Custom, Excise & Service Tax Tribunal
M/S Iocl vs The Commissioner Of Central Excise on 6 June, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
BANGALORE
Appeal(s) Involved:
C/719/2007-DB
[Arising out of Order-in-original No. 5/2007 dated 03/09/2007 passed by Commissioner of Customs, Mangalore]
For approval and signature:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER
HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
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 Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s IOCL,
Mangalore Terminal,
PB No. 6, Panambur,
Mangalore - 575010
Appellant(s)
The Commissioner of Central Excise,
Mangalore
Respondent(s)
Appearance:
Ms. Preetha, Adv For the Appellant Ms Mohammad Yusuf, A.R. For the Respondent Date of Hearing: 30/05/2016 Date of Decision:
CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. 20388 / 2016 Per : S.S GARG The present appeal is directed against the order passed by the Commissioner of Customs confirming the demand in the show-cause notice.
2. Briefly the facts of the present case are that appellants are a Govt of India undertaking engaged in refining and marketing of petroleum products. The appellants received and stored imported as well as indigenous LPG in bulk and thereafter sent it to various LPG bottling plants in the State of Karnataka, Kerala, Tamilnadu, Andhra Pradesh and Goa for bottling and also for supply of LPG through retail dealers. The appellants import LPG and also enter into an agreement with all other oil companies like Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd., IBP Co. Ltd for sale/purchase of LPG.
2.1 During the period 1.4.2002 to 31.3.2004, the appellant imported LPG and filed 120 bills of entry which were assessed provisionally pending submission of original documents from the supplier. In terms of the agreement/contract agreed between the appellant and the foreign supplier, it is the responsibility of the supplier to charter a vessel for delivery of LPG to the appellant. Consequently, the prices agreed upon are on CIF or CF basis which normally comprise of FOB price per MT and the associated transport and insurance cost up to the port of import. Further, the appellant alleged that as per the contract terms, concerning the period for which a tanker may be retained at the port for discharge of the cargo is adhered to by the appellant. On certain rare occasions, the appellant is unable to complete the discharge of cargo within the agreed time due to several reasons, and when the vessel is detained at the port for certain period, which is beyond the agreed period due to external circumstances, due to the reasons beyond the control of the appellant, appellant is required to remit to their supplier certain sums of money as compensation to be paid to the ship owner for the period spent by the vessel at the port beyond the specific period and this payment which is made by the appellant as compensation for detaining the ship at New Mangalore Port beyond the agreed period is called as demurrage charges and this payment made, has no nexus to the transaction value agreed and operated upon on a CIF basis between the parties.
2.1.1. In this factual background, the appellant was issued a show-cause notice dated 13.03.2007 proposing to redetermine the assessable value of the imported LPG by including the demurrage charges of Rs 1,66,58,227/- paid to the supplier on account of detention of the vessel beyond the lay time into the assessable value of the imported LPG by invoking the provisions of Rule 9(2)(a) of the Customs Valuation Rules 1988 and to include the differential canalising charges into the assessable value by invoking the provisions of Rule 9 (1)(a)(1) of the Customs Valuation Rules 1988 and proposed to demand the differential duty.
2.2. Appellant contested the allegations in the show-cause notice and filed a reply stating that the demurrage charges were not includible in the assessable value, that demand of interest was not sustainable since the amendment to Section 18 of the Customs Act to demand interest was inserted only on 13.07.2006 and the impugned import pertains to the period 2002-04. Consequently the provisions of Section 18(3) does not apply. But the learned Commissioner of Customs rejected the contention of the appellant and confirmed the demand. Hence the present appeal.
3. The learned counsel for the appellant submitted that the dispute involved in the present appeal is whether demurrage charges paid for detention of the vessel beyond the lay time for the imports during the period 2002-04, has to be included in the assessable value or not. He further submitted that this issue stands settled in favour of the assessee by a decision in the case of CC Mangalore Vs Mangalore Refinery and Petrochemicals Ltd [2015(325)ELT 214(SC)] wherein it was held that the demurrage charges are incurred after the goods reached at the Indian Port and, therefore, it is a post importation event and cannot form part of the transaction value. The learned counsel also placed reliance on the decision of the larger Bench of the Tribunal in the case of CC Jamnagar Vs Grasim Industries Ltd [2013(296) ELT 39 (Tri-LB)] wherein the larger bench in para 14 has observed as under:?
14. It is our considered view the decision of the Apex Court in the case of Ispat Industries Ltd. and the decision of the Honble High Court of Kolkata in the case of Hindustan Lever Ltd. are squarely applicable on the issue which has been referred to Larger Bench. We find that the decision of the Tribunal in the case of Shine Petroleum Pvt. Ltd. and MGM International Exports Ltd. have correctly considered the issue and in view of that, we hold that for the period from 2-3-2001 to 26-9-2006, the ship demurrage charges cannot be included for the discharge of customs duty on the imported goods even if the assessments are made provisionally. He also cited a decision of the larger Bench of the Tribunal in the case of M/s Indian Oil Corporation & Other Vs CC [2002(122)ELT 615] wherein the larger bench held that ship demurrage charges paid for detention of the ship beyond the lay time was not to be considered as transport cost as it was not ordinarily paid and therefore set aside the demands including for inclusion of the demurrage charges in the assessable value and this decision has been confirmed by the Honble Supreme Court as reported in 2004 (164)ELT 257 (SC)] and the Revenues review petition against the said decision of the Honble Supreme Court was also dismissed as reported in 2005(185)ELT (A)199. Learned counsel also submitted that interest is not demandable because sub-section 3 of Section 18 of Customs Act was inserted with effect from 13.07.2006 and the period of imports in the present case is 2002-04; the provision would not apply. On the other hand, the learned A.R. reiterates the findings of the Commissioner.
4. We have heard both sides and perused the records. The short issue which is involved in the present appeal is as to whether ship demurrage charges paid by the appellant on the import of the goods are to be included in the assessable value of the goods imported for custom duty purposes. Since this issue has been settled by the Honble Apex Court in the case of CCE Mangalore Vs MRPL cited supra in favour of the assessee, moreover the larger bench of this Tribunal in the case of Grasim Industries Ltd cited supra has also held that the ship demurrage charges cannot be included in the discharges of custom duty on the imported goods even if the assessments are made provisionally. Since the issue is squarely covered in favour of the appellant, we have no hesitation to hold that the impugned order is not sustainable in law and we set aside the impugned order by allowing the appeal with consequential relief, if any.
(Order pronounced in open court on )
ASHOK K. ARYA
TECHNICAL MEMBER
S.S GARG
JUDICIAL MEMBER
pnr
HH
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