Silk Mills Ltd. & ANR Vs. Union of India & Ors  INSC 375 (29
B.N.Kripal, A.P.Misra KIRPAL,J.
main question which arises in all these appeals by special leave is whether
while assessing customs duty payable in respect of imported goods, the customs
authorities can add/include landing charges in arriving at the value of those
goods. The facts which are relevant for deciding the issue are similar. For the
sake of convenience we will refer to the facts in the case of Garden Silk Mills
Limited in greater detail.
appellants in these appeals had imported polyester yarn from abroad. The
transactions for sale and purchase between the foreign supplier and the
appellant company were in the nature of CIF contracts i.e. price included
costs, insurance and freight charges. These contracts normally provide CIF
price for the port of discharge. It is not in dispute that under a CIF contract
the price which was paid included not only the cost of the goods but also the
insurance and freight charges.
customs authorities, in determining the value of the goods for the purpose of
ascertaining the amount of duty payable, added to the CIF price the landing
charges which were paid to the Port Trust Authorities. On the payment of the
customs duty being made, the goods were cleared and used by the appellants.
appellant company then filed writ petitions in the High Court of Gujarat, inter
alia, contending that the landing charges which were paid at the rate ¾% of the
CIF value of goods had been wrongly added while arriving at the assessable
value of those goods and, therefore, the High Court should direct a refund of Rs.
69030.60 which was the amount of duty relatable to the landing charges. The
High Court came to the conclusion that the Customs Authorities had rightly
added the landing charges to the CIF value of the goods for the purpose of
determining the customs duty and, therefore, no refund was due to the
appellants. Hence, these appeals by special leave.
12 of the Customs Act, 1962 (hereinafter referred to as the Act) provides for
the levy of duty of customs on the goods imported into or exported from India at such rates as may be specified
under the Customs Tariffs Act, 1975. Prior to its amendment in 1988, Section 14
of the Act read as follows:
Valuation of goods for purposes of assessment.
For the purposes of Customs Tariff Act, 1975 (51 of 1975), or any other law for
the time being in force whereunder a duty of customs is chargeable on any goods
by reference to their value, the value of such goods shall be deemed to be:
the price at which such or like goods are ordinarily sold, or offered for sale,
for delivery at the time and place of importation or exportation, as the case
may be, in the course of international trade, where the seller and the buyer
have no interest in the business of each other and the price is the sole
consideration for the sale or offer for sale.
that such price shall be calculated with reference to the rate of exchange as
in force on the date of which a bill of entry is presented under Section 46, or
a shipping bill or bill of export, as the case may be, is presented under
Where such price is not ascertainable, the nearest ascertainable equivalent
thereof determined in accordance with the rules made in this behalf.
amendment in 1988, a new provision sub-section (1A) has been incorporated in
Section 14, after deleting clause (b) of sub-section 1. The new sub-section
(1A) stipulates that subject to the provisions of sub-section 1, the price
referred to in that sub-section in respect of imported goods shall be
determined in accordance with the rules made in this behalf. Pursuant thereto
Customs Valuation (Determination of Price of Imported Goods) Rules 1988 have
been framed. Post 1988, therefore, the value of the imported goods has to be
determined in accordance with the rules which, according to the respondents,
are based on the GATT Valuation Code (also called Article VII of the General
Agreement on Tariff and Trade) which was adopted in 1979. With these Rules,
however, we are not concerned in the present case because all the goods were
imported prior to the incorporation of sub-section (1A) of Section 14 of the
behalf of the appellants it was contended that under Section 12 of the Act the
duty was leviable on goods imported into India and the value of the goods must be fixed at the time and place of
importation. In the case of C.I.F. contracts, it was contended that the
contracts reflect the price for sale in the course of international trade and
for delivery at the time and place of importation, which, in the case of
appellants, was Bombay. The expressions time and the place
of importation must be understood in an ordinary sense. In commercial world and
in international trade, time and place of importation could only mean (a) the
date of import and (b) the place of import i.e. port of import. It was
submitted that place of importation could not mean wharf, dock, port, quays or
the customs barrier. Similarly the expression delivery, it was contended, had
to be construed in ordinary sense which, in the case of C.I.F. contracts, would
mean the port of discharge i.e. Bombay and not the wharf at the port
of Bombay. According to the appellants the
words for delivery at the time and place of importation occurring in Section 14
of the Act could only mean delivery on the date and the port of discharge and
the price must, therefore, be an ordinarily available price at about the same
time and place of discharge. It could not be a price anterior or posterior to
the point of time when the goods arrived and, therefore, landing charges which
are levied after the delivery of the goods could not be imposed.
