M/s. ULTRATECH NATHDWARA CEMENT LIMITED VERSUS C.C. JAMNAGAR (PREV)

Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO. 3

CUSTOMS Appeal No. 430 of 2010-DB

(Arising out of OIA-136-137-COMMR-A–JMN-2010 Dated- 09.08.2010 passed by Commissioner of CUSTOMS-JAMNAGAR(PREV))

 

M/s. ULTRATECH NATHDWARA CEMENT LIMITED

VERSUS

C.C. JAMNAGAR (PREV)

 

AND

CUSTOMS Appeal No. 431 of 2010-DB

(Arising out of OIA-136-137-COMMR-A–JMN-2010 Dated- 09.08.2010 passed by Commissioner of CUSTOMS-JAMNAGAR(PREV))

M/s. ULTRATECH NATHDWARA CEMENT LIMITED Appellant

P.O. BINANIGRAM, SIROHO, SIROHO, RAJASTHAN

VERSUS

 

C.C. JAMNAGAR (PREV) Respondent

SHARDA HOUSE BEDI BANDAR ROAD,

OPP. PANCHAVATI, JAMNAGAR-GUJARAT

APPEARANCE:

Shri. Saurabh Mathur & Anand Mehta, Advocate for the Appellant

Shri. G. Kirupanandan, Assistant Commissioner (AR) for the Respondent

 

CORAM: HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON’BLE MR. RAJU, MEMBER (TECHNICAL)

 

Final Order No. A/ 10847-10848 /2023

 

 

 

 

 RAMESH NAIR

DATE OF HEARING: 09.12.2022 DATE OF DECISION: 10.04.2023

 

 

1. Thesetwo appeals are directed against Order-in-Appeal 136 to 137/Commr(A)/JMN/2010 dated 09/08/2010. Since these appeals arise out of the very same Order-in-appeal, they are being disposed of by a common order.

 

2. Briefly stated the facts of the case are that the Appellant had filed two bills of entry at Customs House, Navlakhi for imported Steam (Non-coking) Coal in bulk from M/s Visa Comtrade AG, Swtizerland in terms of purchase order dtd. 22.08.2008. The purchase order inter alia, contained clause 2.1 specifying the specification of the Coal to be supplied, clause -5 specifying weighing,sampling and moisture determination, clause -6 relating to price adjustment for quality and rejection. The Bills of entry were assessed provisionally for want of original documents and test results and allowed clearance on payment of duty assessed on the value declared in terms of the Purchase Order. Thereafter on 10.01.2009, the appellant represented before the lower authority that the coal supplied by the exporter was not as per the quality standards specified in the purchase order and that the price charged in the invoices i.e USD 154.34 PMT was re- negotiated after importation in this behalf and mutually agreed to be re-fixed @USD 86.00 PMT as per the minutes of meeting held between the appellant and the supplier’s representative on 07.01.2009 and that the payment was made at the re-negotiated price resulting into reduction in the assessable value. The bills of entry were finally assessed at the declared invoice price USD

154.34 PMT considering the final invoice price. Being aggrieved with assessment of Bills of Entries, the Appellant filed the appeal before the Commissioner (Appeals), who vide impugned order-in- appeal upheld the assessment order and rejected the appeals of the appellant. Hence , the present appeals before us.

 

3. Shri Saurabh Mathur Ld. Counsel appearing for the appellant submitsthat the valuation of goods for the purpose of paying

 

customs duty has to be done in terms of sub-section (1) of Section 14 of Customs Act, 1962. Accordingly the transaction value of such goods has to be the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. In the present case, the price actually payable for the goods at the time and place of importation is the price of USD 86 PMT because the original price of USD 154.34 PMT was for the coal having the specified quality standards as mentioned in Purchase Agreement dtd. 22.08.2008 and the invoice and the goods actually imported are not the goods having the specified quality standard as mentioned in the Purchase Agreement dtd. 22.08.2008. As such, the goods actually imported are different goods for which the price actually payable has been decided as USD 86 PMT in the meeting dated 07.01.2009 referred to have and was to be paid accordingly. Moreover , such price cannot be said to be re-negotiated price of the same goods because the original price of USD 154.34 PMT was for goods having the specified quality standards as mentioned in the Purchase Agreement dtd. 22.08.2008 and the invoice which are different from the goods actually imported. Therefore, the price of USD 86 PMT is the transaction value of goods at the time and place of importation for the quality of coal actually imported; though arrived at later on when difference in quality was noticed and taken up by the appellants with supplier.

