TaxTMI 
TaxTMI 
2019 (9) TMI 536
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....usted against the duty and interest thereon demanded as above. (iii) Goods i.e. ATF valued at Rs. 4,43,62,51,454/- (Four Hundred Forty Three Crores Sixty Two Lakhs Fifty One Thousand Four Hundred and Fifty Four only) cleared on short payment of duty are held liable for confiscation under Section 111(m) of the Customs Act, 1962. However since they are not physically available for confiscation, they are not being confiscated. (iv) I impose penalty of Rs. 8,70,64,405/- (Rupees Eight Crores Seventy Lakhs Sixty Four Thousand Four Hundred and Five only) under Section 114A of the Customs Act, 1962." 2.1 Appellants are engaged in the business of air transportation services on domestic and international sectors. Aviation Turbine Fuel (ATF) is fuel for operating the aircrafts. Generally fuelling of aircraft is done at the airport from where the aircraft starts its journey. (For e.g. when the aircraft flying from say Delhi, aircraft is filled with ATF which is consumed during the course of such flight outside India. Similarly, ATF is filled at the Foreign airport is to be consumed on the return journey to India.) After return of aircraft from a foreign sector the same air....
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.... do not fulfill the conditions prescribed by the notification and has not provided the supporting documents for claiming the benefit of notification. ix. Extended period of limitation is not applicable in the present case as they have not suppressed any fact from the department. x. Impugned goods are not liable for confiscation under Section 111(m) as no bill of entry has been filed by them for clearance of these goods. Also the provisions of Section 111 are not applicable to the case where the goods have been cleared. xi. Since demand itself is not sustainable no penalty can be imposed. Further it is not the case of collusion, willful mis-statement or suppression of facts as the extended period is not invokable. xii. Penalty is not imposable for demand of CVD. xiii. Since the demand for duty itself is not maintainable demand for interest on the same also cannot be sustained. xiv. Interest on penalty demanded is also not sustainable xv. There are calculation errors in the order which are required to be corrected. 4.1 We have heard Ms Lakshmi Menon, Advocate for the appellant and Ms P Vinitha Sekhar, Additional Commis....
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....lobe Aviation Ltd and subsequent decisions following Interglobe. However these decisions have been passed without appreciating the law laid down by the Apex Court in case of Wipro Ltd [2015 (319) ELT 177 (SC)]. ii. From the Rule 1092) of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007, it is quite evident that there cannot be any situation wherein there is no freight element. The rule lays down if the freight is ascertainable then ascertained freight shall be added for determining the assessable value, and in case where it cannot be ascertained it shall be 20% of FOB value. iii. Appellants have to claim the benefit of exemption Notification No 151/94-Cus by producing the required documents They have to produce the document showing the quantity of excise duty paid fuel in the tank of the aircraft just before departure (known as Techlog - which is a document as per DGCA Regulations containing these details and duly signed by the captain of aircraft, the declaration regarding non availment of drawback. As the benefit was not claimed till August 2014, these documents were not produced and are not part of records. Appellants have submitted a le....
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....res consumed on board during extension flights in Domestic Sector and in the tanks of the Aircrafts when imported into India - Reg Attention is invited to Commissioner's Instruction No 04/2006 dated 18.05.2006 regarding leviability of Customs Duty on fuel an d other stores on aircraft/ airlines arriving into India and flying into domestic sectors. The field security office of the batches are hereby directed to charge duty on ATF/ Stores at the prevalent rate of duty as on the date of arrival into India. ATF fuel falls under Tariff Heading Number 2710 19 20 and as on the date of issue of these instruction the duty structure on ATF is as follows: 1. Basic Custom Duty @ 10% 2. CVD @ 8% 3. SP CVD @ 4% 4. Education Cess @ 2% (sample calculation sheet is enclosed for the reference) The value of fuel (ATF)/ Supply of stores is to be based on the invoice value of ATF/ Stores purchased by the subject Aircraft/ Airlines arriving into India and the same should be provided to customs on its arrival. The final value should also include the Insurance and Landing charges i.e. at the rate of 1.125% and 1% respectively). In the....
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....n going aircraft and hence no further duty is demandable from them. Valuation of the goods for the purpose of Custom Duty is done in terms of Section 14 of the Custom Act, 1962 which is reproduced below: "14. Valuation of goods for purposes of assessment. - (1) For the purposes of Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force where under a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be : (a) the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, 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 or offer for sale : Provided that such price shall be calculated with reference to the rate of exchange as in force on the date of which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50. (b) Where such price is not ascertainable, the neare....
