MANALI PETROCHEMICALS LTD., SPIC Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) DURING the period December '95 to September '98, the appellants imported "liquefied propylene gas" through Cuddalore port. The vessels chartered for the purpose were berthed at the outer anchorage and the goods was pumped into barges (capacity 10 MTs each) which carried the goods to the port. On account of delay in completion of discharge of cargo from vessel, the vessels had to be detained for periods longer than the laytime (contracted period for discharge of material) and consequently demurrage had to be paid by the importers. These demurrage charges were the moneys paid by the importers to the charterer of the vessels and the same were not included in the assessable value of the goods for payment of Customs duty. The Customs authorities took the view that these charges were includible as part of freight in the assessable value. It was held that the banking charges involved in the remittance of demurrage were also includible in the assessable value. Accordingly, a show -cause notice was issued to the appellants for recovery of differential amounts of duty on the goods imported by them and for imposing penalties on them. This demand was contested by the parties who, relying on the Board's Circular No. 467/21/89 -Cus.V dated 14.8.91, contended that demurrage and dispatch money did not form part of the assessable value. They submitted that the circular of the Board was binding on the Customs authorities and that the subsequent circular of the Board (No. 14/2001 -Cus.V dated 2.3.2001) on the point had no retrospective effect. The parties also relied on decisions of the Supreme Court and the Tribunal. The proposal to impose penalty was also opposed on the ground that no such penalty could be imposed for any period prior to 28.9.96, the date on which Section 114A was inserted in the statute. In adjudication of the dispute, learned Commissioner of Customs held that the demurrage charges paid by the importers were nothing but freight payable to the charterer for carriage of goods. He also took the view that, "in the circumstances of the case", he was bound by the Board's circular dt. 14.8.91. Accordingly, learned Commissioner included the demurrage and the connected bank charges in the assessable value of the goods and confirmed the demands of duty on the assessees. He also imposed penalties on the parties under Section 114A for the period from 28.9.96. The Commissioner's decision is under challenge in these appeals.

(2.) AFTER hearing both sides and considering their submissions, we find that the Board re -examined the issue [whether demurrage charges and dispatch money (bank charges) were includible in the assessable value] in the light of GATT valuation principles and decided that such charges must not form part of the assessable value of goods imported in chartered vessels vide Circular No. 467/21/89Cus.V dt. 14.8.91. This circular was withdrawn on 2.3.2001 vide Circular No. 14/2001 -Cus., wherein it was laid down by the Board that demurrage charges were required to be included in the assessable value of such goods. The immediate question before us is which of these circulars would govern the valuation dispute in the present case. After hearing both sides and considering their submissions, we find that this question has already been settled by the apex court in the case of Commissioner of Customs, Calcutta v. Indian Oil Corporation Ltd. In the IOC case, the company had imported petroleum products in chartered vessels during 1994 -99. The Customs authorities proposed to include demurrage charges (paid by the importer to the charterer -company) in the assessable value of the goods. The bank charges also were similarly proposed to be included in the assessable value. This proposal was contested on the basis of the aforesaid circular dated 14.8.91. The adjudicating authority rejected this objection and demanded differential duty on the demurrage and bank charges. The party preferred appeal to the Commissioner (Appeals), but the appeal was rejected. The appeal filed by them before the Tribunal against the appellate Commissioner's decision succeeded. The Tribunal's decision was upheld by the apex court. Their lordships considered several earlier judgments and laid down the following principles:

(3.) FINALLY , their lordships held that the inclusion of demurrage charges in the assessable value of the goods by the departmental authorities was contrary to the directive of the CBEC contained in circular dated 14.8.91. It was held to the effect that, as long as that circular had not been withdrawn, it was binding on the Customs authorities. We have already found that the 1991 circular was withdrawn only in 2001. The imports in question in the present case took place before 2001. Hence the adjudicating authority ought not to have included demurrage and connected bank charges in the assessable value of the goods. The demands of duty on the assessees are unsustainable and consequently there can be no penalties on them.