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TMI Blog1985 (1) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... , Pendse, J. had held in Writ Petition Nos. 1099 of 1978, 1641 of 1982 and 2053 of 1982. Smt. Sujata Manohar, J. has referred these matters to be decided by a Division Bench. Raising the same question several importers have filed writ petitions in this Court, some immediately upon assessment of the duty seeking a writ of certiorari, some after paying the duty seeking a writ of mandamus for refund and some others praying for a writ of mandamus to restrain the customs authorities from including the value of the packages in assessing the value of the goods for the levy of customs duty. All these matters are now before us. 2. Suffice for the purpose of appreciating the contentions raised to refer to the facts of the Writ Petition No. 42 of 1983 on the basis of which arguments were addressed by Mr. Setalvad, learned Counsel for the petitioners which arguments were adopted by all the other learned Counsels for the petitioners appearing in this batch of writ petitions. 3. Poly set Corporation, a company incorporated under the provisions of the Companies Act, imported into India High Density Polyethelene Moulding Powder ("HDPE" for short) which are subject to duties of custom under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the value of the packages in which they were packed. These goods in the course of international trade are packed in paper packages or bags for the purpose of import and export and the value of the packages or the packing charges are included in the invoice value of the goods. These paper packages or bags are not of a permanent character and are not strong enough to be suitable for any further use or repeated use. These packages are made of paper and for emptying the HDPE contained therein the top portion has to be ripped off. These packages satisfy all the conditions laid down in the exemption notification referred to above. The petitioners though entitled to the benefit of the exemption granted in respect of the value of the packages in which the said goods were imported, being unaware of the said notification, were paying the customs duty and additional duty assessed and demanded from time to time on such imports. Although in view of the exemption notification no duty or additional duty was leviable on the value of the packages in which the said goods were imported during the period January 1982 to January 1983 customs duty aggregating to a sum of Rs. 21,00,000/-was paid on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They apprehend that the Customs Authorities would not grant them the exemption on the value of the packages. If the exemption is not granted in respect of the value of the packages, a sum of Rs. 17,943/- would be payable by them. The petitioners, therefore, seek an appropriate writ against the Collector of Customs, respondent No. 1 and the Union of India, respondent No. 2 directing them to refund the excess customs duty and additional duty recovered from them and restraining them from subjecting the value of the packages to customs duty or additional duty. In other words, they seek a direction that in assessing the customs duty or additional duty leviable on the goods only the value of the principal goods i.e. HDPE should be taken into account and the value of the packages should be excluded and thus give effect to the exemption notification referred to above. 4. In the common affidavit filed in reply, the respondent pleaded that the goods inclusive of the packages are subject to duty as per the invoice value. Packages and packing material themselves constitute goods and are liable to import duty under a different head depending upon as to whether the packages are of paper, alu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to their value, the value of such goods shall be deemed to be - (a) the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale : Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50 ; (b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this behalf. (2) Notwithstanding anything contained in sub-section (1), if the Central Government is satisfied that it is necessary or expedient so to do it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -"Form or method", in relation to a rate of duty of Customs, means the basis, namely, valuation, weight, number, length, areas, volume or other measure with reference to which the duty is leviable." 6. It would be clear from a reading of the above provisions that unless specifically exempted by a notification issued by the Central Government under Section 25, duties of customs are payable upon the value of all goods imported into India. The duty shall be assessed at such rates as are specified under the Customs Tariff Act or any other law for the time being in force. The value of the goods for the purpose of assessing the duty leviable thereon is to be determined as laid down in Section 14(1)(a), namely, the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade. If the price is not ascertainable, as specified in Section 14(1) (a), the nearest ascertainable equivalent thereof is required to be determined as provided in clause (b) of sub-section (1). Sub-section (2) empowers the Central Government notwithstanding anything contained in sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods at a rate expressed in form or method different from the form or method in which statutory duty is leviable. According to the learned Counsel, this provision authorises the Central Government to direct the valuation of the goods differently for the purpose of levy of duty so as to result in the reduction of duty leviable thereon. We are really not called upon to express any opinion in relation to sub-section (3) of Section 25. Sub-section (3) was inserted in Section 25 only on 13th May, 1983 and was not in force during the period to which these writ petitions relate. Even otherwise sub-section (3) of Section 25 empowers the Central Government to grant exemption from statutory customs duty by providing for levy of duty on such goods in a form or method different from the form or method in which the statutory duty is leviable. The form or method envisaged by sub-section (3) of Section 25 as stated in the Explanation, means a different basis of valuation also. But the exemption notification with which we are concerned does not lay down a different method or form of valuation for levy of customs duty so as to result in exemption of whole or part of the customs duty or additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a permanent character and accordingly strong enough to be suitable for repeated use, are subject to duty even if some goods are packed therein. In view of proviso (c) thereof packages which are not normally used in trade for packing such goods, if used for packing the principal goods would be liable for duty, as packages. In other words, even under the exemption notification the value of the principal goods inclusive of the value of