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TMI Blog2004 (2) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular had not been withdrawn. - Civil Appeals Nos. 2342-2362 of 2001 - - - Dated:- 17-2-2004 - Ruma Pal and P. Venkatarama Reddi, JJ. Raju Ramachandran, Additional Solicitor-General of India (Dhruv Mehta, K. Swami, B. Krishna Prasad, K.C. Kaushik, Mrs. Manik Karanjawala, Ms. Seema Sundd, Ms. Meghna Mishra and Krishan Kumar Gogana, Advocates, with him), for the appellants. Joseph Vellapally, Senior Advocate (Thomas Vellapally, Mahesh Agarwal, Rishi Agarwal, Vivek Yadav, Ms. Manu Krishnan, E.C. Agrawal, V. Lakshmikumaran, Alok Yadav and Rajesh Kumar, Advocates, with him), for the respondents. Judgment Per : Ruma Pal, J - Between 1994 and 1999, M/s. Indian Oil Corporation Ltd., the respondent herein, imported various petroleum products and crude oil into India. These goods were carried to different ports in India by vessels chartered for this purpose. Throughout this period, the respondent had cleared the imported goods upon payment of customs duty without protest by the customs authorities. 2.On 15th March, 2000, the respondent received a show cause notice sent by the Commissioner of Customs, Calcutta, the appellant before us, alleging that the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant, the value of the imported goods was assessable under Section 14 of the Act read with the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The Rules require that the transaction value had to be accepted unless the adjudicating authority has valid reasons to reject it. In that event the value would have to be determined in terms of Rule 5 to Rule 8 proceeding sequentially. The adjudicating authority had accepted the transaction value which was inclusive of cost, insurance and freight (CIF). The demurrage was a component of the cost of freight. Second, it was submitted that although Section 14 of the Customs Act provided for the valuation of goods for purposes of assessment on the price at which such or like goods are ordinarily sold, the word 'ordinary' meant nothing more than that the seller and the buyer should have conducted the transaction at arms length. The appellant relied upon the decision of this Court in M/s. Eicher Tractors Ltd. - 2000 (122) E.L.T. 321 to contend that demurrage was not, in this sense, an extraordinary payment, it is paid in terms of the agreement between the respondent and the vessel owner. Third, it is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Customs Act, 1961 insofar as it is relevant provides : "Instructions to officers of customs. - The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of goods or with respect to the levy of duty thereon, issue such orders, instructions and directions to officers of customs as it may deem fit and such officers of Customs and all the other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board." 8.Materially identical provisions are contained in Section 119 of the Income Tax Act, 1961 and Section 37B of the Central Excise Act. 9.This Court has, in a series of decisions, held that circulars issued under Section 119 of the Income Tax Act, 1961 and 37B of Central Excise Act are binding on the Revenue. 10.The somewhat different approach in M/s. Hindustan Aeronautics v. Commissioner of Income Tax, Karnataka, Bangalore [2000 (119) E.L.T. 513 (S.C.). (2000) 5 SCC 365] by two learned Judges of this Court, apart from being contrary to the stream of authority cannot be taken to have laid down good law in view of the subsequent decision of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1995), when this Court had already construed identical language in the manner indicated. It may be assumed that Parliament had legislatively approved the construction by using the exact words so construed again in the Customs Act. There is, therefore, no reason why the principles enunciated by this Court under the two earlier Acts should not also be determinative of the construction put on the later in respect of a materially similar statutory provision. This was also not argued by the appellant. 14.During the period in question, the following circular had been issued by the Central Board of Excise and Customs with regard, inter alia to demurrage charges : "Subject : Demurrage charges and dispatch money not to form part of the assessable value Regarding. The Kandla Custom House had raised the issue relating to the inclusion of demurrage charges and exclusion of dispatch money for computing the assessable value ascertainable under Section 14 of the Customs Act, 1962. Pursuant to the decision taken in the Tariff Conference of Collector held in August 1981, the issue was further discussed in the Tariff Conference of February 1989. The Conference had desired that the matter m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represent the correct law. The submission of the appellant is directly contradictory to the principles laid down by the series of decisions noted earlier and the attempt on the part of the appellant to distinguish the long line of authority is unacceptable. 19.The decision in Panchmahal Steel (supra) does not allow an adjudicating officer to act in violation of the Circular issued under Section 151A. Incidentally the decision in Panchmahal (supra) was an ex-parte one in the sense that the importer was not represented when the matter was argued. Its failure to prefer an appeal could not in the circumstances mean that the issue had become final as far as all other importers are concerned. Moreover, there was no reference to the Circular nor any reason for coming to the conclusion that demurrage was includible in the value of the imported goods. 