Case: Commissioner of Customs, Mumbai Vs. Bureau Veritas and Ors

2.The factual background leading to the dispute as noted by the Tribunal in essence is a follows:Pride Foramer (the respondent no.2 in Civil Appeal Nos.808-810 of 2004 and sole respondent in Civil Appeal No.811 of 2004) (hereinafter referred to as the "assessee") was the owner of oil well drilling rigs and drill ships which it leased out to parties engaged in oil exploration or exploitation. It entered into a contract with the Oil Natural Gas Commission (in short `ONGC) in January 1999 for lease to the latter of a jack-up rig of 300 ft depth to be utilized for oil exploration and exploitation off the coast of India. The assessee was not originally owner of the rig, and in order to comply with the terms of the contract, purchased in March 1999 the rig Pride Pennsylvania from Pride Global Limited, a company registered in the British Virgina Islands at a price of US $ 17 millions. The rig was being deployed for off sea exploration in accordance with the direction of the hirer, i.e. and did not initially enter either Indian territorial waters or any areas of the exclusive economic zone designated under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 to which the provisions of the Customs Act, 1962 (herein after referred to as `the Act) have been made applicable. In April 2000, the rig was required by the hirer to enter one of such designated areas. On the belief that such entry would constitute import under the Act, assessee filed a Bill of Entry in May, 2000 for the rig, declaring the C.I.F. value of the rig to be Rs.783,439,838. The Bill of Entry was accompanied by an invoice showing details of the value of fixed and loose equipment, spares and consumables on the rig for a total C.I.F. value of U.S. $ 17,682,690. The invoice was issued by the project office in Mumbai of the assessee and signed by Jean Paul Rabier, its manager in India (the respondent no.3 in Civil Appeal Nos.808-810 of 2004). The rig was permitted to be cleared on payment of duty at the declared value.3. Subsequently investigation by the department led it to conclude that the value of price was under declared and that the true value of the rig ought to be Rs.1966,950,295. The rig was placed under seizure in September 2001 and ordered to be released provisionally by the Bombay High Court after securing guarantees and deposits. Notice was issued proposing to enhance the value of the rig as stated above, proposing its confiscation under clause (m) of Section 111 of the Act on the ground that its value was misdeclared. Penalty was also proposed on the importer, Rabier and Bureau Veritas, a marine inspection agency, (respondent no.1 in Civil Appeal Nos.808-810of 2004) whose Singapore office, had issued two reports in 1999 and 2000 certifying the value of the rig. The show-cause notice alleged that the values certified by it were improper. After considering the cause shown and hearing the parties, the Commissioner of Customs (Import) Mumbai (in short the Commission) passed the order which was impugned before the Tribunal. He held the value of the rig to be Rs.1451,893,375 (equivalent to US $ 32.78 million) and demanded differential duty of about Rs.29.45 crores. He ordered confiscation of the rig with an option to redeem it on payment of fine of Rs.5 crores, demanded interest on the differential duty, imposed penalties equal to the duty on the company, Rs.2 lakhs on Jean Paul Rabier and Rs.2 lakhs on Bureau Veritas.4. After confirmation of duty he directed appropriation of Rs.10 crores against the same. Payment of interest @ 24% under Section 28 AB of the Act was demanded from July 2000. Penalty of Rs.29,45,19,057 was imposed and separate penalties under Section 112(a) of the Act were imposed on Bureau Veritas and Jean Paul Rabier.5. The Commissioner found that the transaction value in terms of Rule 4 of the Customs Valuation Determination of Price of Imported Goods Rules, 1988 (in short the "Rules") of the rig was the price paid for its purchase in March 1999 by the importer of US $ 17 millions. The purchase was made by the assessee to bring the rig into India so that it could fulfill the contract that it signed in January of the year with ONGC. He declined to accept the declared value on the ground that the buyer, Pride Foramer and seller, Pride Global Ltd. were related parties each of them being a subsidiary company of Pride International Inc. He noted that the rig was purchased in 1997 by Pride International Inc from Cartier Shipping Co. at US $ 35.35 millions. He did not accept the report by Bureau Vertias issued in March 2000 valuing the rig at US $ 17 millions on the ground that it has been arrived at without taking into account the fact of the earlier sale at US $ 35.35 millions. He valued the rig by applying the rates of depreciation specified in the circular F 4951/16/93-Cus V of 26.5.1993 of the Board at US $ 35.35 millions, taking into account additional amounts which were subsequently spent on the rig. Accordingly, he arrived at the assessable value of Rs.145,18,93,375 and confirmed the demand for differential duty which was worked out at Rs.29.45 crores. The Commissioner held the importer - assessee guilty of suppression of facts and misdeclaration of value. Bureau Veritas and Jean Paul Rabier were guilty of aiding and abetting assessee-importer. Accordingly, Commissioner directed confiscation under Section 113(m) of the Act.6. Before the Tribunal stand of assessee was that the Rules provide that transaction value is not to be rejected solely on the ground of relationship and unless it is shown that the relationship between the parties has influenced the price, transaction value has to be accepted even when the party to the sale and purchase are related. Oil rigs are not traded frequently, and number of such rigs available at a given time is limited. Most of the companies