1999 Supreme(SC) 1129

1999(8) Supreme 476
Supreme Court of India
(From Gujarat High Court)
B.N. Kirpal, A.P. Misra & R.P. Sethi, JJ.
Garden Silk Mills Ltd. & Anr. etc. etc. -Appellants
versus
Union of India & Ors. -Respondents
Civil Appeal Nos. 2976/91 & 2674 of 1982
With
Civil Appeal Nos. 786-90, 3070-75, 5014/1989, 3163/91, 5974/94, 3381/91, 4216-26/95, 7352/83, 8459-60, 8864 to 8866, 11897/1983, 7675/96, 2902/91, 8194/1995, 5983/83,
W.P.(C) Nos. 7221, 7222, 7223, 7224/1982, 40/1983, 7295, 7296/1982,
C.A. No. 5661/1999
(Arising out of SLP (C) No. 4120/1989),
C.A. No. 5662/1999
(Arising out of SLP (C) No. 9814/1990)
C.A. 4082/95
Decided on 29-9-1999
Counsel for the Parties :
For the Appearing Parties : C.S. Vaidyanathan, Additional Solicitor General, Dushyant Dave, G.L. Sanghi, Shanti Bhushan, M.L. Verma, Sr. Advo­cates, Dipankar P. Gupta, Joseph Vellapally, Kailash Vasdev, Sativik Varma, Krishan Mahajan, Rahul Roy, P.H. Parekh, (Ms. Monica Singal) Advocate, for Ms. Bina Gupta, Ramesh Singh, S.J. Goswami, Ms. Vanita Bhargava, (Vineet Kumar) Advocate (NP), Ms. Bina Madhavan, Ms. Musharaf Choudhary, Ravinder Narain, Lalit Chauhan, (Gopal Jain) Advocate for Ms. Manik Karanjawala Prashant Bhushan, Sanjiv Kapoor, Dinesh Chandra, Sunil Dogra, Ms. Monica Sharma, (Ms. Manju Sharma) Advocate (NP), K.R. Nambiar, Ms. Gauri Shanker Murthy, N.K. Bajpai, K.C. Kaushik, Hemant Sharma, R.N. Verma, P. Parmeswaran, C.V. Subba Rao, S.N. Terdol (Ms. Sushma Suri) Advocate (NP)/Advocates.

Important points
1. Landing charges, which are imposed at or after the time of the discharge of the goods and prior to the clearance being granted under Section 47 of the Act, necessarily have to be an element which have to be taken into account in determining the value thereof for the purpose of assessing the customs duty which would be chargeable.
2. 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, then the importer can claim that the landing charges should not be again added to the price.

Headnote:Customs Act, 1962-Section 14 (as it stood prior to 1988 Amendment) r/w Section 12-Valuation of goods for purpose of assessment-Landing charges-Includibility of, in arriving at value of goods-Landing charges which are imposed at or after time of discharge of goods and prior to clearance being granted u/s 47 have to be taken into account while determining value-In case CIF contract, if importer establishes that obligation to pay landing charges is on seller and same was paid by seller but not on behalf of importer then landing charges should not once again be added with price-Onus of proof is on importer and not on Department.

       Held : The principles of valua­tion incorporated in Section 14(1)(a) of the Act therein show that:

        (a) the price is a deemed price;

        (b) at which such or like goods are ordinarily sold or offered for sale;

        (c) for delivery at the time and the place of importation or exporta­tion;

        (d) in the course of international trade;

        (e) where the seller and the buyer have no interest in the business of each other and

        (f) the price is the sole consideration for the sale or offer for sale.

       This Section clearly indicates that it is not the price stated in the CIF contract which alone is to be accepted as being the value of such goods for the purpose of Section 14 of the Act. The said Section requires determination of the value of the imported goods. The appel­lants are right in contending that this is a deeming provision. The value of such goods is to be deemed to be the price at which such goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation 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. The price of the imported goods, in other words, has to be determined in respect of import of those goods for delivery at the time and place of importation. It appears to us that the word “deliv­ery” must necessarily mean the point of time when the goods can be physically delivered to the importer. In other words, “delivery” and “discharge” are not synonymous. As we shall presently see, merely by the shipper discharging the goods at the port of import does not ipso facto give the importer a right to take the delivery thereof. (Paras 9 & 10)

