Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Coromondal Fertilizers Ltd. on 30 October, 1987
Equivalent citations: 1988(15)ECC226, 1988ECR281(TRI.-DELHI), 1988(33)ELT451(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. The proceedings initiated by the aforesaid revision show cause notice issued by the Central Government under the then Section 131(3) of the Customs Act, 1962 have, on transfer of the proceedings to this Tribunal, been taken up as if they were appeals filed by the department.
2. These are 10 appeals. (Actually, only 9 appeals were required to be filed since only 9 Orders-in-original in all were involved). The appeals involve common facts and issues. They relate to the same respondents and were argued before us together. This combined order will dispose of all of them.
3. The nine applications for condonation of delay being for the supplementary appeals, they were not opposed by the respondents. We allowed the applications and condoned the delay.
4. After hearing both sides, we have allowed the Misc. Application of the Department for placing on record certain additional documents also.
5. Coming to the appeals, the facts, in brief, are that the respondents are manufacturers of fertilizers. For such manufacture, they imported rock phosphate and sulphur in bulk from abroad. The goods came to India in chartered ships arranged by M/s. MMTC, the public sector canalising agency. The respondents purchased shiploads of the goods from M/s. MMTC on the high seas. According to the agreement, unloading of the ship on the Indian coast was the responsibility of the respondents. The respondents did not employ outside contractors or stevedors for such unloading. In order to maintain the efficiency of their plant with continuous and timely supply of raw materials, they maintained their own wharf, unloading equipment and staff at Visakhapatnam. The common point of dispute in these appeals is whether stevedoring charges incurred for landing the goods on the Indian shores should be included in the assessable value of the imported goods for assessment of customs duty and, if so, to what extent.
6. The period of controversy is from 1971 to 1976. We are informed that 1.4% by way of 'landing charges' stood already added to the price of the goods. The Asstt. Collector held that this 1.4% did not include stevedoring charges which were addable separately on account of the following elements :-
(i) Unloading labour charges
(ii) Customs Staff Overtime
(iii) Port hire charges for Dining Hall
(iv) Fuel - HSD Oil
(v) Power - Electricity
(vi) Depreciation
(vii) Approx. Maintenance Cost
(viii)Administrative overhead (percentage on unloading labour charges)
(ix) Notional interest on capital (as cost of investment).
On the basis of the actuals, the Asstt. Collector calculated the stevedoring charges at varying "ates ranging from Rs. 5.86 to Rs. 9.42 per MT for the material period. In appeal, the Appellate Collector set aside the Asstt. Collector's orders and held that 1.4% having already been added by way of landing charges which were the same as unloading charges, there was no ground to add anything more. The department is now ii-appeal before us against the orders of the Appellate Collector. The department's case is that the Appellate Collector's assumption that landing charges and unloading charges were one and the same thing was wrong on facts. Placing reliance on the following High Court judgments -
(1) 1982 (10) ELT 203 (G.uj.) - Prabhat Cotton and Silk Mills Ltd. v. U.O.I.; (2) 1983 (12) ELT 258 (Delhi) - Super Traders and Anr. v. U.O.I.;
(3) 1983 (12) ELT 661 (Delhi) - Bhartiya Plastic Udyog and Anr. v. U.O.I.; (4) 1986 (24) ELT 456 (Karnataka) - B.S. Kamath & Co. and Ors. v. U.O.I. the department pleads that landing charges were includible in the value and further the stevedoring charges or unloading charges formed part of the freight inasmuch as in a c.i.f. contract the contractual obligations continued upto the point of delivery of the goods at the port of destination and such charges having not been included in the 1.4% landing charges already added, should also be added as held by the Asstt. Collector.
