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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 ..... t 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 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. Since, according to the show cause notice payment for the demurrage had been made through the negotiating bank, the bank charges and the demurrage paid were includible in the customs value of the goods. On this basis, the assessable value was alleged to be Rs. 6026,05,71,604/-. The respondent was therefore asked to show cause why extra duty to the tune of Rs. 9,75,98,31,199/- should not be realised and why penalty should not be levied against the respondent and its officers. 3.According to the respondent, the 17th to 20th March, 2000 were holidays. On 21st March, the respondent asked for time to file a written reply to the show cause notice. This was rejected by the appellant and the demand was confirmed on 30th March, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 that by virtue of Section 14(1-A) read with Rule 9(2)(a) of the 1988 Rules the actual cost of freight was includible in the assessable value of the imported goods. It is contended that since the 1988 Valuation Rules incorporated the GATT Valuation Principles, this country should adopt the international understanding of the concept of demurrage. A decision of the European Court indicated that the demurrage charges payable to a transport company are part of the cost of transport. In the United States the courts had held that demurrage is only an extended freight. (U.S. v. Attantic Refining Co., DCNJ, 112F Supp. 76, 80) Fourth, it is submitted that the circular issued in 1991 was not binding on the Revenue in view of the decision of this Court in Garden Silk Mills Ltd. (supra). In fact the circular had been withdrawn with effect from 2nd March, 2001. Finally, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproach 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 Constitution Bench in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries [2002 (139) E.L.T. 3 (S.C.)]. After this Court had construed an exemption notification in a particular manner, it said : "We need to make it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue." 11.Despite the categorical language of the clarification by the Constitution Bench, the issue was again sought to be raised before a Bench of three Judges in Collector of Central Excise, Vadodara v. Dhiren Chemicals Industries - 2002 (143) E.L.T. 19 where the view of the Constitution Bench regarding the binding nature of circulars issued under Section 37B of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable 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 may be re-examined in its totality especially in the context of current valuation principles based on the GATT Valuation at Goa on 4th and 5th April, 1991 examined the problem posed in entirety. The Conference came to the conclusion that in the past-despatch money and demurrage would not constitute element of value since it is not an element for the carriage. These moneys are in the nature of penalties or rewards by virtue of a contract of charter agreement between the carrier and the charter and this in no way could be conceived as being part of the freight or for that matter part of the price actually paid or payable for the goods. Having regard to the above and the fact that in no other Custom House there was a practice to include or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 in Dhiren Chemicals (supra), Garden Silks (supra) was a decision on landing charges. It did not construe the 1988 Rules. The circular on the other hand was issued on a re-examination of the issue in the light of the GATT Valuation principles as incorporated in the 1988 Rules. 21.In this view it is not necessary for us to determine the further issue whether in the absence of Board circulars, demurrage would still be includible in the assessable value of the imported goods. For the purposes of these appeals, it is sufficient to hold, as we do, that 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. 22.For the reasons afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 myself to the view that even after the highest Court settles the law on the subject, the view expressed by the Central Board on the same point of law should still hold the field until and unless it is revoked. 25.As is evident from Section 151A the Board is empowered to issue orders or instructions in order to ensure uniformity in the classification of goods or with respect to levy of duty. The need to issue such instructions arises when there is a doubt or ambiguity in relation to those matters. The possibility of varying views being taken by the Customs officials while administering the Act may bring about uncertainty and confusion. In order to avoid this situation, Section 151A has been enacted on the same lines as Section 37A of the Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive 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 may follow from the verdict of this Court in Dhiren Chemicals Industries is another aspect that has worried me. Let us take a case where in accordance with the instructions in the Circular of the Board, the adjudicating authority has to decide the case against the assessee, but as per the decision of this Court, the assessee's contention has to be accepted by the adjudicating authority. If the proposition laid down in Dhiren Chemicals Industries has to be followed, the adjudicating authority should pass an order in terms of the Circular holding the issue in favour of Revenue, knowing fully well that on a challenge by the assessee, it is liable to be set aside in appeal. The assessee will then be driven to file an appeal to get rid of an obviously ill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 persons employed in the execution of the Act, observed thus : "In other words, past transactions which would normally have attracted the stringent provisions of Section 12(1B) as it was introduced in 1955, were substantially granted exemption from the operation of the said provisions by making it clear to all the companies and their shareholders that if the past loans were genuinely refunded to the companies, they would not be taken into account under Section 12(1B)." 30.No proposition was laid down in that case that even if the circular was clearly contrary to the provisions of the Act it should prevail. On the other hand, the learned Judges were inclined to view the circular as granting the benefit of exemption from the operation of the impugned pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is, however, support of certain judicial observations for the view that such circulars constitute external aids to construction. ..." 31.In Bengal Iron Corporation v. C.T.O. [1993 (66) E.L.T. 13 (S.C.) = (1994) Supp. 1 SCC 310] a two Judge Bench considered the effect of a G.O. issued by the State Government clarifying that cast iron castings fall within sub-item (i) of Item No. 2 of the III Schedule to A.P. General Sales Tax Act. The assessee's contention that the benefit should be given in terms of the said G.O. was not accepted by this Court. This is what the Court s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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