M/S. Ispat
Industries Ltd. Vs. Commissioner of Customs,Mumbai [2006] Insc 628 (29 September 2006)
Ashok
Bhan & Markandey Katju
(With
Civil Appeal Nos.5921-5924/2004,6160-6161/2004, 6366/2004 & 1603/2005)
MARKANDEY KATJU, J.
Since
common questions of law are involved in all these appeals we are deciding them
in a common judgment and for our reference we are citing the facts of the case
of Ispat Industries Ltd. (Civil Appeal No. 3972 of 2001).
CIVIL
APPEAL NO. 3972 of 2001 This appeal has been filed against the judgment and
order dated 7th March 2001 passed by the Customs, Excise and Gold (Control)
Appellate Tribunal (hereinafter referred to as CEGAT), West Regional Bench,
Mumbai.
Heard
learned counsel for the parties and perused the record.
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,
a show cause notice dated 22.4.1998 was issued by the Assistant Commissioner of
Customs (Preventive) Alibag Division (Annexure P-4 to the Appeal). In this show
cause notice it was stated that duties which were assessed provisionally under
Section 18 of the Customs Act, 1962 had been assessed finally and the appellant
was requested to pay the duties short paid within 10 days or to explain why an
amount of Rs. 78,54,112/- (the barge charges) should not be recovered from the
appellant. Similar show cause notice dated 17.7.1998 (Annexure P-5 to the
Appeal) was also issued.
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.
The
short point before is as to whether the transportation charges for the use of
barges for carrying the cargo from the mother vessel which anchored at BFL to
the Dharmatar jetty where the goods were unloaded are to be added to calculate
the assessable value for the purpose of duty under the Customs Act.
Before
dealing with the contention of the parties, we may refer to the provisions of
the Customs Act, 1962 which are relevant in this case.
Section
2(23) defines import to mean 'bringing into India from a place outside India'.
Section
2(25) defines 'imported goods' as follows:
"imported
goods" means any goods brought into India from outside India but does not
include goods which have been cleared for home consumption" Section 2(27)
defines 'India' as follows:
"India includes the territorial water of India".
Section
7(1)(a) of the Act states as follows:
"The
Board may, by notification in the Official Gazette, appoint (a) the ports and
airports which alone shall be customs ports or customs airports for the
unloading of imported goods and the loading of export goods or any class of
such goods".
Section
8 of the Act states as follows :
"Power
to approve landing places and specify limits of customs area The Commissioner
of Customs may –
a
approve proper
places in any customs port or customs airport or coastal port for the unloading
and loading of goods or for any class of goods;
b
specify the
limits of any customs area".
Section
14. Valuation of goods for purposes of assessment:
1
"For the
purposes of the Customs Tariff Act, 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
a
the seller and
the buyer have no interest in the business of each other; or
b
one of them has
no interest in the business of the other, and the price is the sole
consideration for the sale or offer for sale]:
PROVIDED
that such price shall be calculated with reference to the rate of exchange as
in force on the date on 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
Section 50;" Section 14(1A) of the Act states as under:
"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." Section 30(1) states as under:
1
"The
person-in-charge of –
i
a vessel; or
ii
an aircraft; or
iii
a vehicle, carrying
imported goods or any other person as may be specified by the Central
Government, by notification in the Official Gazette, in this behalf shall, in
the case of a vessel or an aircraft, deliver to the proper officer an import
manifest prior to the arrival of the vessel or the aircraft, as the case may
be, and in the case of a vehicle, an import report within twelve hours after
its arrival in the customs station, in the prescribed form and if the import
manifest or the import report or any part thereof, is not delivered to the
proper officer within the time specified in this sub-section and if the proper
officer is satisfied that there was no sufficient cause for such delay, the
person-in- charge or any other person referred to in this sub- section, who
causes such delay, shall be liable to a penalty not exceeding fifty thousand
rupees".
Section
31 (1) & (2) of the Act state as under:
1
"The master
of a vessel shall not permit the unloading of any imported goods until an order
has been given by the proper officer granting entry inwards to such vessel.
2
No order under
sub-section (1) shall be given until an import manifest has been delivered or
the proper officer is satisfied that there was sufficient cause for not
delivering it".