7. The respondents first made a preliminary objection saying that the revision show cause notice dated 24-7-1980 dealt with a matter of short levy and, having been issued beyond six months from the communication of the three impugned orders-in-appeal dated 13-12-1978, 12-4-1979 and 12-4-1979, it was time barred under the then Section 131(5) of the Customs Act, 1962. When it was put to the respondents that the matter was one of erroneous refund to which the limitation of Section 131(5) did not apply, vide 1983 ELT - 1596 (S.C.) - Geep Flash light Industries Ltd. and 1979 (4) ELT - 3 81 (Kerala), the respondents accepted that the facts of their case were similar to those of Geep Flashlights and in view of the Supreme Court judgment being against them, they did not press the point of limitation further. They added, however, that they were not dropping the point finally so that, if necessary, they may be able to take it before the Supreme Court.
8. On merits, the respondents' first proposition is that no stevedoring charges were addable at all because the respondents had not paid any stevedoring charges to anyone. Their second proposition is that, as held by the Bombay High Court in 1977 BLR 380 -Sylvania and Laxman Ltd.; the importation was complete as soon as the importing vessel entered the territorial waters of India, and as such, no charges incurred thereafter could be included in the assessable value for assessment of customs duty. However, the respondents stated very fairly that they were not pressing for this second proposition before us as most other High Courts were against them on this point and the Tribunal had also already taken a view in various cases that landing charges were includible in the assessable value of the imported goods. But as in the case of their objection on the ground of limitation, they did not finally drop this point so that their right to revive it before the higher forum was not extinguished. Their next proposition which was seriously pressed for before us was that certain elements of cost added by the Asstt. Collector were not addable and, on the contrary, despatch money earned by the respondents because of quicker unloading of the chartered vessels ought to be deducted from the value. No other plea was pressed for by the respondents. The department opposed the new plea for deduction of despatch money earnings to which the respondents replied that this was their alternate plea and thereby they were only asking for a lesser relief than what had already been allowed to them by the Appellate Collector. The Bench allowed the plea to be taken.
9. We have given the matter our earnest consideration. In the Customs Act, 1962, Section 14 governs determination of assessable value of the imported goods for the purpose of levy of customs duty. The concept of value in Section 14 is a deemed value and such value is 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 ...". Since the price is to be the one for delivery at the place of importation, it is important to determine as to what is meant by the "place of importation". We respectfully agree with Gujarat, Delhi and Karnataka High Courts (vide the citations in paragraph 6 above) that the place of importation cannot be the territorial waters of India when the goods are still lying in the holds of the importing ships; the place of importation has to be the land mass of India where the goods are unloaded from the ship. It is only at such place that it is practicable for the customs and port- authorities to examine and assess the goods, give them port clearance and thereafter effect delivery of the goods to the importers. Therefore, all charges upto the stage of unloading of the goods on the berth have necessarily to be included. We need not dwell further on this point as the respondents themselves did not seriously press for the contrary view before us.
10. The respondents' proposition that stevedoring charges or charges for landing the goods on the land mass of India should not be included becuase they do not pay such charges to anybody is not acceptable. They do incur considerable costs on maintaining their wharf, unloading machinery and on employing the necessary labour force. It is not as if their goods leave the ship and reach the shores of India for the free. Whether the importer employs an outside contractor for doing the unloading work on payment or he does the unloading work himself, unloading costs are incurred in both cases and such costs for placing the goods on the Indian soil have to be added to arrive at the value of the imported goods under Section 14. The respondents made a statement that their two competitors, namely, M/s. Madras Fertilizers and M/s. IFFCO, were not adding the unloading costs in the value of their imported materials. We are not aware of the full facts of the cases of these two companies. In any case, any decision taken to the contrary by any lower authority is not binding on this Tribunal.
11. The learned representative of the department made a simple proposition that the dispute was on addition of landing charges and since Gujarat, Delhi and Karnataka High Court had held landing charges to be includible (vide the citations in paragraph 6 above), that was the end of the matter. The respondents plead, however, that though these three High Courts did say that landing charges were includible in the value, they meant by landing charges the charges for landing the imported goods on the land mass of India or unloading charges or ship to berth charges or stevedoring charges and not the subsequent wharfage charges. We find that the Gujarat High Court, after considering the Supreme Court and the British authorities, finally concluded the ratio on the point in the following terms :
"It would, thus, mean that the valuation has to be made at the point of time and place where the goods are brought from foreign land and are so placed that they can form a part of the mass of the goods within the country."