which owned the rigs lease them out for oil exploration. As number of such owners is limited, oil well drilling is a specialized task. The value of rigs mostly depends upon the day-rates. Whenever oil prices go up due to any reason, there is increase in exploitation of existing oil reserve and exploration for new field. At the relevant point of time the price of oil fell to very low level in 1999 from the high level in 1997. That explains the substantial difference between the price paid for the rig in 1997 and 1999. Reference was made to a certificate obtained from a reputed ship broker in Paris who had indicated price to be between US $ 15 to 17 millions. The fact that rig was insured for US $ 18 millions also show that the transaction value was not influenced by the relationship. Further, even if the depreciated value has to be worked out as done by the Commissioner, original value was to be taken. The counsel for the Valuer submitted that the certificate was given after due verification and mala fides are not involved.7. Revenue stand on the other hand was that it was not been established by the importer that the transaction value was not influenced by the relationship. The drop of the price cannot be explained merely by changes in oil price.8. The appeals against the order of the Commissioner filed by these persons and by the Commissioner were disposed of by the impugned order.9. The Revenue also preferred an appeal against that part of the Commissioners order by which the proposed additions for alleged value additions were rejected.10. The Tribunal noted that both Revenue and the assessee agreed that the declared price is the transaction value and they also agreed that the seller of the rig and the purchaser were related. Therefore, the only issue, to be adjudicated was whether the transaction value is to be accepted and, if not, by what method of assessment value of the rig has to be determined. After referring to various rules the Tribunal referred to data indicated in reputed publications indicating periodical change of value of rigs. After noticing various details the Tribunal came to the conclusion that there were noticeable fluctuations in prices and there were sometime violent fluctuations. With reference to day-rates, it came to hold that there was a relationship between day-rates and the price of oil rigs. Particular reference was made to two publications i.e. the Bassoe Offshore Monthly, published by Bassoe Offshore Consultants, Edinburg, Scotland and Offshore Drilling Monthly published by Jeferies and Company Inc. with offices Worldwide. The Bassoe Offshore Monthly of March 1999 had published a table of changing values of rigs, which was referred to by the Tribunal. It was noted that the relevant data were produced before the Commissioner, but he did not accept them, by introducing the concept of "value in exchange" and "value in use". It was noted that the two aspects were difficult to understand and the Commissioner or the departmental representative did not cast any doubt on the accuracy or reliability of the publications and on the other hand relied upon them to discard the assessees case. It was held that there was considerable substance in the assessees stand. Reference was also made to the affidavits of one Mr. Gavin M.J. Strachan who was considered to be an expert on the valuation aspect. According to the Tribunal, the affidavit of Mr. Gavin M.J. Strachan showed that day-rates fluctuate depending on the supply of and demand for a particular type of rig and the value go up and down accordingly. Accordingly, it was held that the prices of rigs of different types dropped by 50% or more between 1997 and 1999. The explanation offered by the assessee for the 50% drop in prices merited acceptance. Accordingly it was held that there was enough evidence to justify the view that sale of rig in 1999 was uninfluenced by the relationship between buyer and the seller. The price, therefore, would be the transaction value in terms of Rule 4. With reference to various materials it was also noted that even if the depreciation method is adopted, the computation as done by the Commissioner was not correct one. Accordingly, the appeals were allowed and the duty and penalty imposed, interest charged were set aside.

Court's reasoning:
14. After having agreed on some point as recorded, it is not open to the appellant to turn round or take a plea that the position is different. If really there was no agreement, the only course open to the appellant was to move the Tribunal in line with what has been said in State of Maharashtra vs. Ramdas Shrinivas Nayak and Anr. (1982 (2) SCC 463 ). In a recent decision Bhavnagar University vs. Palitana Sugar Mill Pvt. Ltd. and others (2002 AIR SCW 4939) the view in the said case was reiterated by observing that statements of fact as to what transpired at the hearing recorded in the judgment of the Court, are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. If a party thinks that the happenings in Court have been wrongly recorded in a judgment, it is incumbent upon the party, while the matter is still fresh in the minds of the judges, to call the attention of the very judges who have made the record. That is the only way to have the record corrected. If no such step in taken, the matter must necessarily end there. It is not open to the appellant to contend before this Court to the contrary.In the instant case Tribunal has referred to various materials which can by no stretch of imagination be termed irrelevant. The authenticity, credibility or reliability of the data has not been questioned. The inference to be drawn from these materials falls within the domain of factual determination. The conclusions of the Tribunal cannot be termed as perverse or irrational. The evaluation of material facts has been done in the background of applicable statutory provisions and legal principles.