 

4. He also submits thatvaluation could not be insisted in the original price when the price reduction was for the reason that what was imported was different from what was agreed to be imported and, therefore the same has to be done on the price on which the

 

payment was finally made. On receipt of the analysis report from inspectorate Griffith India Ltd. (IGI) on 21.10.2008 it was learnt that the coal supplied does not fulfil the specification as laid down in the purchase order as the criteria mentioned were beyond the acceptable limits as laid down in rejection limit clause and the coal was of “HETROGENOUS” quality so the consignment was rejected. Accordingly it was not usable for the purpose for which it was imported i.e. for use in the kiln of the appellant’s cement industry. Further, the original price so agreed was for the desired quality of coal as per the specification and terms& conditions mentioned in the Purchase agreement.

 

5. He further submits that the Ld. Commissioner of Customs (Appeals), has already agreed to the factthat the price of USD 86 PMT was for a coal supplied beyond the rejection limits specified in clause 6.2.3 of the purchase agreement dtd. 22.08.2008. He discarded this price only for the reason that such price was beyond the framework of the purchase agreement dtd. 22.08.2008 and, therefore, of no sanctity on law. The Ld. Commissioner nowhere disputed the fact that the coal supplied was not of the specified ISO quality standards and was different form the coal intended to be purchased i.e. it has been agreed that the goods actually imported were different from the goods intended for. He has also not disputed the fact of price reduction on account of such difference in the goods actually imported from the goods intended for. However, holding so, he considered the original price of USD 154. 34 PMT as specified in the Purchase agreement dtd. 22.08.2008 for valuation and assessment of the customs duty payable for coal actually imported which was different from the coal intended  In a way, the valuation and

 

assessment of the customs duty was done as if the coal supplied was of the specified ISP quality standards i.e it was not different form the coal intended for. This is not sustainable due to inherent contradiction in the approach of the Ld. Commissioner of Customs (Appeals), which makes the impugned order arbitrary; hence the same is liable to be set aside.

 

6. He also submits that the issue of valuation for assessment of the customs duty payable on the basis of price of goods actually imported is already settled by various decisions. He placed reliance on the following decision.
   • UniversalCommercial  Vs. Collector of Customs, Delhi – 1994(69)ELT 150 (Tri.)
   • N. Sethna Vs. Collector of Customs Bombay – 1996(85)ELT 75 (Tribunal)
   • All India Glass Manufacturers Federation Vs. Collector of Cus. – 1991 (55) ELT 5 (SC)
   • Commissioner Pushpanjali Silks Pvt. Ltd. – 2007 (207)ELT A100(SC)
   • Eicher Tractors Vs. Commissioner of Customs, Mumbai -2000(122)ELT 321 (SC)
   • Modi Xerox Ltd. Vs. Commissioner of Customs, Meerut – 2002 (150)ELT 991 (Tri. Del.)
   • Gujarat Ambuja Cements Ltd. Vs. Commissioner of C.Ex. Ahmedabad – 2003(157)ELT 188(Tri. Del.)

 

7. On other hand, heard Shri G. Kirupanandan, learned Assistant Commissioner(AR) on behalf of the Revenue, he has reiteratedthe findings of the adjudicating authority.

