the goods was passed only on 26th December, 1997.
9. We have considered the rival submissions. The facts would reveal that the sale in favour of Udayani Ship Breakers Limited took place only on 26th December, 1997 which we have extracted the bill of sale in the earlier portion of this order. Until that time they have not got title of the vessel outright. When that is the fact it will be found that the various letters were written by the same M/s. Udayani Ship Breakers Limited on 7th September, 1997, 24th September, 1997,17th November, 1997 and 8th December, 1997. It will be interesting to note that the payment of customs duty took place only on 26th December, 1997 after the bill of sale is executed.
10. The learned Counsel for the Respondents tries to cite the judgment of JM. Industries' case [1989 (39) E.L.T. 109]. In our view the said case will not be applicable to the facts of this case. The difference between the two cases are different:
In J.M. Industries case Instant case
Price approved by High Here no such situation like
Court. that. Imported for ship breaking.
There it was an ocean Here no such things happened.
going vessel. It became Situation is absent here.
regular after arrest by
the Sheriff of Bombay and
sold by auction under the
Orders of the High Court.
No Act of God in cited Here there is act of god
case. in the instant case.
Consumption certificate In this case no such situation
given by Metal Scrap exists.
Trading Corporation.
Reference to conditions No such equivalent condition
11, 12, 15, 16 of the in this case. (Please see
Auction Sale. paragraphs 8 and 9 of the judgment.
11. The main difference between the facts in this case and Collector of Customs v. Sundaram Fasteners Limited is there was no sale in that case. Therefore facts in that case cannot be applicable. Moreover in paragraph 7 it has been held that Priya Blue Industries sold the goods on High Seas Basis during the course of International Trade. It is an admitted fact that between both sides before us on 4-6-1997 Priya Blue Industries Pvt. Ltd. took physical delivery. On 24-6-1997 the said Company requested time for filing bill of entry. The bill of entry was filed only in September, 1997 by Udayani Ship Breakers Limited, the Respondent before us. The foreign invoice was dated 2-6-1997. The vessel arrived here on May 4, 1997. It was originally scheduled for beaching on June 6, 1997; and later on it was made ready only on June 9, 1997. (Please see survey report at page 15A of the paper book). Thereafter due to the end current all the problems are started. The bill of entry filed only by Udayani Ship Breakers in this case before purchase. Section 22 as it stands says it must be to the stores as follows : 'where it is shown to the satisfaction of the Assistant Collector.' It is nowhere in the letters has been written by either the importer or the person who filed the bill of entry asking permission under Section 22. If any person wants remission of duty, which will be in its favour, will not that person claim the same before proper authority as indicated in Section 22 of the Act? Even in the letter dated 26-12-1997 they never asked for any remission. In fact they asked for only breaking of the ship. In our view the valuation adopted by the appellate authority is wrong in law because abatement of duty cannot be granted as facts revealed that no request has been made to Assistant Commissioner in view of Section 22 of the Act. There was no satisfaction has been shown to the Assistant Commissioner by any person. Moreover it is to be observed that bill of sale was dated 26-12-1997 after the goods have been arrived in India in June, 1997. How then can the Respondent claim it as a sale on High Seas Basis as indicated in Agreement of Sale dated 11-9-1997? The entire actions seem to be that there is a possibility of evasion of duty payable at proper value. We are therefore of the view that the order passed by the Commissioner (Appeals) is wrong in law and the Superintendent's order is upheld.
12. Appeal allowed