2000 (11) TMI 164 - AT - Customs

Summary

Issues Involved:
1. Whether the ship's demurrage charges incurred by oil companies were includible in the assessable value of petroleum crude oil and other petroleum products.
2. Whether the oil companies and their senior officials were guilty of suppression of payment of ship's demurrage charges with intent to evade duty and consequently liable to penalty u/s 114A or u/s 112(a) of the Customs Act 1962.

Summary:

Issue 1: Includibility of Demurrage Charges in Assessable Value
The central issue was whether demurrage charges should be included in the assessable value of imported petroleum products. The Tribunal noted that the Government of India, Ministry of Finance (Department of Revenue) issued a Customs Circular dated 14-8-1991, which stated that demurrage charges are penalties or rewards by virtue of a contracted charterer agreement and should not form part of the assessable value. The Tribunal referenced multiple Supreme Court decisions, including Paper Products Ltd. v. Commissioner of Central Excise and British Machinery Supplies Co. v. Union of India, which held that circulars issued by the Central Board of Excise and Customs (CBEC) are binding on the department. Therefore, the Commissioner acted without jurisdiction by issuing a show cause notice contrary to the circular.

The Tribunal also examined the decision in Garden Silk Mills Ltd. v. Union of India, which dealt with the inclusion of landing charges in the assessable value but did not address demurrage charges. The Tribunal concluded that demurrage charges, being extraordinary expenses incurred due to delays, do not form part of the ordinary price and thus should not be included in the assessable value.

Issue 2: Suppression of Payment and Penalty
Given the Tribunal's decision on the first issue, the duty liabilities imposed on the companies were set aside. Consequently, the appellants were not liable for any penalties u/s 114A or u/s 112(a) of the Customs Act 1962.

Conclusion:
The appeals were allowed, and the orders impugned in these appeals were set aside with consequential reliefs to the appellants. The Tribunal held that demurrage charges should not be included in the assessable value of imported petroleum products and that the appellants were not liable for any penalties.