The Hyderabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the FOB price cannot be treated as cum duty price under the provisions of section 14 of the Customs Act, 1962.
Facts of the case:
The appellant exported iron ore fines under various shipping bills wherein there was an export duty @ 5% ad Valorem during the relevant periods.
Shipping bills were filed and duty was paid accordingly. However, the appellant approached the appellate authorities challenging the assessments of the shipping bills before the first appellate authority, contending that the FOB must be taken as cum duty price and the assessable value must be calculated backwards so that whatever is charged by them from the overseas buyers must be treated as including the export duty. However, the contentions were rejected and the appellants approached the Tribunal for relief.
Interpretation of law and Conclusion:
After analyzing the provisions of section 14 of the Customs Act, 1962, the Tribunal observed that“A plain reading of Section 14 would not show such a change in the valuation methodology is permissible under the law. The appellant cannot, on their own, claim a new valuation methodology for their exports when the law specifically lays down that transaction value at the place of export is the assessable value for determining the export duty.
But, it appears that a wrong practice was in vogue of taking the FOB price as cum duty price up to 2008.” According to the Tribunal, section 14 emphasizes the place of importation or the place of exportation. In the case of imports, the place of importation is the Indian Port through which the goods are imported and in the case of exportation, it is the Indian Port through which the goods are exported.
As per Section 1 of the Customs Act, it applies only to India and not beyond and for this reason also the Indian Ports should be treated as relevant in order to harmoniously interpret Section (1) of the Customs Act with Section (14), it said. Referring to various judicial pronouncements, the Tribunal held that the transaction value i.e. FOB price cannot be treated as cum duty price under section 14 of Customs Act, 1962 for the purpose of calculation of export duty