2004 (2) TMI 66 - SC - Customs

Whether the respondent had wilfully mis-declared the value of the goods while making entries under Section 46 of the Customs Act, 1962 by deliberately suppressing that the demurrage charges had been paid to the ship owners under the charter party agreements? Held that - Following the circular issued by the Central Board of Excise and Customs with regard, inter alia to demurrage charges it in no uncertain terms excludes demurrage from the assessable value. In the light of the judicial principles enunciated earlier, it was not open to the appellant to either issue the show cause notice or contend otherwise. The demand based on an assessable value inclusive of demurrage cannot be sustained as long as the circular remained operative and as long as the decisions cited earlier remain good law. Thus demurrage was wrongly included by the adjudicating officer in the assessable value contrary to the directive of the CBEC at a time when the circular had not been withdrawn.

Issues Involved:
1. Inclusion of demurrage charges in the assessable value of imported goods.
2. Binding nature of CBEC circulars on the Revenue.
3. Adherence to principles of natural justice.
4. Applicability of judicial precedents and statutory provisions.

Issue-wise Detailed Analysis:

1. Inclusion of Demurrage Charges in the Assessable Value of Imported Goods:
The core issue was whether demurrage charges should be included in the assessable value of imported goods under Section 14 of the Customs Act, 1962. The Commissioner of Customs alleged that the respondent mis-declared the value by excluding demurrage charges, which were paid to ship owners under charter party agreements. The Customs Excise and Gold (Control) Appellate Tribunal (CEGAT) ruled that demurrage charges should not be included, citing a CBEC circular from 1991 that explicitly excluded such charges from the assessable value. The Tribunal also referenced the decision in Garden Silk Ltd. v. Union of India, which did not support the inclusion of demurrage charges in the value of goods for customs duty purposes.

2. Binding Nature of CBEC Circulars on the Revenue:
The judgment extensively discussed the binding nature of CBEC circulars on the Revenue. The Supreme Court affirmed that circulars issued under Section 151A of the Customs Act are binding on the Revenue. The Court cited several precedents, including Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, which upheld that the Revenue cannot take a stance contrary to an existing circular. The Court reiterated that a show cause notice and demand contrary to existing circulars are ab initio bad and not permissible.

3. Adherence to Principles of Natural Justice:
The respondent argued that the Commissioner acted with undue haste and a closed mind, violating principles of natural justice. The respondent was not given adequate time to respond to the show cause notice, and the demand was confirmed without proper consideration. The Supreme Court acknowledged these procedural lapses, reinforcing that administrative actions must adhere to principles of natural justice.

4. Applicability of Judicial Precedents and Statutory Provisions:
The appellant relied on various judicial precedents and statutory provisions to argue for the inclusion of demurrage charges. However, the Supreme Court clarified that the CBEC circular, which was issued after re-examining the issue in light of GATT Valuation principles, was decisive. The Court also noted that the decision in Garden Silk Mills Ltd. did not address the specific issue of demurrage charges. Additionally, the Court highlighted that the Tribunal's decision in Panchmahal Steel Ltd. was an ex-parte decision and did not consider the CBEC circular, thus lacking authority to override the circular.

Separate Judgment by P. Venkatarama Reddi, J.:
Justice P. Venkatarama Reddi concurred with the dismissal of the appeal based on the binding nature of the CBEC circular. However, he expressed doubts about the correctness of the principle laid down in the Dhiren Chemicals Industries cases, questioning whether circulars should still hold the field even after the highest Court has settled the law on the subject. He emphasized the need for a Constitution Bench to provide a clear and authoritative pronouncement on the binding nature of circulars vis-`a-vis judicial decisions.

Conclusion:
The Supreme Court dismissed the appeals, holding that demurrage charges were wrongly included in the assessable value of imported goods contrary to the CBEC circular. The judgment reinforced the binding nature of CBEC circulars on the Revenue and underscored the importance of adhering to principles of natural justice and statutory provisions.

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