JUDGMENT

Ruma Pal, J.

1. 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 custom 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 misdeclared 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. 60,26,05,71,604. 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.

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 2000. Penalty equivalent to the amount of the duty determined was also levied. In addition, interest @ 20 per cent per annum was imposed.

3. The respondent filed appeals before the Commissioner of Customs (Appeals). The appeals were rejected. The respondent preferred a further appeal before the Customs Excise and Gold (Control) Appellate Tribunal (CEGAT). The Tribunal allowed the appeal of the respondent on grounds which are briefly summarized:

(1) The Central Board of Excise and Customs (CBEC) had issued a circular on 14th August 1991 in which it was said that the demurrage did not form part of the assessable value of the goods imported; the circular was binding on the Revenue and the Department could not contend otherwise;

(2) The decision of this Court in Garden Silk Ltd. v. Union of India, 1999 (113) ELT 358 relied upon by the Revenue was not an authority for the proposition that demurrage payable on account of delay in discharging goods from a vessel was includible in the value of goods while assessing the customs duty payable thereon.

(3) Under Section 14 of the Customs Act, 1962 the assessable value of the imported goods must be the price at which the goods are ordinarily sold. The payment of demurrage was not an incident of an ordinary sale. An extraordinary expenditure, like demurrage, could not be included in the assessable value of the imported goods.

4. According 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) ELT 321 to contend that demurrage was not, in this sense, an extraordinary paym