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2025 (5) TMI 1042 - AT - CustomsClaim for refund - Demand of differential customs duty on metal lease charges under section 28 along with interest and penalty - short payment of duty by reason of willful misstatement or suppression of facts - extended period of limitation - whether the insurance premium was liable to be added to the assessable value - HELD THAT - In the present case the appellant has claimed refund of Rs. 1, 26, 85, 29, 752/-. Even in other cases as noticed above the appellant had paid excess customs duty because the content of gold in the final invoice of the supplier was found to be less than mentioned in the finalized Bills of Entry. No motive can be attached to the appellant in suppressing the final invoice because the appellant has paid more customs duty than what was actually required to be paid in cases where the gold content is found to be lower than that mentioned in the finalized Bills of Entry. It cannot therefore be urged that the appellant had short paid duty on account of any wilful statement or suppression of facts. The extended period of limitation contemplated under section 28(4) of the Customs Act could not therefore have been invoked. In view of the specific terms of the Agreement and the stand taken by the appellant before the RBI it is clear that metal lease charges were not in the nature of interest. The Principal Commissioner therefore was justified in upholding the demand of differential duty on metal lease charges. The Principal Commissioner held that payment of insurance premium charges was a condition of sale and these charges would therefore be liable to be added in terms of rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007. In coming to this conclusion the Principal Commissioner held that from the Agreements it was clear that importer was required to get the goods insured and insurance premium was required to be paid by the importer and the ownership of the goods remained with the respective foreign supplier the till the issuances of the final invoices during which period the importer was merely a bailee of the goods. This finding recorded by the Principal Commissioner is based on the Agreement and does not suffer from any illegality as indeed the appellant was required to get the goods insured and pay insurance premium in terms of the Agreement as a bailee of the goods. Thus the appeal is allowed in part. The invocation of the extended period of limitation and imposition of penalty under section 114A of the Customs Act is set aside. The inclusion of metal lease charges and premium insurance amount in the assessable value is upheld. The order dated 31.12.2022 passed by the Principal Commissioner is accordingly set aside to the extent indicated above and the appeal is allowed in part with consequential relief(s) if any.
The core legal questions considered by the Tribunal are as follows:
(i) Whether the extended period of limitation under section 28(4) of the Customs Act, 1962 could be invoked for raising demand of differential customs duty on the appellant; (ii) Whether penalty under section 114A of the Customs Act, 1962 was rightly imposed on the appellant for short payment of duty by reason of willful misstatement or suppression of facts; (iii) Whether the metal lease charges paid by the appellant to the foreign suppliers are includible in the assessable value of imported goods under section 14 of the Customs Act; (iv) Whether the post-import insurance premium paid by the appellant is includible in the assessable value of imported goods under section 14 of the Customs Act; (v) Whether the goods imported were liable for confiscation under section 111(m) of the Customs Act; (vi) Whether the appellant and its officers were liable to penalties under sections 112(a)(ii) and 114A of the Customs Act for acts or omissions rendering the goods liable for confiscation or for willful misstatement or suppression of facts. Issue-wise detailed analysis: 1. Invocation of extended period of limitation under section 28(4) and imposition of penalty under section 114A: The relevant legal framework comprises sections 28(1) and 28(4) of the Customs Act, which prescribe a two-year limitation period for recovery of duties unless the case involves collusion, willful misstatement, or suppression of facts, in which event a five-year extended period applies. Section 114A imposes penalty equal to the duty short-paid where such willful misstatement or suppression is established. The Tribunal noted that the appellant had imported gold/silver dore bars under contracts with foreign suppliers, who issued provisional invoices at the time of import. Customs clearance was granted provisionally based on these invoices and assay reports from the Central Revenue Control Laboratory confirming compliance with exemption notifications. Subsequently, the appellant received final invoices based on assays conducted post-import, which sometimes showed higher gold content than declared initially, resulting in differential duty demands. The appellant contended that the final quantity of gold/silver could be more or less than the provisional quantity, and in many cases, excess duty was paid where the final content was less. Refund claims for such excess payments were supported by orders sanctioning refunds. This negated any wilful misstatement or suppression of facts, as the appellant had paid more duty in several instances. The Principal Commissioner had invoked the extended limitation period and imposed penalty, reasoning that the appellant had approached customs only under RBI direction and had misrepresented the transaction value as final at the time of import, thereby causing revenue loss. The Tribunal disagreed, holding that since the appellant had paid excess duty in many cases and had disclosed the provisional nature of invoices, no wilful misstatement or suppression was established. The invocation of the extended period and penalty imposition were thus unwarranted. 