Ship Demurrage Charges Cannot be Included in Transaction Value of Imported Goods: CESTAT  rules in favour of Reliance Industries [Read Order]

The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) in the case of Reliance Industries Limited held that ship demurrage charges cannot be included in the transaction value of imported goods.

The issue involved in the present case is whether ship demurrage charges paid by the respondent to the owner of the vessel/ ship in which the goods are imported on account of the vessel/ ship having to wait at the Port are liable to be included in the Transaction value of the imported goods.  

The Revenue appellant submitted that the Commissioner (Appeals) has set aside the order in original and allowed the appeal of the respondent relying upon the Orissa High Court judgment in the case of Tata Steel Limited. He submits that the said decision has been appealed against by filing SLP before the  Supreme Court by the Revenue.  He further submits that the issue is otherwise covered in favour of the Revenue in the case of Grasim Industries Limited.

On the other hand, the respondent submitted that as of now the issue is squarely covered by  Orissa High Court judgment in the case of Tata Steel Limited. Merely by filing SLP before the Supreme Court, the judgment of the Orissa High Court does not lose its binding precedent on the lower authority. 

The revenue seeks to include the demurrage charges in the value of the imported goods for assessment of customs duty. 

A two-member bench of Mr. Ramesh Nair, Member (Judicial) and Mr. Raju, Member (Technical) observed that the demurrage charges cannot be included in the transaction value of imported goods.  Further found that as per the order in original, the entire case of the Revenue is that as per the explanation added to Rule 10 of Custom Valuation Rules, 2002, the cost of transportation of imported goods should be included in the transaction value. This Provision was not provided in the Customs Act, 1962 about the Valuation of goods.  However the same was brought under the rule by way of explanation. 

The CESTAT viewed that the explanation to Rule 10 to Customs Valuation Rules was held ultra virus, the entire basis of the Revenue case falls.  The Tribunal held that the impugned order passed by the Commissioner is just and proper and the same does not suffer from any infirmity.  The Revenue’s appeal was dismissed. 

To Read the full text of the Order CLICK HERE

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