attention was also invited to Sections 2(23) and 2(27) of the Act which read as
import with its grammatical variations and cognate expressions, means into India from a place outside India;
2(27) India includes the territorial waters of India.
submission was sought to be raised that reading Section 12 of the Act with
Sections 2(23) and 2(27), the import of goods into India would be completed
when they enter the territorial waters of India and it is the value at that
point of time which alone can be taken into consideration for the purposes of
assessing the customs duty. If this be so the question of there being any
addition of landing charges to the C.I.F. value can under no circumstances
arise because landing charges are levied in relation to goods after they have
been off-loaded from the ship.
careful analysis it is evident that the principles of valuation incorporated in
Section 14(1) (a) of the Act therein show that:
price is a deemed price; b) at which such or like goods are ordinarily sold or
offered for sale; c) for delivery at the time and the place of importation or
exportation; d) in the course of international trade; e) where the seller and
the buyer have no interest in the business of each other and f) the price is
the sole consideration for the sale or offer for sale.
Section clearly indicates that it is not the price stated in the CIF contract
which alone is to be accepted as being the value of such goods for the purpose
of Section 14 of the Act. The said Section requires determination of the value
of the imported goods. The appellants are right in contending that this is a
deeming provision. The value of such goods is to be deemed to be the price at
which such goods are ordinarily sold, or offered for sale, for delivery at the
time and place of importation in the course of international trade, where the
seller and the buyer have no interest in the business of each other and the
price is the sole consideration for the sale or offer for sale. The price of
the imported goods, in other words, has to be determined in respect of import
of those goods for delivery at the time and place of importation. It appears to
us that the word delivery must necessarily mean the point of time when the
goods can be physically delivered to the importer. In other words, delivery and
discharge are not synonymous. As we shall presently see, merely by the shipper
discharging the goods at the port of import does not ipso facto give the
importer a right to take the delivery thereof.
VI of the Act contains the provisions relating to conveyances carrying imported
or exported goods. Chapter VII of the Act contains provisions regarding the
clearance of imported goods and export goods. Reading the provisions contained
in the said chapters, it becomes apparent that all goods carried by vessel or
aircraft entering from any place outside India has to land the goods at a
customs port or customs airport and that too with the permission of the Customs
Officer (Section 29). The import manifest of the vessel is required to be
delivered to the Customs Officer in terms of Section 30. Unloading of imported
goods can take place only after the import manifest has been delivered and an
order permitting entry inwards of the vessel has been given by the Customs
Officer in terms of Section 31.
32 provides that un- loading of only those goods is permitted as are mentioned
in import manifest. The goods are to be un-loaded as per Section 33 only at the
place which is approved for that purpose and the same cannot be un- loaded
except under the supervision of the Customs Officer (Section 34).
imported goods unloaded in a customs area are required to remain under the
customs authorities until they are cleared for home consumption or are
warehoused or are transshipped (Section 45). The goods can be cleared by the
importer only after, as provided by Section 46, the importer files a bill of
entry for home consumption or warehousing pursuant to which clearance of goods
is granted under Section 47 by the Customs Officer. This clearance is given
after the officer is, inter alia, satisfied that the importer has paid the
import duty assessed on the imported goods.
aforesaid provisions of the Act , therefore, clearly show that after the
imported goods are discharged from the vessel at the wharf the importer cannot
immediately take delivery thereof. The imported goods remain in the custody of
the Port Trust Authorities till they are, inter alia, cleared for home
consumption. This being the position the goods cannot be cleared and delivery
taken without their being valued and assessed and, thereafter, duty being paid.
