Custom, Excise & Service Tax Tribunal
(I) M/S. Mgm International Exports Ltd vs The Commissioner Of Customs on 30 April, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE Appeal No: (i) C/605/2007; (ii) C/573/2007 & (iii) C/587/2007 (Arising out of Order-in-Appeal No: 72/2007/CUS(B) dated 28.6.2007 passed by the Commissioner of Customs (Appeals), Bangalore.) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? (i) M/s. MGM International Exports Ltd. (ii) M/s. Sri Abirami Agencies (iii) M/s. Karps Petroleums Pvt. Ltd. Appellants Vs. The Commissioner of Customs Mangalore Respondent
Appearance Shri R. Venkataraman, Sr. Advocate & Shri T. Bashyam, Advocate, for the appellants.
Shri R. P. Raheja, Authorised Representative (JCDR) and Shri K. Sambi Reddi, Authorised Representative (JDR), for the Revenue.
CORAM DR. S.L. PEERAN, HONBLE MEMBER (JUDICIAL) SHRI T. K. JAYARAMAN, HONBLE MEMBER (TECHNICAL) Date of Hearing: 21.04.2008 Date of decision:30.04.2008 FINAL ORDER Nos._______________________2008 Per Shri T. K. Jayaraman The details of the appeals are furnished below.
Sl. No. Name of the Party Differential Duty Penalty Order-in-Original No. Order-in-Appeal No.
1. M/s. MGM International Exports Ltd. Rs.8,70,805/- Rs.14,74,112/- No.02/2006 dt.21.12.2006 No.72/2007 dt.28.6.2007
2. Sri Abirami Agencies Rs.1,48,829/- Rs.1,48,829/- No.03/2007 dt.15.1.2007 -do-
3. M/s. Karps Petroleums Pvt. Ltd. Rs.1,44,538/- Rs.1,44,538/- No.02/2007 dt.15.1.2007 -do-
2. All these appeals have been filed against a common Order-in-Appeal No. 72/2007 dated 28.06.2007 passed by the Commissioner of Customs (Appeals), Bangalore. The issue involved in all these cases is one and the same whether the demurrage incurred by the appellants are includible in the assessable value of the imported goods. They all had imported Superior Kerosene Oil(SKO) in bulk during the period from 1998 to November 2003 and cleared the goods provisionally by filing Bills of Entry for warehousing/home consumption by declaring the CIF value and cleared the cargo by paying appropriate duty. It was found that initially, they had given a No Demurrage Paid Certificate to the Department at the time of provisional assessment. Later, it was found that the importers had paid demurrage charges to their suppliers/charterers in respect of certain shipments and hence the department demanded differential duty plus interest for the demurrage charges paid, as the same were includible. They were held to be includible in the assessable value by the lower authority. The Original Authority confirmed the demand by including the demurrage charges. He had also imposed penalty as mentioned above. Interest was also demanded as per law. The appellants were aggrieved over the issue and approached the Commissioner (Appeals) for relief. The Commissioner (Appeals) has given a finding in Para 6. Para 6 of the Commissioner (Appeals)s order is reproduced herein below:-
6. As observed, Honble Supreme Court had not decided the issue of includability (or) otherwise of demurrage charges in the assessable value under Customs law. The decisions so far being on the applicability (or) otherwise of Boards Circular on the issue. In view of the stated position, the question of applying the ratios of the case laws cited by the appellants did not arise. At present, the views expressed by the Board vide its circular No.14/2001 dated 2.3.2001 read with Circular dated 20.10.2004 are the correct interpretation of law and the same is binding on the departmental officer in the absence of a contrary view / decision by the Honble Supreme Court. The appellants are highly aggrieved over the issue and that they have come before this Tribunal for relief.
3. Shri R. Venkataraman, the learned Senior Advocate and Shri T. Bashyam, the learned Advocate, appeared on behalf of the appellants. Shri R.P. Raheja, the learned JCDR and Shri K. Sambi Reddy, the learned JDR, appeared on behalf of the Revenue.
4. The learned Senior Advocate brought to our notice that the issue is squarely covered by the decision of this Tribunal in Final Order No. F. 1220 & 1221/2007 dated 30.10.2007 in the case of M/s. Shine Petroleum Pvt. Ltd. & M/s. Elf Gas India Ltd. Vs. CC, Mangalore.
5. On the other hand, the learned Departmental Representative relied on the order of the Tribunals Chennai bench in the case of CC, Chennai Vs. Seven Seas Petroleum Pvt. Ltd. - 2005 (191) ELT 1181 (Tri.-Chennai) and stated that the issue is squarely covered by the above decision and, therefore, he said that the demurrage charges have to be included and the impugned order has to be upheld.