2. Inclusion of metal lease charges in assessable value: Section 14 of the Customs Act and the Customs Valuation Rules govern assessable value. The issue was whether metal lease charges paid to foreign suppliers constituted part of the transaction value and hence liable to customs duty. The appellant argued these charges were interest on deferred payments post-import and not part of the value of imported goods. However, the Principal Commissioner examined the agreements and found that ownership of the goods remained with the suppliers until final settlement, with the appellant acting as bailee. The metal lease charges were payments for leasing the metal from the suppliers during this period, a condition of sale rather than mere interest on deferred payment. Further, the appellant had represented to the RBI that no interest was paid to suppliers, but admitted payment of metal lease charges, indicating these were distinct from interest. The Tribunal upheld the Principal Commissioner's finding that metal lease charges were properly includible in the assessable value as a condition of sale, not merely interest. 3. Inclusion of post-import insurance premium in assessable value: The Principal Commissioner found that the importer was contractually obliged to insure the goods during the period they remained under its custody as bailee. Such insurance premium payments were thus a condition of sale and fell within rule 10(1)(e) of the Customs Valuation Rules, requiring inclusion in assessable value. The appellant did not dispute the contractual obligation to insure but contended these charges should not be added. The Tribunal concurred with the Principal Commissioner's reasoning and upheld the inclusion of insurance premium in the assessable value. 4. Confiscation and penalties on officers: The Principal Commissioner had framed issues regarding confiscation under section 111(m) and penalties on managing directors, CFO, and logistics head under section 112(a)(ii). However, the Tribunal's order primarily focused on the extended limitation and penalty under section 114A, setting aside the penalty and extended limitation invocation. The judgment does not elaborate on confiscation or penalties on officers, indicating these issues were either not pressed or not upheld. Conclusions: The Tribunal allowed the appeal in part by setting aside the invocation of the extended period of limitation under section 28(4) and the penalty under section 114A. It held that no wilful misstatement or suppression of facts was established, and the appellant had paid excess duty in several cases, negating any intent to evade duty. However, the Tribunal upheld the inclusion of metal lease charges and insurance premium in the assessable value of imported goods, confirming the Principal Commissioner's findings based on the contractual relationship and customs valuation rules. Significant holdings and core principles: "The important distinguishing aspect of the penal provisions stated under Section 112 and 114A is that if it is proved beyond doubt that the noticees act of omission and commission by reason of collusion or any willful mis-statement or suppression of facts had resulted in the short levy/non-levy of the duty, in such cases penalty under Section 114A of the Customs Act, 1962 becomes imposable." "It cannot, therefore, be urged that the appellant had short paid duty on account of any wilful statement or suppression of facts. The extended period of limitation contemplated under section 28(4) of the Customs Act could not, therefore, have been invoked." "In the present case, after going through the agreement between the importer and their overseas suppliers, it is clear that 'Metal Lease Charges' were paid as a condition of sale. There were no two separate agreements as cited in above case law. There was only one agreement and importation occurred as lease wherein the relationship between the overseas supplier importer was of bailer and bailee." "The payment of insurance premium charges was a 'condition of sale' and these charges would, therefore, be liable to be added in terms of rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007." Final determinations: (i) The extended period of limitation under section 28(4) and penalty under section 114A of the Customs Act were not invokable or imposable as no willful misstatement or suppression was proved; (ii) Metal lease charges paid to foreign suppliers are includible in the assessable value of imported goods under section 14 of the Customs Act; (iii) Post-import insurance premium paid by the appellant is includible in the assessable value under the Customs Valuation Rules; (iv) The order demanding differential customs duty was upheld only to the extent of inclusion of metal lease charges and insurance premium, while the rest of the demand and penalty were set aside.
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