COMMISSIONER OF CUSTOMS, CALCUTTA ETC. ETC.versusM/S. INDIAN OIL CORPORATION LTD. AND ANR.

       COMMISSIONER OF CUSTOMS, CALCUTTA ETC. ETC.                               A
                                     v.
          MIS. INDIAN OIL CORPORATION LTD. AND ANR.

                          FEBRUARY 17, 2004

                                                                                 B
         [RUMA PAL AND P. VENKATARAMA REDD!, JJ.]


      Customs J!.ct, 1962-Sections 46 and 151-A/Circular dated 14.8.1991
issued by the Central Board of Excise & Customs:

      Import ofpetroleum products and Crude Oil by the assessee-Clearance
                                                                                 c
ofgoods upon payment. ofcustoms duty thereto-Show cause notice on grounds
ofmisdeclaring value ofthe goods and suppressing the facts regarding payment
ofdemurrage charges-Revenue confirming extra duty after adding demurrage
charges in the value ofthe goods-Appeals rejected by the Appellate Authority--
On appeal, Tribunal held that in view of the Circular issued by the CBEC         D
demurrage charges not includible in the customs value of the imported goods-
On appeal, held, the Circular stipulates exclusion of demurrage from the
assessable value of the goods-Affirmed by the Constitution Bench in an
earlier case-It, therefore, remains a good law so long as Circular remains
operative-Hence, demurrage wrongly included in the assessable value of the       E
goods-Customs Valuation (Determination of Price of Imported Goods) Rules
I998; Rules 5-9--Constitution of India, 1950-Article 141.
      Provisions of law under Section 151 A of the Customs Act, vis-a-vis
Section 1I9 of the Income Tax Act and Section 37 of the Central Excise Act-
Ana/ogy between-Held: Parliament had legislatively approved the same F
construction as under the provisions in the Income Tax Act and the Central
Excise Act-The same provision OJsing same words introduced in the Customs
Act-Principle enunciated in earlier Acts should be determinative of the
construction in respect of materially similar statutory provisions in the later
Act-Hence, the Circular is binding on the Revenue-Interpretation of
Statutes-Income Tax Act, 1961; Section I 19--Central Excise Act; Section G
37B.

     Respondent-assessee, an Oil Corporation, imported various
petroleum products and cleared them upon payment of customs duty
without any protest by the Customs authorities. Later, the Revenue had

                                    511                                          H
    512                   SUPREME COURT REPORTS                  [2004] 2 S.C.R.

A issued a show cause notice to the assessee alleging that they had wilfully
    misdeclared the value of the g<!ods by deliberately suppressing the facts
    that the demurrage charges had actually been paid to the ship owners;
    and that since the payment for the demurrage charges had been made
    through the negotiating bank, the demurrage charges along with bank
B   charges, both were includible in the value of the goods. Revenue demanded
    extra customs duty and later confirmed the demand, and also levied
    penalty. Assessee filed an appeal before the authority concerned, which
    was rejected. However, the appeal to the Tribunal was allowed on the
    ground that the Circular issued by the Central Board of Excise and
    Customs declaring that demurrage not includible in the value of the goods
C   imported was binding on the Revenue; that the payment of demurrage
    charges was not an incident of sale; and that it was not an extraordinary
    expenditure, thus could not be includible in the assessable value of goods.
    Hence the present appeal by the Revenue.
          It was contended for the Revenue that the demurrage was a
D component of the cost of freight and the authority concerned had accepted
    the transaction value of the goods imported, which was inclusive of cost,
    insurance and freight; that demurrage was not an extraordinary payment;
    that since the Valuation Rules incorporated the GATT valuation
    principles, demurrage could be considered as part of the cost of transport;
    and that the Circular was not binding as withdrawn later on.
E
          On behalf of the Respondent-assessee, it was submitted that the
    Circular issued as per provisions of the Customs Act was in pari materia
    with Section 378 of the Central Excise Act; and that the Circular was
    binding on Revenue; that the assessable value of the goods is the ordinary
    sale price at the price of importation; and that the demurrage did not form
F   part of the sale.
          Dismissing the appeals, the Court
          HELD: Per Ruma Pal, J.:
          1.1. Materially identical provisions are contained in Section 119 of
G the Income Tax Act and Section 378 of the Central Excise Act. This Court
    has, in a series of decisions, held that Circulars issued under Section 119
    of the Income Tax Act, 1961 and 378 of the Central Excise Act are binding
    on the Revenue. (519-E-F)
         Collector of Central Excise, Vadodara v. Dhiren Chemicals Industries,
H   (2002) 143 ELT 19, followed.
                     COMMR. OF CUSTOMS'" INDIAN OIL CORPORATION LTD.             5 J3
......        Mis. Hindustan Aeroneutics v. Commissioner of Income Tax, Karnataka,      A
         Bangalore, [2000j 5 SCC 365, referred to.

              Simplex Castings Ltd. v. Commissioner of Customs, Visakhapatnam,
         (2003) 5 sec 528, distinguished.

