2019 (7) TMI 1782 - AT - Customs

Valuation of imported goods - inclusion of ship demurrage for Voyage Chartered Vessels incurred before vessels reach the Port in the assessable value - Rule 10(2)(a) of the Customs Valuation Rules 2007 - HELD THAT - The issue herein is no longer res integra and have been impliedly decided in favour of the appellant by Hon ble Orissa High Court in Writ Petition filed by TATA STEEL LTD. AND ORS. VERSUS UNION OF INDIA AND ORS. 2019 (10) TMI 226 - ORISSA HIGH COURT . The Hon ble High Court was please to hold Explanation to sub-rule 2 of Rule 10 of Customs Valuation Rules 2007 is bad and further declared it ultra vires the provision of Section 14 of the Customs Act and hence struck it down. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Whether ship demurrage for 'Voyage Chartered Vessels' incurred before vessels reach the Port is includible in the assessable value of imported goods under Rule 10(2)(a) of the Customs Valuation Rules, 2007.

Detailed Analysis:

1. Facts and Background: The appellant imported Vinyl acetate Monomer in bulk at Kandla Port and Nhava Sheva Port on CIF basis. Regular agreements were made for transportation on 'Voyage Chartered Vessels' basis.

2. Legal Provisions: Notification No. 93/2007-Cus (NT) notified the Customs Valuation Rules, 2007. Circular No. 38/2007-Cus clarified that demurrage charges for detention of the ship in the harbor before touching the landmass are includible in the cost of transportation.

3. Customs Proceedings: The appellant filed Bills of Entry declaring the price paid as the transaction value. Demurrage charges were not known at the time of filing. Show cause notices were issued proposing custom duties on demurrage.

4. Appellant's Arguments: The appellant argued that demurrage charges were incurred after the goods reached the Indian Port, making them post importation events. They cited Supreme Court judgments and Tribunal decisions to support their position.

5. Adjudication: The adjudicating authority confirmed the demand for customs duty and imposed penalties based on Rule 10(2)(a) of the Customs Valuation Rules, considering demurrage charges of chartered vessels as part of the assessable value.

6. Ultra Vires Challenge: The appellant contended that the Explanation under Rule 10(2)(a) was ultra vires Section 14 of the Customs Act, citing a High Court judgment.

7. Judgment: The Tribunal found in favor of the appellant, citing the Orissa High Court's decision that the Explanation to Rule 10(2) was ultra vires and struck it down. Demurrage incurred post importation should be excluded from the assessable value.

8. Conclusion: The impugned order was set aside, and the appeal was allowed, granting the appellant consequential benefits. The Tribunal held that demurrage charges for 'Voyage Chartered Vessels' post importation are not includible in the assessable value as per the Customs Valuation Rules.

This detailed analysis covers the issues, legal provisions, arguments, adjudication, and the final judgment of the Appellate Tribunal CESTAT NEW DELHI regarding the inclusion of ship demurrage charges in the assessable value of imported goods.