Customs, Excise and Gold Tribunal - Mumbai
Ispat Industries Ltd. vs Cc (P) on 7 March, 2001
Equivalent citations: 2001(96)ECR237(TRI.-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. The appellants imported Iron Ore. The nearest Jetty for them to receive the consignment was at Dharamtar in Raigad District. The Collector of Customs (Prev.), Bombay issued a Notification No. 1/94 (NT) dt. 3.10.1994 to facilitate such unloading. The notification in its entirety reads as follows:
I, M.G. Venugopalan, Collector of Customs (Prev.), Bombay, by virtue of powers vested in me under Section 8(a) of the Customs Act, 1962 (52 of 1962) hereby approve "Dharamtar' port in the Dist. Raigad, State of Maharashtra, detailed in the schedule below and as specified in Col. No. 2 & 3 of the said Schedule to be the place for unloading/loading of imported/export goods and permit anchorage of mother vessel of M/s. Nippon Denro Ispat Ltd., Dharamtar, Taluka Alibag only at BFL, Bombay High Sea subject to the strict observance of relevant provisions of the Customs Act, 1962 and other instructions issued by the Government of India from time to time; and also specify the limits of Customs area at Dharamtar Port as indicated in column No. 6 of the said schedule to which the provisions of the said Act shall apply.
SCHEDULE
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Sr. Name of the Unloading/ Place of an- Area Limit
No. Port loading Place chorage
(Mother
Ship)
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(1) (2) (3) (4) (5) (6)
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1. Dharamtar Dharamtar - 260m X 120m 18-42'- 4"N = 31980 Sq. Mtr 73-01' - 6.75"E 18-42' - 2.75"N 73-01' - 7.25"E
2. Bombay BFL 4 miles radius 18 55'N 72 43.5'E 18 58'N 72 43.5'E 18 59'N 72 37'E 18 55'N 72 37'E
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Attested Sd/- Sd/-
(K. Sanjeeva) (M.G. Venugopalan) Asst. Collector (Policy) Collector of Customs (Preventive) Customs (P) Bombay M&P Wing, Bombay
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2. The vessels carrying such iron ore from overseas port could not dock at Dharamtar due to lack of draft. Such Vessels were therefore, allowed to be anchored at the Bombay Floating Light (BFL). The cargo was unloaded from the sea-going vessel into barges and was then transferred to Dharamtar Jetty and unloaded there.
3. Between 14.2.1995 to 21.1.1998,14 consignments were thus imported. The Bills of Entry were provisionally assessed. The duty so assessed was deposited. Thereafter, "Out of charge" order was given and only thereafter the ore was unloaded in the barges. Bills of Lading show that port of discharge was "Mumbai Port/JNPT/Dharamtar". In the Bill of Entry, the FOB price, freight, the actual freight and actual insurance were shown separately in US Dollars. On 7.2.1999, the Jurisdictional Asst, Commissioner of Customs, referring to Rule 9(2)(b) of the Customs Valuation Rules, 1988, opined that cost incurred in transferring the ore to the Dharamtar Jetty is includible. The relevant details were asked for. In the reply, the present appellants stated that the place of importation was BFL from where the goods were cleared "for home consumption". It was therefore claimed that the lighterage charges were not includible. Thereafter, the Customs issued 2 show cause notices for finalisation of the provisional assessment. The importers appeared before the Asst. Commissioner on 3.7.1998. The Asst. Commissioner issued his order on 23.10.1998. In the initial part of his order, he observed that the assessment had already been finalised in April and July, 1998 (appellants contested this), but proceeded to give reasons and confirmed the demand of Rs. 18,55,988/-. He dwelt on the 'time and place of importation'. From the import manifest, he observed that the unloading station was declared as Dharamtar Port. He held that BFL was not the landmass of India and that the import in terms of Customs Act was not completed unless the goods were put on the landmass of India. He referred to a number of judgments before ruling that the lighterage charges were includible in the assessable value. Against the judgment, the importers filed an appeal. The Commissioner upheld the lower order in the following words:
I have carefully gone through the records of the case and heard the appellant. The expression "imported goods" has been defined in Section 2(25) of Customs Act 1962 to mean "any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption". In the present case, the out of charge order under Section 47 of Customs Act 1962 permitting clearance of goods for home consumption was passed before the discharge of cargo from the mother vessel to the barges. However, as the assessment was provisional, the out of charge order for home consumption was not final. Therefore, the import cannot be said to have completed unless the goods reached the landmass of India. The transport charges incurred in relation to carrying of the goods in barges are, therefore, to be included in the assessable value. In view of this, I do not find any merit in the appeal and reject the same.