Section
32 states as under:
"No
imported goods required to be mentioned under the regulations in an import
manifest or import report shall, except with the permission of the proper
officer, be unloaded at any customs station unless they are specified in such
manifest or report for being unloaded at that customs station".
Section
33 states as under :
"Except
with the permission of the proper officer, no imported goods shall be unloaded,
and no export goods shall be loaded, at any place other than a place approved
under clause (a) of Section 8 for the unloading or loading of such goods".
Section
34 states as under :
"Imported
goods shall not be unloaded from, and export goods shall not be loaded on, any
conveyance except under the supervision of the proper officer".
PROVIDED
that the Board may, by notification in the Official Gazette, give general
permission and the proper officer may in any particular case give special
permission, for any goods or class of goods to be unloaded or loaded without
the supervision of the proper officer".
Section
35 states as under :
"No
imported goods shall be water-borne for being landed from any vessel, and no
export goods which are not accompanied by a shipping bill, shall be water-borne
for being shipped, unless the goods are accompanied by a boat-note in the
prescribed form:
PROVIDED
that the Board may, by notification in the Official Gazette, give general
permission, and the proper officer may in any particular case give special
permission, for any goods or any class of goods to be water-borne without being
accompanied by a boat-note".
Section
46 (1) states as under :
"The
importer of any goods, other than goods intended for transit or transshipment,
shall make entry thereof by presenting to the proper officer a bill of entry
for home consumption or warehousing in the prescribed form".
Section
47(1) states as under :
"Where
the proper officer is satisfied that any goods entered for home consumption are
not prohibited goods and the importer has paid the import duty, if any,
assessed thereon and any charges payable under this Act in respect of the same,
the proper officer may make an order permitting clearance of the goods for home
consumption".
Apart
from the above-mentioned provisions in the Act, it is necessary to mention
certain provisions in the Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988 (hereinafter referred to as 'The Rules').
Rule 4
(1) & (2) state as under:
-
"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.
-
The transaction
value of imported goods under sub-rule (1) above shall be accepted :
Provided
that –
-
the sale is in
the ordinary course of trade under fully competitive conditions;
-
the sale does
not involve any abnormal discount or reduction from the ordinary competitive
price;
-
the sale does
not involve special discounts limited to exclusive agents;
-
objective and
quantifiable data exist with regard to the adjustments required to be made,
under the provisions of rule 9, to the transaction value;
-
there are no
restrictions as to the disposition or use of the goods by the buyer other than
restrictions which -
-
are imposed or
required by law or by the public authorities in India; or
-
limit the
geographical area in which the goods may be resold; or
-
do not
substantially affect the value of the goods;
-
the sale or
price is not subject to same condition or consideration for which a value
cannot be determined in respect of the goods being valued;
-
no part of the
proceeds of any subsequent resale, disposal or use of the goods by the buyer
will accrue directly or indirectly to the seller, unless an appropriate
adjustment can be made in accordance with the provisions of Rule 9 of these
rules; and
-
the buyer and
seller are not related, or where the buyer and seller are related, that
transaction value is acceptable for customs purposes under the provisions of
sub-rule (3) below".
Rule
5(1) states as under :
-
-
"Subject to
the provisions of Rule 3 of these rules, the value of imported goods shall be
the transaction value of identical goods sold for export to India and imported at or about the same
time as the goods being valued.
-
In applying this
rule, the transaction value of identical goods in a sale at the same commercial
level and in substantially the same quantity as the goods being valued shall be
used to determine the value of imported goods.
-
Where no sale
referred to in clause (b) of sub-rule (1) of this rule, is found, the
transaction value of identical goods sold at a different commercial level or in
different quantities or both, adjusted to take account of the difference
attributable to commercial level or to the quantity or both, shall be used,
provided that such adjustments shall be made on the basis of demonstrated
evidence which clearly establishes the reasonableness and accuracy of the
adjustments, whether such adjustment leads to an increase or decrease in the
value".
Rule
6(1) states as under:
-
"Subject to
the provisions of Rule 3 of these rules, the value of imported goods shall be
the transaction value of similar goods sold for export to India and imported at or about the same
time as the goods being valued".
