TMI Blog2023 (6) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the transactions price - failure of the appellant to produce the documents - HELD THAT:- The same has no merit. The documents that the Commissioner (appeals) has sought the invoice which is always produced at the time of filing of bill of entry. The agreement between the public sector undertaking and the appellant is also produced before the Commissioner (Appeals), therefore the objection raised by the learned AR cannot be sustained. Appeal allowed. - CUSTOM Appeal No. 10433 to 10438/2015-DB - A /11190-11195/2023 - Dated:- 2-6-2023 - MR. RAJU, MEMBER (TECHNICAL) AND MR. SOMESH ARORA, MEMBER (JUDICIAL) Shri. J.C. Patel, Advocate and Ms. Shilpa Balani, Advocatefor the Appellant Shri. G. Kirupanandan, Assistant Commissioner (AR) for the Respondent ORDER These appeals have been filed by Reliance industries Limited against demand of customs duty by inclusion of High Seas Sale Commission of 2% in their declared assessable value. 2. Learned counsel for the appellant pointed out that they are imported Propane from Abu Dhabi. They had purchased it on High Seas Sale basis from various Public Sector undertaking like IOCL, BPCL, and HPCL. They have agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as the transaction value in terms of Rule 4 or not. As already mentioned above, the price said by the GOI to IFFCO is pool price (i.e. approx. US $ 83 per MT) and that the price paid by STE to exporter i.e. US $ 300 per MT. The pool price is an artificial price at which IFFCO sells goods further after clearance from Customs to the farmers. As this is not the price at which the international transfer of goods has taken place, the same cannot be the assessable value in terms of the circular. In the instant case, as already analyzed above, there are two transactions involved. One is between STE and GOI and another is between GOI and IFFCO. The first high seas sale between STE and GOI is an international transfer of goods. I have already held that the service charges paid by GOI to STE are includable assessable value. There cannot be any doubt that the price at which GOI transfers goods to IFFCO cannot be accepted as transaction value. This is also the reason that IFFCO is paying duty on the price at which the goods are transferred by STE to GOI. In normal course of trade, a person selling the goods on high seas sale basis, would naturally add some commission to cover hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has stated that this 2% Notional High Seas Sale Commission is being added to the assessable value only at Pipavav Port which is the port involved in the present appeal, but this notional Commission is not being added at Mundra and Kakinada Port where also urea is imported by the Appellant. It has also been pointed out that even in the case of two importers, namely M/s. Koramandal International Ltd. and M/s. Kribhco, when urea is imported from Hazira Port, this notional Commission is not added. In support of this contention, Bills of Entry of the importers have also been enclosed. 35 . The Circular, on which reliance has been placed in the show cause notice and the order of the Principal Commissioner, is reproduced below : Circular No. 32/2004-Cus., dated 11-5-2004 Subject : Customs Valuation Rules, 1988 - Determination of assessable value for goods sold on high seas - Regarding. Representations have been received on the Ministry to clarify the manner of determining the value of imported goods imported on high-seas-sales basis. As per the existing practice in Mumbai Customs House, the high-seas-sale-charges are added to the declared CIF value in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Circular clarifies that in case the High Seas Sale Contract price is more than the CIF value plus 2%, then the actual contract price paid by the last buyer should be taken for the purpose of assessment. The Circular also mentions that if the importer can demonstrate that the immediate sale under consideration took place with a view to export the goods to the country of importation, then such transaction would constitute an international transfer of goods, which transaction would be relevant for assessment under Rule 4 of the 1988 Rules. However, the responsibility to prove that the High Seas Sale transaction constituted an international transfer of goods lay with the importer who would have to furnish the entire chain of documents, such as original invoice, High Seas Sales contract, details of service charges/commission paid to establish a link between the first international transfer of goods to the last transaction and it is only in case of doubt regarding the truth or accuracy of the declared value, that the Department may reject the declared transaction value and follow the sequential methods of valuation provided for in the 1988 Rules. Thus, it is not in all cases that 2% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods : Provided further that in the case of goods imported by air, where the cost mentioned in clause (a) are ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods. 38 . The said proviso underwent a further modification in 1990. Clause (ii) of first proviso mandated addition of 1% of the free on board value of the goods plus the cost of transport referred to in clause (a) plus the cost of insurance referred to in clause (c). 39 . It is on the strength of this proviso that even when the actual handling charges were mentioned and that too fixed by the International Airport Authority at Rs. 6998/-, the Customs Authorities still added a further sum to the value of goods, being 1% free on board value of the goods. The Appellant was aggrieved by this addition and it is this addition that was the cause for filing a writ petition in the High Court. 40 . The Supreme Court examined the unamended provision of Section 14 of the Customs Act as also the provision amended in the year 2007. It noticed that under the unamended provision, the principle was to find out the valuation of goods by reference to the value and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, viz., the cost of transportation and the cost of insurance stipulated in clauses (a) and (c) of sub-rule (2) are concerned. In respect of these two costs, provision is retained by specifying that they would be applicable only if the actual cost is not ascertainable. In contrast, there is a complete deviation and departure insofar as loading, unloading and handling charges are concerned. The proviso now stipulates 1% of the free on board value of the goods irrespective of the fact whether actual cost is ascertainable or not. Having referred to the scheme of Section 14 of the Rules in detail above, this cannot be countenanced. This proviso, introduces fiction as far as addition of cost of loading, unloading and handling charges is concerned even in those cases where actual cost paid on such an account is available and ascertainable. Obviously, it is contrary to the provisions of Section 14 and would clearly be ultra vires this provision. We are also of the opinion that when the actual charges paid are available and ascertainable, introducing a fiction for arriving at the purported cost of loading, unloading and handling charges is clearly arbitrary with no nexus with the objectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 : 42 . The Supreme Court noticed the change in the principle that had been brought about in Section 14(1) of the Act in paragraph 22 judgment of Wipro Ltd. and they are as follows : (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 pric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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