14 of the Act provides that the value of the goods shall be deemed to be the
price of the goods for the delivery at the time and place of importation in the
course of international trade. The value has to be determined with relation to
the time when physical delivery to the importer can take place. Physical
delivery can take place only after the bill of entry, inter alia, for home
consumption is filed and it is the value at that point of time which would be
relevant. It is evident that there normally will be some lapse of time between
the time when the shipper discharges the goods and the time when the bill of
entry is filed. The landing charges, which are imposed at or after the time of
the discharge of the goods and prior to the clearance being granted under
Section 47 of the Act, necessarily have to be an element which have to be taken
into account in determining the value thereof for the purpose of assessing the
customs duty which would be chargeable.
14 is a deeming provision. The legislative intent is clear that the actual
price of the imported goods, namely the landing cost, cannot alone be regarded
as the value for the purpose of calculating the duty. If the submission of the
learned Counsel for the appellants is correct namely that the C.I.F. price
represents the value of the imported goods, then the Section 14 would have been
differently worded. It could, for instance, have easily been stated that the
value of the imported goods would be the transaction value of the goods. The
language of Section 14 clearly indicates that though the transaction value may
be a relevant consideration, the value for the purpose of Customs duty will
have to be determined by the Customs Authorities which value can be more, and
at times even less, than what is indicated in the documents of purchase or
question as to whether the import is completed when the goods entered the
territorial waters and it is the value at that point of time which is to be
taken into consideration is no longer res integra. This contention was (5) J.T.
160. In that case the day when the goods entered the territorial waters, the
rate of duty was nil but when they were removed from the warehouse, the duty
had become leviable. The contention which was sought to be raised was that what
is material is the day when the goods had entered the territorial waters
because by virtue of Section 2(23) read with Section 2(27) the import into India had taken place when the goods
entered the territorial waters.
the decision of this Court in Bharat Surfactants Another, 1989(4) SCC 21 and Dhiraj
Lal H. Vohra and Others this Court came to the conclusion in Apars Private
Limited case that the duty has to be paid with reference to the relevant date
as mentioned in Section 15 of the Act.
further submitted that in the case of Apars Private Limited this Court was
concerned with Sections 14 and 15 but here we have to construe the word
imported occurring in Section 12 and this can only mean that the moment goods
have entered the territorial waters, the import is complete. We do not agree
with the submission. This Court in its opinion in Re. The Bill to Amend Section
20 of the Sea Customs Act, 1878 and Section 3 of the Central Excises and Salt
Act, 1944, 1964 (3) SCR 787 at page 823 observed as follows:
speaking, the imposition of an import duty, by and large, results in a
condition which must be fulfilled before the goods can be brought inside the
customs barriers i.e. before they form part of the mass of goods within the
would appear to us that the import of goods into India would commence when the same cross into the territorial
waters but continues and is completed when the goods become part of the mass of
goods within the country;
taxable event being reached at the time when the goods reach the customs
barriers and the bill of entry for home consumption is filed.
submitted by the learned counsel for the appellants that in actual effect in
the case of CIF contracts like the present, it is the shipper who pays the
landing charges and the Indian importer does not incur these expenses in
addition to what he has paid on the basis of the CIF contract. In other words
the submission was that the landing charges are already included in the CIF
value of the goods as they form part of the freight paid to the steamer agent
and the said charges are recovered by the Port Trust authorities directly from
the steamer agents and, therefore, a second inclusion of such landing charges
by loading a flat percentage of the CIF value is uncalled for. In this
connection, reliance was placed on clause 15 of the terms and conditions of a
sample of a Bill of Lading which deals with loading, discharge and delivery and
reads as under:
expenses, costs, dues and other charges which incur before loading and after
discharge of the goods shall be borne by the Merchant.
Additional Solicitor General is correct in submitting that the aforesaid clause
15 does not in any way indicate that the CIF value includes therein the charges
levied by the Port Trust Authorities after the discharge of the goods. It is
difficult to imagine that at the time when the contract is entered into, and
the CIF price is fixed, as to how the parties could envisage as to what the
port charges at the destination are likely to be. It does appear that any
expense which is incurred with regard to the loading or un-loading of the goods
to and from the ship would be included in the CIF price paid by the importer.
