TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 928
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.... 28 (4) of Customs Act, 1962, along with applicable interest thereon, besides confiscation under section 111(m) of Customs Act, 1962 with option to redeem on payment of fine of Rs. 2,50,00,000. In addition, differential duty of Rs. 24,36,879 on 1,33,000 litres of 'high-speed diesel', 9220 litres of 'lubricating oil' and 5250 litres of 'hydraulic oil' was ordered for recovery under section 28 (4) of Customs Act, 1962, along with applicable interest thereon, besides being confiscated under section 111(l) and section 111(m) of Customs Act, 1962 with option to redeem on payment of Rs. 6,00,000 as fine. Penalties under section 112 of Customs Act, 1962 was imposed on the importer and other appellants herein in addition to penalties under section 114AA of Customs Act, 1962. Shri Sachin Kshirsagar is the Director of the importing company and Shri Harish H Bhatia is the proprietor of M/s Harish and Company, the chartered engineer engaged by the importer for appraisal of the value of the impugned vessel. 2. The vessel, with declared value of Rs. 13,82,89,200 for assessment at the rate corresponding to tariff item 8901 9000 of the First Schedule to Customs Tariff Act, 1975, had been built by....
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....75 and for appraisal of the value by chartered engineer. 4. Though the dispute comprised three elements - addition of value of stores and bunkers not declared and misdeclared, non- inclusion of freight, insurance and other charges, incurred before arrival, in the declaration and applicable rate of duty - Learned Counsel for appellant restricted his contentions only to the latter two. 5. The contention of customs authorities is that the vessel is designed for firefighting and support which merits classification at variance with that claimed in the bill of entry. For this, reliance was placed on 'class certificate' issued by American Bureau of Shipping (ABS) and the corresponding portion (or A1) of the ABS Rules for Building and Classing Marine Vessels. Further reliance was placed on 'certificate of class' issued by Indian Register of Shipping describing the vessel as 'SUL, "Offshore Support Vessel" IY AGNI 1 (2400 CUM/HR), DP(2)' denoting compliance with rules for hull, appendages and equipment, compliance with standards for self- propulsion, capability of early stage firefighting and close rescue operations and of fitment with automatic controls for positioning. Furthermore, as p....
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....lying upon the instruction of Central Board of Excise & Customs in circular no. 25/2015-Cus dated 15th October 2015 and, particularly, on '8. It follows that in cases where used capital goods cannot be appraised under Rule three, and where there may be difficulty in applying Rules 4 to 8 of the CVR, 2007, the proper officer may be required to apply the residual method under Rule 9 so as to factor condition, depreciation, refurbishment, charges of assembly & packing and any expenses incurred by way of pre-shipment inspection agency charges etc. 9. Given the nature of challenges in computing the value of second hand machinery under Rule 9, and the need to ensure that the approach applied reflexes commercial reality and results in a value which is fair, and is arrived through uniform processes by all custom houses, it is felt that it is necessary to obtain inspection/placement reports from qualified neutral parties. 10. For this purpose, the Board has decided that Inspection/Appraisement Reports issued by Chartered Engineers, or their equivalent, based in the country of sale of the second hand machinery shall be accepted by all Custom Houses.... In the event that an importer doe....
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....r by the seller and that the other charges incurred by the appellant must, necessarily, be included in the assessable value to conform with section 14 of Customs Act, 1962 and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. He submitted that the report of the Chartered Engineer engaged by the appellant had been correctly rejected as he had admitted, in a statement, to not having inspected the vessel personally or having perused the 'memorandum of agreement (MoA)' for ascertainment of the several conditions therein. According to him, the original value of the vessel had been ascertained by Shri Harish Bhatia, and by his own admission, in conformity with general practice which had nothing to do with his expertise. He also submitted that the misdeclaration of description of the vessel sufficed to reject the declared value as transaction value and for resort to the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 11. Before proceeding to resolve the controversy over valuation, and even before examination of the rival submissions on the classification to be adopted, there are several aspects of this dispute that bear elucidation. Vesse....
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....y acknowledged freedom of the seas and freedom of the skies be compromised at the altar of revenue harvest beyond the intent of law. 13. With this caveat, we approach the issue of valuation. Valuation, by its very nature, is susceptible to multifarious understanding and not the least of which is the commonality of intent in a seller-buyer transaction. The insinuation of governmental mechanism into what is essentially a commercial transaction is justified only by the sovereign power of the State to impose levies and is, therefore, to be construed as limited to that purpose alone. The universally acknowledged convention on valuation is intended to ensure that commercial engagement between two entities operating from distinct national jurisdictions is not distorted by discriminatory treatment and revenue maximization. Section 14 of Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, framed thereunder, are enacted to assure that uniformity of approach not only reflects international consensus but also is a restriction on the bounds of assessment vested in customs authorities. 14. In the extant valuation regime, the concept of 'transacti....
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...., except from contrary evidence, to deny acknowledgement of the 'declared value' of the vessel as the 'gold standard' of 'transaction value' for assessment and for resorting to Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 only upon presentation of circumstances that do so permit. 17. The Rules, though for the most part pertains to re-determination from non-acceptance of declared value, contemplate three different contingencies: the situational alternatives consequent upon rejection of the declared price under the authority of rule 12, the reiteration of the 'gold standard' in rule 3 and the empowerment of additions without, in any way, faulting the declaration itself for lacking conformity with section 14 of Customs Act, 1962. 18. The declared price may be discarded in favour of the actual 'transaction value', subject to availability of evidence of direct or indirect flow of additional consideration to the seller, for conformity with the concept enshrined in section 14 of Customs Act, 1962 without recourse to any provision other than rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Any other substitution of declared v....
