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TMI Blog1998 (3) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... there was lot of litigation and it appears that in order to rationalise the procedure in the manner of determination of duty, the rules were framed. Rule 9(2) as added by rules of 1988 is as under :- "(2) For the purposes of sub-section (1) and sub-section (1A) of Section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of imported goods shall be the value of such goods, for delivery at the time and place of importation and shall include : (a) the cost of transport of the imported goods to the place of importation; loading, unloading(b) and handling charges associated with the delivery of the imported goods at the place of importation; and the cost of(c) insurance: Provided that in the case of goods imported by air, the cost and charges referred to in clauses (a), (b) and (c) above, (i) where such cost and charges are ascertainable, shall not exceed twenty per cent of the free on board value of such goods; (ii) where such cost and charges are not ascertainable such cost and charges shall be twenty per cent of the free on board value of such goods: Provided further that in the case of goods imported other than by air and the actual cost and charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j.) wherein it was held that in making computation of the assessable value of yarn for the purpose of payment of customs duty 3/4% of the CIF value was included in the computation in connection with the landing charges paid to the Port Authorities and in that context the action of the respondents was held justified. This Court in B.S. Kamath and Company and Others v. Union of India and Others, E.L.T. 456 (Kar.) = ILR 1986 Kar. 3895 - 1986 (24) E.L.T. 456 (Kar.) = ILR 1986 Kar. 3895 also upheld the levy. The submission of Mr. Nataraj, learned Senior Counsel for the petitioner, is that the provisions of Section 14(1A) are subject to Section 14(1) and under Section 14 the price which is the consideration for sale has to be taken into consideration. The provision of Section 14(1) have contemplated fiction for determining the value and the delegated authority has no jurisdiction to create further fiction in the matter. It is stated that the facts of the present case depict that the actual extent in respect of handling charges for two imports were Rs. 261/- and Rs. 26/- whereas by this notional computation the figure has been taken at Rs. 33,295/- and Rs. 16,125/- (Annexure-C). The levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the guideline for such determination is by the prescription under Section 156 of the Act, whereas Section 14(1A) is subject to sub-section (1), the fixation of tariff value is under Section 14(2) and "notwithstanding anything contained in sub-section (1) or sub-section (1A)". The fixation of tariff value may depart from price. When Section 14(1) speaks about value which is deemed to be the price for the delivery at the place of importation, it considers a genuine transaction where the price is the sole consideration for delivery at the place of importation. In such a case, there is nothing else to depart from Section 14(1), because of the value being the price at the time and place of importation, landing charges get included for the purpose of value. Therefore, landing charge is nothing but a component of the price for sale and delivery at the place of importation. It makes no difference whether the sale by the international seller to the Indian importer is FOB or CIF price at the place of importation. In all situations, the several components are added to arrive at the price. "Price" has a definite legal connotation and nomen juris. That being so, Section 14(1A) which is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is particularly so when actual charges are easily ascertained. Rule 9(2)(b) if construed as directory so that where the actuals are ascertainable and stand adopted, the rule is saved. If the expression, "shall" is construed as "may", the provision is rational and reasonable and is in accordance with the Act. Under Section 156(2)(a), the rule is framed for the purpose of Section 14(1A). The expression "manner" can only indicate the mode and there is no authority to legislate either for a fiction or for any substantial matter akin to imposition of a duty. 5.It is further submitted that the fiction is assuming a fact which is not for legal purposes and the subordinate legislation cannot introduce fiction. There cannot be a fiction out of fiction since Section 14(1) has already created a fiction and therefore the rule making authority cannot create further fiction. In respect of different persons and goods the provisions operate unevenly for the alleged convenience of administration. The provisions cannot be made too harsh in respect of goods which are costlier. 6. I have considered over the matter, appears that the provisions of Section 14(1) of the Customs Act were amended keep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of such goods shall be deemed to be— the price at which such or like goods are ordinarily sold, or offered for sale, for deliveryd 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." (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf." From the perusal of the Customs Act, it is evident that the charge has been created under Section 12 on importation of goods. The procedure for valuation of goods for the purpose of assessment has been given under Section 14. Section 14 has created a fiction in respect of value of goods which is deemed to be the price and for that purpose it is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the goods sold, the parties to whom they are sold and to which authority the form is to be furnished. But it does not take in the time element. If the provisions of rule as are read with Section 14(1) and 14(1A) it will be found that rule has not gone beyond the powers given