 

8. We have carefully gone through the record of the case and submissions made by both the sides. Having regard to the afore- statedfact, the controversy at hand narrows down to the question

 

whether the final assessment of imported Coal should have been done as per the reduced price US$ 86 PMT re-negotiated by the parties to the contract after completion of imports in question. We are of the opinion that in light of the statutory provisions, the factum of actual payment of the price in terms of the contract/ agreement cannot be ignored while determining the value of the goods under Section 14 of the Act. Further the fact are not disputed in this matter that in respect of the quality of coal consignment actually arrived in India was different. In support of this, appellant also produced the analysis report. We also observed that disputed price adjustment is due to quality and rejection clause mentioned in the purchase agreement. As per the purchase agreement dtd. 22.08.2008, the price originally decided for the coal having the specified quality standards. However the quality analysis report clearly held that the coal supplied does not fulfil the specification as laid down in the purchase order. The said fact nowhere disputed by the revenue in the present matter. We may, however, hasten to add that in such a situation the genuineness and the necessity of reduction in the price are required to be scrutinised very carefully.

 

9. As afore-stated, in the instant case, the Ld. Commissioner (appeals) has not examined the genuineness of the price reduction, and has proceeded to reject the appeal of the appellant. We may, however, add that the Commissioner (Appeals) did properly examine the cogency of the reasons for price reduction though he was not convinced to accept the same.

 

10. We find that the Hon’ble supreme court in the matter of Choudhary Ship Breakers Vs. Commissioner of Ahmedabad reported at 2010 (259) ELT 161 (S.C.) supra observed as under:-
11. 1According to Section 14(1) of the Act, assessment of customsduty under the Customs Tariff Act, 1975 is to be made on the value of the goods imported. Unless the value of the goods is fixed under the sub-section (2) of Section 14, the value has to be determined under sub-section (1) of the said Section. The value, as per Section 14(1), as it stood prior to its amendment with effect from 10th October 2007, 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 – in the course of international trade. The word “ordinarily” is clarified in the Section itself, which describes an “ordinary” sale as one “where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale…”. According to Section 14(1A) price of imported goods is to be determined in accordance with the Rules framed in this behalf. Under Rule 3(i) of the 1988 Rules, the value of the imported goods shall be the “transaction value”. Transaction value has been defined in Rule 2(f) as meaning the value determined in accordance with Rule 4. Rule 4(1), in turn, states that “the transaction value of the imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these Rules.” It is clear from a conjoint reading of Rule 3(i) and Rule 4(1) that the adjudicating authority is bound to accept the price actually paid or payable for the goods as the transaction value, except where exceptions enumerated in Rule 4(2) are attracted, which is not the case here. It is, therefore, manifest that both Section 14(1) and Rule 4 provide that in the absence of any of the special circumstances indicated in Section 14(1) and particularised in Rule 4(2) of the 1988 Rules, the price paid by an importer to the seller in the ordinary course of commerce is to be taken as the transaction value for the purpose of valuation of goods.

 

 

11. From the above facts, it can be safely inferred that if there was a genuine cause for reduction in the price of the imported goodsand the seller was also convinced that there is need for reduction in the price earlier agreed and accordingly accepted the lower price negotiated between the seller and the importer. Section 14 of the Customs Act, 1962 also talks of the price which is either paid or payable to the seller. In such situation it will be improper

 

if importer is asked to pay customs duty on an amount more than what was the consideration for the transaction. The actual transaction value paid is required to be accepted for assessment purpose, particularly when the genuineness of the reduction is not under dispute.

 

12. For all these reasons, we are of the opinion that the assessment authority needs to examine the matter afresh. Accordingly, the appeal is allowed; the impugned order is set aside, and thematter is remitted back to the original authority for fresh consideration, particularly in relation to the verifying genuineness of transaction of appellant and foreign supplier and their payment particulars, agreement, purchase order, invoice, quality inspection reports, actual transaction value etc. related to the disputed transactions. For the said purpose, the original authority should comply with the requirement of the principles of natural Justice. Needless to say that opportunity of personal hearing should be granted to the appellant before deciding the present disputed issue. It is to be noted that our above observations being prima facie and not conclusive, the adjudicating authority is free to take his independent views in accordance with law.
13. Inthe result, the appeals are allowed by way of remand to the adjudicating authority.

(Pronounced in the open court on 10.04.2023)

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

 

 

 

 

 

 

 

 

NEHA

(RAJU) MEMBER (TECHNICAL)