The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that valuation of Customs Duty of fuel oil (FO) and diesel oil (DO) used during the coastal run of the vessel should be done as per the residual method prescribed under rule 9(1) of the Customs Valuation Rules,2007.
Seatrans Ship Management Service Pvt. Ltd, the appellant assessee acted as agent for SPUR Shipping Pte. Ltd., who has chartered a vessel MV ZHENGKAI arrived at Paradip port for the discharge of import cargo on completion of discharge, the vessel was converted from ‘foreign run’ to ‘coastal run’ for carriage of coastal cargo viz thermal coal from Paradip port to Mundra Port.
The assessee appealed against the order passed by the Commissioner (Appeals) to confirm the Customs Duty demand.
Aditya Dutta, the counsel for the assessee contended that the value of imported goods whether it was bunkers or otherwise, had to be determined in terms of Customs Valuation Rules.
Also submitted that the contemporaneous import value which may be available in the National Import Database (NIDB) was the appropriate basis for the valuation of the impugned goods in the present case. However, they had paid customs duty under protest on the value as assessed by the Customs Department.
S.Debnath, the counsel for the department relied on the decisions made by the lower authorities and contended that since during the coastal run, the vessel would not be a ‘Foreign going Vessel’ under section 2(21) of the Customs Act and whatever was consumed during the coastal run would have to be treated as ‘import’ under section 2(21) of the Customs Act and Customs Duty was leviable on the same.
The Bench observed that taking the Indian Oil Corporation Limited (IOCL) Price in the instant case cannot be the basis of the valuation of imported goods under Customs Valuation Rules and the only remaining alternative was ‘valuation of FO and DO by the ‘Residual Method’ under Rule 9(1) of the Customs Act, which provides for determination of value using reasonable means consistent with the principles and general provisions of these Rules and based on data available in India.
The two-member bench comprising Muralidhar (Judicial) and Anpazhakan (Technical) held that assessable value was to be re-determined without including freight, insurance, and landing charges while allowing the appeal filed by the assessee.
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