Rule
9(2) states as under:
-
"For the
purpose of sub-section (1) and sub- section (1A) of Section 14 pf 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 –
-
the cost of
transport of the imported goods to the place of importation;
-
loading,
unloading and handling charges associated with the delivery of the imported
goods at the place of importation; and
-
the cost of
insurance:
Provided
that –
-
where the cost
of transport referred to in clause (a) is not ascertainable, such cost shall be
twenty per cent of the free on board value of the goods;
-
the charges
referred to in clause (b) shall be 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);
-
where the cost
referred to in clause (c) is not ascertainable, such cost shall be 1.125% of
free on board value of the goods;
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:
Provided
also that where the free on board value 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.
Provided
also that in case of goods imported by sea stuffed in a contained for clearance
at an Inland Container Depot or Contained Freight Station, the cost of freight
incurred in the movement of contained from the port of entry to the Inland
Container Deport or Container freight Station shall not be included in the cost
of transport referred to in clause (a).
Rule 9
(4) states as under:
"No
addition shall be made to the price actually paid or payable in determining the
value of the imported goods except as provided for in this rule".
From a
perusal of the above provisions (quoted above), it is evident that the most
important provision for the purpose of valuation of the goods for the purpose
of assessment is Section 14 of the Customs Act, 1962. Section 14(1), has
already been quoted above, and a perusal of the same shows that the value to be
determined is a deemed value and not necessarily the actual value of the goods.
Thus, Section 14(1) creates a legal fiction. Section 14(1) states that the
value of the imported goods shall be the deemed price at which such or like
goods are ordinarily sold or offered for sale, for delivery at the time and
place of importation in the course of international trade. The word
"ordinarily" in Section 14(1) is of great importance. In Section
14(1) we are not to see the actual value of the goods, but the value at which
such goods or like goods are ordinarily sold or offered for sale for delivery
at the time of import. Similarly, the words "in the course of international
trade" are also of great importance. We have to see the value of the goods
not for each specific transaction, but the ordinary value which it would have
in the course of international trade at the time of its import.
The
view we are taking in this case is in accordance with the three-Judge Bench
decision of this Court in M/s. Rajkumar Knitting Mills (P) Ltd. vs. Collector
of Customs, Bombay AIR 1998 SC, 2602. In para 7 of the said decision, it was
observed thus:
"The
words "ordinarily sold or offered for sale" do not refer to the
contract between the supplier and the importer, but to the prevailing price in
the market on the date of importation or exportation" The above decision
thus clearly held that it is not the actual price mentioned in the contract
between the supplier and the importer which has to be seen, but the prevailing
price in the market has to be seen. This again lends support to the view we are
taking that Section 14 is a deeming provision and we have not to take specific
cases for determining the value of the imported goods unless the same is in
accordance with Section 14 of the Act.
Hence,
while determining the value of Section 14, we must never lose sight of the fact
that Section 14(1) is a deeming provision which creates a legal fiction.
Legal
fictions are well-known in law. In the oft-quoted passage of Lord Asquith in
East End Dwelling Co. Ltd. vs. Finsbury Borough Council (1951) 2 All ER 587, it
was observed :
"If
you are bidden to treat an imaginary state of affairs as real, you must surely,
unless prohibited from doing so, also imagine as real the consequence and
incidents which, if the putative state of affairs had in fact existed, must
inevitably have flowed from or accompanied it -. The statute says that you must
imagine a certain state of affairs; it does not say that having done so, you
must cause or permit your imagination to boggle when it comes to the inevitable
corollaries of that state of affairs".
The
observation has been referred to in a large number of Supreme Court decisions
which have been mentioned in G.P. Singh's `Principles of Statutory
Interpretation', Ninth Edition (2004) at pp. 327-338, which may be seen.
In
Commissioner of Income Tax, Bombay vs.
Bombay Corporation, AIR 1930 PC 54, Lord Dunedin observed thus:
"Now
when a person is 'deemed to be' something the only meaning possible is that
whereas he is not in reality that something the Act of Parliament requires him
to be treated as if he were".