       Provisions of Sections 29 to 34 and 45 to 47 clearly show that after the imported goods are discharged from the vessel at the wharf the importer cannot immediately take delivery thereof. The imported goods remain in the custody of the Port Trust Authorities till they are, inter alia, cleared for home consumption. This being the position the goods cannot be cleared and delivery taken without their being valued and assessed and, thereafter, duty being paid. Section 14 of the Act provides that the value of the goods shall be deemed to be the price of the goods for the delivery at the time and place of importa­tion in the course of international trade. The value has to be deter­mined with relation to the time when physical delivery to the importer can take place. Physical delivery can take place only after the bill of entry, inter alia, for home consumption is filed and it is the value at that point of time which would be relevant. It is evident that there normally will be some lapse of time between the time when the shipper discharges the goods and the time when the bill of entry is filed. The landing charges, which are imposed at or after the time of the discharge of the goods and prior to the clearance being granted under Section 47 of the Act, necessarily have to be an element which have to be taken into account in determining the value thereof for the purpose of assessing the customs duty which would be chargeable. (Para 13)

       Section 14 is a deeming provision. The legislative intent is clear that the actual price of the imported goods, namely the landing cost, cannot alone be regarded as the value for the purpose of calculating the duty. If the submission of the learned Counsel for the appellants is correct namely that the C.I.F. price represents the value of the imported goods, then the Section 14 would have been differently word­ed. It could, for instance, have easily been stated that the value of the imported goods would be the transaction value of the goods. The language of Section 14 clearly indicates that though the transaction value may be a relevant consideration, the value for the purpose of Customs duty will have to be determined by the Customs Authorities which value can be more, and at times even less, than what is indicat­ed in the documents of purchase or sale. (Para 14)

       The import of goods into India would commence when the same cross into the territorial waters but continues and is completed when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. (Para 17)

       The value at which the goods are to be assessed is indicated by the importer when he makes a declaration while submitting a bill of entry under Section 46 of the Act. Once, we come to the conclusion that the landing charges would be included in the determining of the value of the goods imported then the onus has to be on the importer to show that the price indicated in the CIF contract includes therein this element of landing charges. If such an element is included in the CIF contract, that would be within the knowledge of the importer and the Department cannot be asked to prove the negative, namely that the CIF contract does not include therein the element of landing charges. (Para 20)

       It was contended that legal fictions are created only for some definite purposes and here the purposes is to take the transaction value in international trade as the basis for valuation. Therefore, whichever view is taken of Section 14(1) (a) of the Act, it should be limited to the purpose the legislation makers had in view when they incorporated it. It was further submitted that in the present case the fiction was clearly limited to the parameters provided in Section 14(1)(a) (ordinary price in international trade at the time and place of importation) and cannot be extended further to be settled with elements like landing charges. Once that is done, the whole purpose of legal fiction stands defeated and, therefore, landing charges cannot form part of the value of goods for assessment. We do not agree with the aforesaid submission because what has to be arrived at is a deemed price in the manner indicated in the said Section. In determining this deemed price in international trade the element of port charges which have to be borne by the importer, in addition to the CIF value, before the goods can be cleared for human consumption must necessarily form a part or an element of the value. The said Section does not accept as final the price fixed by the purchaser and the seller in the course of international trade as reflected in the CIF contract but it requires determination of value by the customs authorities in the manner indicated therein. 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. (Paras 21 & 22)

       In the instant case clause 15 of the Bill or lading does not in any way indicate that the CIF value includes therein the charges levied by the Port Trust Authorities after the discharge of the goods. It is diffi­cult to imagine that at the time when the contract is entered into, and the CIF price is fixed, as to how the parties could envisage as to what the port charges at the destination are likely to be. It does appear that any expense which is incurred with regard to the loading or un-loading of the goods to and from the ship would be included in the CIF price paid by the importer. But there is nothing on record to show that in actual effect landing charges were collected by the Port Trust Authorities from the shipper. No document in this regard showing the discharge of such a liability by the shipper to the Port Trust Authorities has been produced. There can be little doubt that if the importer is able to establish that the obligation to pay the landing charges was on the seller or by the shipping agent, and not by the buyer, and the said charges have infact been paid to the Port Trust Authorities not by or on behalf of the importer, then the importer can claim that the landing charges should not once again be added to the price because in such an event, where payment is made of landing charges by the seller or the shipper, the CIF price must be regarded as including the said landing charges. There is however, in these cases, no factual basis for contending that the landing charges were including in the CIF price and, consequently the said obligation was discharged not by the importer or by its agent but by the seller or the shipper. Therefore landing charges were rightly taken into consi­deration in determining the assessable value of the imported goods for the purpose of Section 14(1)(a) of the Act. (Paras 19 & 24)

       (ii) Customs Act, 1962-Section 3(a)-Provisions not ultra vires of Article 14 of Constitution-Jain Brothers v. Union of India, 1999 (112) ELT 5 (SC) Followed. (Para 33)

       (iii) Customs Act, 1962-Section 14 r/w Notification No. 184/76 Cus dated 2.8.76-Notification as well as Section 14 do not contemplate deduction of value of packages from invoice value-Hind Plastics v. Collector of Customs, 1994(71) ELT 325 followed. (Paras 34 & 35)