6. On a very careful consideration of the issue, we find that the identical issue was examined by this Tribunal in the case of M/s. Shine Petroleum Pvt. Ltd. case, which was cited supra. Para 10 and 10.1 of the said decision is reproduced below:-
10. On a very careful consideration of the entire issue, we find that the department has taken contrary stands at different points of time. In the year 1991, the Board issued a circular based on the discussions in the Tariff Conference of Collectors held in August 1991. According to the Circular, it is stated that Having regard to the above and the fact that in no other Custom House there was a practice to include or deduct such moneys, it has been decided that demurrage and despatch money may not form a part of assessable value. However in 2001, the Board issued a Circular No.14/2001 Cus. dated 2.3.2001 wherein it was clarified that the earlier circular should not be construed as authorizing the exclusion of any ship demurrage charges paid which are required to be included in the assessable value of the goods under Section 14 of the Customs Act, 1962 by virtue of Rule 9 (2) of the Customs (Valuation) Rules, 1988. It was stated in the above said circular that the earlier letter dated 14.8.1991 was issued without specifically examining the implications of Rule 9 of the Customs Valuation Rules or the GATT Valuation Rules. In terms of the GATT Valuation Rules, cost of transportation has to be included in the assessable value of the goods, if it had not been included. The view taken is when there is demurrage and then the demurrage should be added to the cost of transportation. In fact the above Circular deals both with demurrage and despatch moneys. In cases where the unloading takes place much before the stipulated time, the shipping liners would refund certain amounts of money known as despatch money. They had also clarified that despatch money also will not form part of the assessable value. In that connection, the Circular dated 2.3.2001 superseded the earlier letter dated 14.8.1991. Further on 12.1.2006 another Circular No.5/2006-Cus. was issued. This circular was issued based on the decision taken in the Chief Commissioners of Customs Conference on Valuation held in Mumbai on 1.10.2005 in view of the Supreme Courts decision affirming the decision of the Tribunal in the IOC case. We reproduce the copy of the Circular No.5/2006-Cus. herein below.
Valuation (Customs) - Demurrage charges not includible for imports prior to 2-3-2001 Circular No. 5/2006-Cus., dated 12-1-2006 [From F.No. 467/79/2OO5-Cus.V] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject: Includability of ship demurrage charges in the assessable value - decision taken in the Chief Commissioners of Customs Conference on Valuation held at Mumbai on 1-10-2005 and Board meeting dated 28-11-2005.
Attention is invited to the Board letter issued vide F. No. 467/01/2002- Cus. V, dated 20th October 2004 (copy enclosed) [Not printed] on the above subject, wherein, it was conveyed that in light of the decision of the Board to file review petition before the Supreme Court of India, in the case of M/s. Indian Oil Corporation [2004 (165) E.L.T. 257 (S.C.), all importations prior to 2-3-2001 may be kept provisional.
2. Now, in view of the Departments Review Petition in the case of Commissioner of Customs, Calcutta V. Indian Oil Corporation Limited being dismissed by the Honble Supreme Court [2005 (186) E.L.T. A119 (S.C.)] all pending provisional assessments in respect of importation prior to 2-3-2001 may be finalized accordingly.
3. With regard to period after 2-3-2001, the matter is under consideration and clarification shall be issued in due course.
4. Receipt of the Circular may please be acknowledged.
In terms of the circular, there was a direction that all importations prior to 2.3.2001 may be kept provisional. With regard to period after 2.3.2001, it was stated that the matter is under consideration and clarification shall be issued in due course. Therefore, the circular dated 12.1.2006 has not decided the entire issue and has simply said that the matter was under examination. Finally, the Board issued the Circular No.26/2006 dated September 26, 2006 wherein it has been clarified that in view of the Apex Courts decisions, assessments prior to 2.3.2001 should be finalized based on the Apex Courts decision by not including the demurrage charges and the current assessments can be finalized by including the ship demurrage charges in the assessable value of the imported goods.
10.1 On a careful consideration of the issue, we find that there are two views regarding the includablility of the demurrage charges in the assessable value. The learned advocate relied on the authority of the IOC decision of the Tribunal affirmed by the Supreme Court and he further relied on the Commentary on the GATT Valuation Code but the issue is highly debatable as the learned departmental representative referred to certain other decisions of other countrys wherein it has been held that demurrage is only extended freight. However, the present legal position is that demurrage is to be added to the cost of transportation by virtue of an amendment in the Customs Valuation Rules. In any case, since the amendment is only of recent origin, for the relevant period, we cannot hold demurrage would be includable in view of the Supreme Courts decision which affirmed the Tribunal decision in the IOC case. Even though the Supreme Court had not gone into the merit of the case, it had not set aside the finding of the Tribunal in the IOC case. In fact the decision of the Tribunal has been affirmed. In view of this fact, we have to categorically hold that the decision of the Tribunal holds the field during the relevant period. The definite clarification of the Board in the matter was issued only on September 26, 2006. This Circular cannot be given retrospective effect. In view of the above observations, we are of the view that the benefit of the decision of the IOC case by the Tribunal has to be given to the appellants during the relevant period. Hence, we set aside the impugned orders and allow the appeals with consequential relief.
7. It is seen that in the above decision, relying on the Honble Apex Court decision in the case of IOC Ltd. 2004 (165) ELT 257(SC), it was held that the Boards Circular of 2006 cannot have retrospective effect. Therefore, during the relevant period, benefit of the Apex courts decision has to be given to the appellant. Since, the issue is one and the same, following the ratio of the above decision, we hold that the demurrage charges are not includible in the assessable value during the relevant period. Later, the law was amended. As of now, the legal poison is that the demurrage charges have to be included in the assessable value. But we have given the reasoning in the above cited decision as to why the change cannot be effected during the relevant period in view of the Supreme Courts decision. The ratio of the above decision has to be followed here also. Therefore, the demands are not sustainable. No penalties can be imposed. Hence, we set aside the impugned order and allow the appeals with consequential relief.
(Pronounced in open court on 30th April, 2008) (T.K. JAYARAMAN) Member (T) (S.L.PEERAN) Member (J) /pr/