Learned
counsel for the respondent, no doubt, emphasized on Rule 9 of the Rules (quoted
above), but it must be realized that Rule 9 cannot be given an interpretation
which is in violation of Section 14 of the Act. After all, the rules are
subservient to the Act and cannot deviate from the provisions of the parent
Act.
Learned
counsel for the Revenue emphasized on Rule 9(2)(a) of the Rules in support of
his contention that barging charges have also to be included in the value of
the imported goods as they are also transportation charges.
On
first impression the submission of learned counsel for the Revenue appears to
be sound, because surely the transportation by barge is also part of the
transportation of the goods. However, on a deeper analysis, we are of the
opinion that the submission of the learned counsel of the Revenue is clearly
untenable. Admittedly, all the contracts entered into with the foreign sellers
are either CIF contracts or FOB contracts with Bills of Lading nominating
Bombay/JNPT/Dharamtar as the ports of discharge. As such the cost of transport
has already been included in the price paid to the seller under the CIF
contract or an ascertainable freight determined and paid by the buyer from the
foreign port to the Indian port.
Hence,
a further addition to the transport charges under Rule 9(2)(a) of the Customs Valuation
Rules, 1988 is in our opinion clearly impermissible.
If we
read Rule 9(2) of the Rules independently without considering it along with
Section 14 of the Act, then of course the submission of the learned counsel for
the Revenue could be sustained. However, in our opinion, Rule 9(2) has to be
read along with Section 14 and it cannot be read independently. As already
stated above, Section 14 creates a legal fiction and we have to see the
ordinary value of the imported goods in the course of international trade at
the place and time of import. This means that specific cases of import should
be ignored. In fact, it is for this reason that Rules 4, 5 and 6 of the Rules
have been promulgated.
The
actual price paid for the goods can only be taken into consideration provided
the sale is in the ordinary course of trade under fully competitive conditions
and the other provisions of Rule 4 are satisfied.
It is
well-known that there are sales in which there is under- invoicing or
over-invoicing or for some other reasons the sale is not under full competitive
conditions. In such a case, Rules 5 & 6 have to be resorted to and the
actual price has not to be seen.
Thus,
the Rules have been created to serve the object of Section 14 which was to
determine a deeming price and not the actual price of the imported goods.
In our
opinion if there are two possible interpretations of a rule, one which subserves
the object of a provision in the parent statute and the other which does not,
we have to adopt the former, because adopting the latter will make the rule
ultra vires the Act.
In
this connection, it may be mentioned that according to the theory of the
eminent positivist jurist Kelsen (The Pure Theory of Law)in every legal system
there is a hierarchy of laws, and whenever there is conflict between a norm in
a higher layer in this hierarchy and a norm in a lower layer the norm in the
higher layer will prevail (see Kelsen's `The General Theory of Law and State').
In our
country this hierarchy is as follows:
-
The Constitution
of India;
-
The Statutory
Law, which may be either Parliamentary Law or Law made by the State
Legislature;
-
Delegated or
subordinate legislation, which may be in the form of rules made under the Act,
regulations made under the Act, etc.;
-
Administrative
orders or executive instructions without any statutory backing.
The Customs
Act falls in the second layer in this hierarchy whereas the rules made under
the Act fall in the third layer.
Hence,
if there is any conflict between the provisions of the Act and the provisions
of the Rules, the former will prevail. However, every effort should be made to
give an interpretation to the Rules to uphold its validity. This can only be
possible if the rules can be interpreted in a manner as to be in conformity with
the provisions in the Act, which can be done by giving it an interpretation
which may be different from the interpretation which the rule could have if it
was construed independently of the provisions in the Act. In other words, to
uphold the validity of the rule sometimes a strained meaning can be given to
it, which may depart from the ordinary meaning, if that is necessary to make
the rule in conformity with the provisions of the Act. This is because it is a
well settled principle of interpretation that if there two interpretations
possible of a rule, one of which would uphold its validity while the other
which would invalidate it, the former should be preferred.
In
this connection we may also refer to the Gunapradhan Axiom of the Mimansa
Principles of Interpretation, which is our indigenous system of interpretation
(see K.L. Sarkar's `Mimansa Rules of Interpretation, Second Edition p.71).
