Demurrage charges not includible in assessable value of imported goods:SC

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Demurrage charges not includible in assessable value of imported goods

Excise & Customs : Ship demurrage
charges paid by assessee/importer on import of goods were not liable to be
included in assessable value of goods imported for customs duty purposes
 [2016]
66 taxmann.com 108 (SC)
SUPREME COURT OF INDIA
Commissioner of Central Excise,
Mangalore
v.
Mangalore Refinery & Petrochemicals
Ltd.
A.K. SIKRI AND ROHINTON
FALI NARIMAN, JJ.
CIVIL APPEAL
NOS. 2691-2728 OF 2009 & 1454 OF 2011
AUGUST  27, 2015 
Section 14 of the Customs Act, 1962 – Levy of duty – Valuation of
goods – Whether ship demurrage charges paid by assessee/importer on import of
goods were to be included in assessable value of goods imported for customs
duty purpose – Held, no [Para 5] [In favour of assessee]
Circulars
and Notifications: Board Circular No. 96/2002, dated 27-12-2002
FACTS
The question involved in the instant appeal is as to whether ship
demurrage charges paid by the assessee-importer on the import of the goods
were to be included in the assessable value of the goods imported for purpose
of levy of customs duty.
HELD
The demurrage charges are admittedly incurred after the goods reached
at Indian ports and, therefore, it is a post-importation event. Such charges,
therefore, cannot form part of the transaction value. [Para 5]
In view of the aforesaid, the appeal filed by the revenue was liable
to be dismissed.
CASE REVIEW
Mangalore
Refinery & Petrochem Ltd.
 v. Commissioner of Customs 2006
(205) ELT 753 (Bang. – Tri.) affirmed.
Commissioner
of Customs,
 v. Essar
Steel Ltd. 
[2015] 51 GST 181/58 taxmann.com 191 (SC) (para 6) followed.
CASES REFERRED TO
Mangalore
Refinery & Petrochem Ltd.
 v. Commissioner of Customs 2006
(205) ELT 753 (Tri. – Bang.) (para 4), Mangalore Refinery & Petrochem Ltd. v. CCE 2002 taxmann.com 1590 (CEGAT – Bang.) (para 4) and Commissioner
of Customs
 v.Essar Steel Ltd. [2015] 51 GST 181/58 taxmann.com 191 (SC) (para 5).
ORDER
A.K.
Sikri, J. 

The short issue which is involved in these appeals is as to whether ship
demurrage charges paid by the respondent/importer (hereinafter referred to as
the ‘assessee’) on the import of the goods are to be included in the assessable
value of the goods imported for customs duty purposes. In order to decide this
issue, facts can be taken from Civil Appeal Nos. 2691-2728 of 2009.
2. The assessee in these
appeals is M/s. Mangalore Refinery and Petrochemicals Limited. It had imported
94204.425 MTs (ullage quantity measurement of vessel) of Crude Oil vide Bill
of Entry No. 0924, dated May 23, 2001 and warehoused the same into their shore
tanks. The same was cleared under provisional assessment by executing P.D.
Bond, pending production of original documents by the assessee and reply to
further queries by the Department. The provisional assessment was taken up for
finalization based on this Court’s decision which upheld the order passed by
the CEGAT in the case of M/s. HPCL and M/s. NOCIL,
wherein it was held that customs duty should be levied on the quantity that is
pumped into the shore tanks in terms of Board’s Circular No. 96/2002, dated
December 27, 2002. The shore tank quantity of Crude Oil is considered as the
relevant quantity for the purpose of assessment. On scrutiny of the documents
filed by the assessee, it was found that Bill of Lading quantity was taken as
the Cost & Freight (FOB) component of the relevant value for assessment as
per Section 14 of the Customs Act, 1962. Therefore, irrespective of the fact
whether there is shortage in the quantity received compared with the Bill of
Lading quantity or not, the importer has to pay the duty on transaction value,i.e. the
full value paid for the Bill of Lading quantity. On that basis, the customs
authorities took the view that the declared shore tank quantity is to be
corrected, which worked out to 93756.154 Mts.
3. We are not concerned
with this aspect in the present appeals. That issue has been raised in other
batch of appeals, which we have heard today and judgment is reserved.
4. Insofar as issue
involved in these appeals is concerned, we may point out that during this
period the goods could not be cleared and it was observed that the assessee had
paid demurrage charges of Rs. 6,48,094.93 among other fees/charges. As per the
Revenue/appellant, these demurrage charges were also to be included in the
assessable value for the purpose of levy of duty of customs. Show-cause notice
dated June 9, 2003 was issued in this behalf, which resulted in passing of
order dated March 7, 2005 confirming the demand raised in the show-cause
notice. The assessee filed appeal against the order of the Adjudicating
Authority before the Commissioner of Customs (Appeals), which was however
dismissed. The assessee, thereafter, approached the Customs, Excise and Service
Tax Appellate Tribunal (for short, ‘CESTAT’) and the CESTAT has passed order
dated February 6, 2006 [Mangalore Refinery & Petrochem Ltd. v. Commissioner
of Customs
 2006 (205) E.L.T. 753 (Tri.-Bang.) holding that the
assessee should discharge duty liability on the transaction value, which is
actually the amount paid on the Bill of Lading quantity. However, insofar as
demurrage is concerned, it has held that the same is includible in the
transaction value. In forming this opinion, the Tribunal relied upon its
earlier order in the case of this very assessee, which is reported as Mangalore
Refinery & Petrochemicals Ltd.
 v. CCE 2002 taxmann.com 1590 (CEGAT – Bang.).
5. We have heard the
counsel for the parties at length. It is not even necessary to go into the
various nuances of the matter as we are of the opinion that these appeals are
bound to fail on one simple ground. The demurrage charges are admittedly
incurred after the goods reached at Indian ports and, therefore, it is a
post-importation event. Such charges, therefore, cannot form part of the
transaction value. Issue in this behalf is settled by this very Bench in the
case of Commissioner of Customsv. Essar Steel Ltd. [2015] 51 GST 181/58 taxmann.com 191.
6. Following the
aforesaid judgment, these appeals fail and are, accordingly, dismissed.

* In
favour of assessee.
 Appeal
arising out of order of Tribunal in Mangalore Refinery & Petrochem
Ltd.
 v. Commissioner of Customs 2006 (205) ELT 753
(Bang. – Trib).
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