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....Counsel for the appellants is correct namely that the C.I.F. price represents the value of the imported goods, then the Section 14 would have been differently worded. It could, for instance, have easily been stated that the value of the imported goods would be the transaction value of the goods. The language of Section 14 clearly indicates that though the transaction value may be a relevant consideration, the value for the purpose of Customs duty will have to be determined by the Customs Authorities which value can be more, and at times even less, than what is indicated in the documents of purchase or sale. 15. The question as to whether the import is completed when the goods entered the territorial waters and it is the value at that point of time which is to be taken into consideration is no longer res integra. This contention was raised in Union of India v. Apar Industries Limited - 1999 (112) E.L.T. 3 (S.C.) = 1999 (5) J.T. 160. In that case the day when the goods entered the territorial waters, the rate of duty was nil but when they were removed from the warehouse, the duty had become leviable. The contention which was sought to be raised was that what is material is t....
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....re, landing charges cannot form part of the value of goods for assessment. 20. We do not agree with the aforesaid submission because what has to be arrived at is a deemed price in the manner indicated in the said Section. In determining this deemed price in international trade the element of port charges which have to be borne by the importer, in addition to the CIF value, before the goods can be cleared for human consumption must necessarily form a part or an element of the value. The said Section does not accept as final the price fixed by the purchaser and the seller in the course of international trade as reflected in the CIF contract but it requires determination of value by the customs authorities in the manner indicated therein. What has to be seen is the value or cost of the imported articles at the time of importation i.e. at the time when they reach the customs barrier. Landing charges which have to be paid to the Port Trust must therefore, be taken into consideration while determining the value of the imported goods for the purpose of assessment of duty. It is only if the importer establishes that the obligation to pay the landing charges is on the seller and no....
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....on of the Apex Court in case of WIPRO Ltd [2015 (319) ELT 177 (SC)], and Hon'ble Apex Court has in this decision held as follows: "4. At this juncture, instead of proceeding further with the factual narration, we would like to deviate a bit and take note of the relevant valuation rules and the amendments made therein from time to time. These rules are made in exercise of powers conferred under Section 156 of the Customs Act, 1962, read with Section 22 of the General Clauses Act, 1897. The purpose of these rules is to arrive at the valuation of the imported goods to enable the Customs Authorities to levy duty thereupon, on the basis of the value so arrived at. Rule 2 is the "definition" clause whereunder certain terms are defined. Rule 2(f) defines "transaction value" to mean the value determined in accordance with Rule 4 of these Rules. This is to be read along with Rule 3. We, therefore, reproduce Rule 3 and relevant portion of Rule 4 hereunder : "3. Determination of the method of valuation. - For the purpose of these rules, - (i) the value of imported goods shall be the transaction value; (ii) if the value cannot be determined under the provisi....
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....nsaction value of "similar goods". If this also inapplicable then "deductive value" is to be arrived at in terms of formula contained in Rule 7. If that is also inapplicable, residual method is provided in Rule 8 which prescribes that the value shall be determined using "reasonable means" consistent with the principles of general provisions of these Rules and subsection (1) of Section 14 of the Customs Act and on the basis of data available in India. At the same time, sub-rule (2) of Rule 8 excludes certain methods which are not to be applied to determine the value under these Rules. Precise language of sub-rule (2) of Rule 8 is reproduce as under : "(2) No value shall be determined under the provisions of these rules on the basis of - (i) the selling price in India of the goods produced in India; (ii) a system which provides for the acceptance for Customs purposes of the highest of the two alternative values; (iii) the price of the goods on the domestic market of the country of exportation; (iv) the price of the goods for the export to a country other than India; (v) minimum Customs values; or (vi) arbitrary or fictiti....
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....lued, to the extent that such royalties and fees are not included in the price actually paid or payable. (d) the value of any part of the proceeds of any subsequent resale, disposal, or use of the imported goods that accrues, directly or indirectly, to the seller; (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable. (2) For the purposes of sub-section (1) and sub-section (1A) of Section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of the imported goods shall be the value of such goods, for delivery at the time and place of importation and shall include - (a) the cost of transport of the imported goods to the place of importation; (b) loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation; and (c) the cost of insurance : Provided that in the case of goods imported by air, the cost and charges referred to in....
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....eferred to in clause (c) is not ascertainable, such cost shall be 1.125% of free on board value of the goods; Provided further that in the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods; Provided also that where the free on board value of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (i) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii) above." 10. Clause (ii) of first proviso, as is clear from reading thereof, mandated addition of one per cent 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). 11. Reverting to the facts of the present case, it is on the strength of this proviso, even when the actual handling charges were shown as Rs. 69.98 paisa, that too as fixed by the International Airport Authority, the Customs Authorit....
