Customs valuation limits bar inclusion of demurrage charges; delegated rules cannot widen assessable value beyond the statute.

A delegated rule cannot expand the customs valuation base beyond Section 14 of the Customs Act, 1962. The Orissa High Court held that the Explanation to Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, which treated ship demurrage charges as part of transport cost, was inconsistent with the parent statute. Demurrage was characterised as a detention-related charge, not part of the price of imported goods or an authorised transportation component. The Explanation was therefore held invalid and struck down as ultra vires Section 14.

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Issues: Whether the Explanation to Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, by which ship demurrage charges were included in the cost of transport, was beyond the rule-making power under Section 156 of the Customs Act, 1962 and inconsistent with Section 14 of the Customs Act, 1962.

Analysis: The statutory scheme of Section 14 governs valuation of imported goods on the basis of the value/transaction value contemplated by the Act. The permitted additions relate to costs and services specified by the legislation and the rules made in its aid. Demurrage is not a component expressly contemplated by Section 14 as part of the assessable value. The Explanation introduced in the 2007 Rules treated demurrage as part of transport cost, but that enlargement was held to travel beyond the parent enactment. The Court also noted that demurrage is in the nature of a penalty or charge for detention and does not form part of the price of the imported goods or the transportation component authorised by the Act.

Conclusion: The Explanation to Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 was held invalid and struck down as ultra vires Section 14 of the Customs Act, 1962.

Ratio Decidendi: A delegated rule cannot enlarge the valuation base for imported goods beyond what Section 14 of the Customs Act, 1962 authorises, and demurrage charges are not includible in assessable value unless the parent statute itself permits such inclusion.

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