Per K.K. Agarwal : Heard both sides.

2. The basic issue referred for decision by the Larger Bench [referral order reported in 2006 (76) RLT 93 (CESTAT-Mum.)] is that in case of import of ships for the purpose of scrapping whether any price variation on the basis of addendum issued to Memorandum of Agreement (MOA) can be allowed after the vessel has entered the territorial waters of India specially when there is no clause for price variation in the MOA and the only recourse provided in the case of discrepancy is, arbitration which was not taken recourse to, and the vessel is sold on the basis of LDT of the vessel by agreeing to a particular amount per Ton of LDT and there is no change in the LDT at the time of importation.

3. The learned D.R. Shri Pardeshi on behalf of the Revenue submitted that ships for scrapping are generally sold on the basis of the LDT of the vessel by agreeing to a particular amount per Ton of LDT and that this is an established practice of selling the vessel for breaking in international trade. LDT is a well defined term in maritime law and is commonly understood by all those who deal in the sale and purchase of old ships for the purpose of scrapping. Even the custom duty was earlier imposed on the basis of LDT of the vessel. He then invited attention to the memorandum of agreements entered into by the two respondents M/s. Lucky Steel Industries and Y.S. Investment under which purchase price of vessel was indicated as US$ 122 per one longer ton of LDT and US$ 133 per longer ton of LDT in the case of Lucky Steel Industries and Y.S. Investment respectively. There was no clause contemplating any price variation on any account whatsoever. In case of any discrepancy or dispute between the parties, the only course available was to go for arbitration proceedings. It was submitted that in both the cases the vessel on their arrival were duly surveyed by the surveyor and the LDT in both the cases was confirmed by the surveyor and thereby it is established that there has been no change in the LDT of the two vessels. However, in the case of Lucky Steel three addendums were issued on 03.09.1998, 23.09.1998 and 06.10.1998. While the first two addendums related to some change in the description of the vessel and some damages suffered the third addendum extended the date of delivery but still maintained the original price even though the date of delivery was changed from 10.09.1998 to 30.09.1998. Earlier the delivery date was not before 10.09.1998 but not later than 18.09.1998. The vessel arrived on 29.09.1998 and was surveyed on 30.09.1998 and LDT was confirmed on the same date. However, an addendum was issued on 06.10.1998 whereby the purchase price of the vessel was reduced from US$ 122 per long ton to US$ 118 per long ton without citing any reason for reduction in the price. Similarly in the case of Y.S. Investment the memorandum of agreement was entered into on 14th September 1998 wherein the vessel was required to be delivered under own power during 1st October/31st October 1998 with 31st October 1998 cancelling date cancelling in buyer's option. Subsequently four addendums were issued, two on 15.10.1998, 3rd on 27.10.1998 and 4th on 23.11.1998. While the addendum carried out by first two addendums were of minor nature, the addendum issued on 27.10.1998 called for a reduction in price from US$ 133 per long ton to US$ 126 per long ton. The 4th addendum issued on 23.11.1998 inter alia provided for further reduction in price to US$ 120 per long ton if the vessel is beached on or before 24.11.1998 on its own power etc. Both these addendum did not indicate any reason for reduction in price.

4. Shri Pardeshi submitted that under Section 14, the value for the purpose of custom duty is the price at which the goods are ordinarily sold or offered for sale for delivery at the time and place of importation in the course of international trade. Therefore, the value which is relevant, is the value at the time of import and an