1980 (11) TMI 153 - Commissioner - Customs

Issues Involved:
1. Inclusion of landing charges in the assessable value under Section 14 of the Customs Act.
2. Legal basis for levying duty on landing charges.
3. Practical considerations and implications of calculating actual landing charges.

Issue-wise Detailed Analysis:

1. Inclusion of Landing Charges in the Assessable Value:
The appellants, M/s. Kirloskar Oil Engines Ltd., contended that landing charges should not be included in the assessable value as per Section 14 of the Customs Act. They argued that the c.i.f. invoice value converted at the appropriate rate of exchange should be accepted as the assessable value. The appellants relied on Section 2(23) of the Customs Act, which defines import, and Section 2(27), which includes territorial waters within India, to argue that landing charges incurred after importation are post-importation charges and should not be included in the assessable value. However, the judgment clarified that the value on which duty should be charged is determined by Section 14, and a literal interpretation of Sections 2(23) and 2(27) is not appropriate.

2. Legal Basis for Levying Duty on Landing Charges:
The judgment noted that the inclusion of landing charges to arrive at the assessable value has been a long-standing practice by Indian Customs, dating back to before 1935. Landing charges are paid to agencies approved by the Collector of Customs, typically the Port Trust, which is a statutory authority. The Port Trust issues a dock scale of rates for different services rendered, and these rates are not levied without due force of law. The judgment highlighted that while the actual landing charges vary widely, the notional addition made by Customs is almost never in excess of 1%. The judgment emphasized that legally, only the actual landing charges should be liable for assessment, and there is no authority for the notional weighted average used by Customs.

3. Practical Considerations and Implications:
The judgment discussed the practical difficulties in estimating actual landing charges for heterogeneous consignments. Customs periodically publish trade notices with percentage additions for landing charges, calculated based on sufficient data and meticulous care. The judgment dispelled any impression that these additions are arbitrary. The judgment acknowledged that the notional addition is a pragmatic solution for business convenience, but it lacks a legal basis. The judgment also noted that importers who pay higher actual landing charges end up paying less customs duty, while those who pay lower charges pay excess duty. The judgment stated that the legal basis for including landing charges in the assessable value should be examined under Section 14.

Interpretation of Section 14:
The judgment analyzed Section 14, which defines the assessable value as the price at which goods are ordinarily sold for delivery at the place of importation. The judgment clarified that delivery ex-hook on the port authority's wharf meets the requirements of Section 14. It stated that further charges paid to port authorities for services beyond delivery ex-hook, such as removal to a safe place and proper stacking, are post-importation services and should not be included in the assessable value. The judgment emphasized that the term "landing charges" is misleading, as it implies expenses for unloading cargo, which are already included in the freight charges.

Conclusion:
The judgment concluded that there is no legal authority to levy duty on the notional addition of landing charges. It allowed the appeal, stating that the assessable value of the appellant's goods should be reduced by the amount added for landing charges, and a consequential refund should be paid. The judgment underscored that expenses for delivery at the place of importation are included in the freight element of the c.i.f. quotation, and landing charges are for post-importation services.

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