Demurrage charges cannot be included for the purpose of valuation under the Customs Act, 1962.

JUDGMENT :

1. By way of this writ petition, the petitioners have approached the Court challenging the "Explanation 1'to Sub-rule (2) of Rule 10 of the Customs Valuation (Determination of Price Imported Goods) Rules, 2007 and prayed to declare it to be ultra vires the provisions of section 14 of the Customs Act, 1962 for short, the Act).

2. Fact of the case is that the petitioner herein being a Company registered under Companies Act, 1956, imports certain machineries and other items to be used for manufacture of iron and steel products at its plants at Jamshedpur in Jharkhand. The Petitioner imports raw materials in bulk quantities by chartered vessels through the Paradeep Port located in the district of Jagatsinghpur, Odisha and Haldia Port in West Bengal. Such import into the country is assessed to Duty of Customs under Section 14 of the Act.

3. In exercise of powers conferred under Section 156 of the Act read with Section 14 thereof, the Government of India, Ministry of Finance-opposite party No. 1, promulgated the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 (for short, "Rules, 1988"), which was notified vide Notification No.51/1988-Cus (N.T.) dated 18.07.1988.

3.1. While Section 14 of the Act and the Rules, 1988 were in force, the Ministry of Finance-opposite party No. 1, clarified vide its Circular F. No.467/21/89-Cus.V dated 14.8.1991 (Annexure-1) that post-dispatch money would not constitute elements of value since element for the carriage. "Demurrage" and ' dispatch' money being in the nature of penalties or rewards by virtue of a contracted character agreement between the carrier and character 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. Hence, 'demurrage' and 'dispatch money' may not form, a part of freight or for that matter part of the price paid or payable for the goods and assessable under section 14 of the Customs Act, 1962.

3.2. While the issue regarding inclusion of 'demurrage' and 'dispatch' money as a part of assessable value under Section 14 of the Act was being agitated in different forums and was pending resolution by the Hon'ble Supreme Court, the Ministry of Finance, Opposite Party No.1, vide its Circular No.14/2001-Cus dated -02.03. 2001 (Annexure-2), withdrawn the Circular dated 14.08.1991, under Annexure-1 and clarified that by virtue of Rule 9 (2) of the Rules, 1988, ship demurrage charges paid are required to be included in the assessable value of goods under Section 14 of the Act. The aforesaid clarification is not in consonance with the provisions of Section 14 of the Act and Rule 9 of the Rules, 1988 and the same was evidently issued in an arbitrary attempt of the Ministry of Finance, Opposite Party No. 1 to change its view and illegally directed for inclusion of demurrage charges in the cost of transportation to form part of the assessable value.

4. The issue regarding inclusion of demurrage charges to be assessable value of imported goods was decided by the Larger Bench of the Customs Excise and Service Tax Appellate Tribunal(CESTAT) (for short, 'the Tribunal) in the case of Indian Oil Corporation Limited vs. Commissioner of Customs, Calcutta reported in 2000 (122) ELT. 615 (Tri-LB) by holding that if demurrage charges would form a part of the assessable value, the goods covered by the same contract would be assessed to duty at different assessable values and such a situation is not envisaged in the provisions of Section 14 of the Act. The Union of India, Opposite Party No.1 challenged the aforesaid decision of the Tribunal in appeal before the Hon'ble Supreme Court and the appeal was dismissed as reported in 2004 (165) ELT 257 (SC) and the decision of the Tribunal, as above, was upheld.

4.1. A review petition filed by the Union of India-Opposite Party No. 1 against the s