               1.2. The pruvisions of Section 151A of the Customs Act are in pari       B
         materia with the provisions of Section 119 of the Income Tax Act, 1961
         and Section 37B of the Central Excise Act. Parliament introduced Section
         151A by an amendment to the Customs Act, 1962 in 1995 but with effect
         from 27th December, 1985 (Act 80of1995), when this Court had already
         construed identical language in the manner indicated. It may be assumed
         that Parliament had legislatively approved the construction by using the       C
         exact words so construed again in the Customs Act. There is, therefore,
         no reason why the principles enunciated by this Court under the two
         earlier Acts should not also be determinative of the construction put on
         the later in respect of a materially similar statutory provision. {521-A, B}
                                                                                        D
               1.3. The Circular issued by the CBEC in no uncertain terms excludes
         demurrage from the assessable value. In the light of the judicial principles
         enunciated earlier, it was not open to the Revenue to either issue the show
         cause notice or contend otherwise. The demand based on an assessable
         value inclusive of demurrage cannot be sustained as long as the circular
         remained operative and as long as the decisions in the case of CCE,            E

---      Vadodara v. Dhiren Chemicals Industries (supra) remain good law. The
         Circulars issued by the Central Board of Direct Taxes under the Income
         Tax Act, 1961 and the Central Board of Excise & Customs under the
         Central Excise Act, 1944 have been held to be binding primarily on the
         basis of the language of the statutory provisions buttressed by the need       p
         of the adjudicating officers to maintain uniformity in the levy of tax/duty
         throughout the country. (522-A-CJ

              Collector of Central Excise, Vadodara v. Dhiren Chemicals Industries,
         (2002) 143 ELT 19, relied on.
                                                                                        G
              Mis. Hindustan Aeroneutics v. Commissioner ofIncome Tax, Karnataka,
         Bangalore, (2000) 5 SCC 365 and Panchmahal Steel Ltd. v. Collector of
         Customs, Rajkot, (1998) 101 ELT 399, distinguished.

               1.4. The stand of the Revenue that this Court had taken the view
         that demurrage was includible in the value of the goods in Garden Silks        H
    514                   SUPREME COURT REPORTS                  [2004] 2 S.C.R.

A both in the adjudication order and before the Tribunal appears to have
  been abandoned, rightly, in the written notes of submission. Apart from
                                                                                   ··-
  the decision of the Constitution Bench in Dhiren Chemicals, Garden Silks
  was a decision on landing charges. It did not construe the I 988 Rules. The
  Circular on the other hand was issued on a re-examination of the issue in
B the light of the GATT Valuation principles as incorporated in the I 988
  Rules. In this view it is not necessary to determine the further issue
  whether in the absence of Board Circulars, demurrage would still be
  includible in the assessable value of the imported goods. It is sufficient to
  hold that demurrage was wrongly included by the adjudicating officer in
  the assessable value contrary to the directive of the Central Board of
C Excise and Customs at a time when the Circular had not been withdrawn.
                                                                                     ,.,....,_
                                                        (522-G-H, 523-A-C)

          Garden Silk Mills Ltd. v. Union of India, (1999) 113 ELT 368,
    distinguished.

D         Per Venkatarama Reddi, J. (Supplementing to highlight certain
    doubts as to the correctness of the proposition laid down in the two cases
    of Dhiren Chemical Industries - one decided by the Constitution Bench and
    the other by a three Judge Bench):

          1.1. The Circulars issued by the Board under Section 151-A of the
E   Customs Act or Section 37 B of the Central Excise Act are generally
    binding on the Revenue. Normally, the instructions issued by the superior
    authorities on administrative side cannot fetter the exercise of quasi         ..........
    judicial power and the statutory authority invested with such power has
    to act independently in arriving at a decision under the Act. However,
    when there is a statutory mandate to observe and follow the orde.rs and
F
    instructions of the Board in regard to specified matters, that mandate has
    to be complied with. It is not open to the adjudicating authority to deviate
    from those orders or instructions which the statute enjoins that it should
    follow. If any order is passed contrary to those instructions the order is
    liable to be struck down on that very ground. Extending this principle
G   which flows from the statutory provision contained in Section 151-A of
    the Customs Act or a pari-materia provision in other fiscal enactments,
    this Court rightly held that it is not open to the department to file an
    appeal against the order passed in conformity with the circular. Though,
    Supreme Court, the highest Court settles the law on the subject, the view
H   expressed by the Central Board on the same point of law should still hold
                 COMMR. OF CUSTOMS v. INDIAN OIL CORPORATION LTD.            515

     the field until and unless it is revoked. 1523-G-H; 524-A-Dl                   A
          Sirpur Paper Mills Ltd. v. Commissioner of Wealth Tax, Hyderabad,
     11970) 1 sec 795, relied on.

           1.2. As is evident from Section 151-A, the Board is empowered to
     issue orders or instructions in order to ensure uniformity in the              B
     classification of goods or with respect to levy of duty. The need to issue
     such instructions arises when there. is a doubt or ambiguity in relation to
     those matters. The apparent need to issue such Circulars is felt when there
     is no authoritative pronouncement of the Court on the subject. Once the
     relevant issue is decided by the Court at the highest level, the very basis
     and substratum of the Circular disappears. The law laid down by this           C
     Court will ensure uniformity in the decisions at all levels. By an express
     constitutional provision, the law declared by the Supreme Court is made
     binding on all the Courts within the territory of India (vide Article 141).
     Proprio vigore the law is binding on all the tribunals and authorities.
                                                                       (524-E-G)    D
            1.3. In a situation, as in the present case, the Customs authority
     should obey the constitutional mandate emanating from Article 141 read
     with Article 144 rather than adhering to the letter of a statutory provision
     like Section 151-A of t.1e Customs Act. The Customs authority should act
                                                                                    E
--
     subservient to the decision of the highest Constitutional Court and not to
     the Circular of the Board which is denuded of its rationale and substratum
     under the impact of the authoritative pronouncement of the Highest Court.
     Alternatively, Section 151-A has to be suitably read down so that the
     Circulars issued would not come into conflict with the decision of this
     Court which the Customs authorities are under a Constitutional obligation
     to follow. (525-C-D)                                                           F
           1.4. No principle or authority could countenance the view expressed
     in Dhiren Chemicals case that regardless of the interpretation placed by
     this Court, the Circulars which give a different interpretation would still
     survive and they have to be necessarily followed by the statutory
     functionaries. The opinion expressed in the case of Hindustan Aeronautics      G
     v. Commissioner of Income Tax, Karnataka, [2000) 5 SCC 365 seems to
     project a correct view, though that decision cannot prevail over the
     Constitution Bench decision in Dhiren Chemical Industries. [525-E]

