TMI Blog2015 (4) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Section 14 of the Act. - It introduced a deeming/fictional provision by stipulating that the value of the goods would be the price at which such or like goods are “ordinarily sold, or offered for sale”. Under the new provision, however, the valuation is based on the transaction price namely, the price “actually paid or payable for the goods”. Even when the old provision provided the formula of the price at which the goods are ordinarily sold or offered for sale, at that time also if the goods in question were sold for a particular price, that could be taken into consideration for arriving at the valuation of goods. The underlying principle contained in amended sub-section (1) of Section 14 is to consider transaction value of the goods imported or exported for the purpose of customs duty. Transaction value is stated to be a price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. Therefore, it is the price which is actually paid or payable for delivery at the time and place of importation, which is to be treated as transaction value. However, this sub-section (1) further makes it clear that the price actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion that the authorities have not been able to satisfy as to how such a provision helps in achieving the object of Section 14 of the Act. It cannot be ignored that this provision as well as Valuation Rules are enacted on the lines of GATT guidelines and the golden thread which runs through is the actual cost principle. Further, the loading, unloading and handling charges are fixed by International Airport Authority. Impugned amendment, namely, proviso (ii) to sub-rule (2) of Rule 9 introduced vide Notification dated 05.07.1990 is unsustainable and bad in law as it exists in the present form and it has to be read down to mean that this clause would apply only when actual charges referred to in Clause (b) are not ascertainable. - Decided in favour of assessee. - Civil Appeal No. (S). 9766-9775 of 2003, Civil Appeal No. (S). 1950-1951 of 2004 - - - Dated:- 16-4-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Appellant : Mr. Vasudevan Raghavan,Adv. For the Respondent : Mr. K. Radhakrishnan, Sr. Adv., Mr. Arijit Prasad, Adv., Mr. B. Krishna Prasad, Adv. JUDGMENT A. K. Sikri, J. These appeals are preferred by the appellant challenging the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otional handling charges, amounted to ₹ 16,209.20 paisa instead of ₹ 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 procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at in terms of formula contained in Rule 7. If that is also inapplicable, residual method is provided in Rule 8 which prescribes that the value shall be determined using reasonable means consistent with the principles of general provisions of these Rules and sub-section (1) of Section 14 of the Customs Act and on the basis of data available in India. At the same time, sub-rule (2) of Rule 8 excludes certain methods which are not to be applied to determine the value under these Rules. Precise language of subrule (2) of Rule 8 is reproduce as under: 2. No value shall be determined under the provisions of these rules on the basis of - (i) the selling price in India of the goods produced in India; (ii) a system which provides for the acceptance for customs purposes of the highest of the two alternative values; (iii) the price of the goods on the domestic market of the country of exportation; (iv) the price of the goods for the export to a country other than India; (v) minimum customs values; or (vi) arbitrary or fictitious values. 7) Once the transaction value is arrived at by applying the formula applicable in a given case in terms of aforesaid provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that accrues, directly or indirectly, to the seller; (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable. 2. For the purposes of sub-section (1) and subsection (1A) of Section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of the imported goods shall be the value of such goods, for delivery at the time and place of importation and shall include - (a) the cost of transport of the imported goods to the place of importation; (b) loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation; and (c) the cost of insurance : Provided that in the case of goods imported by air, the cost and charges referred to in clauses (a), (b) and (c) above,- (i) where such cost and charges are ascertainable, shall not exceed twenty per cent of the free on board value of such goods, (ii) where such cost and charges are not ascertainable such cost and charges shall be twenty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods is not ascertainable, the costs referred to in clause (a) shall be twenty per cent of the free on board value of the goods plus cost of insurance for clause (I) above and the cost referred to in clause (c) shall be 1.125% of the free on board value of the goods plus cost of transport for clause (iii) above. 10) Clause (ii) of first proviso, as is clear from reading thereof, mandated addition of one per cent of the free on board value of the goods plus the cost of transport referred to in clause (a) plus the cost of insurance referred to in clause (c). 