2025 (4) TMI 834 - AT - Customs

Valuation - inclusion of floating crane charges incurred for unloading coal from mother vessels to barges in the assessable value as part of transportation costs under Section 14 of the Customs Act 1962 and Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007 - Loading/unloading expenses from mother ship to barge are part of cost of transportation and includible in assessable value post 2007 under new Section 14 based on actual transaction value - difference of opinion - majority order - HELD THAT - It is found that in the present case in order to come to the conclusion as to whether the floating crane charges can be termed has transportation cost or not the same would require to go into factual details. It is also found that in WIPRO LTD. VERSUS ASSISTANT COLLECTOR OF CUSTOMS OTHERS 2015 (4) TMI 643 - SUPREME COURT the Supreme Court has viewed that the amendment per se to Section 14 (1) on its own is not bringing in any material change except for the mode of arriving at the value which was based on deemed value earlier and change to transportation value w.e.f 10.10.2007. A harmonious reading of the Section 14 (1) prior to 2007 subsequent to 2007 read with Valuation Rules 2007 clarifies this. Therefore simply based on the amended provision of Section 14 (1) alone the matter cannot be decided. The Hon ble Member (Judicial) has gone into various factual details gone into by the Hon ble Supreme Court in ISPAT INDUSTRIES 2006 (9) TMI 181 - SUPREME COURT which he has recorded and has rightly felt that they are required to be checked even in the present case. The Hon ble Member (Judicial) is agreed upon and it is held that the matter is required to be remanded to the adjudicating authority to undertake necessary verification of the points highlighted by him at Para 19 (a) to (f) and as per the directions given by him at Para 20 and Para 21 of the Interim Order. Conclusion - The question as to whether any further addition to CIF value for transportation charges is warranted or not needs elaborate discussions and findings on various aspects. The matter is to be placed before the regular Division Bench to pass necessary order.

Summary

The core legal questions considered in the judgment revolve around the proper inclusion of floating crane charges in the assessable value of imported goods under the Customs Act, 1962. Specifically, the issues include:

1. Whether floating crane charges incurred for unloading coal from mother vessels to barges at anchorage within the port constitute part of the cost of transportation (freight) and are therefore includible in the assessable value under Section 14 of the Customs Act read with Rule 10 of the Customs Valuation Rules, 2007.

2. Whether these charges should be treated as loading/unloading charges already covered under the statutory 1% loading/unloading/handling charge, thus excluding them from additional valuation.

3. The applicability of the principle of provisional assessment under Section 18(2) of the Customs Act and whether demands raised under Section 28 without finalizing provisional assessments are valid.

4. Whether non-inclusion of floating crane charges amounts to misdeclaration attracting confiscation and penalty under Sections 111(m) and 114A of the Customs Act.

5. The relevance and applicability of various precedents, especially the Supreme Court decisions in Coromandel Fertilisers Ltd., Wipro Ltd., Ispat Industries Ltd., and others, in the context of valuation rules before and after the 2007 amendment to Section 14.

6. The definition and interpretation of "place of importation" and its impact on the inclusion of barging and floating crane charges in customs valuation.

Issue-wise Detailed Analysis

1. Inclusion of Floating Crane Charges in Assessable Value as Transportation Cost

Legal Framework and Precedents: Section 14 of the Customs Act, 1962, mandates inclusion of costs such as transportation, loading, unloading, and insurance in the assessable value. Rule 10(2) of the Customs Valuation Rules, 2007, elaborates that the value of imported goods includes the cost of transport to the place of importation and loading/unloading/handling charges at that place. The Explanation to Rule 10(2) includes ship demurrage, lighterage, or barge charges within transport costs. The Supreme Court's decision in Coromandel Fertilisers Ltd. (2000) held that once a fixed percentage for landing charges is added, no further addition for unloading can be made. However, this was prior to the 2007 amendments.