It is
deeply regrettable that in our Courts of Law, lawyers quote Maxwell and Craies
but nobody refers to the Mimansa Principles of Interpretation. Few people in
our country are aware about the great intellectual achievements of our
ancestors and the intellectual treasury they have bequeathed us. The Mimansa
Principles of Interpretation is part of that intellectual treasury, but it is
distressing to note that apart from a reference to these principles in the
judgment of Sir John Edge, the then Chief Justice of Allahabad High Court, in Beni
Prasad v. Hardai Devi, (1892) ILR 14 All 67 (FB), and in the judgments of one
of us (Markandey Katju, J.) while a Judge of Allahabad High Court (which have
been annexed to the Second Edition of K.L. Sankar's book), there has been
almost no utilization of these principles even in our own country.
It may
be mentioned that the Mimansa Rules of Interpretation were our traditional
principles of interpretation laid down by Jaimini in the 5th Century B.C. whose
Sutras were explained by Shabar, Kumarila Bhatta, Prabhakar, etc. The Mimansa
Rules of Interpretation were used in our country for at least 2500 years,
whereas Maxwell's First Edition was published only in 1875.
These Mimansa
Principles are very rational and logical and they were regularly used by our
great jurists like Vijnaneshwara (author of Mitakshara), Jimutvahana (author of
Dayabhaga), Nanda Pandit, etc. whenever they found any conflict between the
various Smritis or any ambiguity or incongruity therein. There is no reason why
we cannot use these principles on appropriate occasions even today. However, it
is a matter of deep regret that these principles have rarely been used in our
law Courts. It is nowhere mentioned in our Constitution or any other law that
only Maxwell's Principles of Interpretation can be used by the Court.
We can
use any system of interpretation which helps us solve a difficulty. In certain
situations Maxwell's principles would be more appropriate, while in other
situations the Mimansa principles may be more suitable. One of the Mimansa
principles is the Gunapradhan Axiom, and since we are utilizing it in this judgment
we may describe it in some detail. 'Guna' means subordinate or accessory, while
'Pradhan' means principal. The Gunapradhan Axiom states :
"If
a word or sentence purporting to express a subordinate idea clashes with the
principal idea, the former must be adjusted to the latter or must be
disregarded altogether".
This
principle is also expressed by the popular maxim known as 'matsya nyaya', i.e.
'the bigger fish eats the smaller fish'.
According
to Jaimini, acts are of two kinds, principal and subordinate. In Sutra 3 : 3 :
9 Jaimini states :
"Guna
mukhya vyatikramey tadarthatvan mukhyen vedasanyogah" Kumarila Bhatta, in
his Tantravartika (See Ganganath Jha's English Translation Vol. 3, p. 1141)
explains this Sutra as follows:
"When
the Primary and the Accessory belong to two different Vedas, the Vedic
characteristic of the Accessory is determined by the Primary, as the Accessory
is subservient to the purpose of the primary." It is necessary to explain
this Sutra in some detail. The peculiar quality of the Rigveda and Samaveda is
that the mantras belonging to them are read aloud, whereas the mantras in the Yajurveda
are read in a low voice. Now the difficulty arose about certain ceremonies,
e.g. Agnyadhana, which belong to the Yajurveda but in which verses of the Samaveda
are to be recited.
Are
these Samaveda verses to be recited in a low voice or loud voice? The answer,
as given in the above Sutra, is that they are to be recited in low voice, for
although they are Samaveda verses, yet since they are being recited in a Yajurveda
ceremony their attribute must be altered to make it in accordance with the Yajurveda.
In the
Shabar Bhashya translated into English by Dr. Ganga Nath Jha, published in the Gaekwad
Oriental Series, the Sutra is read as follows:
"Where
there is a conflict between the use and the substance greater regard should be
paid to the use" Commenting on Jaimini 3 : 3 : 9 Kumarila Bhatta says :
"The
Siddhanta laid down by this Sutra is that in a case where there is one
qualification pertaining to the Accessory by itself and another pertaining to
it through the Primary, the former qualification is always to be taken as set
aside by the latter. This is because the proper fulfillment of the Primary is
the business of the Accessory also as the latter operates solely for the sake
of the former.
