2003 (3) TMI 256 - AT - Customs

Inclusion of Charges in Assessable Value for Imported Products

The case addressed the inclusion of demurrage, wharfage, and stock loss charges in the assessable value of imported petroleum products purchased on a high ... Assessable value - transaction value / price actually paid or payable - Customs Valuation Rules, 1988 - Rule 9(1)(e) of the Customs Valuation Rules, 1988 - high seas sale - inclusion of predetermined charges in CIF value - demurrage, wharfage and shore stock lossAssessable value - Rule 9(1)(e) of the Customs Valuation Rules, 1988 - high seas sale - inclusion of predetermined charges in CIF value - Whether demurrage, wharfage and shore stock loss payable under exhigh seas sale contracts are includible in the assessable value of imported petroleum products. - HELD THAT: - The majority held that where a high seas sale agreement between the foreign seller and the Indian buyer expressly provides that demurrage, wharfage and onshore stock loss are payable by the buyer and these items are reflected in the final invoice, such payments constitute part of the price actually paid or payable and must be included in the transaction value. The Valuation Rules treat exhigh seas sale contracts as the relevant sale for Customs valuation; the price received by the high seas seller from the high seas purchaser is the assessable value. Rule 9(1)(e) requires inclusion of 'all other payments actually made or to be made as a condition of sale of the imported goods by the buyer to the seller.' Where the charges were predetermined and agreed at the time of the high seas sale and form part of CIF, they are not postimportation extraordinary expenses but elements of the contract price and therefore includible in CIF for duty assessment. The Tribunal distinguished authorities where demurrage arose from extraordinary postimport delays and where demurrage was paid to carriers under charter agreements; those facts do not govern a case where the importer paid the seller under the sale contract. The majority therefore concluded that the lower appellate orders excluding these charges were erroneous and allowed the Revenue appeals. [Paras 8, 18]Demurrage, wharfage and stock loss charges payable under the exhigh seas sale contracts and shown in final invoices are includible in the assessable value (CIF) under Rule 9(1)(e) and the Revenue appeals are allowed.Demurrage, wharfage and shore stock loss - Board Circular dated 14-8-1991 - precedents distinguishing extraordinary postimport charges - Whether the Board Circular (and related earlier decisions treating demurrage as nonassessable where it arose as a postimport extraordinary charge) applied to and excluded the charges in these cases. - HELD THAT: - The Tribunal (majority) held that the Board Circular and the Supreme Court decision based on analogous facts were distinguishable because those authorities dealt with demurrage and related charges arising as postimport extraordinary expenses paid to carriers or resulting from detention after importation. In the present cases the charges were payable by the importer directly to the high seas seller under the sale contract and were predetermined elements of the price. Thus the Circular and the authorities relying upon it did not govern the contractual facts here and could not be invoked to exclude the charges from valuation. The Tribunal also noted that the factual matrix (who paid whom and whether the charge formed part of the sale price at high seas) is decisive for applicability of those precedents. [Paras 16, 17]The Board Circular and decisions excluding demurrage as assessable in cases of postimport extraordinary detention do not apply to facts where such charges are contractually payable to the high seas seller and are part of the price; those authorities are therefore not a bar to inclusion here.Final Conclusion: By majority the Tribunal allowed the Revenue appeals and held that demurrage, wharfage and shore stock loss which were predetermined and payable by the buyer under exhigh seas sale contracts and reflected in final invoices form part of the transaction value/CIF and must be included in the assessable value for customs duty; authorities and circulars treating demurrage as nonassessable in postimport extraordinary situations were held distinguishable on the facts. Issues Involved:1. Inclusion of demurrage, wharfage, and stock loss charges in the assessable value of imported petroleum products.Issue-wise Detailed Analysis:1. Inclusion of Demurrage, Wharfage, and Stock Loss Charges in Assessable Value:The primary issue in this case was whether demurrage, wharfage, and stock loss charges should be included in the assessable value of the imported petroleum products. The importers had purchased the goods from Indian Oil Corporation (IOC) on a high seas sale basis. The goods were assessed provisionally, and the final invoice included charges for demurrage, wharfage, and stock loss. The importers contended that these charges should not be included in the assessable value under Section 14 of the Customs Act.The Revenue argued that, in terms of Rule 4 of the Customs Valuation Rules (CVR), 1988, the value of imported goods should be the price actually paid or payable for the goods when sold for export, including all payments made or to be made by the buyer to or for the benefit of the seller. They contended that these charges were pre-determined and formed part of the contractual price agreed upon at the time of the high seas sale.The Tribunal noted that the terms of the contract between IOC and the importers included these charges as part of the final price. The lower appellate authority had concluded that the importer's liability to pay for the goods arose as soon as the goods were loaded at the load port, and these charges were pre-determined and agreed upon at the high seas, making them part of the assessable value.The Tribunal distinguished the present case from the Larger Bench decision in Indian Oil Corporation Ltd. v. CC, Calcutta, where demurrage charges were not included in the assessable value due to their occurrence in extraordinary situations post-importation. In the current case, the charges were pre-determined and agreed upon at the high seas, making them part of the cost, insurance, and freight (CIF) value.The Tribunal held that these charges should be included in the assessable value when the importers purchased the goods on a high seas sale basis. The lower appellate authorities were found to be wrong in excluding these charges from the assessable value, and the Revenue's appeals were allowed.Separate Judgments:Member (Technical) - Jeet Ram Kait:Jeet Ram Kait, Member (Technical), held that the demurrage, wharfage, and stock loss charges should be included in the assessable value as these expenses were pre-determined and agreed upon at the high seas sale. He emphasized that these charges were part of the CIF value and should be considered for import duty assessment.Member (Judicial) - Archana Wadhwa:Archana Wadhwa, Member (Judicial), disagreed with the majority view and held that these charges should not be included in the assessable value. She relied on the Larger Bench decision in Indian Oil Corporation Ltd. v. CC, Calcutta, and the Ministry's Circular, which stated that demurrage charges are not part of the price actually paid or payable for the goods. She argued that these charges were post-importation costs and should not be included in the assessable value.Third Member on Reference - P.G. Chacko:P.G. Chacko, Member (Judicial), agreed with the view of Jeet Ram Kait, Member (Technical). He held that demurrage, wharfage, and stock loss charges paid by the importers to IOC in terms of the high seas sale agreements should be included in the assessable value. He emphasized that the Valuation Rules treated an ex-high seas seller as a foreign supplier and the buyer in India as the importer, making the terms of the high seas sale contract relevant for customs valuation.Majority Order:The majority decision, supported by P.G. Chacko and Jeet Ram Kait, held that the appeals filed by the Revenue were allowed, and the demurrage, wharfage, and stock loss charges should be included in the assessable value of the imported goods. The orders of the lower appellate authorities were set aside.