2016 (10) TMI 126 - SC - Indian Laws

Valuation - whether customs duty is to be added to the value of goods for the purpose of payment of octroi under Bombay Municipal Corporation (Levy of Octroi) Rules, 1965 - import of certain computer parts and claimed exemption from payment of customs duty thereupon invoking the provisions of Notification No. 133 of 1994 dated 22.06.1994 - Held that - from the reading of Rule 2(7)(a), it becomes clear that for ascertaining the value of the goods not only the original invoice but certain other charges like shipping dues, insurance, custom duty, excise duty, countervailing duty etc. are also includible in the value of articles if such charges are, in fact, incurred by the assessee or even liable to be incurred by the importer . It was the case of the respondent-Corporation that since 25 per cent of the production was allowed to be cleared in the domestic market subject to payment of excise duty, equivalent to the custom duty, is added. We find that the aforesaid position taken by the respondent-Corporation does not flow either from the reading of Rule 2(7)(a) or paragraph 3 of Notification No. 133 of 1994 dated 22.06.1994. Insofar as excise duty is concerned, the said excise duty was not paid on the goods imported. On the contrary, it was paid on the articles that were manufactured out of the goods which were imported. Therefore, the payment of excise duty on such manufactured articles would have no relation or connection with the goods that were imported by the appellants. Once we read and interpret the provisions of paragraph 3 of the notification in the manner stated above, obviously, there was no liability towards customs duty on these goods which were incurred or were liable to be incurred as mentioned in Rule 2(7)(a) of Rules, 1965. It is stated for the sake of repetition that insofar as customs authorities are concerned, they have not only granted exemption, they even allowed the clearance of 25 percent of the production into the domestic area in terms of paragraph 3 of the exemption notification. Thus, as far as goods are concerned, they were fully exempted from payment of any customs duty. Therefore, no liability in this respect is either incurred or was liable to be incurred and therefore, provisions to Rule 2(7)(a) for the purpose of adding the customs duty would not be attracted. - Decided in favour of appellant

Summary

Issues:
Interpretation of Bombay Municipal Corporation (Levy of Octroi) Rules, 1965 regarding the inclusion of customs duty in the valuation of goods for octroi payment.

Analysis:
The Supreme Court addressed the dispute arising from the inclusion of customs duty in the valuation of goods for octroi payment under the Bombay Municipal Corporation (Levy of Octroi) Rules, 1965. The case involved the import of computer parts by the appellants, who claimed exemption from customs duty under Notification No. 133 of 1994. The notification allowed exemption if the goods were re-exported or cleared domestically on payment of excise duty. The bone of contention was paragraph 3 of the notification, which detailed the conditions for exemption. The respondent Corporation included customs duty in the valuation of goods for octroi payment under Rule 2(7)(a) of the Rules.

The Court analyzed Rule 2(7)(a) and the notification to determine the inclusion of customs duty. It noted that the rule required the inclusion of various charges in the value of goods, but the respondent's position on adding customs duty for cleared articles lacked legal basis. The Court emphasized that the excise duty paid on manufactured articles did not establish a liability for customs duty on the imported goods. The exemption granted by customs authorities and the fulfillment of conditions under the notification supported the appellants' claim for exemption from customs duty.

Consequently, the Court allowed the appeals, setting aside the High Court's order. The appellants were granted the consequential relief of a refund. Additionally, a related appeal by the Municipal Corporation was dismissed in light of the main judgment. The judgment clarified the legal interpretation of the Rules and the notification, affirming the appellants' entitlement to exemption from customs duty for the imported goods, thereby resolving the dispute regarding octroi payment valuation.