M/S CHOUDHARY SHIP BREAKERS versus COMMISSIONER OF CUSTOMS, AHMEDABAD

Citation: [2010] 12 S.C.R. 854 · Decided: 22-10-2010 · Supreme Court of India · Bench: D.K. JAIN

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2010] 12 S.C.R. 854 
M/S CHOUDHARY SHIP BREAKERS 
V. 
COMMISSIONER OF CUSTOMS, AHMEDABAD 
(Civil Appeal No. 1908 of 2006) 
OCTOBER 22, 2010 
[D. K. JAIN AND H. L. DATTU, JJ.] 
Customs Act, 1962 -
s. 14 -
Valuation of goods for 
purposes of assessment -
Import of old vessel under 
C Memorandum of Agreement and purchase price agreed -
Reduction in purchase price by way of addendum to the 
original agreement - Customs duty - Assessment of -
Tribunal upholding levy of additional customs duty by the 
Department at original transaction value of the vessel - On 
D appeal, held.· Price paid by importer to seller in the ordinary 
course of commerce is to be taken as the transaction value 
for the purpose of valuation of goods -
On facts, while 
determining value of vessel uls 14, factum of actual payment 
of price in terms of addendum cannot be ignored - However, 
E in such a situation genuineness and necessity of reduction 
in price is to be scrutinised very carefully - Tribunal did not 
examine the same and rejected the assessee's appeal -
Thus, matter remitted back to the tribunal for consideration 
afresh -
Customs Valuation (Determination of Price of 
F Imported Goods) Rules, 1988 - r. 4(2). 
The appellants imported an old vessel under 
Memorandum of Agreement (MOA). As per the MOA, the 
total purchase price of the vessel was agreed. The vessel 
arrived and the surveyor on inspection submitted the 
G report that the ship breaker is bound to suffer additional 
loss since side tanks have undergone heavy corrosion 
(wastage). The seller and the appellant entered into a 
fresh agreement in the form of an addendum to the 
H 
854 
CHOUDHARY SHIP BREAKERS v. COMMISSIONER 855 
OF CUSTOMS, AHMEDABAD 
original MOA. In the addendum, the price of the vessel 
A 
was reduced. The Deputy Commissioner of Customs 
passed the final assessment order at the original 
transaction value of the vessel and levied additional 
customs duty. The Commissioner of Customs dismissed 
the appeal. The tribunal upheld the order passed by the 
B 
Commissioner of Customs. Therefore, the appellant filed 
the instant appeal. 
. Remitting the matter to the tribunal, the Court 
HELD: 1.1 It is manifest that both Section 14(1) of the 
C 
Customs Act, 1962 and Rule 4 of the Customs Valuation 
(Determination of Price of Imported Goods) Rules, 1988 
provide that in the absence of any of the special 
circumstances indicated in Section 14(1) and 
particularised in Rule 4(2) of the 1988 Rules, the price 
D 
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. The word 'ordinarily' 
is clarified in the Section itself, which describes an 
'ordinary' sale as one 'where the seller and the buyer have 
E 
no interest in the business of each other and the price is 
the sole consideration for the sale'. Rule 4(1) states that 
'the transaction value of the imported goods shall be the 
price actually paid or payable for the goods when sold 
for export to India, adjusted in accordance with the 
F 
provisions of Rule 9 of the Rules.' [Para 15] [861-G-H; 862-
A-B-C-D] 
1.2 In light of the statutory provisions, the factum of 
actual payment of the price in terms of the addendum 
cannot be ignored while determining the value of the 
vessel under Section 14 of the Act. However, in such a 
situation the genuineness and the necessity of reduction 
in the price are required to be scrutinised very carefully. 
[Para 16] [862-G-H] 
856 
SUPREME COURT REPORTS 
[2010] 12 S.C.R. 
A 
1.3 In the instant case, the tribunal did not examine 
the genuineness of the addendum, and proceeded to 
reject the appeal of the appellant on the ground that there 
was no provision for price variation in the original MOA. 
However, the Commissioner (Appeals) examined the 
8 cogency of the reasons for price reduction though he 
was not convinced to accept the same. Therefore, the 
impugned order is set aside, and the matter is remitted 
back to the tribunal for fresh consideration, particularly, 
in relation to the genuineness of the addendum entered 
C into between the appellant and the supplier. [Paras 17 
and 18] [863-A-C] 
Commissioner of Customs, Ahmedabad Vs. Atam 
Manohar Ship Breakers Pvt. Ltd. 2003 (156) E.L.T. 151; 
Commissioner of Customs, Ahemdabad Vs. Guru Ashish 
D Ship Breakers 2003 (157) E.L.T. 277 - Referred to. 
E 
Case Law Reference: 
2003 (157) E.L.T. 277 
Referred to. 
2003 (156) E.L.T. 1

Excerpt shown. Read the full judgment & AI analysis in Lexace.