However, for the imports before Oct 10, 2007, the recent judgment in the case of Shine Petroleum Pvt. Ltd [2008 (224) ELT 134 (Tri.- Bang.)] brings relief for importers.
The Central Board of Excise and Customs (CBEC) had in 1991 continued the practice of not including ship demurrage in the value of imported goods (Circular no. 467/21/89-Cus.V, dated Aug, 14, 1991).
Ten years later, the CBEC said that it was never the intention of the Board to "exempt" ship demurrage charges from customs duty and that nothing contained in the earlier letter should be construed as authorising the exclusion of any ship demurrage charges paid which are required to be included in the assessable value of goods (Circular no. 14./2001 dated March 2, 2001).
Five years later, the CBEC asked not to load ship demurrage for importations prior to March 2, 2001, but for imports after that, the matter is under consideration and clarification shall be issued in due course Later, the Board asked ship demurrage to be loaded in such cases (Circular no. 26/2006 dated Sep, 26, 2006).
Meanwhile, the Courts came out with different views. Demurrage charges paid for detention of vessel at the port are pre-landing stage charges and hence, includible in the assessable value [Panchmahal Steel Ltd [1998 (101) ELT 399 -(T) and Seven seas Petroleum Ltd. 2005 (191) ELT 1181 (Tri.) - refree decision]. Ship demurrage being extraordinary expense, is not includible. [Exim India Oil Co. Ltd 2001 (131) ELT 207 (Tri.) and Indian Oil Corporation Ltd 2000 (122) ELT 615 T-LB]. Demurrage caused due to delay and not due to importation and hence not includible [Hindustan Lever Ltd. 2002 (142) ELT 33 (Cal.)]. Government lawyer concedes that demurrage is not includible [Yeses International 2001 (133) ELT 526 (S.C.)].
For imports before March 2, 2001, the SC judgment in the case of Indian Oil Corporation Ltd [2004 (165) ELT 257 (S.C.)] that the government cannot argue against its own circular settled the issue.
However, litigations persisted for imports. In the Shine Petroleum case, the Tribunal observed that the CBEC circular dated January 12, 2006, only stated that the matter was under consideration. A definitive view that ship demurrage is to be loaded for imports after March 2, 2001 was taken by the CBEC only through its circular dated September, 26, 2006. This circular cannot be given retrospective effect, said the Tribunal.
The Tribunal held that new Valuation Rules mandate loading of ship demurrage but for imports during the earlier period, the Tribunal and SC judgments in the case of IOC will hold good. Although the SC did not decide the issue on merits, the Larger Bench decision was not turned down but was affirmed. Therefore, ship demurrage should not be loaded.
The Shine Petroleum case will influence the outcome of pending litigations. If the CBEC accepts this judgment not to load ship demurrage for the period before Oct, 10, 2007, it can withdraw the pending litigations and save unnecessary costs for the importers.
