COMMISSIONER OF CUSTOMS, CALCUTTA ETC. ETC. vs. M/S. INDIAN OIL CORPORATION LTD. AND ANR.

CIVIL APPEAL No. 2342/2001Supreme Court[2004] 2 S.C.R. 51117 February 2004Bench: 2 JudgesAuthor: RUMA PAL, P. VENKATARAMA REDDI19 pages
AI SummaryDismissed

What were the facts?

The Revenue issued a show cause notice to the assessee, Indian Oil Corporation Ltd., alleging misdeclaration of the value of imported petroleum products and suppression of facts regarding demurrage charges paid to ship owners. The Revenue contended that demurrage charges, paid through a negotiating bank, were includible in the assessable value of the goods, leading to a demand for extra customs duty and penalty. The assessee's appeals were rejected by the initial authority but allowed by the Tribunal. The Tribunal held that a Circular dated 14.8.1991 issued by the Central Board of Excise & Customs (CBEC) stipulated that demurrage charges are not includible in the customs value of imported goods, and this Circular was binding on the Revenue. The Revenue appealed this decision.

What did the Supreme Court hold?

The Supreme Court, dismissing the appeals, held that the provisions of Section 151-A of the Customs Act are in pari materia with Section 119 of the Income Tax Act and Section 37B of the Central Excise Act. The Court affirmed that Circulars issued under these provisions are binding on the Revenue. The CBEC Circular dated 14.8.1991 clearly excludes demurrage from the assessable value. Therefore, the Revenue was not entitled to include demurrage in the assessable value. The demand for extra customs duty based on an assessable value inclusive of demurrage could not be sustained as long as the Circular remained operative and the judicial pronouncements supporting it were good law. The Court found it unnecessary to determine if demurrage would be includible in the absence of Board Circulars, as it was wrongly included contrary to the directive. The Court noted that a common thread does not run through all decisions regarding the binding character of circulars, suggesting a need for a Constitution Bench pronouncement on the subject.

What were the issues?

1. Whether demurrage charges are includible in the assessable value of imported goods, considering the Circular dated 14.8.1991 issued by the CBEC and the provisions of Section 151-A of the Customs Act, 1962, in light of similar provisions in Section 119 of the Income Tax Act, 1961, and Section 37B of the Central Excise Act. Assessee's Contentions: The Circular issued under the Customs Act is binding on the Revenue, similar to Section 37B of the Central Excise Act. The assessable value is the ordinary sale price at the time of importation, and demurrage does not form part of the sale. Revenue's Contentions: Demurrage is a component of the cost of freight and the transaction value accepted by the authority included cost, insurance, and freight. Demurrage is not an extraordinary payment. The Valuation Rules incorporate GATT valuation principles, making demurrage part of the cost of transport. The Circular was withdrawn later and therefore not binding.

Which sections of the Income-tax Act were involved?

Section 46,Section 151-A,Section 119,Section 37B

AI-generated summary — verify with the full judgment below

COMMISSIONER OF CUSTOMS, CALCUTTA ETC. ETC. A v. MIS. INDIAN OIL CORPORATION LTD. AND ANR. FEBRUARY 17, 2004 [RUMA PAL AND P. VENKATARAMA REDD!, JJ.] Customs J!.ct, 1962-Sections 46 and 151-A/Circular dated 14.8.1991 issued by the Central Board of Excise & Customs: Import of petroleum products and Crude Oil by the assessee-Clearance of goods upon payment. of customs duty thereto-Show cause notice on grounds of mi eclaring value of the goods and suppressing the facts regarding payment of demurrage charges-Revenue confirming extra duty after adding demurrage charges in the value of the goods-Appeals rejected by the Appellate Authority-- B c On appeal, Tribunal held that in view of the Circular issued by the CBEC D demurrage charges not includible in the customs value of the imported goods- On appeal, held, the Circular stipulates exclusion of demurrage from the assessable value of the goods-Affirmed by the Constitution Bench in an earlier case-It, therefore, remains a good law so long as Circular remains operative-Hence, demurrage wrongly included in the assessable value of the E goods-Customs Valuation (Determination of Price of Imported Goods) Rules I998; Rules

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