Consequently
if, in consideration of its own qualification it were to deprive the Primary of
its natural accomplishment then there would be a disruption of that action (the
Primary) for the sake of which it was meant to operate. Though in such a case
the proper fulfillment of the Primary with all its accompaniments would mean
the deprival of the Accessory of its own natural accompaniment, yet, as the
fact of the Accessory being equipped with all its accompaniments is not so very
necessary (as that of the primary), there would be nothing incongruous in the
said deprival"(See Ganganath Jha's English translation of the Tantravartika,
vol. 3 p. 1141).
The Gunapradhan
Axiom can also be deducted from Jaimini 6 : 3 : 9 which states :
"When
there is a conflict between the purpose and the material, the purpose is to
prevail, because in the absence of the prescribed material a substitute can be
used, for the material is subordinate to the purpose".
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, the Gunapradhan principle is fully applicable to the interpretation of
Rule 9(2). Rule 9(2) is subservient to Section 14. We must, therefore,
interpret it in such a way as to make it in accordance with the main object
that is contained in Section 14 of the Customs Act. It may be that in isolation
Rule 9(2) conveys some other meaning, but when it is read along with Section 14
of the Act, it must be given a meaning which is in accordance with the object
of Section 14. The object of Section 14 is 'primary' whereas the conditions in
Rule 9(2) are the 'accessories'. The 'accessory' must, therefore, serve the
'primary'.
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.
Learned
counsel for the Revenue has relied upon a decision of this Court in Garden Silk
Mills Ltd. vs. Union of India 1999 9113) ELT 358(SC), in which it was observed
thus:
"It
was further submitted that in the case of Apar's 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 water, 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:
"Truly
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
country." It 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;
the taxable event being reached at the time when the goods reach the customs
barriers and the bill of entry for home consumption is filed".
On the
strength of the above observation in the Garden Silk case (supra), learned
counsel has submitted that the place of importation is not where the ship is
anchored (BFL), but the jetty which has been approved for unloading of the goods
under Section 8 of the Act. Hence, he submitted that the transportation charges
for carrying goods from the mother ship by barges to the jetty has also to be
included in the valuation of the goods for imposing duty.
In our
opinion, the decision of this Court in Garden Silk (supra) is clearly
distinguishable.
It may
be noted that Garden Silk (supra) was a case where the question was whether
landing charges could be included in the value of the imported goods for the
purpose of valuation of the goods for imposing custom duty. That was not a case
relating to transportation charges nor was it a case relating to charges for
transportation of goods from the mother ship on a barge to the place (jetty)
approved under Section 8(a) of the Act. For the same reason the decision of
this Court in Coromandal Fertilizer Ltd. vs. Collector of Customs 2000(1) SCC
448, also is not relevant because that decision also is a case relating to
landing charges and has nothing to do with the question as to whether
transportation charges for transporting the goods from the mother ship by barge
to the place approved under Section 8(a) has to be added for the purpose of
valuation of the goods for imposing custom duty.
Similarly,
the decision in Union of India vs. Apar Industries Limited 1999 (5) JT 160 is
also not relevant. In that case the facts were that 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. In this context, this
Court held that what is material is not the date when the goods entered the
territorial waters of India but the date mentioned in Section
15 of the Act. Thus, Apar Industries case (supra) has also nothing to do with
the question which we were dealing with in the present case.
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.
On
these facts, the Supreme Court observed thus:
"The
contention, therefore, that the ship entered Indian territorial waters on February 20, 1989 and was ready to discharge the
cargo is not relevant for the purpose of Section 15(1) read with Sections 46
and 31 of the Act. The prior entries regarding presentation of the bill of
entry for clearance of the goods on February 27, 1989 and their receipt in the appraising
section on February 28,
1989 also are
irrelevant. The relevant date to fix the rate of customs duty, therefore, is March 2, 1989. The rate which prevailed as on
that date would be the duty to which the goods imported are liable to the
impost and the goods would be cleared on its payment in accordance with the
rate of levy of customs prevailing as on March 2, 1989".