by the Act. In the case of Hari Vishnu Kamath v. Ahmad Ishaque - AIR 1955 S.C. 233, wherein it was observed that an enactment in form mandatory might in substance be directory and ascertaining the true intention of the legislature which is the determining factor and that must ultimately depend on the context. It may be observed that if the rule goes beyond the scope of the Act or the section under the authority of it is framed then it may be declared as ultra vires the Act. 9It may be observed that basic elements for levy. of tax/duty are nature of the tax i.e., object, rate, persons and the manner which have to be clearly specified by the legislature. The duty in the present case is a customs duty and the rates and persons have also been prescribed. The competence of the Parliament for rule making power or the provisions of Section 14(1) are not in dispute. The method of collection or the manner may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a whole the interpretation that `shall' should be taken as 'may' is not appearing to me proper because that will be contrary to the very spirit under which the rules were framed. The GATT agreement have provided the addition with the actuals on the objective and quantifiable basis. The figure of percentage which has been specified in the rule may be because of the experience of the respondents which they have gained during all these years. As stated above, some persons would be getting the benefit even by fixing this particular percentage while the others will suffer. In the case of the petitioner, the amount of the duty has tremendously been increased because of the notional value which has been taken more than 100 times of the actuals. It is for the rule making authority to take into consideration the overall picture. If the rule in a particular case is harsh then for that reason it cannot be declared as ultra vires. It is for the delegated authority to consider and for that reason the petitioner can make a representation to the delegated authority explaining the circumstances under which the provisions of Rule 9(2) have acted harshly on him. 11. In the case of Lohia Machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t matters it gives the lead to the legislature. However much one might deplore the "New Despotism" of the executive, the very complexity of the modern society and the demand it makes on its Government have set in motion forces which have made it absolutely necessary for the legislatures to entrust more and more powers to the executive. Textbook doctrine evolved in the 19th century have become out of date. Present position as regards delegation of legislative power may not be ideal, but in the absence of any better alternative, there is no escape from it. The legislatures have neither the time, nor the required detailed information nor even the mobility to deal with the innumerable problems arising time and again. In certain matters they can only lay down the policy and guidelines in as clear a manner as possible." 12.On the point of delegated legislation whether it is excessive delegation reference was made to the case of M/s. Hiralal Ratan Lal v. Sales Tax Officer, Section III, Kanpur and Another - AIR 1973 (S.C.) 1034 : (1973) 31 STC 178 (S.C.), wherein the following observations were made — "It is true that the legislature cannot delegate its legislative functions to any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; all these provisions are subsidiary to the main power to levy a tax. . .". 15.The procedure for determining the amount of tax payable could be left to delegated authority. The jurisdiction of legislature i.e.. Parliament is not in dispute and it is stated that the Parliament could have enacted such a provision under Section 14(1), but there being no guideline as such the delegated authority cannot exercise its power. In this regard the decision of Agricultural Market Committee v. Shalimar Chemical Works Limited - (1997) 5 SCC 516, is relevant wherein it was observed — "The principle which, therefore, emerges out is that the essential legislative function consists of the determination of the legislative policy and the legislature cannot abdicate essential legislative function in favour of another. Power to make subsidiary legislation may be entrusted by the legislature to another body of its choice but the legislature should, before delegating, enunciate either expressly or by implication, the policy and the principles for the guidance of the delegates. These principles also apply to taxing statutes. The effect of these principles is that the delegate which has been authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possess by nature with the object of founding thereon a consequence of a certain kind, which would have been contrary to reason and truth without the assumption as defined in Woorden Tolk, a Legal Dictionary published in Hague in 1773. 18. The contention that the rule has created a disproportional counter-mischief has also no substance as there is no wrong coming to the category of mischief in the enactment designed to remedy at the cost of setting up a disproportionate counter-mischief. The reasons for exclusion of discretion or fixing the percentage is uniformly irrespective of the weight of articles imported vis-a-vis the value is only to achieve certainty for proper determination in advance of the duty. In respect of heavy articles the amount may be more than 1%. The uniformity excluding actuals is stated to be on the basis of data collected and the experience of the respondents. In Commissioner of Income-tax, West Bengal v. Gangadhar Banerjee and Company (Private) Limited - (1965) 57 ITR 176 (SC), it was observed that "in arriving at the assessable profits the Income-tax Officer may disallow many expenses actually incurred by the assessee; and in computing his income, he may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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