2018 (5) TMI 569 - AT - Customs

Levy of customs duty on liquid cargo not received in the shore tanks - Valuation - inclusion of demurrage charges - Revenue was of the view that the assessment and valuation of the goods should be based on the transaction value declared in the invoice price irrespective of the quantity ascertained through shore tank measure or in other manner - whether the demurrage charges incurred by the appellant should be included in the assessable value? Held that - reliance placed in the case of C.C.E., Mangalore Versus Mangalore Refinery & Petrochemicals Ltd. 2016 (1) TMI 325 - SUPREME COURT , where it was held that it is not even necessary to go into the various nuances of the matter as we are of the opinion that these appeals are bound to fail on one simple ground. The assessment is to be made on the basis of quantity of crude oil actually received in the shore tanks in the port of arrival in India. Valuation - inclusion of demurrage charges for the purposes of valuation of crude oil - Held that - The demurrage charges are admittedly incurred after the goods reached at Indian ports and, therefore, it is a post-importation event. Such charges, therefore, cannot form part of the transaction value - demurrage charges are not includable in the transaction value of the crude for the purposes of assessment. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Levy of duty of customs on liquid cargo not received in shore tanks; inclusion of demurrage charges for valuation under Customs Act, 1962.

Analysis:
The Revenue filed applications for bunching of appeals due to identical issues. With consent, the issue was decided on merits. Appellant challenged Orders-in-Appeal related to duty on crude oil and demurrage charges. Appellant cited settled cases favoring them. The Hon'ble Supreme Court rulings in Mangalore Refinery & Petrochemicals Ltd. and CCE, Mangalore cases were crucial.

On the duty levy issue, the Supreme Court clarified that duty is on imported goods, not quantity. The taxable event is "import," completed upon goods entering customs barriers. The bill of lading quantity does not reflect the imported quantity. The Tribunal's reasoning on customs duty basis was unsustainable. The judgment declared that duty is based on crude oil quantity received in shore tanks.

Regarding demurrage charges, the Supreme Court held that they are post-importation events and should not be part of the transaction value. This decision was reinforced by the Essar Steel Ltd. case. Consequently, demurrage charges are not included in crude oil valuation for assessment purposes.

As per the Supreme Court judgments, the Commissioner's orders were set aside as unsustainable. Therefore, the appeals were allowed, and the judgments were pronounced on 20/04/2018.