2023 (10) TMI 963 - AT - Customs

Demurrage Charges Excluded from Customs Valuation: Tribunal Upholds Legal Precedent, Dismisses Revenue's Appeal.

The Appellate Tribunal CESTAT Ahmedabad dismissed the Revenue's appeal, affirming the Commissioner's order that demurrage charges are not to be included ... Valuation - inclusion of ship demurrage charges paid by the respondent to the owner of the vessel/ ship in which the goods are imported on account of vessel/ ship having to wait at the Port in the Transaction value of the imported goods - entire case based on explanation added to Rule 10 of Custom Valuation Rules, 2007 - HELD THAT:- The very same issue has been considered by the Hon’ble Orissa High Court in the case of Tata Steel Limited [2019 (10) TMI 226 - ORISSA HIGH COURT] wherein the Hon’ble Court has held that the contentions raised by the petitioner that the relevant provisions in the Principal Act is silent about the ‘demurrage’; thus, it was beyond the legislative power to include it in the Rules is accepted and thus the explanation to sub-rule-(2) of Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is held to be bad and hence declared ultra vires the Constitution/provision of Section 14 of the Customs Act, 1962, and hence the same is struck down. From the above order, it is settled that the demurrage charges cannot be included in the transaction value of imported goods. The entire case of the Revenue is that as per the explanation added to Rule 10 of Custom Valuation Rules, 2007, the cost of transportation of imported goods should be included in the transaction value - HELD THAT:- This Provision was not provided in the Customs Act, 1962 with regard to the Valuation of goods. However the same was brought under the rule by way of explanation. The Hon’ble Orissa High Court in above case has held that the said provision in the Rule is ultra virus to the Customs Act, 1962. Therefore, when the explanation to Rule 10 to Customs Valuation Rules was held ultra virus, the entire basis of the Revenue case falls. The impugned order passed by the learned Commissioner is just and proper and the same does not suffer from any infirmity - Accordingly, the same is upheld and Revenue’s appeal is dismissed. Issues involved: Whether ship demurrage charges paid by the respondent are liable to be included in the transaction value of imported goods.Summary:The Appellate Tribunal CESTAT Ahmedabad considered the issue of including demurrage charges in the value of imported goods for customs duty assessment. The Revenue argued that a previous judgment by the Orissa High Court was not applicable due to jurisdictional issues and cited a different case to support their position. On the other hand, the Respondent relied on the Orissa High Court judgment and a Tribunal decision in a similar case. The Tribunal examined the arguments and reviewed the Orissa High Court judgment, which held that demurrage charges cannot be included in the transaction value of imported goods. The Tribunal found that the explanation added to the Custom Valuation Rules was ultra vires to the Customs Act, rendering the Revenue's case baseless. Citing judicial discipline, the Tribunal upheld the Commissioner's order and dismissed the Revenue's appeal, following the Orissa High Court judgment and a previous Tribunal decision.This judgment clarifies the treatment of demurrage charges in the valuation of imported goods for customs duty assessment, emphasizing the importance of legal principles and precedents in such matters.