TMI Blog2005 (5) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... es were not satisfied with the reasons for the reduction in price and therefore, the communication was issued on the appellants proposing to recover the differential duty on the basis of the original price fixed with the suppliers. The adjudicating authority made an assessment order confirming the demand of Rs. 2,63,562/- on this respondent. Appeal No. C/317/99 - 3. The respondent had imported one old vessel purchased for breaking from M/s. Shenton Shipping, SA, Singapore for US$ 27,88,632.34. Thereafter, they negotiated a letter of credit for US$ 2700670.23 with the State Bank of Saurashtra, Bhavnagar in favour of the seller as per addendum No. 2 dated 15-11-97. The price was again reduced due to late beaching instructions and by addendum No. 3, dated 19-11-97 the final price was decided at US$ 25,88,725.35 and the said amount was released in favour of the seller through the State Bank of Saurashtra as per the letter of credit. The physical delivery of ship was taken by the respondent on 21-11-97. The Bill of Entry was presented by the respondent at the reduced price. The Customs authorities, not being convinced with the reasoning for reduction in price, demanded differential duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and the adjudicating authority ultimately confirmed the demand to the tune of Rs. 19,84,914/-. 8. The adjudicating authorities were of the opinion that the negotiated price would not necessarily be acceptable for the purpose of valuation under Section 14 of the Customs Act and there was no good reason which can reasonably appeal to accept the reduced price. It was held that there is no convincing evidence that the original agreed price was paid or not paid to the cash buyer agent at Bhavnagar. The plea of the importers for assessment of Bill of Entry filed by them at reduced price was, therefore, rejected. 9. The Appellate Commissioner who heard the group of appeals together, since the main question involved in them was common and the arguments in all cases were common (as observed in paragraph 3 of the impugned order), came to a finding that the evidence revealed that because of breach of some of the conditions of the memoranda of agreements on the part of the sellers disputes had arisen between the respective parties which ultimately were resolved by reduction in price in order to avoid cancellation/frustration of the original contract. It was held that had the price could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments were made at the reduced prices. He argued that the facts which were to the knowledge of a party were to be proved by him and fact as to what payments were actually made by buyer to the sellers was entirely within their knowledge. The respondent-buyers were, therefore, required to produce evidence to show what actual payments were made to the sellers. He also submitted that there were no satisfactory particulars given for showing the so-called discrepancies and excess removals from the ships which could have justified reduction in price. He argued that since the appellants did not demonstrate the justification for reduction in price, the adjudicating authority was justified in relying on the original price as reflected in the MOA in all these matters. He also submitted that any subsequent change in price cannot relate back to the advantage of the appellants, and the Customs duty continued to be payable on the original price, as reflected in the MOA. 11. Admittedly, all these ships were imported for the purpose of breaking them. In none of these cases, breaking up was decided after the import. In all the cases the original price is reflected in the MOA and the variation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) E.L.T. 358 (S.C.). The Customs authorities would, therefore, be justified in examining whether the price of the imported goods as declared was the genuine price reflecting the transaction value. However, as held by the Supreme Court in Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai reported in 2000 (122) E.L.T. 321 (S.C.), on reading Rule 3(1) and Rule 4(1) of the said Valuation Rules together it is clear that a mandate has been cast on the authorities to accept the price actually paid or payable for the goods in respect of the goods under assessment as the transaction value. However, this mandate is not invariable and is subject to certain exceptions specified in Rule 4(2)(a)(d). The Supreme Court held that unless the price actually paid for the particular transaction falls within the exceptions, the Customs authorities are bound to assess the duty on the transaction value. It was held that Rule 4(1) speaks of the transaction value and the utilisation of the definite article indicated that what should be accepted as the value for the purpose of assessment to Customs duty was the price actually paid for the particular transaction, unless of course the price was unaccept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual delivery, on as is where is basis complete virtually intact with everything on board including the items specified. Provisions are made for breaking the vessel at buyer s risk and expense after delivery against the release of the purchase price in accordance with the terms of the letter of credit to the sellers, so as to enable them to instruct their agents at the port of delivery as well as the Master of the vessel for providing the beaching assistance. The buyers had an option to cancel the agreement or to seek appropriate reduction in the purchase price in the event of the vessel suffering marshal damage due to any reason before delivery. If the buyers were not able to open the letter of credit or to take delivery in the manner specified due to any of the reasons stated in the MOA over which they had no control, the agreement was to be considered as null and void and the letter of credit was to stand immediately released to the buyers. 13.2 Thus, delivery of the vessel was of paramount importance and it is evident, from the stipulations of the MOA in all these matters, that the title in the ship passed at time of its delivery to the buyer. These arrangements are in consonan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the parties have mutually agreed to substitute a reduced price by altering the original contract. Apart from the parties mutually altering the price stipulated in the original contract by novatio there is also a statutory provision contained in Section 64A(1) of the Sale Goods Act, 1930 which contemplates increase or decrease in contract price depending upon the variation in the duty of Customs or Excise on goods [Section 64A(2) of Sale of Goods Act]. 14. It is thus clear that that the price originally fixed in the MOA was not inflexible and it could be varied by mutual agreement of the parties to the contract. In other words, the parties were free to negotiate the price originally fixed and bring about a variation in the original contract in which event they will not be held bound to the terms of the original contract and the altered terms will now bind them. In the facts of the present appeals, all the reductions in prices have been made in writing signed by both the parties to the original contract and there is no doubt expressed against the genuineness of such addendums nor is there any material on record on the basis of which the validity of the addendums can be doubted. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the evidence that if the price had not been reduced by the seller, the contract would have been frustrated and therefore, the parties to the MOA had mutually agreed to reduce the price in the compelling circumstances to give life to the contracts. No valid ground is made out even before us to show that the transaction value as reflected by the altered price should be discarded, especially when all the alterations were made prior to the passing of the title to the buyers i.e. prior to the taking of delivery by them. We, therefore, do not find any warrant for interfering with the finding of the Appellate Commissioner on the above count. 17. During the course of his decision the Appellate Commissioner has in paragraph 8 of the order, referred to the decisions of the Supreme Court in Collector of Customs, Calcutta v. Salim Abbas Bhai (supra) and Jalyan Udyog (supra) and held that applying the ratio of these decisions the date when the appellants beached their vessels for breaking up is to be considered as the date of importation and the value prevailing on the date of importation was the assessable value under Section 14(1) of the said Act for levy of import duty. In Jalyan Udyog (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... couched in simple and clear language it admits no ambiguity or doubt and it said that ocean going vessels other than vessels imported to be broken up were exempt from payment of Customs duty leviable thereon. It then said that where such ocean going vessel was subsequently broken up it shall be chargeable with the duty which will be payable if it were imported for being broken up. The idea behind the notification evidently was to encourage the imports, of ocean going vessels. The notification also contemplated and provided for the situation where the imported ocean going vessel became not sea worthy after a few years and the ship owner decided to scrap or break up. It provided that in such a situation it would be deemed as if the ship was imported for breaking up when it is broken up and the Customs duty be charged on that basis. The notification created a fiction viz. the vessel must be deemed to have been imported for being broken when it is broken up, though as a matter of fact the import was at an earlier point of time. This necessarily means that duty will be levied on value and at the rate prevailing on the date of breaking up. By virtue of the fiction created by the proviso, ..... 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