IMPORTANT POINTS
1. Transportation charges for the use of barges for carrying the cargo from the mother vessel to the place where the goods are unloaded are not to be added to calculate the assessable value for the purpose of duty under the Customs Act.
2. If there are two possible interpretations of a rule, one which subserves the object of a provision in the parent statute and the other which does not, the Court has to adopt the former, because adopting the latter will make the rule ultra vires the Act.
3. It is deeply regrettable that in our Courts of Law, lawyers quote Maxwell and Craies but nobody refers to the Mimansa Principles of Interpretation which are our traditional principles of interpretation.

Headnote:(i) Customs Act 1962—Sections 2, 7, 8(a), 14, 18, 30 to 35 and 46—Customs Tariff Act, 1975—Customs Valuation—(Determination of Price of Imported Goods) Rules, 1988—Rules 4(1), 5(1), 6(1), 9(2), 9(4)—Valuation of goods for purpose of assessment—Import of consignments of iron ore pellets—Cargo could not be discharged directly from the mother vessel to the port of discharge due to lack of draft —It was discharged from the mother ship on to the barges at Bombay Floating Light (BFL), which carried the goods to the port of discharge—BFL had not been so approved but was only a place for anchoring the ship—In the Bills of Entry filed by appellant in respect of imported cargo, assessable value of iron ore pellets was arrived at by including freight incurred on imported cargo from the place of export to the port of discharge—However, Assistant Commissioner of Customs informed appellant that freight incurred on barges and other associated charges in transportation of goods from BFL to the Dharamtar Jetty has also to be added for determining the correct assessable value—Whether transportation charges for use of barges for carrying the cargo from the mother vessel to the place where the goods were unloaded are to be added to calculate assessable value for purpose of duty under the Act—(No)—Freight charges paid by buyer to the shippers included the charges for freight not only upto BFL but also to Dharamtar.
       Held : In the present case, the vessel had been anchored and permission by the proper officer under Section 47 after examination of the cargo had been granted after due payment, and goods were allowed to be water-borne through a Boat Note under Section 35. (Para 56)
       The goods were unloaded from the mother ship on to the barge at BFL which, do doubt, had not been approved as the landing place under Section 8 of the Act. However, Section 33 permits unloading at a place other than that approved under Section 8 with the permission of the proper officer, and there is no doubt that permission had been obtained under Section 33 under the supervision of the proper officer under Section 34, and the goods were accompanied by a Boat Note under Section 35 of the Customs Act. Hence, unloading of the goods from the mother ship at the BFL was valid, since it was done in accordance with Sections 33 and 34 of the Customs Act. No doubt, the BFL had not been approved as proper place under Section 8(a), but it was a place where the mother ship could anchor. Hence, in our opinion, there is no illegality.(Para 57)
       In the impugned order dated 7.3.2001 the Tribunal has based its decision on its conclusion that the place of import was the Dharamtar Jetty and not the BFL (vide paragraphs 9 to 18 of The Tribunals order). Without commenting on the correctness or otherwise of this view, we are of the opinion that whether we treat the place of import as BFL or the Dharamtar jetty it will make no difference to the conclusion we have reached viz. that charges for transport of the goods by barges from BFL to Dharamtar jetty cannot be included in the valuation of the goods.(Paras 58)
       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.(Para 60)
       (ii) Customs Act, 1962—Section 14 —Section 14(1) is a deeming provision which creates a legal fiction.
       Held : The most important provision for the purpose of valuation of the goods for the purpose of assessment is Section 14 of the Customs Act, 1962. Section 14(1), has already been quoted above, and a perusal of the same shows that the value to be determined is a deemed value and not necessarily the actual value of the goods. Thus, Section 14(1) creates a legal fiction. Section 14(1) states that the value of the imported goods shall be the deemed price at which such or like goods are ordinarily sold or offered for sale, for delivery at the time and place of importation in the course of international trade. The word "ordinarily" in Section 14(1) is of great importance. In Section 14(1) we are not to see the actual value of the goods, but the value at which such goods or like goods are ordinarily sold or offered for sale for delivery at the time of import. Similarly, the words "in the course of international trade" are also of great importance. We have to see the value of the goods not for each specific transaction, but the ordinary value which it would have in the course of international trade at the time of its import.(Para 13)
       (iii) Customs Act, 1962—Customs Valuation Rules—Conflict between the provisions of the Act and the Rules—Provisions of the Act to prevail—However, every effort should be made to give an interpretation to the Rules to uphold its validity—If two interpretations are possible of a rule, one of which would uphold its validity while the other would invalidate it, the former should be preferred—Interpretation of Statutes.
       Held : The Customs Act falls in the second layer in this hierarchy whereas the rules made under the Act fall in the third layer. Hence, if there is any conflict between the provisions of the Act and the provisions of the Rules, the former will prevail. However, every effort should be made to give an interpretation to the Rules to uphold its validity. This can only be possible if the rules can be interpreted in a manner as to be in conformity with the provisions in the Act, which can be done by giving it an interpretation which may be different from the interpretation which the rule could have if it was construed independently of the provisions in the Act. In other words, to uphold the validity of the rule sometimes a strained meaning can be given to it, which may depart from the ordinary meaning, if that is necessary to make the rule in conformity with the provisions of the Act. This is because it is a well settled principle of interpretation that if there two interpretations possible of a rule, one of which would uphold its validity while the other which would invalidate it, the former should be preferred. (Para 28)
       (iv) INTERPRETATION OF STATUTES—MIMANSA, Rules of Interpretation—Traditional principles of interpretation, rarely being used in our law Courts—Gunapradhan Axiom—Applicability.
       Held : It is deeply regrettable that in our Courts of Law, lawyers quote Maxwell and Craies but nobody refers to the Mimansa Principles of Interpretation. Few people in our country are aware about the great intellectual achievements of our ancestors and the intellectual treasury they have bequeathed us. The Mimansa Principles of Interpretation is part of that intellectual treasury, but it is distressing to note that apart from a reference to these principles in the judgment of Sir John Edge, the then Chief Justice of Allahabad High Court, in Beni Prasad v. Hardai Devi, (1892) ILR 14 All 67 (FB), and in the judgments of one of us (Markandey Katju, J.) while a Judge of Allahabad High Court (which have been annexed to the Second Edition of K.L. Sankars book), there has been almost no utilization of these principles even in our own country. (Para 30)
       It may be mentioned that the Mimansa Rules of Interpretation were our traditional principles of interpretation laid down by Jaimini in the 5th Century B.C. whose Sutras were explained by Shabar, Kumarila Bhatta, Prabhakar, etc. The Mimansa Rules of Interpretation were used in our country for at least 2500 years, whereas Maxwells First Edition was published only in 1875. These Mimansa Principles are very rational and logical and they were regularly used by our great jurists like Vijnaneshwara (author of Mitakshara), Jimutvahana (author of Dayabhaga), Nanda Pandit, etc. whenever they found any conflict between the various Smritis or any ambiguity or incongruity therein. There is no reason why we cannot use these principles on appropriate occasions even today. However, it is a matter of deep regret that these principles have rarely been used in our law Courts. It is nowhere mentioned in our Constitution or any other law that only Maxwells Principles of Interpretation can be used by the Court. We can use any system of interpretation which helps us solve a difficulty. In certain situations Maxwells principles would be more appropriate, while in other situations the Mimansa principles may be more suitable. One of the Mimansa principles is the Gunapradhan Axiom, and since we are utilizing it in this judgment we may describe it in some detail.(Para 31)

