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2015 (9) TMI 245 - SUPREME COURT

2015 (9) TMI 245 - SUPREME COURT - 2015 (323) E.L.T. 433 (SC) - Levy of duty on goods actually imported – Appellant imported crude oil which was said to have escaped payment of full customs duty –Revenue in its show cause stated that quantity of crude oil mentioned in various bills of lading should be basis for payment of duty, and not quantity actually received into shore tanks in India – According to Commissioner, full payment for goods has to be made on quantity mentioned in bill of lading – .....

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mported changes, is wholly unsustainable – Therefore Tribunal's judgment set aside and declare that quantity of crude oil actually received into shore tank in port in India should be basis for payment of customs duty – Appeals disposed of – Decided in favour of assesse. - Civil Appeal No. 2753 of 2006, Civil Appeal No.1109 OF 2007, Civil Appeal Nos. 6736-6773 OF 2015, (Arising Out Of S.L.P. (C) Nos. 1906-1943 of 2009) - Dated:- 2-9-2015 - A. K. Sikri And R. F. Nariman, JJ. Civil Appeal No. 2753 .....

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of 2012, Civil Appeal Nos. 4480-4486 of 2014 For the Petitioner : Mr M P Devanath, Adv. For the Respondent : Mr Ashok Kumar Panda, Sr. Adv., Mr B Krishna Prasad, Adv. and Mr Arvind Kumar Sharma, Adv. JUDGMENT R. F. Nariman, J. 1. Leave granted in Special Leave Petition (Civil) Nos. 1906-1943 of 2009. 2. In this batch of appeals an interesting question arises on the import of crude oil by the appellants. We will take the facts contained in Civil Appeal No. 2753 of 2006 for the purpose of decidin .....

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assessable value of ₹ 23,71,30,242 /- for the period from 13.1.96 to 15.3.98. These figures were arrived at as revenue in its show cause notice dated 7 th January, 2000 stated that the quantity of crude oil mentioned in the various bills of lading should be the basis for payment of duty, and not the quantity actually received into the shore tanks in India. This was stated on the basis that since duty was now levied on an ad valorem basis and not on a specific rate, the duty should be paid .....

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reading of the Customs Act, 1962 and the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and therefore the show cause notice ought to be dropped. 4. On 24th July, 2002, the Commissioner of Customs passed a detailed order in which he held that since the basis of customs duty had changed into an ad valorem regime, "transaction value" would necessarily mean the value at which the goods were to be purchased from the foreign supplier. According to the learned Commi .....

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6. Shri Lakshmikumaran, learned counsel appearing for the appellants in these appeals, urged before us that the Tribunal in the present case had lost sight of the fact that the taxable event is only when goods are imported, and that therefore valuation at the time of import alone has to be looked at. He further argued that the reasoning of the Tribunal was entirely fallacious, and that it misconstrued Section 14 of the Customs Act and did not give proper heed to Sections 12, 13 and 23 of the sa .....

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ent made it clear that import duty should be based only on the invoice price which is the price paid or payable for imported goods irrespective of the quantity ascertained through shore tank measurement, it is this price alone that should be taken into account for valuation purposes. Further, according to her, "transaction value" would necessarily mean the price that is payable for goods when sold for export to India and that therefore such price would only be referable to the quantity .....

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India from a place outside India; 2(25) "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption; Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imp .....

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goods are restored to the importer after pilferage. Section 23. Remission of duty on lost, destroyed or abandoned goods. - (1) Without prejudice to the provisions of section 13, where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs that any imported goods have been lost otherwise than as a result of pilferage or destroyed, at any time before clearance for home consumption, the Assistant Commissioner of Custom or Deputy Commissioner of C .....

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nsumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption. (2) Where the importer fails to pay the import duty under sub-section (1) within two days, excluding holidays from the date on which the bill of entry is returned to him for payment of duty, he shall pay interest at such rate, not below ten .....

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) Act, 1991 and the importer has not paid such duty before such commencement, the date of return of such bill of entry to him shall be deemed to be the date of such commencement for the purpose of this section: Provided also that if the Board is satisfied that it is necessary in the public interest so to do, it may, by order for reasons to be recorded, waive the whole or part of any interest payable under this section." 9. Rules 2(1)(f) and 4(1) of the Customs Valuation (Determination of Pr .....

