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2010 Supreme(SC) 1019
2010 (7) Supreme 955
SUPREME COURT OF INDIA
D.K. Jain and H.L. Dattu, JJ.
M/s Chaudhary Ship Breakers — Appellant
versus
Commissioner of Customs, Ahmedabad — Respondent
Civil Appeal No. 1908 of 2006
Decided on : 22-10-2010
IMPORTANT POINT
The factum of actual payment of the price in terms of the addendum cannot be ignored while determining the value of the vessel.
Headnote:(a) Customs Act, 1962 – Section 14 – Where the price of the vessel had been reduced by way of an addendum to the original agreement, the acceptance of the revised price would depend on the genuineness of the said addendum – Genuineness or otherwise of the addendum and not the factum of absence of a provision in the original agreement for reduction of price is relevant. (Para 14)
2003 (157) E.L.T. 277 (Tri.-Mumbai) – Cited with approval
2003 (156) E.L.T. 151 (Tri.-Mumbai) – Distinguished
(b) Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 – Rules 3(i) and 4(1) – 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 (Para 15)
(c) Customs Act, 1962 – Section 14(1) r/w Rule 4, Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 – In the absence of any of the special circumstances 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. (Para 15)
(d) Customs Act, 1962 – Section 14 – The factum of actual payment of the price in terms of the addendum cannot be ignored while determining the value of the vessel provided the addendum reducing the price and the necessity of reducing the price is genuine. (Para 16)
Facts of the case:
1. M/s Chaudhary Ship Breakers imported an old vessel for demolition purpose under Memorandum of Agreement dated 19th November 1997 with Standard Marine Trading Inc., New York on “as is where is” basis. As per the said MOA, the total purchase price of the vessel was agreed at US $ 992887.20 at the rate of US $ 172 per long ton.
2. After survey, the price of the vessel was reduced to US $ 929388.60.
3. A provisional assessment was made at the reduced price mentioned in the addendum, and differential duty of ‘6,76,415/- was sought to be levied. However the final assessment order was passed by the Deputy Commissioner of Customs, Bhavnagar on 28th August 2000, at the original transaction value of the vessel at US $ 992887.20.
4. The appeal filed by the appellant was dismissed by the Commissioner of Customs (Appeals).
5. The Tribunal also dismissed the appeal.
Finding of the Court:
The factum of actual payment of the price in terms of the addendum cannot be ignored while determining the value of the vessel.
Result : Matter remitted back to the Tribunal.
JUDGMENT
D.K. Jain, J. —
I.A. Nos.3 and 4 of 2005
1. In the absence of any resistance, both the applications are allowed and the additional documents are taken on record. Applications stand disposed of.
2. Delay condoned.
3. This civil appeal under Section 130E of the Customs Act, 1962 (for short “the Act”) is directed against order dated 2nd February 2005, passed by the Customs, Excise and Service Tax Appellate Tribunal (for short “the Tribunal”), whereby the appeal preferred by the appellant herein has been dismissed, confirming the levy of additional customs duty by virtue of the final assessment order passed by the Deputy Commissioner (Customs), Bhavnagar on 28th August 2000.
4. Shorn of unnecessary details, the facts, material for the adjudication of the present appeal, may be stated as follows:
M/S Chaudhary Ship Breakers, the appellant before us,imported an old vessel for demolition purpose under Memorandum of Agreement (for short “MOA”) dated 19th November 1997 with Standard Marine Trading Inc., New York on “as is where is” basis. As per the said MOA, the total purchase price of the vessel was agreed at US $ 992887.20 at the rate of US $ 172 per long ton. The Light Displacement Tonnage (LDT) of the vessel was shown at 5772.6 LDT. As per Clause 12(B) of the MOA, the buyer was given an option to seek proportionate reduction in purchase price if the vessel suffered any partial damage so as to affect the vessel’s LDT. Clause 15 contained the description/ specifications of the vessel wherein the ballast tanks of the vessel were described as “double bottom tanks, fore peak tank, AFT peak tank and wing tank.” Further, Clause 16 provided that any dispute relating to the interpretation of the said MOA would be referred to arbitration. Clause 25 gave seller the option to repudiate the agreement if there was any dispute in relation to the description of the vessel.
5. The vessel arrived at the Alang Anchorage on 21st November 1997. The surveyors carried out inspection on 22nd November 1997, and submitted their report on 7th July 2000. The said report stated that “since the side tanks are meant for the receipt/carriage of sea water ballast for the ship’s stability, the plating over the years undergo heavy corrosion (wastage.) Accordingly, the ship breaker is bound to suffer additional (illegible) loss on this account.”
6. It seems that in light of the afore-quoted observations by the surveyors, fresh negotiations took place between the seller and the appellant, which resulted in a fresh agreement in the form of an addendum dated 8th December 1997 to the original MOA. In the said addendum, the price of the vessel was reduced to US $ 929388.60. The addendum mentioned that the price reduction was due to the “double skin.” The bill of entry was filed on 19th December 1997 at the reduced price of the vessel.
7. A provisional assessment was made at the reduced price mentioned in the addendum, and differential duty of ‘ 6,76,415/- was sought to be levied. The final assessment order was passed by the Deputy Commissioner of Customs, Bhavnagar on 28th August 2000, at the original transaction value of the vessel at US $ 992887.20.
8. The appeal filed by the appellant against the said order of adjudication was dismissed by the Commissioner of Customs (Appeals) on 5th November 2003 on the ground that the importer had not produced any evidence to show that the vessel was not the same as was offered to them under the MOA, as was required to be demonstrated by the importer in light of the decisions of the Tribunal in Commissioner of Customs, Ahmedabad Vs. Atam Manohar Ship Breakers Pvt. Ltd.1 2003 (156) E.L.T. 151 (Tri.-Mumbai) and Commissioner of Customs, Ahemdabad Vs. Guru Ashish Ship Breakers,2 2003 (157) E.L.T. 277 (Tri.-Mumbai). The Commissioner (Appeals) observed that:
“10. The description does not show that the vessel, which was contracted, was Single Skin or Double Skin. The Survey Reports of M/s. Erison & Richards dated 22.1.97 does not me
