M/S UDAYANI SHIP BREAKERS LTD. versus COMMNR. OF CUSTOMS AND CENTRAL EXCISE, RAJKOT

Citation: [2006] 2 S.C.R. 138 · Decided: 08-02-2006 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Dismissed

Judgment (excerpt)

A 
MIS UDA Y ANI SHIP BREAKERS LTD. 
'-r-
v. 
COMMNR. OF CUSTOMS AND CENTRAL EXCISE, RAJKOT 
FEBRUARY 8, 2006 
B 
[ASHOK BHAN AND P.K. BALASUBRAMANYAN, JJ.] 
Customs Act, 1962-Sections 14 and 22--Customs Tariff Act, 1975--
Section 3-Customs Valuation (Determination of Price of Imported Goods) 
c Rules, 1988-Rules 3 and 4-lmporter imported a ship for purpose of 
breaking-Ship got grounded and damaged due to bad weather-Importer, 
thereafter, sold the ship on 'as is where is' basis to appellant at a reduced 
price-Appellant filed a Bill of Entry with Revenue declaring the value of the 
ship at the reduced price-Revenue rejected the value declared as it was not 
D 
the price paid in the course of international trade-Commissioner (Appeals) 
allowed the appeal of the appellant holding that the appellant purchased the 
ship on high seas basis and allowed abatement of customs duty under Act 
since the ship got damaged prior to examination by Revenue-Tribunal, in 
appeal, held in favour of the Revenue-Correctness of-Held, the appellant is 
1 
not entitled to abatement of customs duty under the Act in absence of a 
E specific claim from the Revenue-On facts, the transaction between the importer 
and the appellant is a transaction in course of domestic trade and not in the 
course of international trade-Hence, the reduced price cannot be assessable 
value for levy of customs duty under the Act. 
An importer entered into a memorandum of agreement with a 
F foreign seller for import of a ship for purpose of breaking for a 
consideration of Rs. 24. 78 crores. After taking delivery of the ship it paid 
the consideration to the foreign seller. On account of heavy current and 
storm, the ship got dragged and grounded. The importer sought time from 
Revenue to file Bill of Entry. On seeking further extension of time, the 
G Revenue declined. The importer, thereafter, entered into a memorandum 
of understanding and an agreement of sale with appellant for sale of the 
ship on "as is where is" basis for a consideration of Rs. 12.01 crores. ,The 
importer transferred the title in favour of the appellant by execution of a 
bill of sale. The appellant presented the Bill of Entry stating the price as 
, , 
Rs. 12.01 crores. The Revenue rejected the value declared by the appellant 
H 
138 
/ 
~ 
UDAYANI SHIP BREAKERS LTD. v. COMMR. OF CUSTOMS AND CENTRAL EXCISE 
139 
"~<. in the Bill. of Entry as it was not the price in the course of international A 
trade and appraised the value of the ship at the price at which it had been 
purchased from the foreign seller. The appellant, being aggrieved, filed 
an appeal before Commissioner (Appeals). The Commissioner (Appeals) 
allowed the appeal holding that the appellant was entitled to benefit of 
abatement of customs duty under section 22 of the Customs Act, 1962 since B 
the ship was damaged before examination under section 17 of the Act. The 
Commissioner (Appeals) further held that the appellant had purchased 
.... 
the ship on high seas basis during the course of international trade . 
The Revenue, being aggrieved, filed an appeal before Customs, 
Excise and Gold (Control) Appellate Tribunal. The Tribunal allowed the c 
appeal holding that the appellant is not entitled to abatement of duty under 
section 22 of the Act as no request to that effect has been made to Assistant 
Commissioner of Customs. The Tribunal further held that the appellant 
could not claim the purchase of ship on high seas basis. 
Dismissing the appeal of the appellant, the Court 
D 
>I 
HELD: 1.1. To claim benefit of the abatement of customs duty under 
> 
Section 22 of the Customs Act, 1962, the party claiming the abate'!1ent 
has to satisfy the Assessing Authority that a case had been made out under 
the Section for abatement of duty on damaged or deteriorated goods. In 
the absence of any claim made under the Section in writing to the Assessing E 
Authority, the appellant could not claim the abatement under Section 22 
of the Act. 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. F 
.... 
(145-D-E] 
1.2. The act of import was over as soon as the letter of credit was 
opened by the importer in favour of the foreign seller and remitted the 
sum to the foreign seller in terms of the letter

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