2015 (2) TMI 127 - AT - Customs

Valuation - Determination of transactional value - Provisional assessmet - Unjust enrichment - whether duty liability has to be determined on the basis of transaction value paid or payable for the supply of goods or the duty liability should be determined on the basis of the shore tank receipt quantity - Held that - rate of duty was ad valorem during the period of imports in the present case and the appellant was required to pay to the foreign supplier the value agreed upon for the bill of lading quantity even though the actual quantity received could be less due to ocean and other losses or due to natural causes and the appellant was not entitled for any deduction in the value on bill of lading quantity. As regards the reliance placed by the appellant on the decision in appellant s own case vide order dated 2-5-2003, the imports in the said case pertained to the period 1992-97 and the rate of duty was specific during most of the period of imports. Thus the factual and legal position obtaining with regard to the customs levy was different when compared to the facts of the present case where the rate of duty is ad valorem. When the rate of duty is ad valorem and payment is made for the bill of lading quantity without any adjustment in value for the various losses, it is on the transaction value that the duty liability has to be discharged and not on the basis of the quantity of bulk liquid cargo which is actually received. As regards the various case laws relied upon by the appellant, we find that they are not relevant to the facts of the present case before us. However as regards NCCD duty which is levied at specific rates, the above analysis will not apply and they will have to be levied on the actual shore tank receipt quantity and we hold accordingly. - Following decision of MANGALORE REFINERY & PETROCHEM. LTD. Versus CC, MANGALORE 2006 (2) TMI 518 - CESTAT, BANGALORE . Whether ship demurrage charges are includible in the assessable value of the goods imported - this matter was referred to the Larger Bench for consideration in view of conflicting decisions in the matter in the case of Grasim Industries Ltd. (2013 (10) TMI 246 - CESTAT AHMEDABAD). The larger Bench noted that rule 10(2) of the Customs Valuation Rules, 2007, which was pari material with Rule 9 (2) of CVR, 1988, added an explanation specifically including ship demurrage charges, lighterage or barge charges in the cost of transport of imported goods. Therefore, for the period prior to 2007, the said charges were not includible even if the assessments were made provisionally. This larger bench decision prevails over other decisions of this Tribunal. In the present case, this period involved is prior to 2007. Consequently, it has to be held that ship demurrage charges are not includible in the assessable value of the imported goods prior to CVR, 2007 coming into force and we hold accordingly. Doctrine of unjust enrichment will not apply considering Sections 27(2), (3) of the Customs Act. The doctrine of unjust enrichment will only apply when the assessment is finally completed. There can be no application for refund before the final assessment is made. Any adjustment between the differential amount of duty in relation to the one set of bills of entry where there is a short payment and the excess amount of duty covered by another set of bills of entry is not permissible. It was further held that what is required to be done by the assessee is to pay the duty short paid and separately claim refund of the duty paid in excess . Since the issue of unjust enrichment has to be considered, it obviously follows that each transaction has to be examined separately and therefore, there cannot be any clubbing of clearances. Prior to 13-7-2006 there was no provision for demand of interest on differential duty on finalisation of provisionally assessed bill of entry. Levy of Interest is substantive in character and therefore, in the absence of specific provisions, the demand for interest cannot be made - impugned orders are set aside and the matter remitted back to the adjudicating authority for computation of the differential duty demands and also for consideration of the refund claims due to the appellant in accordance with law - Appeal disposed of.

Issues Involved:
1. Basis for determining duty liability in an ad valorem tax regime.
2. Inclusion of ship demurrage charges in the assessable value of imported goods.
3. Adjustment of short payment of duty against excess payments in provisional assessments.
4. Application of unjust enrichment principles in refunds arising from finalization of provisional assessments.
5. Interest liability prior to July 2006 in the case of finalization of provisional assessments.

I. Basis for Determining Duty Liability in an Ad Valorem Tax Regime:
The Tribunal held that in an ad valorem tax regime, duty liability should be determined based on the transaction value paid or payable for the goods, not on the shore tank receipt quantity. This conclusion was based on the fact that the appellant was required to pay the foreign supplier based on the Bill of Lading quantity, regardless of any ocean or natural losses. The Tribunal noted that the decision in the appellant's own case (Order dated 2-5-2003) pertained to a period when the duty rate was specific, not ad valorem. The Tribunal cited the MRPL case, emphasizing that when the levy is ad valorem, the transaction value based on the Bill of Lading quantity is the correct basis for duty calculation. The Tribunal also rejected the appellant's argument that the CBEC circular dated 12-1-2006 should be applied prospectively, referencing the Apar Industries Ltd. case which held that the circular interprets the law and is not contradictory to earlier circulars.

II. Inclusion of Ship Demurrage Charges in the Assessable Value of Imported Goods:
The Tribunal ruled that ship demurrage charges are not includible in the assessable value of imported goods for the period prior to the Customs Valuation Rules, 2007. This decision was based on the Larger Bench ruling in the Grasim Industries Ltd. case, which clarified that such charges were not part of the assessable value before the 2007 rules came into force.

III. Adjustment of Short Payment of Duty Against Excess Payments in Provisional Assessments:
The Tribunal held that short payments of duty cannot be adjusted against excess payments made in respect of other bills of entry. Each transaction must be examined separately, and refund claims for excess payments need to be filed separately, subject to the principles of unjust enrichment. This conclusion was drawn from the decision in the HPCL case, which stated that any adjustment between differential amounts of duty is not permissible.

IV. Application of Unjust Enrichment Principles in Refunds Arising from Finalization of Provisional Assessments:
The Tribunal affirmed that the principles of unjust enrichment apply to refunds arising from the finalization of provisional assessments under section 18 of the Customs Act. This conclusion was supported by the jurisdictional Bombay High Court decision in the United Spirits Ltd. case, which emphasized that refunds under section 27 of the Customs Act are subject to the provisions of unjust enrichment.

V. Interest Liability Prior to July 2006 in the Case of Finalization of Provisional Assessments:
The Tribunal ruled that no interest liability accrues for the period prior to 13-7-2006 in the case of finalization of provisional assessments. This decision was based on the Tribunal's rulings in the Sterlite Industries and Raj Petroleum Products Ltd. cases, which held that there was no provision for demanding interest on differential duty before 13-7-2006.

Conclusion:
The Tribunal set aside the impugned orders and remitted the matter back to the adjudicating authority for computation of differential duty demands and consideration of refund claims in accordance with the principles laid down. The appeals were disposed of accordingly.

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