IMPORTANT POINT
Proviso (ii) to Rule 9(2)(b) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 stipulating 1% of the free on board value of the goods irrespective of the fact whether actual cost is ascertainable or not held ultra vires section 14, Customs Act, 1962. It has to be read down to mean that it would apply only when actual charges referred to in Clause (b) are not ascertainable.

Judgment

A.K. Sikri, J.

These appeals are preferred by the appellant challenging the validity of judgment dated 11.10.2002 passed by the Division Bench of the High Court of Judicature at Madras. The High Court has, vide the said judgment, disposed of few writ petitions filed under Article 226 of the Constitution of India as well as certain writ appeals which were filed against the orders of the single Judge. All the aforesaid writ petitions and writ appeals were preferred by the appellants herein.

2) The subject matter of those writ petitions/writ appeals was the constitutional validity of proviso (II-i) of Rule 9(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to as the “Valuation Rules”). This proviso has been inserted by Notification No.39/90 dated 05.07.1990 issued by the Ministry of Finance, Department of Revenue, Union of India. As per the appellant, this proviso is not only ultravires Section 14(1) and Section 14(1-A) of the Customs Act, 1962 (hereinafter referred to as the 'Act') but is also violative of Article 14 and Article 19(1)(g) of the Constitution of India. The challenge, however, stands repelled by the High Court in the impugned judgment leading to dismissal of writ petitions and writ appeals. This is how these appeals have come up in this Court, via special leave petition route, in which leave was granted.

3) In order to understand the controversy, purpose would be served in taking note of the facts from the Writ Appeal No.1079/2000 which was filed by the appellant in the High Court. The appellant is engaged in the manufacture and marketing of Mini and Micro Computer Systems and peripheral devices like printer, drivers etc. It, inter alia, imported various components including software from time to time. The appellant presented a Bill of Entry No.15020 dated 15.04.1993. The chargeable weight of the consignment was 315 kgs and the actual loading, unloading and handling charges amounted to Rs.65.40 paisa as per the tariff of the International Airport Authority of India, Madras (now Chennai). However, the Customs Authorities, on the basis of the impugned notification added a sum of Rs.15,214.69 paisa to the value of the goods as handling charges as the impugned provision entitles the authorities to add 1% of the F.O.B. value of goods on account of loading, unloading and handling charges. The actual duty charged, as a consequence of addition of the notional handling charges, amounted to Rs.16,209.20 paisa instead of Rs.69.98 paisa.

4) At this juncture, instead of proceeding further with the factual narration, we would like to deviate a bit and take note of the relevant valuation rules and the amendments made therein from time to time. These rules are made in exercise of powers conferred under Section 156 of the Customs Act, 1962, read with Section 22 of the General Clauses Act, 1897. The purpose of these rules is to arrive at the valuation of the imported goods to enable the customs authorities to levy duty thereupon, on the basis of the value so arrived at. Rule 2 is the “definition” clause whereunder certain terms are defined. Rule 2(f) defines “transaction value” to mean the value determined in accordance with Rule 4 of these Rules. This is to be read along with Rule 3. We, therefore, reproduce Rule 3 and relevant portion of Rule 4 hereunder:

“3. Determination of the method of valuation-For the purpose of these rules, -

(i) the value of imported goods shall be the transaction value;

(ii) if the value cannot be determined under the provisions of Clause (i) above, the value shall be determined by proceeding sequentially through Rules 5 to 8 of these rules.

4. Transaction Value – (1) The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules.

(2) The transaction value of imported goods under sub-rule (1) above shall be accepted. Pr