A
careful perusal of the decision in Dhiraj Lal's case (supra) again shows that
this decision is not relevant for deciding the present case as it was not a
case where the goods were discharged from the mother ship on to barges from
where they were taken to the places approved under Section 8(a) of the Act.
In Kiran
Spinning Mills vs. Collector of Customs AIR 2000 SC 3448, this Court observed :
"That
apart, this Court has held in Sea Customs Act, (1964) 3 SCR 787 at page 803:
(AIR 1963 SC 1760) that in the case of duty of customs the taxable event is the
import of goods within the customs barriers. In other words, the taxable event
occurs when the customs barrier is crossed.
In the
case of goods which are in the warehouse the customs barriers would be crossed
when they are sought to be taken out of the customs and brought to the mass of
goods in the country".
A
perusal of the facts of the above case reveals that it was not a case in which
the question whether the transportation charges for carrying the goods from the
mother ship by barges to the place approved under Section 8(a) was to be added
was involved. Hence this decision is also distinguishable.
Learned
counsel for the Revenue relied upon a Constitution Bench judgment in M/s. Bharat
Surfactants (Pvt) Ltd. and another vs. Union of India and another AIR 1989 SC
2054, in para 14 of which it was observed :
"We
do not find it possible to accept this submission. The provisions of S.15 are
clear in themselves. The date on which a Bill of Entry is presented under S. 46
is, in the case of goods entered for home consumption, the date relevant for
determining the rate of duty and tariff valuation. Where the Bill of Entry is
presented before the date of Entry Inwards of the vessel, the Bill of Entry is
deemed to have been presented on the date of such Entry Inwards".
In our
opinion, this case has no relevance in the present case.
The
facts there were that although the ship in question entered Bombay port and registered itself there
but was unable to secure a berth in the port
of Bombay at that time. Hence the vessel
under pressing circumstances left for Karachi port for unloading other cargo intended for that port. On return to Bombay port, it was asked to pay a higher
rate of duty which had been increased in the meantime. It was in that
connection that the aforesaid observation was made by the Constitution Bench.
Clearly, this decision has nothing to do with the present case, because it was
not concerned with transportation charges by a barge.
Thus,
it appears that most of the decisions cited by learned counsel for both the
parties in this case are not very relevant for deciding the controversy in
issue here.
It
must be remembered in this context that a case is only an authority for what it
actually decides. As observed by the Supreme Court in State of Orissa vs. Sudhansu Sekhar Misra AIR 1968
SC 647 (vide para 13):
"A
decision is only an authority for what it actually decides. What is of the
essence in a decision is its ratio and not every observation found therein nor
what logically follows from the various observations made in it. On this topic
this is what Earl of Halsbury, LC said in Quinn vs.
Leathem
1901 AC 495: "Now before discussing the case of Allen vs. Flood (1898) AC
1 and what was decided therein, there are two observations of a general
character which I wish to make, and one is to repeat what I have very often
said before, that every judgment must be read as applicable to the particular
facts proved, or assumed to be proved, since the generality of the expressions
which may be found there are not intended to be expositions of the whole law,
but governed and qualified by the particular facts of the case in which such
expressions are to be found. The other is that a case is only an authority for
what it actually decides. I entirely deny that it can be quoted for a
proposition that may seem to follow logically from it. Such a mode of reasoning
assumes that the law is necessarily a logical Code, whereas every lawyer must
acknowledge that the law is not always logical at all".
In Ambica
Quarry Works vs. State of Gujarat &
others 1987 (1) SCC 213, this Court observed :
"The
ratio of any decision must be understood in the background of the facts of that
case. It has been said long time ago that a case is only an authority for what
it actually decides, and not what logically follows from it".
In Bhavnagar University vs. Palitana Sugar Mills Pvt. Ltd 2003(2) SCC 111, this
Court observed :
"It
is well settled that a little difference in facts or additional facts may make
a lot of difference in the precedential value of a decision".
