TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 226
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....Port located in the district of Jagatsinghpur, Odisha and Haldia Port in West Bengal. Such import into the country is assessed to Duty of Customs under Section 14 of the Act. 3. In exercise of powers conferred under Section 156 of the Act read with Section 14 thereof, the Government of India, Ministry of Finance-opposite party No. 1, promulgated the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 (for short, "Rules, 1988"), which was notified vide Notification No. 51/1988-Cus (N.T.) dated 18.07.1988. 3.1. While Section 14 of the Act and the Rules, 1988 were in force, the Ministry of Finance-opposite party No. 1, clarified vide its Circular F. No. 467/21/89-Cus.V : dated 14.8.1991 (Annexure-1) that post-dispatch money would not constitute elements of value since element for the carriage. 'Demurrage' and 'dispatch' money being in the nature of penalties or rewards by virtue of a contracted character agreement between the carrier and character and this in no way could be conceived as being part of the freight or for that matter part of the price actually paid or payable for the goods. Hence, 'demurrage' and 'dispatch money' ma....
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.... therein that demurrage charges are not included as a part of assessable value under Section 14 of the Customs Act, 1962, for imports prior to 02.03.2001, i.e. the date of issue of circular vide Annexure-2. 4.2. Subsequently, Ministry of Finance- Opposite Party No. 1, vide Circular No. 26/2006-Cus. : Dated 26.09.2006 (Annexure-4) clarified that pending assessment after 02.03.2001 should be finalised by including ship demurrage charges in the assessable value of the imported goods. 5. Under Section 14 of the Act, as was in force till 09.10.2007, duty of customs was chargeable on the 'deemed price' of the imported goods. As against above provision in the Act, the Rules, 1988 as was in force during the above period, provided that the value of the imported goods for assessment to duty shall be "transaction value". In order to overcome the practical difficulties faced due to inherent contradiction between 'deemed price' in Section 14 of the Act and 'transaction value' as referred to in the Rules, 1988, Section 14 of the Act was amended by the Finance Act, 2007, with effect from 10.10.2007. Simultaneously, with effect from the same date, i.e. 10.10.2007, the Min....
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....tioner confirms with the overseas supplier/charter about the ship demurrage charges, as applicable to the respective vessels and thereafter submit such details to the Deputy Commissioner of Customs, Paradeep Port-Opposite Party No. 3, who then finalizes the provisional assessment of the respective bills of entries by including ship demurrage charges to the transaction values of the respective consignment for computation of duties of customs payable thereon, but without granting any benefit/concession in valuation of the consignment in respect of which the Petitioner-Company earns 'dispatch money' as reward/incentives. 7. Under the above circumstances, such goods imported by the petitioner under one purchase order, delivered by the suppliers through a number of vessels over a period of time, got assessed to duties of customs computed on different assessable value purely on account of inclusion of demurrage charges which varies from vessel to vessel contingent upon detention of the vessels either in the port of importation or on the high seas for various reasons such as congestion, non-availability of berth, poor discharge rate delay in unloading the goods etc., which are be....
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....rnational trade, where- (a) the seller and the buyer have no interest in the business of each other; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale. Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50. (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf. (2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), if the Board is satisfied that it is necessary or expedient so to do if may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. (3) For the purpose of this section (a) "rate of exchange" means the rate of e....
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....ard is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. Explanation - For the purposes of this section- (a) "rate of exchange" means the rate of exchange. (i) determined by the Board, or (ii) ascertained in such manner as the Board may direct, for the conversion of India currency into foreign currency or foreign currency into Indian currency; (b) "foreign currency" and "Indian currency" have the meanings respectively assigned to them in clause (m) and clause (q) of Section 2 of the Foreign Exchange Management Act, 1999 (49 of 1999.) 10. Subsequent to amendment of the Customs Act, 1962, corresponding Rules also amended. Petitioner also provided a comparative chart of amendment of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 vis-`-vis Rules of 2007, which is quoted below: Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. Customs Valuat....
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....of 1962) and these rules, the value of the imported goods shall be the value of such goods, for delivery at the time and place of importation and shall include- (a) the cost of transport of the imported goods to the place of importation; (b) loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation; and (c) the cost of insurance; Provided that- (i) where the cost of transport referred to in clause (a) is not ascertainable, such cost shall be twenty per cent of the free on board value of the goods; Provided further that in the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods. (ii) the charges referred to in clause (b) be one per cent of the free on board value of the goods plus the cost of transport referred to in clause (a) plus the cost of insurance referred to in clause (c). (iii) where the cost referred to in clause (c) is not ascertainable, such cost shall be 1.125% of free on board value of the goods. Provided also that where the free on board value of the goods is not ascertainable, the cos....