there is nothing on record to show that in actual effect landing charges were
collected by the Port Trust Authorities from the shipper. No document in this
regard showing the discharge of such a liability by the shipper to the Port
Trust Authorities has been produced. There can be little doubt that if the
importer is able to establish that the obligation to pay the landing charges
was on the seller or by the shipping agent, and not by the buyer, and the said
charges have infact been paid to the Port Trust Authorities not by or on behalf
of the importer, then the importer can claim that the landing charges should
not once again be added to the price because in such an event, where payment is
made of landing charges by the seller or the shipper, the CIF price must be
regarded as including the said landing charges. There is however, in these
cases, no factual basis for contending that the landing charges were included
in the CIF price and, consequently the said obligation was discharged not by
the importer or by its agent but by the seller or the shipper.
also submitted on behalf of the appellants that onus of proving that the
transaction value does not represent the value for the purposes of Section 14
of the Act and that it has to be loaded with any other elements such as landing
charges, is on the Department. We are unable to agree with the submission. The
value at which the goods are to be assessed is indicated by the importer when
he makes a declaration while submitting a bill of entry under Section 46 of the
Act. Once, we come to the conclusion that the landing charges would be included
in the determining of the value of the goods imported then the onus has to be
on the importer to show that the price indicated in the CIF contract includes
therein this element of landing charges. If such an element is included in the
CIF contract, that would be within the knowledge of the importer and the
Department cannot be asked to prove the negative, namely that the CIF contract
does not include therein the element of landing charges.
contended that legal fictions are created only for some definite purposes and
here the purpose is to take the transaction value in international trade as the
basis for valuation. Therefore, whichever view is taken of Section 14(1) (a) of
the Act, it should be limited to the purpose the legislation makers had in view
when they incorporated it. It was further submitted that in the present case
the fiction was clearly limited to the parameters provided in Section 14(1)(a)
(ordinary price in international trade at the time and place of importation)
and cannot be extended further to be settled with elements like landing
charges. Once that is done, the whole purpose of legal fiction stands defeated
and, therefore, landing charges cannot form part of the value of goods for
not agree with the aforesaid submission because what has to be arrived at is a
deemed price in the manner indicated in the said Section. In determining this
deemed price in international trade the element of port charges which have to
be borne by the importer, in addition to the CIF value, before the goods can be
cleared for human consumption must necessarily form a part or an element of the
value. The said Section does not accept as final the price fixed by the
purchaser and the seller in the course of international trade as reflected in
the CIF contract but it requires determination of value by the customs
authorities in the manner indicated therein. What has to be seen is the value
or cost of the imported articles at the time of importation i.e. at the time
when they reach the customs barrier. Landing charges which have to be paid to
the Port Trust must, therefore, be taken into consideration while determining
the value of the imported goods for the purpose of assessment of duty. It is
only if the importer establishes that the obligation to pay the landing charges
is on the seller and not on the importer and that the seller or his agent has,
in fact, paid the said landing charges to the Port Trust Authorities, that the
importer can claim that the landing charges should not be again added to the
none of the cases before us has it been found by any fact finding authority,
even in cases of CIF contracts, that the Port Trust Authorities did receive the
landing charges from the shipper or the foreign seller and that the said
charges were included in the CIF contract.
notice that various High Courts in India since 1982 have held that for the
purpose of arriving at the value at which goods are delivered to the buyer at
the time and place of importation into India, the concept of value as
understood in Section 14 of the Act necessarily requires the landing charges to
be included in the value. These decisions are:
1982(10) ELT 203 (Gujarat High Court) Prabhat 9.3.1982. b)
1983(12) ELT 258 (Delhi High Court) Super dated 23.9.1982, followed by another
judgment in 1983(12) Union of India, judgment dated 7.1.1983. c) 1984(18) ELT 235 (Punjab and Haryana High Court) Oswal
Woolen Mills Ltd.
of Customs, Calcutta, judgment dated 21.1.1985.
1986(24) ELT 456 (Karnataka High Court) B.S. Kamath & 1987(32) ELT 2263 (Bombay High Court) Ashok Traders vs.