20.We may mention here that the stand of the appellant that this Court had taken the view that demurrage was includible in Garden Silks (supra) both in the adjudication order and before the Tribunal appears to have been abandoned, in our opinion rightly, in the written notes of submission. Apart from the decision of the Constitution Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power has to act independently in arriving at a decision under the Act (vide Sirpur Paper Mills Ltd. v. Commissioner of Wealth Tax, Hyderabad [(1970) 1 SCC 795]. However, when there is a statutory mandate to observe and follow the orders and instructions of the Board in regard to specified matters, that mandate has to be complied with. It is not open to the adjudicating authority to deviate from those orders or instructions which the statute enjoins that it should follow. If any order is passed contrary to those instructions the order is liable to be struck down on that very ground. That is what has been held in some of the cases referred to by my learned sister. Extending this principle which flows from the statutory provision contained in Section 151A of the Customs Act or a pari materia provision in other fiscal enactments, this Court also held that it is not open to the department to file an appeal against the order passed in conformity with the circular. To this extent I have no difficulty in understanding the rationale of the decisions of this Court leaving apart for the time being the decisions in which a somewhat different note was struck. However, I am unable to reconcile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adhering to the letter of a statutory provision like Section 151A of the Customs Act. The Customs authority should act subservient to the decision of the highest constitutional Court and not to the circular of the Board which is denuded of its rationale and substratum under the impact of the authoritative pronouncement of the highest Court. Alternatively, Section 151A has to be suitably read down so that the circulars issued would not come into conflict with the decision of this Court which the Customs authorities are under a Constitutional obligation to follow. 27.I can perceive of no principle or authority to countenance the view expressed in Dhiren Chemicals case that regardless of the interpretation placed by this Court, the Circulars which give a different interpretation would still survive and they have to be necessarily followed by the statutory functionaries. The opinion expressed in the case of Hindustan Aeronautics v. Commissioner of Income Tax, Karnataka [2000 (119) E.L.T. 513 (S.C.) = (2000) 5 SCC 365] seems to project a correct view, though that decision cannot prevail over the Constitution Bench decision in Dhiren Chemicals Industries. The unintended results that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h pedestal seems to have its origin in Navnit Lal's case [AIR 1965 SC 1375]. In that case, a Constitution Bench of this Court was examining the constitutional validity of Sections 2, 6A(e) and 12(1B) inserted in the Income Tax Act of 1922 by the Finance Act of 1955. These Sections provided that any payment made by a closely held Company to its shareholder by way of advance or loan to the extent to which the Company possessed accumulated profits shall be treated as dividend taxable under the Act and this would include any loan or advance made in the relevant year prior to the assessment year, 1955-56, if such loan or advance remained outstanding on the 1st day of the previous year relevant to the assessment year 1955-56. In order to mitigate the rigour of the provision to some extent, the Central Board of Revenue issued a circular under Section 5(8) of the Act to the effect that if any such outstanding loans or advances of past years were repaid on or before 30th June, 1955, they would not be taken into account in determining the tax liability of the shareholders who received such loans or advances. The Court after pointing out that the circular would be binding on all officers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atachaliah, J. (as he then was) speaking for the Court observed thus : "Sri Ramachandran contended that circular of 1965 of the Central Board of Direct Taxes was binding on the authorities under the Act and should have been relied upon by the High Court in support of the Court's construction of Section 40(b) to accord with the understanding of the provision made manifest in the circular. This contention and the proposition on which it rests, namely, that all circulars issued by the Board have a binding legal quality incurs, quite obviously, the criticism of being too broadly stated. The Board cannot preempt a judicial interpretation of the scope and ambit of a provision of the 'Act' by issuing circulars on the subject. This is too obvious a proposition to require any argument for it. .......... *** ...The Tribunal, much less the High Court, is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to the assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. But that is not the same thing as saying that such circular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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