Though in the earlier paragraphs the said High Court took the landing charges as "the charges paid to the Port authorities upon the unloading of goods on the dock" (paragraph 5) and mentioned landing charges and wharfage charges as two separate elements in paragraph 8 of their judgment, we are concerned with the final ratio of the judgment. Delhi and Karnataka High Courts also agreed with this final ratio. As per this ratio, even wharfage charges are includible in the value. It is only on payment of both unloading and wharfage charges, in fact on payment of all normal charges upto the stage of clearance of the goods at the port gate, that delivery of the imported goods gets effected to the importer. This concept is fully in accord with the concept on the Central Excise side, vide 1983 (14) ELT - 1896 (S.C.) - Bombay Tyres International Ltd., whereby all costs upto the stage of removal of the goods at the factory gate are includible in the assessable value even though Section 4(4)(b) of the Central Excises and Salt Act defines "place of removal" as the place of manufacture. "Place of importation" in Section 14 of the Customs Act, 1962, should take the similar meaning as the place of removal of the imported goods, that is, the port gate. Delivery to the importer is affected only here.
12. The 1.4% Port landing charge already added to the respondents' value comprised wharfage charges and conveying charges from wharf to transit sheds and not unloading charges from ship to berth. The unloading charges have, therefore, to be computed and added too.
13. As already stated, the real point of dispute before us lay in determining as to which of the elements should constitute stevedoring charges or ship to berth charges. Both sides stated before us that no comparative costs of unloading bulk cargo at Vizag Port were available since no one other than the respondents was doing this work. We have, therefore, no alternative but to compute the unloading costs on the basis of the respondents' own expenses. In paragraph 6 above, we have already listed the elements of costs held by the Asstt. Collector to be includibie. During arguments before us, it was common ground by both sides that overtime allowance paid to the customs staff should not be an includible element as already held by this Tribunal in earlier cases. We agree that customs OTA payments, being exceptional costs incurred by only some importers under special circumstances, are not to be added. They are not an item of normal or regular expenditure. For the rest, the respondents contended that depreciation cost of unloading machinery, notional interest on capital employed in the unloading facility and administrative over-heads should not be added at all and that repair and electricity costs should be added only for the period of actual use of the wharf and the machinery. We do not agree with the respondents. It is a matter of common sense, and one need not go into refinements of cost accounting for this purpose, that if an outside stevedor were to do the unloading job, he would not only include all the elements of cost objected to by the respondents but add some profit for himself too. Here, the respondents do the unloading themselves. It is not that the work goes on for 3 months or so at a stretch and then the wharf and the machinery remain idle for the rest 9 months. The work goes on intermittently throughout the year. Naturally, the wharf and the equipment have to be maintained in operational condition all the time so that at the time of need they are in a working order. It is common knowledge that machinery depreciates while it is being worked as well as when it is lying idle. We, therefore, hold that depreciation and maintenance costs have to be included for the whole year. However, we do not consider it reasonable that elements of administrative overheads should be included right upto the Board of Directors' level. Only staff and officers directly dealing with the wharf work and one level of higher supervisory staff need be added. If the supervisory staff devotes a part of their time to supervision of the wharf work, only their part costs, pro rata, may be added. The rate at which the department computed the cost of depreciation and maintenance and repair is the same which the respondents themselves adopt for their accounting. Similarly, the rate of interest on capital employed is reportedly the normal bank landing rate. The rates adopted are, therefore, in order. However, since we are burdening the respondents with the costs of maintaining an .efficient facility, it is only fair that the fruits of that efficiency should also accrue to them. We, therefore, order that despatch money earned because of unloading of the chartered vessel before the stipulated lay time should be deducted from the costs. Conversely, if the appellants have paid any penalty for delayed unloading of the ship, the same should be added to the costs.
14. In the light of our discussion, we allow these appeals of the department subject to the condition that the Assistant Collector should re-quantify the unloading charges to be added in the light of Our observations in the preceding paragraph. The three impugned orders-in-appeal are, accordingly, set aside and the orders-in-original are restored with the modification ordered by us.