4. In deciding the complex question of law involved in this case, the orders of the Commissioner (Appeals) are of no assistance. The order of the Asst. Commissioner also does not throw any light as to the ground on which the charges are included. In the letter dated 7.2.1995 referred to above of the Customs Valuation Rules were extensively quoted. It was claimed that in terms of Rule 9(2)(b), the charges of transportation from the mother vessel were for "loading, unloading and handling for the delivery for the importation" and therefore would warrant inclusion. We would take this as the charge and the ground for confirmation of the demand.
5. We have heard Shri Vipin Jain, Chartered Accountant for importers and Shri B.K. Choubey, JDR for the revenue.
6. Rule 9(2) of the cited Rules reads as below:
For the purpose of Sub-section (1) and Sub-section (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-
i) 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;
ii) 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);
iii) 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 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].
(3) Additions to the price actually paid or payable shall be made under this rule on the basis of objective and quantifiable data.
(4) 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.
7. A substantial portion of the appeal memorandum has been denoted to the statement that the impugned order is absurd and that it has not disclosed the point involved in the appeal before him.
8. We have already observed earlier that the said order offers no assistance. But we would not like to remit the proceedings back. We find the point of law to be interesting and would proceed to settle it.
9. The first issue for decision is as to at which spot does the "import" takes place. In other words what the "place of importation" is. In the appeal memorandum great reliance has been placed on the judgment of the Bombay High Court in the case of Apar 1985 (10) ELT 644 : 1988 (19) ECR 514 (Bom). In this judgment it was held that as soon as the goods entered the territorial waters of India, the import was said to have taken place. The judgment was overruled by the Supreme Court . In the judgment in the case of Garden Silk Mills , the Supreme Court held that the import of goods to India commences with the arrival of the vessel in the territorial waters of India but is completed only when the goods are placed on the wharf so as to become part of the mass of the goods within the country.
10. Shri Jain time and again claimed that the place of importation was BFL and the act of import was complete when the ore was unloaded in the barges. In fact he equates the barges to the landmass of India and submits that the charges for subsequent transportation do not even remotely become includible in the assessable value.
11. Chapter VI of the Customs Act, 1962 deals with the provisions relating to the clearance of imported goods. Section 33 states that the imported goods cannot be unloaded except a place approved under Section 8(a) of the Act. We have earlier referred to the Notification issued by the Collector of Customs which designates Dharamtar as the place of unloading. The provisions of the Act bind not only the importers but also the officers of the Customs. In terms of this Notification, the BFL was not declared to be an unloading station. The notification shows that BFL as the place of anchorage and not the place for unloading of the goods.
12. The anchoring of the ship and activity of unloading at that point is therefore a link or a step during the passage of the goods from the time they enter the territorial waters of India to the time they are unloaded on the landmass of India. Section 35 of the Act deserves to be reproduced here:
35. Restrictions on goods being water-borne.-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, 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.
This provision has not been discussed or even noticed by any one in the proceedings, nor was it referred to in the argument before us. This Section provides for documentary coverage during the transportation of goods unloaded from a mother vessel into the daughter vessel up to the place of landing. The phrase "water-borne for being landed is explicit.
13. We have earlier referred to Section 33 of the Act. In terms of this provision, the imported goods can be unloaded only at the place approved under Section 8(a) of the Act. The notification issued by the Commissioner of Customs (P) (supra) specifies Dharamdhar Port as the place of unloading and not the BFL. On this ground also it cannot be said that the place of importation was BFL.
14. Section 116 of the Act is also relevant here. It provides for penalty on the ship owner in the case of non-landing or short landing of cargo. In the case of bulk cargo such as oil, ore, the quantity loaded is given in the invoice. On arrival of the vessel a draft survey is made and quantity is ascertained. The quantity of the goods after being unloaded from the ship where possible is also ascertained. There have been disputes in the past whether in such a situation for verification of the invoice quantity, the draft survey quantity should be taken or whether the actual quantity landed should be taken. In the Judgements reported in 2000 (41) RLT 414 : 2001 (94) ECR 323 (T) (CC Vishakapatnam v. Hindustan Petroleum Corpn.) and it was held that the quantity actually available on landing should be taken in preference over draft survey report.