the package is sought to be made liable to customs duty. Once the value of the packages is included in the invoice value, the packages as such are exempted from levy of customs duty as package separately to which they were liable under the several tariff entries to which we would refer later; but in assessing the value of the principal goods, the value of the packages in which the principal goods are packed in the course of international trade is not deducted. But, it the goods are imported or exported in packages which satisfy the three conditions mentioned in the said notification then such packages are exempt from separate duty thereon as packages. That is made abundantly clear by the use of the words "leviable thereon", that is, the duty leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l considerations must ultimately be directed to the determination and ascertainment of the only fact which has got to be determined and ascertained under Section 30 (b) of the Sea Customs Act, 1878, which is the cost of the goods of like kind and quality at the place of importation. Cost of the goods on importation is the value of the goods as such ready for delivery at the time of importation of goods. The Customs Act envisages valuation of the goods under Section 14 in accordance with Rules 3 and 4 of the Customs Valuation Rules, 1963, which deal with packaging. They take into account the type of packing used for goods in the course of international trade and provide for assessing the CIF value of the goods including the value of the packaging. Rules 3 and 4 reads as follows : "3.(a) The value of the imported goods may be based on the value at which such goods, or comparable goods produced or manufactured by the person who has produced or manufactured the goods to be assessed, are ordinarily sold or offered for sale to other buyers in India under competitive conditions ; (b) if the value cannot be determined under clause (a) it may be based on the export price at which such g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al value of the goods including the value of the packages and the value of the packages can be ascertained from the certificate issued by the foreign suppliers or the local agent of the foreign suppliers, that cannot be deducted under Section 14 in assessing the value of the goods imported; nor can any abatement in the value of the goods be allowed. That is neither permissible under Section 14 nor directed by the exemption notification issued under Section 25 of the Customs Act. 8. Mr. Setalvad, learned Counsel for the petitioners, contended that goods in the normal course of trade are imported "in packages or containers or the like": In importing goods in packages, two different goods are not being imported, namely : (1) the goods contained in the packages, i.e. the principal goods, and (2) the packages themselves. What are imported are the principal goods and in this case, it is the HDPE contained in the packages and not the packages as such ; the principal goods imported in packages constitute a single item of goods. Mr. Setalvad points out that the exemption would not apply to the importation of mere packages or to the importation of goods otherwise than in packages. This not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged according to certain standards and certain goods are imported in packages and some cannot be imported except in packages. Even in retail, the same goods are sold in packages as well as loose, that is without any package. Though the goods be the same, if they are sold in packages, they cost more and if they are sold loose, they cost less, because their value is less. Nevertheless, in both the cases what are sold are the principal goods. The buyer pays the higher price for the goods and not for the package ; only the value of the goods goes up due to the package. It is not as if the goods and packages are sold in one case and in the other case only the goods. The cost of goods sold in packages is inclusive of the value of the packages. The exemption notification, in our view, does not permit the valuation of the goods in packages being split up into principal goods and packages and exempt the packages from duty. It treats goods in packages as one single item of goods and prohibits levy of customs duty on packages as separate goods. If the exemption notification were not to be issued, even if the value of the packages was included in assessing the value of the goods imported in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty. They are : (1) Notification Nos. 260 and 261, dated 11th October, 1958 under Notes 86 and 87 of the First Schedule to the Tariff Act which deal with drums and containers full and empty and exempt 2% of the empty drums and containers from duty ; (2) Notification No. 155, dated 28th July, 1980 under Note 96 which deals with empty spare bags used for packing manure, foodgrains or milk ; and (3) Notification No. 81, dated 5th April, 1978 under Note 99 which deals with empty spare kraft paper bags used for packing cement and exempts spare bags to the extent of 3%. It is argued by Mr. Setalvad that when spare bags and spare containers imported along with the goods in bags and containers are exempted to the extent referred to in the said Notification, in respect of goods imported in packages there should be abatement in the value of the principal goods to the extent of the value of the packages. This contention cannot be accepted for more reasons than one. Firstly, there is no analogy between those Notifications and the Exemption Notification with which we are now concerned. Those Notifications exempt some empty bags, drums and containers sent as spares along with the goods i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o valuing the goods, the Customs authorities are not valuing two goods, the principal goods as such and the packages in which the goods are imported and are levying duty on two different goods; they are only valuing the goods contained in the packages. From out of the value of the goods so assessed, the cost or the value of the packages is not severable and is not deductible for the purpose of assessing the duty leviable thereon. 14. For the foregoing reasons, we are of the view that the exemption notification does not permit the valuation of the packages in which the goods are imported separately from the principal goods and does not authorise the Customs authorities to deduct the same from the invoice value of the goods under Section 14 of the Customs Act; nor does it entitle the importers to claim exemption from the levy of customs duty on the value of packages under Section 25 read with the exemption notification. We agree with the view taken by Smt. Sujata Manohar, J. that the exemption notification does not provide for reduction in the value of the goods as prescribed in Section 14 of the Customs Act; it only exempts packages from being separately charged to Customs duty. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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