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the aforesaid provisions, it is clear that the levy of customs duty under Section 12 is only on goods imported into India. Goods are said to be imported into India when they are brought into India from a place outside India. Unless such goods are brought into India, the act of importation which triggers the levy does not take place. If the goods are pilferred after they are unloaded or lost or destroyed at any time before clearance for home consumption or deposit in a warehouse, the importer is .....

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uish his title to the goods and shall not be liable to pay any duty thereon. In short, he may abandon the said goods even after they have physically landed at any port in India but before any of the aforesaid orders have been made. This again is for the good reason that the act of importation is only complete when goods are in the hands of the importer after they have been cleared either for home consumption or for deposit in a warehouse. Further, as per Section 47 of the Customs Act, the import .....

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the Customs Act, the levy of import duty cannot take place until goods are imported, that is, brought into India. Obviously, therefore, it is the quantity of goods brought into India alone that attracts the levy of import duty. 12. The Customs Valuation Rules which defines "transaction value" also speaks of the price that is actually paid or payable only for "imported goods". Unless goods are imported, that is, "brought into India" no such price is actually paid or .....

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of importation and shall include - (a) The cost of transport of the imported goods to the place of importation; (b) loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation; and (c) the cost of insurance: Provided that - (i) where the cost of transport referred to in clause (a) is not ascertainable, such cost shall be twenty per cent of the free on board value of the goods; (ii) the charges referred to in clause (b) shall be one per c .....

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where the free on board value of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (i) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii) above. Provided also that in case of goods imported by sea stuffed in a container for clearance at an Inland Container Depot or Container Freight Station, .....

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r the Rules would necessarily arrive at the same result, namely, that the quantity of goods to be seen for purposes of valuation can only be after they are imported, that is, brought into India and have to be so at the time and place of importation. 14. The Tribunal's judgment dated 6 th February, 2006 gives several reasons for arriving at the conclusion that the bill of lading quantity alone is to be looked at for the purpose of determining the value of goods imported. The first reason that .....

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t stand in the way because it is not the question of demanding duty on goods not received, but it is the demand of duty on the transaction value. In spite of the "ocean loss", the appellant has to make payment on the basis of the Bill of Lading quantity. 15. We are afraid that each one of the reasons given by the Tribunal is incorrect in law. The Tribunal has lost sight of the following first principles when it arrived at the aforesaid conclusion. First, it has lost sight of the fact t .....

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;imported" occurring in Section 12 and this can only mean that the moment goods have entered the territorial waters the import is complete. We do not agree with the submission. This Court in its opinion in Bill to Amend Section 20 of the Sea Customs Act, 1878 and Section 3 of the Central Excises and Salt Act, 1944, Re [AIR 1963 SC 1760 : (1964) 3 SCR 787 sub nom Sea Customs Act (1878), S. 20(2), Re] SCR at p. 823 observed as follows: "Truly speaking, the imposition of an import duty, b .....

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s and the bill of entry for home consumption is filed." [at paras 17 and 18] 16. Secondly, the taxable event in the case of imported goods, as has been stated earlier, is "import". The taxable event in the case of a purchase tax is the purchase of goods. The quantity of goods stated in a bill of lading would perhaps reflect the quantity of goods in the purchase transaction between the parties, but would not reflect the quantity of goods at the time and place of importation. A bill .....

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urposes of valuation. Fourthly, the basis of the judgment of the Tribunal is on a complete misreading of Section 14 of the Customs Act. First and foremost, the said Section is a section which affords the measure for the levy of customs duty which is to be found in Section 12 of the said Act. Even when the measure talks of value of imported goods, it does so at the time and place of importation, which again is lost sight of by the Tribunal. And last but not the least, "transaction value" .....

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cheme. Customs duty whether at a specific rate or ad valorem is not leviable on goods that are pilferred, lost or destroyed until a bill of entry for home consumption is made or an order to warehouse the goods is made. This, as has been stated above, is for the reason that the import is not complete until what has been stated above has happened. The circular dated 12th January, 2006 on which strong reliance is placed by the revenue is contrary to law. When the Tribunal has held that a demand or .....

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