15. Shri Jain attempted to support the argument that the BFL was the place of importation by stating that the "out of charge" order was given by the proper office while the goods were still at BFL in the mothership before being unloaded in the barges. We need to examine this statement.
16. Section 46 of the Act requires an importer to file a Bill of Entry either for home consumption or for warehousing. Such goods are assessed to duty in terms of Section 17 of the Act. The goods are permitted clearance thereafter in terms of Section 47(1) of the Act. The relevant provision reads as follows:
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.
"The Order" spoken of in this provision is the "out of charge" order. This phrase figures in para 10 of Chapter 1 of the Customs Appraising Officer's Manual, Vol.1 shown to us by Mr. Jain. This lists the duties of the shed appraiser. The instructions are that the shed appraiser should give such order only when he is satisfied that all Customs Duties are paid and that everything is in order.
17. The Assessment to duty and payment of duty can be made prior to the landing of the goods and in fact can be made even before the goods are imported. Second proviso to Section 46(3) of the Act permits the importer to file a prior Bill of Entry where the vessel carrying the goods is yet to arrive provided the Commissioner has given such permission. In such a case it is not unusual to have an out of Customs control order to be given before the goods are landed on the wharf. This is because it is not the shed Appraiser who would verify the exit of the goods from the docks. It is the duty of the Preventive Officer. Therefore on the perusal of the Manual we do not find any support in the pleas of Mr. Jain. Even if a Manual were to make such provision it would have to be held ultra vires the provisions of the law and therefore discarded.
18. On the basis of the discussion above, we have no hesitation in holding that the place of importation was not the BFL but it was Dharamdhar Port.
19. The next issue for determination is the nature of the charge incurred in transporting the iron ore from the mothership to Dharamdhar Port. As we have narrated above, in the first letter dated 7.2.1997 the issue of inclusion of less charge was first raised. Rule 9(2) of the Customs Valuation Rules 1988 is referred to in this letter. The provisions of this sub-rule are reproduced in para (5) above.
20. The letter is vague in describing the charge incurred for carriage by the barges, but insists that it should be included. In the finalisation Show Cause Notices the ground shown is "barge charges, difference in freight charges" (Show Cause Notice dated April 1998). In the other show cause notice issued in July 1998 the only description is "barge charges". In his order the Assistant Commissioner dealt at length on the coverage of Section 14 of the Act. He held that the place of importation was Dharamdhar and not BFL. He referred to a number of other Sections and confirmed the duty but without putting any label on the charges that is, whether they were freight charges or they were landing charges. The Order now impugned before us, as we have earlier observed, does not clarify this position. We are therefore forced to examine both the possibilities.
21. The Show Cause Notice for finalisation termed the expenses as 'freight'.
22. The submission is made that the goods by virtue of their having been cleared at BFL ceased to be "imported goods" and therefore the charges cannot be termed as freight. We have earlier held that the goods become imported goods not at BFL but at Dharamdhar Jetty and therefore this submission has no merit. The second submission is that as per the Bills of Lading the freight was for discharge at multiple choice ports i.e. Mumbai, JNPT & Dharamdhar and even if the importer had incurred additional expenditure, the addition thereof as freight would amount to double inclusion.
23. We find that in terms of Rule 9(2)(a) (supra) it is the cost of transportation that is required to be included without taking into account the identity of the person incurring such cost. If the burden of landing the goods at Dharamdhar was on the carrier, then this cost would have been incurred by him and would have become a part of the freight shown in the Bill of Entry. In the present case the importer had incurred the additional costs himself. The cost so incurred is required to be added to the freight paid for the carriage of the goods from the port of exportation to the BFL.
24. If these costs were to be termed as handling charges i.e. landing charges, then the importer would have no problem. This is because in the Bill of Entry the handling charges are shown as 1%. The relevant rules lay down that where the actual landing charges are not available they should be charged @ 1% of the value. It is thus presumed that the actuals would be less than assumed cost. In that case the additional cost would not merit inclusion. On the basis of the analysis above we hold that:
(1) The place of importation was not the BFL but that it was Dharamdhar;
(2) The cost of transportation of the imported goods to the place of importation are required to be taken into account for computation of the valuation. The barge charges are a part of such cost of transportation and act of addition would sustain.
(3) The impugned orders are upheld and the appeal is dismissed.