          Collector of Central Excise, Vadodara v. Dhiren Chemicals Industries,
     (2002) 143 ELT.19, followed.                                                   H
    516                   SUPREME COURT REPORTS                  [2004] 2 S.C.R.   ........
A        Hindustan °Aeronautics v. Commissioner of Income Tax, Karnataka,
    120001 5 sec 365, relied on.

          2. The dicta/observations in some of the decisions of this Court need
    to be reconciled or explained. The need to redefine succinctly the extent
    and parameters of the binding character of the Circulars of Central Board
B   of Direct Taxes or Central Excise looms large. It is desirab.le that a
    Constitution Bench hand down an authoritative pronouncement on the             -
    subject. [529-D)

          Collector of Central Excise, Vadodara v. Dhiren Chemicals Industries,
    (2002) 143 ELT l9; Garden Silk Mills Ltd. v. Union of India, (1999) 113
c   ELT 368; and Panchmahal Steel Ltd. v. Collector of Customs, Rajkot, (1998)
    101 ELT 399; Navnit Lat's case AIR (1965) SC 1375; Ellerman Lines Ltd.,
    v. Commissioner of Income Tax, West Bengal, AIR (1972) SC 524; K.P.
    Varghese v. /. T. Officer, Ernakulam, AIR (1981) SC 1922; Sirpur Paper Mills
    ltd. v. Commissioner of Wealth Tax, Hyderabad, [1970) 1SCC795; Keshavji
    Ravji & Co. v. /. T. Commissioner, 11990) 2 SCC 231; Bengal Iron
D   Corporation, v. C. T.O., (1994) Supp. 1 SCC 310; CS. T. v. Indra Industries,
    12000) 9 SCC 66 and Wilh, Wilhelmsen v. C./. T., 11996) 9 SCC 161, referred
    to.
         CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2342-
    2362 of 2001.
E
          From the Judgment and Order dated 6.11.2000 of the Central Excise
    Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O. Nos .
                                                                                   --
    .878-898 of 2000-A with Stay No. 258/2000-A in A.Nos. C/249/2000-A with
    C/Stay/1234/2000-A and A.No. C/319-328/2000-A, C/629/88-A and C/650-
    658 of I 987-A.
F
         Raju Ramachandran, Additional Solicitor General, Dhruv Mehta, K.
    Swami, B. Krishna Prasad, K.C. Kaushik, Mrs. Manik Karanjawala, Ms.
    Seema Sundd, Ms. Meghna Mishra and Krishna Kumar Gogana for the
    Appellant.
         Joseph Vellapally, Thomas Vallapally, Mahesh Agarwal, Rishi Agarwal,
G
    Vivek Yadav, Ms. Manu Krishnan, E.C. Agarwal, V. Lakshmikumaran, Alok
    Yadav and Rajesh Kumar for the Respondents.
          The Judgment of the Court was delivered by

           RUMA PAL, J. Between 1994 and 1999, M/s Indian Oil Corporation
                                                                                   -
H   Ltd., the respondent herein, imported various petroleum products and crude
         COMMR. OF CUSTOMS v. INDIAN OIL CORPORATION LTD. [RUMA PAL, J.]      517

    oil into India. These goods were carried to different pons in India by vessels   A
    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.

           On 15th March, 2000, the respondent received a show cause notice sent
    by the Co)11missioner of Customs, Calcutta, the appellant before us, alleging    B
    that the respondent had wilfully misdeclared the value of the goods while
    ma~ing 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        C
    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.(:)026,05,71,604. 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, 17th to 20th March 2000 were holidays.        D
    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.                                                                     E
         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
    (CEGA T). The Tribunal allowed the appeal of the respondent on grounds
    which are briefly summarized:                                                    F
           (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;                               G
           (2) The decision of this Court in Garden Silk Mills Ltd. v. Union of
               India, 1999 (113) EL T 358 relied upon by the Revenue was not
               an authority for the proposition that demurrage payable on account
               of delay in discha:-ging goods from a vessel was includible in the
               value of goods while assessing the customs duty payable thereon.      H
j
    518                    SUPREME COURT REPORTS                     [2004) 2 S.C.R.

