M/S. Ispat Industries Ltd vs Commissioner Of Customs,Mumbai

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.

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.

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.

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.

Thereafter the appellant gave its reply and was also heard personally through its authorized representative, but by the order of the Assistant Commissioner of Customs dated 5.10.1998 (Annexure P-6 to the Appeal) the demand was confirmed. The appellant appealed against the said order which was rejected by the Commissioner of Customs (Appeals), Mumbai vide order dated 10.2.1999.

Aggrieved, the appellant filed an appeal to the Customs, Excise & Gold (Control) Tribunal which has been dismissed on 7.3.2001. Hence this appeal.

In Dhiraj Lal H. Vohra & others vs. Union of India & others 1993 (Supp.3) SCC 453, the facts were that the appellants' ship arrived on February 20, 1989 at Madras port and was ready to discharge the cargo. It delivered the import manifest under No. 116 on the said date but due to continued strike the cargo could not be handled. On February 27, 1989 the petitioner presented the bill of entry "for clearance of goods for home consumption" and it was entered at No. 012036 which was received in the appraising section of the group on February 28, 1989. The ship arrived into the port and was berthed on March 2, 1989. The entry inward was granted on March 2, 1989. From March 1, 1989 the rate of excise duty was altered. It was increased to 150 per cent ad valorem plus Rs. 300 per piece for certain sizes and for other sizes duty was raised to 150 per cent ad valorem plus weight-based duty. The result was that pre-tariff duty was Rs. 15,73,611.05 while as per the new tariff levy effective from March 1, 1989 the difference came to Rs. 1,80, 46,092.64.

Provided further that in the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such cost shall not exceed twenty per cent of free on board value of the goods:

To give an example, the prescribed Yupa (sacrificial post for tying the sacrificial animal) must be made of Khadir wood. However, Khadir wood is weak while the animal tied may be restive. Hence, the Yupa can be made of Kadar wood which is strong. Now this substitution is being made despite the fact that the prescribed wood is Khadir, but this prescription is only subordinate or Accessory to the performance of the ceremony, which is the main object. Hence if it comes in the way of the ceremony being performed, it can be modified or substituted".

In our opinion, it is really not necessary to decide whether the place of importation is the jetty or the BFL. Whether the place of import is deemed to be the BFL or Dharamtar jetty it would make no difference to the conclusion we have arrived at because the cost of transportation of the imported goods has already been included for delivery at the Dharamtar jetty and has already been paid to the seller in the CIF or FOB contract. Hence, a further addition to the transport charges in the form of barge charges for the transportation by barges cannot be said to be contemplated by Section 14 of the Act.

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.

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 Tribunal's 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.

It is not disputed that the freight upto the Dharamtar jetty had been paid by the buyer. Hence we cannot agree that additional transportation charges being the charges for carrying the goods by barges from the mother ship to the Dharamtar Jetty have to be added to the valuation. The fact that the mother ship could not come upto the Dharamtar Jetty is an extraordinary situation (due to lack of draft) and hence any extra transportation charge to meet this situation cannot, in our opinion, be added to the value of the goods.

For the reasons given above, this appeal is allowed and the impugned order of the Tribunal as well as of the Customs authorities are set aside, and it is held that the charges for transportation of the goods by barges from the mother ship at BFL to the Dharamtar Jetty cannot be added to the valuation of the imported goods for the purpose of levying customs duty.

Any amount collected by the revenue as duty on barge charges shall be refunded forthwith to the assessee with statutory interest from the date of payment to the date of refund, which must be within three months from today. No costs.

Civil Appeal Nos. 6366/2004, 1603/2005, 6160-6161/2004 & 5921-5924/2004 In view of the decision in Civil Appeal No. 3972 of 2001, Civil Appeal Nos. 6366/2004 and 1603/2005 are allowed and Civil Appeal Nos. 6160-6161/2004 and 5921-5924/2004 filed by the Revenue are dismissed. No costs.