11) Reverting to the facts of the present case, it is on the strength of this proviso, even when the actual handling charges were shown as ₹ 69.98 paisa, that too as fixed by the International Airport Authority, the customs authorities added further sum of ₹ 15,214.69 paisa to the value of goods of handling charges, being one per cent free on board value of the goods. Obviously, the appellant was aggrieved by this addition and handling charges on notional basis pursuant to the aforesaid proviso whereby the charges for loading, unloading and handling associated with the delivery of imported goods at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause some would be getting the benefit while others would suffer certain detriment, is no reason for invalidating the provision when many others would be getting the benefit thereof as well. The percentage had been fixed by the rule making authority after taken into consideration the overall picture. 14) The High Court, in the impugned judgment, after referring to various decisions of this Court, accepted the plea of the Government holding that rule making authority had the requisite power to make a provision of this nature by including landing charges for the purpose of valuation as valuation on such a basis was held to be valid by this Court in Garden Silk Mills Ltd. v. Union of India (1998) 8 SCC 744. The justification for adding one per cent of F.O.B. value in determination handling charges can be discerned from paras 17 and 18 of the impugned judgment which read as under: 17. We are not able to uphold the contents of the learned counsel for the petitioner for the reason that prior to the impugned notification, the same one percent of F.O.B. value was taken by the authorities as loading, unloading and handling charges for determination of the assessable value of the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principle that when a power is conferred on the Legislature to levy a tax, that power itself must be widely construed. Reliance upon the judgment in Garden Silk Mills is placed by the High Court in the following manner: 19. The Supreme Court in Garden Silk Mills Ltd. v. Union of India reported in AIR 2000 Supreme Court 33 has observed that Section 14 is a deeming provision. The legislative intent is clear that the actual price of imported goods viz., the landing costs cannot alone be regarded as the value for the purpose of calculating the duty. The language of Section 14 clearly indicates that though the transaction value may be relevant consideration, the value for the purpose of custom duty will have to be determined by the customs authority, which value can be more and at times even less than what is indicated in the document of purchase or sale. 16) Questioning the correctness of the aforesaid view taken by the High Court, Mr. Dushyant Dave, learned senior counsel appearing for the appellant in all these appeals, submitted that prior to the impugned notification dated 05.07.1990, the Rule in this regard was to the effect that the handling charges were reckoned on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned provision. 18) We have given our due consideration to the submissions of the learned counsel for the parties with reference to the material on record as well as various statutory and other provisions, placed at our disposal. 19) In order to arrive at the answer to the issue raised, we shall have to go through the scheme of customs duties as payable under the Act. Chapter V is the relevant chapter which deals with Levy of, and Exemption from, Customs Duties . It contains the provisions from Section 12 to Section 28BA. Section 12 which talks of dutiable goods , provides that duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported into, or exported from, India. Thus, the rates at which the customs duties is to be imposed are specified in the Customs Tariff Act, 1975. That rate is on the value of goods imported or exported, as the case may be. Therefore, there is a need to determine the value of the goods imported and exported. The yardsticks for arriving at this value are contained in Section 14 of the Act. This provision as originally stood and was prevalent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed provision reads as follows: 14. Valuation of goods.- (1) For the purposes of the the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf: Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf: Provided further that the rules made in this behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the reflection of the price at which these are ordinarily sold or offered for sale. To put it otherwise, the reason for discarding the price mentioned in the invoice could be only when the said price appeared to be suppressed one. In such a case, the authorities could say that generally such goods are ordinarily sold or offered for sale at a different price and take that price into consideration for the purpose of levying the duty. It could, however, be done only if there was evidence to show that ordinarily the price at which these goods are ordinarily sold or offered for sale is higher than the price mentioned in the invoice. In fact, this fundamental concept is retained even now while introducing the concept of transaction value under the amended provision. More importantly, the rules viz. Valuation Rules, 1988 had incorporated this very principle of transaction value even under the old provision. No doubt, as per this provision existing today generally the price mentioned is to be accepted as it is the transaction value. However, this very provision stipulates the circumstances under which that price can be discarded. In any case, having regard to the question with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods unless it is impermissible because of certain circumstances stipulated therein. Keeping in mind this fundamental aspect, we have to examine the scheme of the Valuation Rules, 1988. 