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.... the reimbursement by an informant to any public officer of all expenses and damages incurred in respect of any detention of any goods made on his information and of any proceedings consequent on such detention.; (f) the information required in respect of any goods mentioned in a shipping bill or bill of export which are not exported or which are exported and are afterwards re-landed; (g) the publication, subject to such conditions as may be specified therein, of names and other particulars of persons who have been found guilty of contravention of any of the provisions of this Act or the rules. (h) the amount to be paid 3 (for compounding and the manner of compounding) under sub-section (3) of Section 137." 11.1. Hon'ble Supreme Court in the case of Rasiklal Kantilal & Co. vis. Board of Trustees of Port of Bombay, reported in 2017 (348) ELT 3 (SC), held as under: "24. The dispute in this case centres around demurrage. Therefore, we deem it appropriate to examine the meaning of the expression "demurrage". The expressions "demurrage" is not defined under the Act. Strictly speaking, the expression demurrage in the world of shipping meant- 'DEMURRAGE in the strict me....
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.... 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 formalization 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....
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....ted with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50. (1-A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf. (2) Notwithstanding anything contained in sub-section (1) or sub-section (1-A), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. (3) For the purpose of this section- (a) 'rate of exchange' means the rate of exchange- (i) determined by the Board, or (ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currently into Indian currency'. (b) "foreign currency" and "Indian currency" have the....
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.... India and necessary for the production of the imported goods; (c) Royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable. (d) The value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly, to the seller; (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable. 9. (2) xx xx 9.(3). Additions to the price actually paid or payable shall be made under this on the basis of objective and quantifiable data. 9. (4). No addition shall be made to the price actually paid or payable in determining the value of the imported goods except as provided for in this rule." A reading of Rule 4 and Rule 9 makes it clear that only those costs and services that are actually paid or....
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.... sale or in any other case; (iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section. Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. (2) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value." (21) A reading of the unamended provision would show that the earlier/old principle was to find the valuation, of goods "by reference to their value". It introduced a deeming/fictional provision by stipulating that the value of the goods would b....
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....ed goods shall be determined in accordance with rule 6 made in this behalf. Therefore, rules can be made in determining the price. However, these rules have to be subject to the provisions of sub-section (1), the underline principle whereof, as stated above, is to taken into consideration actual price of the goods unless it is impermissible because of certain circumstances stipulated therein. Keeping in mind this fundamental aspect, we have to examine the scheme of the Valuation Rules, 1988." 11. In respect of the explanation, which travels beyond the scope of the Act, learned counsel for the petitioner relied upon decision of the Hon'ble Supreme Court in the case of Agricultural Market Committee vs. Shalimar Chemical Works Ltd., reported in (1997) 5 SCC 516, wherein the Hon'ble Court in paragraphs 26 and 28 observed as under:- "26. The principle which, therefore, emerges out is that the essential legislative function consists of the determination of the legislature policy and the Legislature cannot abdicate essential legislative function in favour of another. Power to make subsidiary legislation may be entrusted by the Legislature to another body of its choice but the L....
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....ing and handling charges to the extent and in the manner specified in the rules made in his behalf." 12.1. In this regard, judgment of the Hon'ble Supreme Court in the case of Garden Silk Mills Ltd. vs. Union of India, reported in 1999 (113) E.L.T. 358 (SC) was relied, wherein it has been observed as under: "15. The question as to whether the import is completed when the goods entered the territorial waters and it is the value at that point of time which is to be taken into consideration is no longer res integra. This contention was raised in Union of India vs. Apar Industries Limited, 1999 (5) J.T. 160. In that case the day when the goods entered the territorial waters, the rate of duty was nil but when they were removed from the warehouse, the duty had become liveable. The contention which was sought to be raised was that what is material is the day when the goods had entered the territorial waters because by virtue of Section 2 (23) read with Section 2 (27) the import into India had taken place when the goods entered the territorial waters. Following the decision of this Court in Bharat Surfactants (M/s.) (Private) Ltd. and Another vs. Union of India and Another,: 1989 (4....
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....e Merchant. Learned Additional Solicitor General is correct in submitting that the aforesaid clause 15 does not in any way indicate that the CIF value includes therein the charges levied by the Port Trust. Authorities after the discharge of the goods. It is difficult to imagine that at the time when the contract is entered into, and the CIF price is, fixed, as to how the parties could envisage as to what the port charges at the destination are likely to be. It does appear that any expense which is incurred with regard to the loading or unloading of the goods to and from the ship would be included in the CIF price paid by the importer. But there is nothing on record to show that in actual effect landing charges were collected by the Port Trust Authorities from the shipper. No document in this regard showing the discharge of such a liability by the shipper to the Port Trust Authorities has been produced. There can be little doubt that if the importer is able to establish that the obligation to pay the landing charges was on the seller or by the shipping agent, and not by the buyer, and the said charges have in fact been paid to the Port Trust Authorities not by or on behalf of the ....