A          (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.
B
           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
C   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 I4 of the
    Customs Act provided for the valuation of goods for purposes of assessment
D   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 Mis Eicher Tractors. Ltd. 2000 (I22) EL T 321 to
    contend that demurrage was not, in this sense, an extraordinary payment. It
    is paid in terms of the agreement between the respondent and the vessel
E   owner. Third, it is submitted that by virtue of Section 14 (I-A) read with
    Rule 9 (2)(a) of the 1988 Rules the actual cost of freight was includible in
    the assessable value of the imported goods. It is contended that since the
    1988 Valuation Rules incorporated the GATT Valuation Principles, this
    country should adopt the international understanding of the concept of
F   demurrage. A decision of the European Court indicated that the demurrage
    charges payable to a transport company are part of the cost of transport. In
    the United States the courts had held that demurrage is only an extended
    freight. (US. v. Attantic Refining Co., DCNJ, 112 F Supp 76,80) Fourth, it
    is submitted that the circular issued in 1991 was not binding on the Revenue
    in view ,of the decision of this Court in Garden Silk Mills Ltd. (supra). In
G   fact the circular had been withdrawn with effect from 2nd March 2001.
    Finally, it was submitted that the Tribunal had itself in the case of Panchmahal
    Steel ltd. v. Collector of Customs, Rajkot 1998 (101) ELT 399 held that
    demurrage charges were includible in the assessable value of imported goods.
    The judgment was delivered on 4th December 1996 and "eclipsed" the 1991
H   circular.
 -..
..a
              COM MR. OF CUSTOMS v. INDIAN OIL CORPORATION LTD. [RUMA PAL, J.] 519

              The respondent has submitted that the circular had been issued under
       SectiQn 151 A of the Customs Act which was in para materia with Section
                                                                                                            A

       37B of the Central Excise Act and that it was well settled that the Revenue
       was bound by the instructions issued by CBEC. It is submitted that the
       Commissioner ought not to have raised or confirmed the demand in violation
       of the instructions of the CBEC nor was it open to the Revenue to file an
       appeal before this Court seeking relief contrary to the circular. On the merits,                     B
       it is submitted that the 1988 Rules were subject to the provisions of Section
       14 which provides that the assessable value had to be arrived on the basis of
       the ordinary sale price at the price of importation. It is submitted that apart
       from the fact that demurrage did not form part of the ordinary sale price,
       even Rule 9(2)(a) did not include demurrage as a component of the assessable                         C
       value. The decisions in Garden Silk and Panchmahal as also the decision of
       the European Court have been distinguished as inapplicable. It was submitted
       that the order of the Commissioner was passed with undue haste, with a
       closed mind and in violation of the principles of natural justice.
             Section 151-A of the Customs Act, 1961 in so far as it is relevant                             D
       provides:
                "Instructions to officers of customs. - The Board may, if it considers
                it necessary or expedient so to do for the purpose of uniformity in the
                classification of goods or with respect to the levy of duty thereon,
                issue such orders, instructions and directions to officers of customs as
                it may deem fit and such officers of Customs and all the other persons                      E
                employed in the execution of this Act shall observe and follow such
                orders, instructions and directions of the Board".
            Materially identical provisions are contained in Section 119 of the
       Income Tax Act, 1961 and Section 3 78 of the Central Excise Act.
             This Court has, in a series of decisions, held that circulars issued under                     F
       Section 119 of the Income Tax Act, 1961and378 of the Central Excise Act
       are binding on the Revenue 1•


       1.   See Navnit Lal C. Jhf'veri v. K.K. Sen. (1965) 56 ITR 198; Ellerman Lines Ltd. v. CIT. (1971)
            82 !TR 913, K.P. Varghese v. Income Tax Officer, Ernakulam. [1981] 4 sec 173; Union             G
            of India v. Azadi Bachao Ando/an, [2003] 8 SCALE 287, 308; Collector of Central Excise
            Patna v. Usha Martin Industries, (1994) (94) ELT: [1997] 7 SCC 47; Ranadey
            Micro.'1utrientsv. CCE, (1996) 8 ELT, 19: [1996] IO SCC 387; Collector ofCentral Excise,
            Bombay v. Jayant Dalal (P) Ltd., (1998) 100 ELT 10: [1997] 10 SCC 402; Collector of
            Central Excise, Bombayv. Kores India Ltd., (1997) 89 ELT441; [1997] 10 SCC 338; Paper
            Products Ltd. v. Collector of Central Excise, (1999) 112 ELT 765: [1997] 7 SCC 84 and
            Dabur India Ltd. v. CCE, Meeru:, (2003) 157 ELT 129 16.                                         H
    520                    SUPREME COURT REPORTS                     [2004] 2 S.C.R.

A         The somewhat different approach in Mis. Hindustan Aeronautics v.
    Commissioner of Income Tax, Karnataka, Bangalore, [2000] 5 SCC 365 by
    two learned Judges of this Court, apart from being contrary to the stream of
    authority cannot be taken to have laid down good law in view of the subsequent
    decision of the Constitution Bench in Collector of Central Excise, Vadodara
B   v. Dhiren Chemical Industries. After this Court had construed an exemption
    notification in a particular manner, it said:                                       _.._..,..
            "We need to make it clear that, regardless of the interpretation that
            we have placed on the said phrase, if there are circulars which have
            been issued by the Central Board of Excise and Customs which place
            a different interpretation upon the said phrase, that interpretation will
c           be binding upon the Revenue".