Court's Interpretation and Reasoning: The adjudicating authority and appellate authority initially held that floating crane charges are an extended element of freight (transportation cost), distinct from loading/unloading charges, and thus includible in assessable value. This was based on the fact that gearless vessels lacked cranes, necessitating floating cranes for unloading, and the freight for gearless vessels was lower, justifying additional charges as freight extension.

The Judicial Member, however, emphasized the need to examine factual aspects such as whether goods were cleared for home consumption before landing, permissions under Sections 33, 34, and 35 of the Customs Act for movement of goods, and whether the jetty was included as port of discharge in the bill of lading. The Judicial Member relied on the Apex Court's decision in Ispat Industries Ltd. (2006) which held that barge charges from anchorage to approved unloading place could not be added to valuation if freight to the approved port was already paid.

The Technical Member took the view that post-2007 amendments to Section 14, which replaced the deemed value concept with actual transaction value and explicitly included transportation costs, mandate inclusion of floating crane charges as transportation cost. He opined that the earlier Apex Court decision in Ispat Industries (pre-2007 law) was not applicable due to the change in law and that excluding such charges would be ultra vires Section 14.

Key Evidence and Findings: Statements from the importer's managing director acknowledged floating crane charges as an extended freight cost. The department noted that the freight paid was less than for geared vessels, supporting the claim that floating crane charges are additional freight. The bill of lading and customs notifications designating the place of unloading were scrutinized to understand the place of importation.

Application of Law to Facts: The Tribunal recognized that the place of importation is the notified port area on landmass, not the anchorage point. Barging charges to transport goods from anchorage to port are transportation costs and includible in assessable value. However, the floating crane charges for unloading at anchorage are factually and legally complex, requiring further examination of permissions, clearance status, and contractual terms.

Treatment of Competing Arguments: The appellant argued that floating crane charges are part of unloading and thus covered within the 1% statutory loading/unloading charge, not to be added separately. The department contended these are transportation costs beyond unloading and thus includible. The Judicial Member favored a fact-based inquiry before deciding, while the Technical Member favored strict inclusion based on statutory amendments.

Conclusion: The majority held that barge charges are includible as transportation cost. However, the question of floating crane charges requires remand for detailed factual inquiry considering statutory permissions, place of importation, and contractual details.

2. Treatment of Loading/Unloading Charges and Statutory 1% Charge

Legal Framework and Precedents: Rule 10(2)(b) fixes loading, unloading, and handling charges at 1% of CIF value including transport and insurance costs. Coromandel Fertilisers Ltd. held that once fixed landing charges are included, no further addition for unloading is permissible.

Court's Interpretation and Reasoning: The department distinguished floating crane charges from statutory unloading charges, considering the former as transportation cost. The Judicial Member noted that the statutory 1% charge applies to unloading at the place of importation (landmass port), not at anchorage or on barges. The Technical Member rejected the appellant's reliance on Coromandel, noting the decision predates the 2007 amendments and does not cover transportation costs incurred prior to unloading at port.

Application of Law to Facts: Since floating crane charges were incurred at anchorage, not at the designated port, they do not fall within the statutory unloading charge. Hence, the 1% charge does not cover these expenses.

Conclusion: Floating crane charges are distinct from statutory unloading charges and may be includible in assessable value as transportation cost.

3. Provisional Assessment and Validity of Demand under Section 28

Legal Framework and Precedents: Section 18(2) permits provisional assessment with finalization later. Section 28 applies to short levy or non-levy detected after finalization. The appellant relied on judgments holding that differential duty can only be recovered after finalization of provisional assessment, and demands under Section 28 without such finalization are invalid.

Court's Interpretation and Reasoning: The Judicial Member directed verification of whether provisional assessments were finalized before demand under Section 28 was raised. The Technical Member did not address this point explicitly.

Conclusion: The matter was remanded to verify compliance with procedural safeguards relating to provisional assessment before demands under Section 28.

4. Misdeclaration, Confiscation, and Penalty

Legal Framework and Precedents: Section 111(m) provides for confiscation of goods if value or particulars are misdeclared. Section 114A imposes penalty for suppression of facts. The appellant contended that since floating crane charges were not included due to bona fide interpretation and goods were cleared before investigation, confiscation and penalty are not justified. Reliance was placed on precedents requiring availability of goods for confiscation and proper bonds for redemption fine.