Union of India, judgment dated 9.10.1987 followed by another judgment in
1992 (57) ELT 221 (Bombay High Court) in Ceat India, judgment dated 4.12.1987. h) 1994(69) ELT 4 (Madras judgment dated 5.8.1993.
opinion these decisions have correctly interpreted the relevant provisions of
the Customs Act and the submissions on behalf of appellants cannot be accepted.
the aforesaid reasons, we do not find any merit in the contentions of the
appellants and, in our opinion, landing charges were rightly taken into
consideration in determining the assessable value of the imported goods for the
purposes of Section 14(1)(a) of the Act. There being no other point for
consideration, Civil Appeal Nos. 2976 of 1991 and 2674 of 1982 are accordingly
APPEAL NOS. 8459-60, 8864, 8865, 8866, 11897 OF 1983 AND 7675 OF 1996 The only
contention raised in these appeals by Mr. J.
Sr. Advocate related to the addition of the landing charges to the CIF value
for the purpose of determining the assessable value under Section 14(1)(a) of
the Act. The emphasis of the learned counsel was that in the case of CIF
contract the freight which is paid included the landing cost and, therefore,
the same cannot be added once again to the CIF value.
have already indicated earlier, it is a question of fact whether landing cost
was included in the freight which was paid by the importer in the case of a CIF
contract. There is nothing on record to indicate that in actual effect the
landing cost was paid to the Post Trust Authorities by the shipper or the
seller or their agents out of the freight which had been paid by the importer
as a part of CIF price. Even if landing and delivery is the responsibility of
shipper, it appears to us that the landing charges are demanded after the goods
have been discharged from the vessel and it is not correct to state that the
discharge of the goods from the vessel is synonymous with the landing and
delivery of the goods to the buyer. These appeals are also, accordingly,
NOS. 7352 OF 1983 AND 4216-26 OF 1995 The only question, in these appeals,
related to landing charges. In view of the aforesaid discussion, we do not find
any merit in this contention and the appeals are, accordingly, dismissed.
NOS. 3070-75 OF 1989 Addition of landing charges is the only question raised in
these appeals. For the reasons stated hereinabove, we do not find any merit in
this submission and, therefore, these appeals are dismissed.
PETITION NOS. 7221-23 AND 7295 OF 1982 The only contention raised in these
petitions pertains to the addition of landing charges. For the reasons stated
hereinabove, we do not find any merit in this submission and, therefore, these
petitions are dismissed.
PETITION © NOS. 7224, 7296 OF 1982 AND 40 OF 1983 The only contention raised in
these petitions pertains to the addition of landing charges. For the reasons
stated hereinabove, we do not find any merit in this submission and,
accordingly, these petitions are dismissed.
APPEAL NO. 2902 OF 1991 The only contention raised in this appeal pertains to
the levy and addition of landing charges. For the reasons stated hereinabove,
we do not find any merit in this submission and, therefore, this appeal is
APPEAL NO. OF 1999 ARISING OUT OF SPECIAL LEAVE PETITION © NO. 4120 OF 1989
Special leave granted. Three contentions were urged in this appeal. The first
was whether landing charges can be included for determining the assessable
value of imported goods under Section 14 of the Act. In view of the foregoing
discussion, it is clear that the charges paid to the Port Trust Authorities
prior to the clearance of goods would be included in determining the assessable
value and, therefore, this contention is rejected.
second contention was whether Section 3(a) of the Customs Tariff Act is ultra
virus of Article 14 of the Constitution of India and/or whether the customs
authorities are correct in charging additional duty on the sum total of
assessable value, basic customs duty and auxiliary duty, instead of only on
additional duty. In the case of Jain similar contention was not accepted and it
was held that the said provision is valid.
third contention was that the appellant had imported consignment of HDPE Blow moulding
Grade from M/s.
Inter Trade, Yugoslavia. The total invoice price of the consignment was US $ 830
per M.T. The said invoice price also included in it the cost of packing
materials. The cost of packing materials was US $ 40 per M.T. The appellant
claimed benefit of exemption from customs duty on the value of packages in
terms of Notification No. 184/76-Cus; dated 2.8.76.