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.... in the recording the statement of a professional and in relying upon the 'admission' therein of deficiency in survey undertaken by that professional. It is not necessary that a Chartered Engineer undertakes the survey on his own and the extant instructions do not bar entrusting of such technical evaluation to appropriate experts. As far as the computation, commencing with value at the time of construction of the vessel, is concerned, the sole counter is a much higher estimation by the Chartered Engineer designated by customs authorities - that both are estimations. and any justification offered for the preferment of one over the other is fraught with bias and prejudice, is unarguable. In such circumstances of estimation by the second Chartered Engineer and in not having acceded to the request for cross-examination, the reliance placed upon the report of Shri Rajendra S Tambe is not tenable as to be sufficiently in conformity with rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 20. The justification offered for invoking rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, i.e., alleged misdeclaration of tariff ite....
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.... as 'CIF' in transactions. These payments are made for transportation from the place of shipment and, being paid either to the seller or, on advice of the seller, to the provider of such service, add to the value of 'imported goods' when deployed for further processing or in the pricing for subsequent sale as such. The vessel, ever coursing the seas and oceans, does not take on additional insurance merely for the purposes of movement to a destination for registration and the cost of self-propulsion does not add to the value of the vessel. Furthermore, between the event of 'conveyance' and transformation as 'goods' before reverting to its former form, it cannot be conjectured that any transportation occurs for invoking the proviso in rule 10(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Consequently, the enhancement of 'assessable value' beyond the declared value fails on every count. 22. The claim of the appellant that the imported vessel merits classification against tariff item 8901 9000 corresponding to 'other vessels for the transport of both persons and goods' is based on the intended use between the base and offshore platforms and the int....
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....)], as more appropriate. 23. It is seen from the record of proceedings in the impugned order that the appellant had also claimed re-classification against tariff item 8906 9000 of First Schedule to Customs Tariff Act, 1975 from which the adjudicating authority concluded that the appellants were, themselves, uncertain of classification claimed by them initially. We are not inclined to appreciate the logic of that proposition as also the detailed analysis of the design of the vessel which led to the conclusion that tariff item 8905 9090 of First Schedule to Customs Tariff Act, 1975 is an appropriate description that conforms to the classification of the impugned vessel thus '12. As per evidence/documents available on record that the Provisional Certificate of Singapore Registry for the Vessel "Dalini Topaz" dated 08.01.2008, the Certificate of Singapore Registry for the vessel "Pacific Amethyst", issued on dated 30.04.2009, the Provisional Certificate of Indian Registry dt. 30.06.2017 for the vessel "Sagar Fortune", the final certificate of Indian registry dt. 05.10.2017 issued for the vessel "Sagar Fortune", all describe the said vessel as "Steel Offshore Supply Vessel". It is al....
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....fires on other vessels/oil rigs/platforms efficiently. This capacity gives this vessel a major edge over the other vessels falling in the category of Offshore support vessels. Besides this advanced firefighting capacity this vessel is also equipped, since its manufacture, with an advance dynamic positioning system (DPS-2) which provides it with a capability to maintain its position in close proximity to other vessels/oil rigs/platforms even in monsoons. This means that the vessel is meant for being in very close proximity to the oil rigs/platforms to provide support to such oil rigs/platforms including the support in the form of firefighting and that is why the importer has imported it. It is to be employed. This vessel is also equipped with 40 cabins onboard. Capt. Shri Bijoy Kumar Sharma, Surveyor of IRS, who has surveyed the said vessel, has deposed in his statement these cabins are meant to provide accommodation to specialized persons (SPS persons)like Technicians, Surveyors, Engineers, Divers, Ship's crew, etc and that these cabins can also be used for rescuing the staff of Rigs/Platforms in case of an emergency. It therefore is evident that the importer, has imported this....
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.... (lack of evidence of any modification having been carried out in the subject vessel), makes the subject vessel appropriately classifiable under Chapter 8905 9090. However, even if it is assumed by the Importer that there are two CTHs that merit equal consideration, the subject vessel is to be classified under the heading which occurs last in numerical order among those which equally merit consideration as per Rule 3 of the above rules. It therefore is clear from the above that the vessel 'Sagar Fortune' which had been classified by the importer under CTH 89019000 is rightly classifiable under CTH 89059090, which attracts Basic Customs Duty @5%. Therefore, it is evident that the importer had deliberately mis- declared the OTH of the subject vessel as 89019000 with an intention to. evade duty. Now that the subject vessel is liable to be properly classifiable under CTH 89059090, the basic customs duty @ 5% now is leviable on the subject vessel by virtue of it getting classified under CTH 89059090. Therefore, the total differential duty on the subject vessel on 'account of its re-classification and re-determination of value amounts to Rs.3,53,25,921/-, as detailed in para ....
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....nate classification is nothing but an afterthought to escape from the legitimate duty that becomes due on account of the subject vessel's correct classification under chapter heading 89.05. I therefore hold that the subject vessel "Old & Used self-propelled Platform supply Vessel Sagar Fortune, earlier known as Pacific Amethyst" imported vide bill of entry no. 2630993 dated 28.07.2017 is correctly classifiable under CTH 89059090 and that the importer M/s S. S. Offshore Pvt. Ltd. had mis-declared its classification only with an intention to evade duty thereon.' renders the finding to be incomplete. 24. In the light of this inadequacy, we are unable to firm up on the applicable classification for want of determination in the impugned order between heading 8905 and heading 8906 of the First Schedule to Customs Tariff Act, 1975. That gap must be bridged to enable which we set aside the impugned order and remand the matter back to the original authority for a fresh decision on the claim of the appellant for fitment within heading 8906 of First Schedule to Customs Tariff Act, 1975. As this remand is intended to arrive at the appropriate classification, the appellant may also make i....