         Despite the categorical language of the clarification by the Constitution
  ·Bench, the issue was again sought to be raised before a Bench of three
   Judges in Collector of Central Excise, Vadodara v. Dhiren Chemicals
   Industries: (2002) 143 EL T 19 whei"e the view of the Constitution Bench .
D regarding the binding nature of circulars issued under Section 37B of the
   Central Excise Act, 1944 was reiterated after it was drawn to the attention of
   the Court by the Revenue that there were in fact circulars issued by the
   Central Board of Excise and Customs which gave a different interpretation
   to the phrase as interpreted by the Constitution Bench. The same view has
E also been taken in Simplex Castings ltd. v. Commissioner of Customs,
   Visakhapatnam, [2003] 5 sec 528.

          The principles laid down by all these decisions are :

           (l) Although a circular is not binding on a Court or an assessee, It
               is not open to the Revenue to raise the contention that is contrary
F
               to a binding circular by the Board. When a circular remains in
               operation, the Revenue is bound by it and cannot be allowed to
               plead that it is not valid nor that it is contrary to the terms of the
               statute.
           (2) Despite the decision of this Court, the Department cannot be
G              permitte~ to take a stand contrary to the instructions issued by
               the Board.
           (3)   A show cause notice and demand contrary to existing circulars
                 of the Board are ab initio bad
H          (4)   It is not open to the Revenue to advance an argument or file an
             COMMR. OF CUSTOMS v. IN DIAN OIL CORPORATION LTD. [RUMA PAL, J.]       521

                    appeal contrary to the circulars.                                      A
              As we have noted the provisions of Section 151 A are in pari materia
        with the provisions of S. 119 of the Income Tax Act 1961 and Section 37B
.....   of the Central Excise Act. Parliament introduced Section 151 A by an
        amendment to the Customs Act, 1962 in 1995 but with effect from 27th
        December, 1985 (Act 80 of 1995), when this Court had already construed             B
        identical language in the manner indicated. It may be assumed that Parliament
        had legislatively approved the construction by using the exact words so
        construed again in the Customs Act. There is, therefore, no reason why the
-..     principles enunciated by this Court under the two earlier Acts should not also
        be determinative of the construction put on the later in respect of a materially   C
        similar statutory provision. This was also not argued by the appellant.

             During the period in question, the following circular had been issued
        by the Central Board of Excise and Customs with regard, inter alia to
        demurrage charges:

                "Subject : Demurrage charges and dispatch money not to form part           D
                of the assessable value - Regarding.

               The Kandla Custom House had raised the issue relating to the inclusion
               of demurrage charges and exclusion of dispatch money for computing
               the assessable value ascertainable under Section 14 of the Customs E
               Act, 1962. Pursuant to the decision taken in the Tariff Conference of
               Collector held in August 1981, the issue was further discussed in the
               Tariff Conference of February 1989. The Conference had desired
               that the matter may be re-examined in its totality especially in the
               context of current valuation principles based on the GATT Valuation
               at Goa on 4th and 5th April, 1991 examined the problem posed in F
               entirety. The Conference came to the conclusion that in the past-
               despatch money and demurrage would not constitute element of value
               since it is not an element for the carriage. These moneys are in the
               nature of penalties or rewards by virtue of a contract of charter
               agreement between the carrier and the charter and this in no way
               could be conceived as being part of the freight or for that matter part G
               of the price actually paid or payable for the goods.

                   Having regard to the above and the fact that in no other Custom
                House there was a practice to include or deduct such moneys, it has
                been decided that 'demurrage' and 'despatch' money may not form            H
    522                    SUPREME COURT REPORTS                     [2004) 2 S.C.R.

A           a part of assessable value".

          The Circular in no uncertain terms e~cludes demurrage from the
    assessable value. In the light of the judicial principles enunciated earlier, it
    was not open to the appellant to either issue the show cause notice or contend
    otherwise. The demand based on an assessable value inclusive of demurrage
B   cannot be sustained as long as the circular remained operative and as long
    as the decisions cited earlier remain good law.

          The submission of the appellant in this context is that the respondent
    had not acted on the basis of the circular and therefore the principle of
    promissory estoppel did not apply. The submission is misconceived. The
C circulars issued by the CBDT under the Income Tax Act, 1961 and the CBEC
    under Section 37B of the Central Excise Act, 1944 have been held to !Je
    binding primarily on the basis of the language of the statutory provisions
  . buttressed by the need of the adjudicating officers to maintain uniformity in
   the levy of tax/duty throughout the country.
D
           It is then submitted that the CEGA T had itself held that the demurrage
    charges were pre-landing charges and hence includible in the assessable value
    in Pan~hmahal v. Collector of Customs Rajkot, ( 1998) 10 I EL T 399 . It is
    submitted that the law laid down by the Tribunal which became final for
    want of appeal wou Id have to be followed otherwise there would be a chaotic
E   situation. Reliance has also been made on the decision of this Court in
    Hindustan Aeronautics, (supra).

          We have already noted that Hindustan Aeronautics does not represent
    the correct law. The submission of the appellant is directly contradictory to
    the principles laid down by the series of decisions noted earlier and the
F   attempt on the pait of the appellant to distinguish the long line of authority
    is unacceptable.

