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1. M/s. Essar Gujarat Ltd., (hereinafter referred to as EGL), which is a company engaged in the manufacture of sponge iron and hot rolled steel products at its plant in Hazira, set up its Hazira plant in 1989-90 with a capacity to manufacture approximately eight lakh metric tonnes of hot briquette iron (sponge iron) per annum. The principal raw materials for this product are iron ore and iron ore pellets. The appellant company imported DR (direct reduction) grade iron ore pellets due to non-availability of pellets of the desired quality in India. Since Hazira was not a regular port, no standard freight rates were available, therefore EGL approached its sister concern M/s. Essar Shipping Ltd. (hereinafter referred to as ESL) to arrange for shipment of iron ore pellets and as per ESL's advice, EGL agreed to import iron ore pellets in vessels hired on charter basis. It was understood between EGL and ESL that EGL would enter into a charter party agreement with ship owners and that EGL would reimburse all expenses including hire charges to ESL as well as pay ESL the agreed amount for organising and co-ordinating the shipments. Accordingly ESL entered into time charter agreement for five out of the six vessels which form the subject matter of the present dispute, while the sixth vessel, M.V. Nand Nidhi which belonged to ESL was directly hired by EGL on time charter basis. The goods were imported in six vessels in a total of nine voyages as detailed below:

Shipment serial No.   Amount

1. a) Iron Ore from Brazil to India - Cargo quantity loaded as per Bill of Lading No. 62 on time charter vessel Maersk Santosa @ Rs. 3367- PMT Rs. 2,09,72,448/-

b) Being supervision charges at Rs. 501-PMT for transportation of 62,4 1 8 MT of Iron Ore Pallets from Brazil-Vizag (should be Ha/.ira) Macrsk Sanlosa Rs. 31,20,900/-

c) Iron Ore from Brazil to India - Cargo quantity rate as per Bill of Lading 62,418 MT on time charter vessel Maersk Santosa @ US$ 11 PMT (Rs. 17perUS$) Rs. 1,16,72,166/-

9. The allegations in the show cause notice and findings in the Commissioner's order equate the reimbursement of the amounts by the company to ESL for hire of the vessels on time charter basis on account of the company to "freight". However, we agree with the learned counsels for the appellants that all charges paid on account of time charter party cannot be equated to freight. When the vessel is taken under a time charter party, the payment is for the hire and use of the vessel as a whole and such charges are referred to as "hire charges" and not as "freight". Freight in the ordinary mercantile sense is the reward payable to the carrier for the carriage and removal of the goods. (See Scrutton on Charter Parties & Bills of Lading at page 331). In para 34 of the impugned order the Commissioner has held that the cost incurred in chartering the vessel for the purpose of delivery of the cargo has to be taken as the normal cost of transportation when there were no alternative means of delivering the cargo to Hazria. He thus seeks to equate the reimbursement of the amounts by EGL to ESL for hire of the vessels on time charter basis on behalf of EGL, to freight, which is contrary to law. Further, in the face of the admitted position that ESL entered into charter party agreement on behalf of EGL the presumption of the Commissioner in para 35 of the impugned order that the agreements between EGL and ESL was not a mere charting of the vessels but overall charges for carriage of the goods from the place of export to the place of import is incorrect, particularly when it is accepted by the Commissioner that EGL paid to ESL amounts in excess of what ESL paid to the character.

10.3 Shri Mondal sought to distinguish the above judgment of the Supreme Court by stating that in the present case M/s. ESL did not carry their own goods on the vessels hired by them but carried goods of EGL and earned freight on account of carriage of goods. This distinction does not advance the case of the Revenue as there is no dispute that EGL paid freight as per freight certificates issued by ESL and added that element of freight to the assessable value of the imported goods.

11. In the course of hearing it was contended by the learned representative of the Revenue that the description shown in the invoices shows that the payments had been made by EGL to ESL towards transportation of the imported goods. This submission runs contrary to the allegation in the show cause notice and the result of DRI investigations as it is an admitted position in the notice that payment made by EGL to ESL were for adjustment/reimbursement of expenses incurred by ESL from time to time for hire of vessels on time charter basis on account of EGL. Therefore the so called "freight ascertained" is nothing but the totality of the charges/amounts paid by EGL to ESL which incurred the charges in respect of vessels hired on time charter basis, and the freight ascertained is not the cost of transport of goods from the place of exportation to the place of importation and therefore it cannot be added to the transaction value in terms of Rule 9(2)(a) of the Customs Valuation Rules.