JUDGMENT

Markandey Katju, J.—Since common questions of law are involved in all these appeals we are deciding them in a common judgment and for our reference we are citing the facts of the case of Ispat Industries Ltd. (Civil Appeal No. 3972 of 2001).

Civil Appeal No. 3972 of 2001

2. This appeal has been filed against the judgment and order dated 7th March 2001 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as CEGAT), West Regional Bench, Mumbai.

3. Heard learned counsel for the parties and perused the record.

The facts of the case are that the appellant is a regular importer of iron ore pellets falling under Chapter Sub-heading No. 2601.12 of the Customs Tariff Act, 1975. The present appeal relates to 14 consignments of iron ore pellets imported between 14.2.1996 to 21.2.1998. In all these cases, the mother vessel coming from abroad and carrying the cargo anchored at Bombay Floating Light (in short BFL). The cargo on board the mother vessel was then examined by the custom authorities and provisionally assessed to duty. After payment of this duty, the out of charge order was passed on the Bills of Entry permitting clearing of such goods for home consumption. After obtaining the out of charge order, the cargo was discharged at BFL from the mother vessel to the barges which then ferried the cargo to the Dharamtar Jetty.

4. It may be mentioned that the cargo could not be discharged directly from the mother vessel to the Dharamtar Jetty due to lack of draft. Hence it was discharged from the mother ship on to the barges at BFL, which carried the goods to the Dharamtar Jetty. It may further be mentioned that while Dharamtar has been approved as a place for unloading under Section 8(a) of the Customs Act, BFL has not been so approved but is only a placing for anchoring the ship.

5. In the Bills of Entry filed by the appellant in respect of the imported cargo, the assessable value of the iron ore pellets was arrived at by including freight incurred on the imported cargo from the place of export to the port of discharge viz. Mumbai/JNPT/Dharamtar. However, by letter dated 7.2.1997 (Annexure P-2 to the Appeal), the Assistant Commissioner of Customs informed the appellant that as per Rule 9 of the Customs Valuation Rule, 1988, the freight incurred on barges and other associated charges in transportation of the goods from BFL to the Dharamtar jetty has also to be added for determining the correct assessable value for the purpose of calculating duty.

6. The appellant sent its reply on 19.5.1997 (Annexure P-3 to the Appeal) stating that the transportation charges of iron ore pellets by barges from BFL to Dharamtar jetty is not inclusive in the assessable value. The appellant alleged that the expression "place of importation" in Section 14 of the Customs Act read with Rule 9 referred to the BFL and not Dharamtar jetty because the goods in question passed out of customs control at BFL. The appellant further alleged that the risk and title to the goods changes the moment the cargo is discharged from the mother vessel on to the barges. Hence, it was alleged that the Dharamtar jetty cannot be considered as the place of importation, and the assessable value of the cargo should be determined without including the transportation charges of the barges from BFL to Dharamtar jetty.

7. Thereafter, a show cause notice dated 22.4.1998 was issued by the Assistant Commissioner of Customs (Preventive) Alibag Division (Annexure P-4 to the Appeal). In this show cause notice it was stated that duties which were assessed provisionally under Section 18 of the Customs Act, 1962 had been assessed finally and the appellant was requested to pay the duties short paid within 10 days or to explain why an amount of Rs. 78,54,112/- (the barge charges) should not be recovered from the appellant. Similar show cause notice dated 17.7.1998 (Annexure P-5 to the Appeal) was also issued.

8. Thereafter the appellant gave its reply a

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2006 Supreme(SC) 925

Cases Referred (12)