           The decision in Panchmaha/ Steel (supra) does not allow an adjudicating
    officer to act in violation of the Circular issued under Section 151A.
G   Incidentally the decision in Panchmahal (supra) was an ex-parte one in the
    sense that the importer was not represented when the matter was argued. Its
    failure to prefer an appeal could not in the circumstances mean that the issue
    had become final as far as all other importers are concerned. Moreover, there
    was no reference to the Circular nor any reason for coming to the conclusion
    that demurrage was includible in the value of the imported goods.
H
          COMMR. OF CUSTOMS v. INDIAN OIL CORPORATION LTD. [REDD!, J.]          523
           We may mention here that the stand of the appellant that this Court had      A
    taken the view that demurrage was includible in Garden Silk (supra) both in
    the adjudication order and before the Tribunal appears to have been abandoned,
    in our opinion rightly, in the written notes of submission. Apart from the
    decision of the Constitution Bench in Dhiren Chemicals (suprn), Garden
    Silks (supra) was a decision on landing charges. It did not construe the 1988       B
    Rules. The circular on the other hand was issued on a re-examination of the
    issue in the light of the GATT Valuation principles as incorporated in the
    1988 Rules.

          In this view it is not necessary for us to detennine the further issue
    whether in the absence of Board circulars, demurrage would still be includible      C
    in the assessable value of the imported goods. For the purposes of these
    appeals, it is sufficient to hold, as we do, that demurrage was wrongly included
    by the adjudicating officer in the assessable value contrary to the directive of
    the CBEC at a time when the circular had not been withdrawn.

          For the reasons aforesaid, the appeals are dismissed with costs.              D
           P. VENKAT ARAMA REDD I, J. I am in agreement with my learned
    Sister that without entering into the merits of the contentions advanced, the
    Revenue's appeal is liable to be dismissed in the light of the-Circular dated
    14-8-1991 issued by Central Board of Excise and Customs which is traceable
    to the power conferred on the B• ard by Section 151-A of the Customs Act.           E
    The purpose of this separate opinion is only to highlight certain doubts I have
    entertained as to the correctness of the proposition laid down in the two
    Dhiren Chemical Industries cases-one decided by the Constitution Bench
    and the other by a three Judge Bench. The absence of reasoning in both these
    decisions has aggravated my doubts and made me ponder over the possible
    implications of the said judgments. Hence I felt impelled to express the            F
    thoughts passing in my mind and my primafacie views, hoping that the legal
    position will perspicuously be laid down by a Constitution Bench sooner or
    later. For the time being, I have refrained from persuading my learned Sister
    to refer the matter to a larger Bench as the decision in the instant case need
    11ot rest on the principle enunciated in the said two decisions.                    G
          I have no reservations in accepting the principle that the circulars issued


-   by the Board under Section 151 (A) of the Customs Act or Section 37 B of
    the Central Excise Act are generally binding on the Revenue. Normally, the
    instructions issued by the superior authorities on administrative side cannot
                                                                                        H
    524                     SUPREME COURT REPORTS                     [2004] 2 S.C.R.

A   fetter the exercise of quasi judicial power and the statutory authority invested
    with such power has to act independently in arriving at a decision under the
    Act (vide: Sirpur Paper Mills ltd. v. Commissioner of Wealth Tax, Hyderabad,
    [ 1970] 1 SCC 795. However, when there is a statutory mandate to observe
    and follow the orders and instructions of the Board in regard to specified
    matters, that mandate has to be complied with. It is not open to the adjudicating
B   authority to deviate from those orders or instructions which the statute enjoins
    that it should follow. If any order is passed contrary to those instructions the
    order is liable to be struck down on that very ground. That is what has been
    held in some of the cases referred to by my learned Sister. Extending this
    principle which flows from the statutory provision contained in Section 151
C   (A) of the Customs Act or a pari-materia provision in other fiscal enactments,
    this Court also held that it is not open to the department to file an appeal
    against the order passed in conformity with the circular. To this extent I have
    no difficulty in understanding the rationale of the decisions of this Court
    leaving apart for the time being the decisions in which a somewhat different
    note was struck. However, I am unable to reconcile myself to the view that
D   even after the highest Court settles the Jaw on the subject, the view expressed
    by the Central Board on the same point of Jaw should still hold the field until
    and unless it is revoked.

          As is evident from Section 151-A the Board is empowered to issue
E orders or instructions in order to ensure uniformity in the classification of
    goods or with respect to levy of duty. The need to issue such instructions
    arises when there is a doubt or ambiguity in relation to those matters. The
    possibility of varying views being taken by the customs officials while
    administering the Act may bring about uncertainty and confusion. In order to
    avoid this situation, Section 151-A has been enacted on the same lines as
F   Section 37A of the Central Excise Act. The apparent need to issue such
    circulars is felt when there is no authoritative pronouncement of the Court on
    the subject. Once the relevant issue is decided by the Court at the highest
    level, the very basis and substratum of the circular disappears. The law laid
    down by this Court will ensure uniformity in the decisions at all levels. By
    an express constitutional provision, the law declared by the Supreme Court
G   is made binding on all the Courts within the territory of India (vide Article
    141). Proprio vigore the law is binding on all the tribunals and authorities.
    Can it be said that even after the law is declared by the Supreme Court the
    adjudicating authority should still give effect to the circular issued by the
    Board ignoring the legal position laid down by this Court? Even after the
H   legal position is settled by the highest Court of the land, should the customs
                    COMMR. OF CUSTOMS v. INDIAN OIL CORPORATION LTD. [REDD!, J.]         525
........    authority continue to give primacy to the circular of the Board?. Should              A
            Section 151 (A) be taken to such extremities? Was it enacted for such purpose?
            Does it not amount to transgression of constitutional mandate while adhering
            to a statutory mandate? Even after the reason and rationale underlying the
            circular disappears, is it obligatory to continue to follow the circular? These
-~
            are the questions which puzzle me and these are the conclusions which follow
             if the observations of this Court in the two cases of Dhiren Chemical Industries
                                                                                                  B
            are taken to their logical conclusion.

