2006 (9) TMI 181 - SC - Customs

Whether the transportation charges for the use of barges for carrying the cargo from the mother vessel which anchored at BFL to the Dharmatar jetty where the goods were unloaded are to be added to calculate the assessable value for the purpose of duty under the Customs Act? Held that - The bills of lading show that the port of discharge was Mumbai Port/JNPT/Dharamtar. In the bill of entry, the FOB price, freight and insurance were shown separately in U.S. dollars. Since Dharamtar was also shown as the port of discharge, the freight charges paid by the buyer to the shippers included the charges for freight not only upto BFL but also to Dharamtar. Appeal is allowed and the impugned' order of the Tribunal as well as of the Customs authorities are set aside, and it is held that the charges for transportation of the goods by barges from the mother ship at BFL to the Dharamtar Jetty cannot be added to the valuation of the imported goods for the purpose of levying customs duty. Any amount collected by the revenue as duty on barge charges shall be refunded forthwith to the assessee with statutonr interest from the date of payment to the date of refund, which must be within three months from today.

Issues Involved:
1. Whether transportation charges for the use of barges for carrying cargo from the mother vessel anchored at BFL to the Dharamtar jetty should be included in the assessable value for customs duty under the Customs Act.

Detailed Analysis:

1. Background and Facts:
The appellant, a regular importer of iron ore pellets, challenged the inclusion of transportation charges from BFL to Dharamtar jetty in the assessable value for customs duty. The cargo was discharged from the mother vessel to barges at BFL due to lack of draft at Dharamtar jetty.

2. Legal Provisions Referenced:
The judgment referenced several sections of the Customs Act, 1962, including:
- Section 2(23) defining import.
- Section 2(25) defining imported goods.
- Section 2(27) defining India.
- Sections 7, 8, 14, 30, 31, 32, 33, 34, 35, 46, and 47.
Additionally, the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, particularly Rule 9, were cited.

3. Appellant's Argument:
The appellant argued that the transportation charges from BFL to Dharamtar jetty should not be included in the assessable value. They contended that the "place of importation" was BFL, not Dharamtar jetty, as the goods passed out of customs control at BFL.

4. Revenue's Argument:
The Revenue argued that under Rule 9(2)(a) of the Customs Valuation Rules, 1988, transportation charges from BFL to Dharamtar jetty should be included in the assessable value as they are part of the transportation costs.

5. Court's Analysis:
The court analyzed Section 14 of the Customs Act, which creates a legal fiction for determining the value of imported goods. It emphasized that the value to be determined is a deemed value, not the actual value, and must reflect the ordinary value in the course of international trade at the time and place of importation.

6. Interpretation of Rule 9(2):
The court held that Rule 9(2) must be read in conjunction with Section 14 of the Act. It stated that if Rule 9(2) were interpreted independently, it might support the Revenue's contention. However, when read with Section 14, it must align with the legal fiction created by Section 14, which focuses on the ordinary value of the goods in the course of international trade.

7. Legal Fiction and Precedents:
The court referred to the principle of legal fiction and previous judgments, including the three-Judge Bench decision in M/s. Rajkumar Knitting Mills (P) Ltd. v. Collector of Customs, Bombay, which emphasized the ordinary value in the market over the actual contract price.

8. Distinguishing Previous Cases:
The court distinguished the present case from previous cases cited by the Revenue, such as Garden Silk Mills Ltd. v. Union of India, which dealt with landing charges, not transportation charges by barges.

9. Conclusion:
The court concluded that whether the place of importation is BFL or Dharamtar jetty, the transportation charges from BFL to Dharamtar jetty should not be included in the assessable value. The freight up to Dharamtar jetty had already been included in the price paid to the seller under CIF or FOB contracts.

10. Final Judgment:
The appeal was allowed, and the orders of the Tribunal and Customs authorities were set aside. It was held that transportation charges by barges from BFL to Dharamtar jetty cannot be added to the valuation of imported goods for customs duty. Any amount collected as duty on barge charges was to be refunded to the assessee with statutory interest within three months.

11. Impact on Related Appeals:
In view of this decision, related appeals were decided accordingly, with some allowed and others dismissed based on the same reasoning.

Conclusion:
The court's judgment clarified the interpretation of transportation charges in the valuation of imported goods, emphasizing the legal fiction created by Section 14 of the Customs Act and the need to align subordinate rules with the primary statutory provisions.

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