High sea sale charges form part of assessable value when contractually payable as a condition of sale.

In a high sea sale transaction, charges contractually payable by the buyer to the seller, including demurrage, facilitation, bank and survey fees, were treated as part of the sale price and held includible in the assessable value for customs duty. Non-disclosure of the final invoice and supply arrangements before assessment was treated as suppression of material facts, justifying invocation of the extended period of limitation. Confiscation of the goods was upheld, while the penalty was substantially reduced in view of the circumstances, including the possible passing on of duty burden.

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Issues: (i) Whether demurrage charges, facilitation charges, bank charges and survey fees paid under the high sea sale and fuel supply arrangements were includible in the assessable value for customs duty; (ii) whether suppression of material facts justified invocation of the extended period of limitation; (iii) whether confiscation and penalty required interference.

Issue (i): Whether demurrage charges, facilitation charges, bank charges and survey fees paid under the high sea sale and fuel supply arrangements were includible in the assessable value for customs duty.

Analysis: The arrangement was treated as a high sea sale transaction in which the buyer paid the seller, IOCL, the disputed charges under the contractual terms. The charges were held to be payable as part of the sale arrangement and not shown to be post-import or outside the sale price. The Tribunal held that the seller's service charges and the other fixed charges stipulated in the agreements formed part of the price payable for the imported goods and fell within the scope of additions permissible under the valuation rules.

Conclusion: The disputed charges were held includible in the assessable value and the duty demand on that basis was sustained.

Issue (ii): Whether suppression of material facts justified invocation of the extended period of limitation.

Analysis: The final invoice and the relevant supply arrangements were not disclosed to Customs before finalisation of assessment, and the Tribunal treated that non-disclosure as suppression of vital facts. On that basis, it was held that the Department was justified in invoking the longer period.

Conclusion: The extended period of limitation was held applicable against the appellant.

Issue (iii): Whether confiscation and penalty required interference.

Analysis: While upholding confiscation of the goods covered by the specified bills of entry, the Tribunal took a lenient view on penalty, noting the possibility of duty burden being passed on to the purchaser of power. The original penalty was substantially reduced.

Conclusion: Confiscation was upheld and the penalty was reduced.

Final Conclusion: The appeal failed on the core valuation and limitation issues, but relief was granted by reducing the penalty, resulting in a partial modification of the original order.

Ratio Decidendi: In a high sea sale transaction, charges contractually payable by the buyer to the seller as part of the sale arrangement are includible in the assessable value when they form part of the condition of sale.

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