High Court dis-allowed the aforesaid benefit on the ground that the effect of
aforesaid notification was not to exclude the value of packages from the total
assessable value of the imported goods (which includes the value of the
packages as the invoice value includes the value of the packages) but to exempt
the levy of duty on the packages separately, since in law these are two
separate imposts one on the value of the contents (which is the invoice value
and which includes the value of packages) at the rate applicable to the contents
and the other on the value of the package itself. This question now stands
concluded with the Collector of Customs [1994 (71) ELT 325] wherein this very
notification had been construed and it was held that this notification as well
as Section 14 did not contemplate deduction of value of packages from the
invoice value. This contention of the appellant cannot, therefore, be accepted.
the aforesaid reasons this appeal is accordingly dismissed.
APPEAL NO. 3381 OF 1991 Three contentions were raised. The first was whether
landing charges could be included for determining the assessable value of
imported goods under Section 14 of the Act. In view of the foregoing
discussion, this contention of the appellants is rejected.
second contention related to the validity of Section 3(a) of the Customs Tariff
Act. In view of the decision of this Court in Jain Brothers case, this issue
has been decided against the appellants.
third contention related to the claim for exemption by virtue of Notification No.
184/76-Cus dated 2.8.1976 of customs duty and packing material. In view of the
decision of this Court in Hind Plastics case, this submission of the appellants
can also be not accepted. This appeal is accordingly dismissed.
APPEAL NO. 5974 OF 1994 In the written submissions filed on behalf of the
appellants it was stated that the appellants had filed a declaration under the Kar
Vivadh Samadhan cheme, 1998. The Assistant Commissioner, Kar Vivadh Samadhan
Scheme, Central Excise, Mumbai had conveyed to the appellants that the
declaration is not based on the show cause notice or demand notice prior to
31st March, 1998 and, therefore, the said declaration was not tenable and was
rejected. This letter of March, 1999 has been challenged in the Writ Petition
of 1999 in the Bombay High Court and the same is pending in the High Court. In
the written submissions it was stated that either this appeal being C.A. No.
5974 of 1994 be kept pending or the same be heard after the disposal of Writ
Petition No. 2528 of 1999 by the Bombay High Court or in the alternative, this
Civil Appeal No. 5974 of 1994 may be allowed to be withdrawn. In our opinion,
the latter course is a preferable one and, therefore, Civil Appeal No. 5974 of
1994 is dismissed as withdrawn in view of the pendency of the Writ Petition No.
2528 of 1999 before the Bombay High Court.
APPEAL NO. 5014 OF 1989 Three contentions were raised in this appeal. The first
was whether the countervailing duty at the rate of 42% could be levied on the goods
viz., Polyvinyl Alcohol imported by the appellant or whether the appellant was
entitled to benefit of the exemption notification imposing a duty of 10% as the
Polyvinyl Alcohol imported is manufactured only from Vinyl Acetate Monomer.
issue has to be decided against the appellant in view of the decision of this
Court in M/s. Motiram Tolaram [1999(4) Scale 666].
second contention related to the landing charges and the said contention cannot
be accepted in view of our discussion hereinabove.
third contention related to value of packing charges and the grant of benefit
of exemption notification.
same has to be rejected In view of the decision of this Court in Hind Plastics
case (supra). This appeal is, accordingly, dismissed.
APPEAL NOS. 5983/83, 786/89, 788-90 OF 1989 The contentions, which were raised
in these appeals are a) vires of Section 3 of the Customs Tariff Act; (b)
demand of duty by including landing charges, © adding on of customs duty for
the purposes of assessing the countervailing duty and (d) exemption of duty on
the packing material under Notification No. 184/76-Cus. Dated 2.8.1976.
the reasons stated hereinabove none of these contentions can be accepted and
the appeals are, consequently dismissed.
C.A. NOS. 3163/91, 8194/95 AND CIVIL
APPEAL NO. /99 ARISING OUT OF S.L.P.© 9814 OF 1990 Leave granted in S.L.P. ©
No. 9814 of 1990. In view of the discussion hereinabove, the contentions raised
in the above-said appeals cannot be accepted and the appeals are, consequently
Appeal No.4082 of 1995 The only contention raised by the appellant before the
High Court related to the packing charges. For the reasons stated hereinabove
that contention must fail here also. As no other ground was urged before the
High Court the question of the appellant being allowed to raise any additional
ground does not arise. The appeal is dismissed.
While Civil Appeal No. 5974 of 1994 is dismissed as withdrawn, the other
appeals and petitions are dismissed with costs.