Legal principle

A show cause notice and demand contrary to an existing circular of the Board issued under Section 151A are ab initio bad, and while the circular remains in operation the Revenue is bound by it and cannot plead its invalidity or contend otherwise.

Court decision

The Supreme Court dismissed the Revenue's appeals with costs, holding that demurrage was wrongly included by the adjudicating officer in the assessable value contrary to the CBEC circular while it remained operative; the Court expressly declined to decide whether, absent a circular, demurrage would be includible. IOC succeeded.

Facts

Between 1994 and 1999 M/s Indian Oil Corporation Ltd. imported petroleum products and crude oil into India on chartered vessels and cleared the goods on payment of duty without protest. On 15 March 2000 the Commissioner of Customs, Calcutta issued a show cause notice alleging that IOC had wilfully misdeclared value in entries under Section 46 of the Customs Act, 1962 by suppressing demurrage paid to ship owners under charter party agreements, and demanded extra duty of Rs.9,75,98,31,199 with penalty and 20% interest, confirmed on 30 March 2000 despite a request for time. IOC's appeals failed before Commissioner (Appeals), but CEGAT allowed the appeal, relying on a CBEC circular of 14 August 1991 excluding demurrage from assessable value. The Revenue appealed to the Supreme Court.

Key provisions

• Section 14, Customs Act, 1962 — Valuation of goods
• Section 151A, Customs Act, 1962 — Instructions to officers of customs
• Section 151, Customs Act, 1962 — Certain officers required to assist officers of customs
• Section 46, Customs Act, 1962 — Entry of goods on importation