2006 Supreme(SC) 111

2006(2) Supreme 215
Supreme Court of India
(From Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai)
Ashok Bhan & P.K. Balasubramanyan, JJ.
M/s. Udayani Ship Breakers Ltd. —Appellant
versus
Commnr. of Customs & Central Excise, Rajkot —Respondent
Civil Appeal No. 2338 of 2001
Decided on 8-2-2006
Counsel for the Parties :
For the Appellant : V.M. Doiphade, Rajesh Kumar, Advocates.
For the Respondent : K. Radhakrishnan, Sr. Advocate, Rupesh Kumar and P. Parmeswaran, Advocates.

Important point
In the absence of any claim made under Section 22 of the Customs Act, the party could not claim the abatement as to claim the benefit of the abatement, the party claiming the abatement has to satisfy the assessing authority that a case had been made out.

Headnote:Customs Act, 1962—Sections 14, 17, 21 and 22—Abatement of duty on damaged or deteriorated goods—It is for the party claiming the abatement to show to the satisfaction of Assistant Commissioner of Customs or Deputy Commissioner of Customs that imported goods had been damaged or deteriorated at any time before or during the unloading of goods in India—Action to evade duty payable at the proper value—Importer entered into an agreement of memorandum with the foreign seller—It imported vessel for the purpose of breaking—Importer got a letter of Credit opened in favour of the foreign sellers—Permission was granted for breaching the vessel at the designated plot by the proper officer of Customs—On account of heavy current and storm the vessel got dragged towards appellant’s plot and got grounded there—Importer sought extension of time for filing the Bill of Entry for home consumption in respect of the vessel—Importer thereafter entered into a memorandum of understanding with appellant for sale of ship for Rs. 12,01,00,000/—Appellant presented a Bill of Entry before the Superintendent of Customs—Assessing Authority in his assessment order held that value declared by appellant was not the price in the course of international trade—Whether Tribunal was right in declining grant of abatement of duty—(Yes)—Tribunal was right in observing that from the conduct of parties it cannot be ruled out that action seemed to be to evade duty payable at the proper value.

       Held : A reading of Section 22 shows that it is for the party claiming the abatement to show to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs that any imported goods had been damaged or deteriorated at any time before or during the unloading of the goods in India; or that any imported goods, other than warehoused goods, had been damaged at any time after the unloading thereof in India but before their examination under section 17, on account of any accident not due to any willful act, negligence or default of the importer, his employee or agent; or that any warehoused goods had been damaged at any time before clearance for home consumption on account of any accident not due to any willful act, negligence or default of the owner, his employee or his agent. Thus to claim the benefit of the abatement under Section 22, the party claiming the abatement has to satisfy the Assessing Authority that a case had been made out under Section 22 for abatement of duty on damaged or deteriorated goods. In the absence of any claim made under Section 22 in writing to the Assessing Authority the appellant could not claim the abatement under Section 22 and the Assessing Authority did not record rightly its satisfaction that the appellant was entitled to the abatement of the duty. The Tribunal is right in holding that the Commissioner (Appeals) had erred in giving benefit to the appellant for abatement of duty under Section 22 of the Act. The act of “Import” in this case was over as soon as the letter of credit was opened by the importer in favour of the foreign seller and remitted the sum of Rs. 24,78,27,175/- to the foreign seller on 12.8.1997 in terms of the letter of credit opened with the Vysya Bank Ltd., Mumbai through ABN Amro Bank, N.V. Brussels. (Paras 11 and 12)

       The price of the vessel in the course of international trade was the price [US$ 68,49,839.00] paid by the importer to the Ruby Enterprises Inc., Belgium in terms of the Memorandum of Agreement dated 2.6.1997 in terms of sub-Section (1) of Section 14 of the Act. The transaction between the importer and the respondent in terms of the Memorandum of understanding dated 10.9.1997 cannot be described as the transaction of purchase and sale during the course of international trade. Any sale of goods after the act of “import” within the meaning of the Act is over, can only be described as a sale in the course of domestic trade and not a sale in the course of international trade. (Para 14)

       Under sub-Section (1) of Section 14 of the Act the imported goods are required to be assessed at the price ordinarily charged for them in the course of international trade. As pointed out hereinabove the sale price of the aforesaid vessel during the course of international trade which has actually been paid was US$ 68,49,839.00 equivalent to Rs. 24,78,27,175/-. The reduction in the price to Rs. 12,01,00,000/- was not during the course of international trade but domestic trade. The reduced price, therefore, cannot be accepted for determining the value under sub-Section (1) of Section 14 of the Act. (Para 15)

       No application was made by the buyers i.e. importer in this case to the Assistant Commissioner of Customs, Bhavnagar for any abatement of duty on the damaged goods as the importer has not come forward for the clearance of the aforesaid vessel. The appellant i.e. buyer who had purchased the vessel in the course of domestic trade was not entitled to seek any abatement of duty on the ground on which it claimed before the Appellate Authority. No such case had been made out before the Assessing Authority before the goods were actually cleared. Adoption of two different values for the same goods for the purpose of charging duty of customs under Section 12 of the Act and Section 3 of the Customs Tariff Act, 1975 is not only unprecedented but also patently illegal. (Para 17)