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....ice shall be calculated with reference to the rate of exchange as in force on the date on which a Bill of Entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50; (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf. (2) Notwithstanding anything contained in sub-section (1) or sub-section (1A) if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. (3) For the purposes of this section - (a) "rate of exchange" means the rate of exchange - (i) determined by the Board, or (ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency; ....
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.... presented under Section 46, or a shipping bill of export, as the case may be, is presented under Section 50. (2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value." 21. A reading of the unamended provision would show that the earlier/old principle was to find the valuation of goods "by reference to their value". It introduced a deeming/fictional provision by stipulating that the value of the goods would be the price at which such or like goods are "ordinarily sold, or offered for sale". Under the new provision, however, the valuation is based on the transaction price namely, the price "actually paid or payable for the goods". Even when the old provision provided the formula of the price at which the goods are ordinarily sold or offered for sale, at that time also if the goods in question were sold for a particu....
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....ble for the goods will not be treated as transaction value where the buyer and the seller are related with each other. In such cases, there can be a presumption that the actual price which is paid or payable for such goods is not the true reflection of the value of the goods. This Section also provides that normal price would be the sole consideration for the sale. However, this may be subject to such other conditions which can be specified in the form of Rules made in this behalf. 23. As per the first proviso of the amended Section 14(1), in the transaction value of the imported goods, certain charges are to be added which are in the form of 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 which can be prescribed in the rules. Sub-section (2) of Section 14, which remains the same, is an over-riding provision which empowers the Board to fix tariff values for any class of imported goods or export goods under certain circumstances. We are not concerned wi....
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....f the goods, Rule 5 mentions that transaction value of "identical goods" is to be taken into consideration. Thus, wherever the value of identical goods is available, one can safely rely upon the said value in the event transaction value of the goods in question is indeterminable. Value of the identical goods is most proximate. If that is also not available, next proximate value is provided in Rule 6 which talks of value of "similar goods". In the absence thereof, we come to the formula of applying the "deductive value" as contained in Rule 7. In those cases, where even deductive value cannot be arrived at, one has to resort to residual method provided in Rule 8 which prescribes that the value shall be determined using "reasonable means". This would indicate adopting "Best Judgment Assessment" principle. However, even while having best judgment assessments, Rule 8 reminds the authorities that such reasonable means or best judgment assessments has to be in consonance with the principles of general provisions contained in the Rules as well as sub-section (1) of Section 14 of the Act and also on the basis of data available in India. 26. On the aforesaid examination of the sche....
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.... free on board value of such goods. In fact, sub-rule (3) of Rule 9 leave no manner of doubt when it mentions that additions are to be made on the basis of objective and quantifiable data. 34. In the present case before us, the only justification for stipulating 1% of the F.O.B. value as the cost of loading, unloading and handling charges is that it would help Customs authorities to apply the aforesaid rate uniformly. This can be a justification only if the loading, unloading and handling charges are not ascertainable. Where such charges are known and determinable, there is no reason to have such a yardstick. We, therefore, are not impressed with the reason given by the authorities to have such a provision and are of the opinion that the authorities have not been able to satisfy as to how such a provision helps in achieving the object of Section 14 of the Act. It cannot be ignored that this provision as well as Valuation Rules are enacted on the lines of GATT guidelines and the golden thread which runs through is the actual cost principle. Further, the loading, unloading and handling charges are fixed by International Airport Authority. 36. We are, therefore, of t....
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.... is self evident that CIF value as determined under Section 14 of Customs Act, 1962 is inclusive of "international freight and insurance" and not the "domestic freight and insurance". Sale price of IOC can never be inclusive of international freight insurance as these expenses are never incurred by IOC in making such sales at Indian Airports. Hence even going by the instruction of the Commissioner we are of the view that sale price of IOC, will have to be further loaded with the freight and insurance charges to determine the CIF value of the imported goods. Interestingly Commissioner instruction though seeks to add the insurance charges notionally is silent about the addition of freight charges. However in terms of Rule 10(2) of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 which is pari materia with the erstwhile Rule 9(2) of Custom Valuation Rules, 1988, value has to be added towards insurance freight and landing charges. If actual are available on the actual basis and if actual are not available the additions will have to be made on notional basis in the manner prescribed by the said rules. 5.8 Appellant have claimed that actual charges towards the ....