25) It can very well be seen from the Valuation Rules, 1988 that these Rules are made to facilitate arriving at the valuation of goods in all the contingencies provided in sub-section (1) of Section 14. We have already reproduced the relevant Rules and indicated the scheme thereof. To recapitulate in brief, Rule 3 echoes the principle enshrined in sub-section (1) of Section 14 by mentioning that value of the imported goods would be the transaction value It is interesting to note, which is somewhat strange, that though concept of transaction value was introduced in sub-section (1) of Section 14 by amendment in the year 2007, which before that in the Valuation Rules, 1988, the expression transaction value is incorporated. This also lends credence to our observations that the concept of unamended provision was also to arrive at to take into consideration the actual value wherever it was available and was not excluded by any of the circumstances mentioned therein. . Likewise, Rule 4 again repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the Act as well as in the Rules to arrive at the valuation of the goods, it becomes clear that wherever actual cost of the goods or the services is available, that would be the determinative factor. Only in the absence of actual cost, fictionalised cost is to be adopted. Here again, the scheme gives an ample message that an attempt is to arrive at value of goods or services as well as costs and services which bear almost near resemblance to the actual price of the goods or actual price of costs and services. That is why the sequence goes from the price of identical goods to similar goods and then to deductive value and the best judgment assessment, as a last resort. 27) In the present case, we are concerned with the amount payable for costs and services. Rule 9 which is incorporated in the Valuation Rules and pertains to costs and services also contains the underlying principle which runs though in the length and breadth of the scheme so eloquently. It categorically mentions the exact nature of those costs and services which have to be included like commission and brokerage, costs of containers, cost of packing for labour or material etc. Significantly, Clause (a) of sub-r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unloading and handling charges are concerned, it was reduced to 1% of the free on board value of goods and in case of insurance charges, the amended provision provided for such cost at 1.125% free on board value of goods. However, as mentioned above, the spirit behind this proviso continued to be the same viz. the proviso was to made applicable only when the actual cost was indeterminable. 31) In contrast, however, the impugned amendment dated 05.07.1990 has changed the entire basis of inclusion of loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation. Whereas fundamental principle or basis remains unaltered insofar as other two costs, viz., the cost of transportation and the cost of insurance stipulated in clauses (a) and (c) of sub-rule (2) are concerned. In respect of these two costs, provision is retained by specifying that they would be applicable only if the actual cost is not ascertainable. In contrast, there is a complete deviation and departure insofar as loading, unloading and handling charges are concerned. The proviso now stipulates 1% of the free on board value of the goods irrespective of the fact wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case. A reading of sub-section (3) of Section 14 would make it clear that such rate of exchange can be determined by the Board or can be ascertained in such manner as the Board may direct, for the conversion of Indian currency into Foreign currency or Foreign currency into Indian currency. Thus, Board had been given power to determine the rate of exchange or stipulate the manner in which such rate of exchange is to be determined. Armed with this power, the customs authorities notified the rate of exchange for the purposes of Section 14 at one US dollar equal to ₹ 31.44. Notification in this behalf was issued by the Board on 27.03.1992. On 29.04.1992, the Reserve Bank of India had notified the exchange rate of one US dollar equal to ₹ 25.95. On the basis of this fixation by the Reserve Bank of India, the notification dated 27.03.1992 stipulating exchange rate of one US dollar equal to ₹ 31.44 was challenged as arbitrary fixation of the exchange rate. This Court sustained the challenge in the following words: 5. The counter filed by the respondent before the High Court, as also before this Court, does not indicate why the rate was fixed at ₹ 31.44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are reproducing the same: 13. It is very common for the legislature to provide for a general rule-making power to carry out the purpose of the Act. When such a power is given, it may be permissible to find out the object of the enactment and then see if the rules framed satisfy the test of having been so framed as to fall within the scope of such general power confirmed. If the rule-making power is not expressed in such a usual general form then it shall have to be seen if the rules made are protected by the limits prescribed by the parent act. (See: Sant Saran Lal v. Parsuram Sahu, AIR 1966 SC 1852). From the provisions of the Act we cannot spell out any legislative intent delegating expressly, or by necessary implication, the power to enact any prohibition on transfer of land. We are also in agreement with the submission of Shri Anil Divan that by placing complete prohibition on transfer of land subservient to tea estates no purpose sought to be achieved by the Act is advanced and so also such prohibition cannot be sustained. Land forming part of a tea estate including land subservient to a tea plantation have been placed beyond the ken of the Act. Such land is not to be take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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