M/S. MANGALORE REF. & PETROCHEMICALS LTD vs. COMMNR. OF CUSTOM, MANAGALORE

C.A. No.-002753-002753 - 2006Supreme Court02 September 2015Bench: A.K. SIKRI ROHINTON FALI NARIMAN15 pages
For Petitioner: M. P. DEVANATHFor Respondent: B. KRISHNA PRASAD
AI SummaryAllowed

What were the facts?

The appellant, M/s. Mangalore Ref. & Petrochemicals Ltd., imported crude oil between January 13, 1996, and March 15, 1998. The revenue alleged that 71 out of 144 voyages resulted in short payment of customs duty amounting to Rs. 6,59,49,685. The revenue's show cause notice dated January 7, 2000, contended that duty should be based on the quantity mentioned in the bills of lading, not the quantity received in shore tanks, especially since duty was levied on an ad valorem basis. The appellant replied on April 14, 2000, arguing that under various judgments, only the quantity at the time of import is relevant, irrespective of the duty rate. The Commissioner of Customs, by order dated July 24, 2002, upheld the revenue's view, stating that 'transaction value' meant the value as per the bill of lading quantity. The CESTAT dismissed the appeal on February 6, 2006, agreeing with the Commissioner.

What did the Supreme Court hold?

The Supreme Court held that each of the Tribunal's reasons was incorrect. Firstly, import duty can only be levied on goods brought into India, and the taxable event is completed when goods become part of the mass of goods within the country, reaching the customs barriers and filing of a bill of entry for home consumption. Secondly, the taxable event for imported goods is 'import', not purchase. A bill of lading quantity reflects the purchase transaction but not the quantity at the time and place of importation. Thirdly, Sections 13 and 23 of the Customs Act were disregarded; no duty is leviable on goods lost, pilfered, or destroyed before clearance for home consumption or warehousing. Fourthly, Section 14 of the Customs Act, which provides the measure for levy, refers to the value at the time and place of importation. 'Transaction value' under the Customs Valuation Rules must be read in conjunction with the statutory position that valuation is at the time and place of importation. The circular relied upon by the revenue was contrary to law. The Court set aside the Tribunal's judgment and declared that the quantity of crude oil actually received into shore tanks should be the basis for customs duty payment.

What were the issues?

1. Whether, for the purpose of customs duty, the quantity of imported crude oil should be determined based on the bill of lading quantity or the quantity actually received into shore tanks in India, particularly when duty is levied on an ad valorem basis? (Question of law and mixed fact and law, concerning Section 12, Section 14, Section 13, and Section 23 of the Customs Act, 1962, and the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988). Assessee's contentions: The taxable event is import, and valuation must be at the time of import. The Tribunal misconstrued Section 14 and disregarded Sections 12, 13, and 23. 'Transaction value' under the Customs Valuation Rules cannot override the parent statute. Revenue's contentions: Supported the Tribunal's judgment. Relied on a circular dated January 12, 2006, stating that import duty should be based on invoice price (price paid or payable) irrespective of shore tank measurement. 'Transaction value' refers to the price payable for goods sold for export, hence linked to the bill of lading quantity.

Which sections of the Income-tax Act were involved?

Section 2(22),Section 2(23),Section 2(25),Section 12,Section 13,Section 14,Section 23,Section 47,Section 60

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
Page 1 JUDGMENT REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2753 OF 2006 M/S. MANGALORE REF. & …Appellant PETROCHEMICALS LTD. Versus COMMISSIONER OF CUSTOMS, …Respondent MANGALORE WITH CIVIL APPEAL NO. 1109 OF 2007 CIVIL APPEAL NOS. OF 2015 (ARISING OUT OF S.L.P. (C) NOS. 1906-1943 OF 2009) CIVIL APPEAL NOS. 4738-4755 OF 2010 CIVIL APPEAL NOS. 4770-4806 OF 2010 CIVIL APPEAL NOS. 4808-4809 OF 2010 CIVIL APPEAL NOS. 5465-5562 OF 2010 CIVIL APPEAL NOS. 7774-7775 OF 2011 CIVIL APPEAL NO. 11357 OF 2011 CIVIL APPEAL NOS. 8666-8667 OF 2013 CIVIL APPEAL NO. 3628 OF 2015 CIVIL APPEAL NO. 5074 OF 2015 CIVIL APPEAL NO. 5052 OF 2015 CIVIL APPEAL NOS. 9279-9283 OF 2012 CIVIL APPEAL NOS. 4480-4486 OF 2014

J U D G M E N T R.F. Nariman, J. 1

Page 2 JUDGMENT

1.

Leave granted in Special Leave Petition (Civil) Nos. 1906- 1943 of 2009. 2. In this batch of appeals an interesting question arises on the import of crude oil by the appellants. We will take the facts contained in Civil Appeal No. 2753 of 2006 for the purpose of deciding these matters.

3.

In the said Civil Appeal, during the period

The order continues below.

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