                  I am of the view that in a situation like this, the Customs authority
            should obey the constitutional mandate emanating from Article ! 41 read with
            Article 144 rather than adhering to the letter of a statutory provision like
            Section 151-A of the Customs Act. The Customs authority should act
                                                                                                  c
            subservient to the decision of the highest Constitutional Court and not to the
            circular of the Board which is denuded of its rationale and substratum under
            the impact of the authoritative pronouncement of the highest Court.
            Alternatively, Section 151-A has to be suitably read down so that the circulars
            issued would not come into conflict with the decision of this Court which the         D
            Customs authorities are under a Constitutional obligation to follow.

                   I can perceive of no principle or authority to countenance the view
            expressed in Dhiren Chemicals case that regardless of the interpretation placed
            by this Court, the Circulars which give a different interpretation would still
            survive and they have to be necessarily followed by the statutory functionaries.      E
    --·     The opinion expressed in the case of Hindustan Aeronautics v. Commissioner
            of Income Tax, Karnataka [2000] 5 SCC 365 seems to project a correct view,
            though that decision cannot prevail over the Constitution Bench decision in
            Dhiren Chemical Industries (supra). The unintended results that may follow
            from the verdict of this Court in Dhiren Chemical Industries is another aspect
                                                                                                  F
            that has worried me. Let us take a case where in accordance with the
            instructions in the Circular of the Board, the adjudicating authority has to
            decide the case against the assessee, but as per the decision of this Court, the
            Assessee' s contention has to be accepted by the adjudicating authority. If the
            proposition laid down in Dhiren Chemical Industries has to be followed, the
            adjudicating authority should pass an order in terms of the Circular holding          G
            the issue in favour of Revenue, knowing fully well that on a challenge by the
            assessee, it is liable to be set aside in appeal. The aSS\!SSee will then be driven
            to file an appeal to get rid of an obviously illegal order. ls it all contemplated
 ----'--.
             by Section 151-A?
     /


                   As far as the present case is concerned, there is no direct decision of        H
    526                      SUPREME COURT REPORTS                      [2004] 2 S.C R.

A   the Supreme Court which has taken a view different from what was expressed
    in the Circular of 1991. As clarified by my learned Sister, the decision of th is
    Court in Garden Silks case has no direct bearing on the issue involved in this
    case. It did not construe the 1988 Rules. Hence, the doubts expressed by me
    in regard to the correctness of the principle laid down in Dhiren Chemical
B   Industries case need not necessarily be resolved in the instant case. Still, the
    observation in Dhiren Chemical Industries was sought to be pressed into
    service to counter the contention of the appellant that a cloud has been cast
    on the Circular in the wake of the Tribunal's order in Panchmahal Steel case
    and therefore the Circular had been eclipsed. Whether the Tribunal's order
    stands on the same footing as the decision of this Court, insofar as its impact
C   on the Circular is concerned is one aspect which will have to be considered
    in an appropriate case. Here, that issue need not be probed further. I agree
    with my learned Sister that the order of the Tribunal being an ex-parte one,
    it does not take precedence over the binding circular under Section 151-A
    and I may add that the Tribunal's decision is not so categorical and clear as
    to strike at the root of the Circular in its application to the facts of the present
D   case. Hence, there is no need for further discussion on this point.

           Before parting, I would like to point out that the basis on which the
    circulars of the Central Board are placed on a high pedestal seems to have
    its origin in Navnit Lal's case AIR (1965) SC 1375. In that case, a Constitution
E   Bench of this Court was examining the constitutional validity of Sections 2,
    6A(e) and 12( I B) inserted in the Income Tax Act of 1922 by the Finance Act
    of 1955. These Sections provided that any payment made by a closely held
    Company to its shareholder by way of advance or loan to the extent to which
                                                                                           -
    the Company possessed accumulated profits shall be treated as dividend taxable
    under the Act and this would include any loan or advance made in the
F   relevant year prior to the assessment year 1955-56, if such loan or advance
    remained outstanding on the 1st day of the previous year relevant to the
    assessment year 1955-56. In order to mitigate the rigour of the provision to
    some extent, the Central Board of Revenue issued a circular under Section
    5(8) of the Act to the effect that if any such outstanding loans or advances
    of past years were repaid on or before 30th June, 1955, they would not be
G   taken into account in determining the tax liability of the shareholders who
    received such loans or advances. The Court after pointing out that the circular
    would be binding on all officers and persons employed in the execution of



H
    the Act, observed thus:
            "In other words, past transactions which would normally have attracted
                                                                                           -
            the stringent provisions of Section 12(1 B) as it was introduced in

                                                                                               ~
                                                                                               I
        COM MR. OF CUSTOMS v. INDIAN OIL CORPORATION LTD. [REDD!, J]       527

        1955, were substantially granted exemption from the operation of the       A
        said provisions by making it clear to all the companies and their
        shareholders that if the past loans were genuinely refunded to the
        companies, they would not be taken into account under Section
        12(1B)."

