1999 (9) TMI 88 - SC - Customs

Whether while assessing customs duty payable in respect of imported gods, the customs authorities can add/include landing charges in arriving at the value of those goods? Held that - What has to be seen is the value or cost of the imported articles at the time of importation i.e. at the time when they reach the customs barrier. Landing charges which have to be paid to the Port Trust must therefore, be taken into consideration while determining the value of the imported goods for the purpose of assessment of duty. It is only if the importer establishes that the obligation to pay the landing charges is on the seller and not on the importer and that the seller or his agent has, in fact, paid the said landing charges to the Port Trust Authorities, that the importer can claim that the landing charges should not be again added to the price. In none of the cases before us has it been found by any fact finding authority, even in cases of CIF contracts, that the Port Trust Authorities did receive the landing charges from the shipper or the foreign seller and that the said charges were included in the CIF contract. No merit in the contentions of the appellants and, in our opinion, landing charges were rightly taken into consideration in determining the assessable value of the imported goods for the purposes of Section 14(1)(a) of the Act.

Issues Involved:
1. Inclusion of landing charges in the assessable value of imported goods for customs duty.
2. Validity of Section 3(a) of the Customs Tariff Act.
3. Exemption from customs duty on packaging materials under Notification No. 184/76-Cus.

Issue-wise Detailed Analysis:

1. Inclusion of Landing Charges in Assessable Value:
The primary issue was whether customs authorities could add landing charges to the CIF (Cost, Insurance, and Freight) price to determine the value of imported goods for customs duty. The appellants argued that the CIF price already included all costs up to the port of discharge, and therefore, landing charges should not be added. However, the court held that under Section 14 of the Customs Act, the value of imported goods must include all costs incurred up to the point of physical delivery to the importer, which includes landing charges. The court emphasized that "delivery" and "discharge" are not synonymous, and the value must be determined at the point when the goods can be physically delivered to the importer, which is after the landing charges are paid. The court also noted that if the importer can prove that the landing charges were paid by the seller or their agent, then these charges should not be added again. However, in the cases presented, no such proof was provided, and therefore, the addition of landing charges was deemed appropriate.

2. Validity of Section 3(a) of the Customs Tariff Act:
The appellants challenged the constitutionality of Section 3(a) of the Customs Tariff Act, arguing that it was ultra vires of Article 14 of the Constitution of India. This section allowed for the charging of additional duty on the sum total of assessable value, basic customs duty, and auxiliary duty. The court referred to its previous decision in Jain Brothers v. Union of India, where it upheld the validity of this provision. Consequently, the court rejected the appellants' contention, affirming that the provision was constitutionally valid.

3. Exemption from Customs Duty on Packaging Materials:
The appellants sought exemption from customs duty on packaging materials under Notification No. 184/76-Cus, arguing that the cost of packaging materials should be excluded from the assessable value. The court referred to its decision in Hind Plastics v. Collector of Customs, which clarified that the notification did not contemplate the deduction of the value of packages from the invoice value but rather exempted the levy of duty on the packages separately. Therefore, the court held that the appellants were not entitled to the claimed exemption, as the cost of packaging materials was included in the total invoice price.

Separate Judgments:
The court delivered separate judgments for various appeals and petitions, all of which were dismissed except for Civil Appeal No. 5974 of 1994, which was dismissed as withdrawn due to pending litigation in the Bombay High Court.

Conclusion:
The Supreme Court upheld the inclusion of landing charges in the assessable value of imported goods for customs duty, validated Section 3(a) of the Customs Tariff Act, and denied the exemption from customs duty on packaging materials. All appeals and petitions were dismissed, except for one which was withdrawn.

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