Court's Interpretation and Reasoning: The adjudicating authority found misdeclaration in non-inclusion of floating crane charges. However, since goods were already confiscated and redemption fine imposed earlier, no second confiscation or fine was ordered. The Judicial Member considered the appellant's submissions regarding absence of goods for confiscation and procedural irregularities, directing further examination.

Conclusion: The question of confiscation and penalty requires further factual scrutiny, particularly regarding timing and availability of goods and procedural compliance.

5. Interpretation of "Place of Importation" and its Impact

Legal Framework and Precedents: Section 14 and Rules 9/10 refer to costs to the "place of importation." Apex Court decisions (Prabhat Cotton, Shriram Fibres, Garden Silk Mills) hold that place of importation is the landmass port where goods are landed, not the anchorage or territorial waters. Customs notifications designate specific jetties and port areas as places of unloading and customs control.

Court's Interpretation and Reasoning: The Tribunal held that loading/unloading charges at anchorage or on barges do not constitute charges at the place of importation. Barging charges transporting goods to the port are transportation costs to the place of importation and includible. The floating crane charges at anchorage fall outside this scope and require detailed factual analysis.

Conclusion: Place of importation is the notified port area on landmass; costs incurred prior to arrival there are transportation costs, while unloading charges apply only at the designated place of importation.

6. Applicability of Pre- and Post-2007 Legal Framework

Legal Framework and Precedents: Prior to 2007, Section 14 prescribed deemed value with valuation rules creating a legal fiction. Post-2007 amendments shifted to actual transaction value including actual transportation costs. The Apex Court in Ispat Industries (2006) interpreted pre-2007 law and held barge charges could not be added if freight to port was paid. Wipro Ltd. (2015) clarified that except for shift from deemed to transaction value, provisions remain similar.

Court's Interpretation and Reasoning: The Technical Member held that post-2007 amendments require inclusion of floating crane charges as transportation cost. The Judicial Member opined that factual circumstances must be examined to apply the principles correctly. The majority remanded the matter for detailed inquiry.

Conclusion: Pre-2007 precedents are not fully applicable post-2007 due to change in valuation method; however, factual matrix remains crucial.

Significant Holdings

"The place of importation is the notified place of unloading on the landmass of India and not the anchorage point where the ship anchors."

"Barge charges being part of the transport cost to the place of importation are includible in the assessable value."

"Loading, unloading and handling charges fixed at 1% of CIF value refer to charges at the place of importation and do not include transportation costs incurred prior to arrival at the port."

"The floating crane charges for unloading at anchorage cannot be summarily treated as loading/unloading charges or as transportation cost without detailed factual inquiry including whether goods were cleared for home consumption before unloading, permissions under Sections 33, 34, and 35 were obtained, and contractual terms."

"The differential duty demand under Section 28 without finalization of provisional assessment under Section 18(2) is not valid; such procedural compliance must be verified."

"Non-inclusion of floating crane charges may amount to misdeclaration under Section 111(m), but confiscation and penalty require availability of goods for seizure and procedural compliance."

"Post-2007 amendments to Section 14 mandate inclusion of actual transportation costs in assessable value, superseding earlier deemed value jurisprudence."

"If two interpretations of a rule exist, the one that subserves the object of the parent statute must be adopted; excluding transportation costs post-2007 would be ultra vires."

Final Determination:

The appeals were allowed by way of remand to the adjudicating authority to examine detailed factual aspects including clearance status, permissions for unloading and movement, contractual terms, and provisional assessment finalization. The inclusion of floating crane charges as transportation cost in the assessable value is not precluded but requires fact-based determination. The remand directs the authorities to afford full opportunity to the appellants to present evidence and arguments on these points. The Tribunal did not conclusively hold floating crane charges as includible or excludible but emphasized the need for a comprehensive factual and legal inquiry consistent with the amended statutory framework.