       No proposition was laid down in that case that even if the circular was     B
clearly contrary to the provisions of the Act it should prevail. On the other
hand, the learned Judges were inclined to view the circular as granting the
benefit of exemption from the operation of the impugned provisions subject
to fulfillment of certain conditions. Navnit Lal 's case was referred to and
construed in two cases decided by Benches of two learned Judges. The first         C
one was the case of Ellerman Lines Ltd v. Commissioner of Income Tax,
West Bengal, AIR (1972) SC 524 and the other is KP. Varghese v. I. T
Officer, Ernakulam, AIR (1981) SC 1922. In both these cases it was assumed
that Navnit Lal 's case was an authority for the proposition that even if the
directions given in the circular clearly deviate from the provisions of the Act,   D
yet, the Revenue is bound by it. These three decisions were repeatedly referred
to and relied on in the subsequent decisions in which the issue arose as
regards the binding nature of the circulars either under the Income Tax Act
or under the Central Excise Act. In between, there was the three Judge Bench
decision in Sirpur Paper Mills Ltd. v. CommissiDner of Wealth Tax, [1~70]
I SCC 795 in which Section 13 of the Wealth Tax Act corresponding to               E
Section 5(8) of the Income Tax Act, 1922 fell for consideration. This Court
took the view that the instructions issued by the Board may control the
exercise of the power of the departmental officials in matters administrative
but not quasi-judicial. There is yet another decision of a three Judge Bench
which seems to make a dent on the weight of the proposition that the circulars     F
of the Board, even if they are plainly contrary to the provisions of the Act,
should be given effect to and binding on the authorities concerned in the
administration of the Act. That is the case of Keshavji Ravji & Co. v. /. T
Commissioner, [1990] 2 SCC 231. Venkatachaliah, J (as he then was) speaking
for the Court observed thus:
                                                                                   G
        "Sri Ramachandran contended that circular of 1965 of the Central
        Board of Direct Taxes was binding on the authorities under the Act
        and should have been relied upon by the High Court in support of the
        Court's construction of Section 40(b) to accord with the understanding
        of the provision made manifest in the circular.
                                                                                   H
    528                     SUPREME COURT REPORTS                     [2004] 2 S.C.R.
                                                                                         ·-"
A           This contention and the proposition on which it rests, namely, that all
            circulars issued by the Board have a binding legal quality incurs,
            quite obviously, the criticism of being too broadly stated. The Board
            cannot preempt a judicial interpretation of the scope and ambit of a
            provision of the 'Act' by issuing circulars on the subject. This is too
            obvious a proposition to require any argument for it.. ....
B
                                              ***
            ..... The Tribunal, much less the High Court, is an authority under the
            Act. The circulars do not bind them. But the benefits of such circulars
            to the assesses have been held to be permissible even though the
c           circulars might have departed from the strict tenor of the statutory
            provision and mitigated the rigour of the law. But that is not the same
            thing as saying that such circulars would either have a binding effect
            in the interpretation of the provision itself or that the Tribunal and the
            High Court are supposed to interpret the law in the light of the circular.
D           There is, however, support of certain judicial observations for the
            view that such circulars constitute external aids to construction ...... "

           In Bengal Iron Corporation v. C.T.O., [1994] Supp. l SCC 310 a two
    Judge Bench considered the effect of a G.O. issued by the State Government
    clarifying that cast iron castings fall within sub-item (i) of item No.2 of the
E   iii schedule to A.P. General Sales Tax Act. The assessee's contention that the
    benefit should be given in terms of the said G.O. was not accepted by this
    Court. This is what the Court said at para 19.

           "Now coming to G.0.Ms. 383, it is undoubtedly ofa statutory character
           but, as explained hereinbefore the power under Section 42 cannot be
F
           utilized for altering the provisions of the Act but only for giving
           effect to the provisions of the Act. Since the goods manufactured by
           the appellant are different and distinct goods from cast iron, their sale
           attracts the levy created by the Act. In such a case, the government
           cannot say, in exercise of its power under Section 42(2) that the levy
G          created by the Act shall not be effective or operative. In other words,
           the said power cannot be utilized for dispensing with the levy created
           by the Act, over a class of goods or a class of persons, as the case
           may be. For doing that, the power of exemption conferred by Section
           9 of the A.P. Act has to be exercised."
H         In C.S. T. v. Indra Industries, [2000] 9 SCC 66 a three Judge Bench
--            COM MR. OF CUSTOMS v. INDIAN OIL CORPORATION LTD. [REDDI, J J

     referred to the above case and purported to distinguish it as follows:

              "The observations in para 18 of the judgment in Bengal Iron Corpn.
                                                                                529

                                                                                        A

              at best, apply only when a case of estoppel against a statute is made
              out."

          In With, Wilhelmsen v. CI. T, [1996] 9 SCC 161 a two Judge Bench              B
     having referred to Section 5(8) of I. T. Act, 1922 observed thus:

              "The provision is clear. It requires no elaboration. It is, however,
              evident that the power so conferred on Central Board of Revenue has
              to be exercised for the purpose of and within the four corners of the
              Att"                                                                      C
            I have referred to these cases to demonstrate that a common thread
     does not run through the decisions of this Court. The dicta/observations in
     some of the decisions need to be reconciled or explained, The need to redefine
     succinctly the extent and parameters of the binding character of the circulars     D
     of Central Board of Direct Taxes or Central Exc:ise looms large. It is desirable
     that a Constitution Bench hands down an authoritative pronouncement on the
     subject.

     S.K.S.                                                     Appeals dismissed.