CESTAT sets aside additional charges on imported cement carrier ship valuation, confirms Rs. 27 crores assessable value

CESTAT Bangalore allowed appeal in part regarding valuation of imported cement carrier ship. Tribunal rejected additional charges of 20% transportation cost, 1.125% handling charges, and 1% insurance added by adjudicating authority beyond chartered engineer's assessed value of Rs. 27 crores. Following Supreme Court precedent in Mangalore Refinery case, demand for bunker fuel quantity remaining at Colombo port was set aside as only goods actually imported into India attract customs duty. Confiscation, fine and penalty were also set aside due to absence of fact suppression. Final assessable value confirmed at Rs. 27 crores as per chartered engineer's valuation report.

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Issues Involved:
1. Valuation of imported Cement Carrier ship.
2. Demand of differential duty on the ship.
3. Demand of Customs duty on bunkers.
4. Imposition of fine and penalty.

Summary:

1. Valuation of Imported Cement Carrier Ship:
The Appellant, M/s KC Maritime, imported a Cement Carrier ship through Mangalore port, declaring the value as USD 5,98,00,000 (equivalent to Rs. 26,91,00,000/-) and claimed exemption from Basic Customs Duty, paying an additional duty of 5%. The adjudicating authority rejected the transaction value and re-determined the value of the ship as Rs. 27 crore, adding 20% of the FOB value as the cost of transportation, resulting in a final value of Rs. 33,06,48,750/-. The Appellant argued that the value declared in the B/E is the transaction value based on the purchase invoice and Chartered Engineer's certificate, and the additional cost of transportation at 20% is unjustifiable.

2. Demand of Differential Duty on Ship:
A Show Cause Notice (SCN) was issued on 08.01.2012, alleging undervaluation and demanding Rs. 71,15,715/- as short payment with interest u/s 28(1)/28(4) of the Customs Act, 1962. The Appellant contended that the demand is unsustainable as it is barred by limitation, with the SCN served two days late. The adjudicating authority confirmed the demand of Rs. 30,31,174/- with interest on the vessel, adding freight, insurance, and handling charges. The Tribunal found the inclusion of 'freight' and 'insurance' unjustifiable, relying on the judgments of Wipro Ltd and Sachin Kshirsagar, and concluded that the enhancement of 'assessable value' beyond the Chartered Engineer's assessment fails on every count.

3. Demand of Customs Duty on Bunkers:
The adjudicating authority demanded Rs. 40,83,901/- for the bunkers, re-determining the transaction value based on the quantity at the time of delivery in Colombo. The Appellant argued that the duty should be based on the quantity received in India, supported by the judgment of Mangalore Refinery & Petrochemicals Ltd. The Tribunal agreed, stating that the duty should be based on the quantity received at the Mangalore port, making the additional demand unsustainable.

4. Imposition of Fine and Penalty:
The adjudicating authority imposed penalties of Rs. 71,15,075/- u/s 114A and Rs. 10 lakhs u/s 114AA of the Customs Act, 1962. The Appellant argued there was no suppression of facts to justify the penalties. The Tribunal set aside the fine and penalties, noting that the Appellant made a true declaration in the Bill of Entry and there was no intent to evade duty.

Conclusion:
The appeal is partially allowed, with the assessable value of the ship confirmed as Rs. 27 crores. The additional demands for customs duty on transportation, insurance, handling charges, and bunkers are set aside. The confiscation of the ship and the imposition of fines and penalties are also set aside. The order is modified to reflect these changes, with consequential relief granted in accordance with the law.

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