In Bharat
Petroleum Corporation Ltd. & another vs. N.R. Vairamani & another AIR
2004 SC 4778, it was held that a decision cannot be relied on without
disclosing the factual situation. In the same judgment this Court held as
under:
"Courts
should not place reliance on decisions without discussing as to how the factual
situation fits in with the fact situation of the decision on which reliance is
placed. Observations of courts are neither to be read as Euclid's theorems nor as provisions of the
statute and that too taken out of their context. These observations must be
read in the context in which they appear to have been stated. Judgment of
Courts are not to be construed as statutes. To interpret words, phrases and
provisions of a statute, it may become necessary for judges to embark into
lengthy discussions but the discussion is meant to explain and not to define.
Judges interpret statutes, they do not interpret judgment. They interpret words
of statutes; their words are not to be interpreted as statutes".
In
London Graving Dock Co. Ltd. vs. Horton 1951 AC 737 at p. 761, Lord Mac Dermot
observed:
"The
matter cannot, of course, be settled merely by treating the ipsissima verba of Willes,
J as though they were part of an Act of Parliament and applying the rules of
interpretation appropriate thereto. This is not to detract from the great
weight to be given to the language actually used by that most distinguished
Judge".
In
Home Office vs. Dorset Yacht Co. 1970(2) All ER 294 Lord Reid said, "Lord Atkin's
speech is not to be treated as if it was a statute definition. It will require
qualification in new circumstances." Megarry, J in (1971) 1WLR 1062
observed:
"One
must not, of course, construe even a reserved judgment of Russell L. J as if it
were an Act of Parliament". And in Herrington vs. British Railways Boards
(1972) 2 WLR 537, Lord Morris said:
"There
is always peril in treating the words of a speech or judgment as though they
are words in a legislative enactment, and it is to be remembered that judicial
utterances made in setting of the facts of a particular case".
Circumstantial
flexibility, one additional or different fact may make a world of difference
between conclusions in two cases. Disposal of cases by blindly reliance on a
decision is not proper.
The
following words of Lord Denning in the matter of applying precedents have
become locus classicus:
"Each
case depends on its own facts and a close similarity between one case and
another is not enough because even a single significant detail may alter the
entire aspect. In deciding such cases, one should avoid the temptation to
decide cases (as said by Cordozo) by matching the colour of one case against
the colour of another. To decide therefore, on which side of the line a case
falls, the broad resemblance to another case is not at all decisive.
"Precedent
should be followed only so far as it marks the path of justice, but you must
cut the dead wood and trim off the side branches else you will find yourself
lost in tickets and branches. My plea is to keep the path of justice clear of
obstructions which could impede it".
Hence,
the decisions of the Court cited by the appellant's counsel are confined to
their own facts and can have no application to the present case.
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.
The
goods were unloaded from the mother ship on to the barge at BFL which, do
doubt, had not been approved as the landing place under Section 8 of the Act.
However, Section 33 permits unloading at a place other than that approved under
Section 8 with the permission of the proper officer, and there is no doubt that
permission had been obtained under Section 33 under the supervision of the proper
officer under Section 34, and the goods were accompanied by a Boat Note under
Section 35 of the Customs Act. Hence, unloading of the goods from the mother
ship at the BFL was valid, since it was done in accordance with Sections 33 and
34 of the Customs Act. No doubt, the BFL had not been approved as proper place
under Section 8(a), but it was a place where the mother ship could anchor.
Hence, in our opinion, there is no illegality.
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.
The bills
of lading show that the port of discharge was Mumbai Port/JNPT/Dharamtar. In
the bill of entry, the FOB price, freight and insurance were shown separately
in U.S. dollars. Since Dharamtar was also shown as the port of discharge, the
freight charges paid by the buyer to the shippers included the charges for
freight not only upto BFL but also to Dharamtar.
The
view we are taking is in accordance with the view expressed in Halsbury's Laws
of England, Fourth Edition Vol.43(2) : Shipping and Navigation para 1707 where
it is stated :
"1707.
Proceeding `so near to port of discharge as ship can safely get'. In practice,
the contract usually provides that the ship is to proceed to the port of
discharge or so near to it as she can safely get. This provision is intended to
benefit the ship owner, and its effect is to substitute another destination to
which the ship may proceed. By proceeding to this other destination and
delivering the cargo there, the ship owner equally completes the voyage in
accordance with the terms of the contract, and is thus entitled to be paid the
full freight." 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.
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