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IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No. C/303/04-Mum.
Arising out of Order-in-Appeal No. 508/2003 (215/JMN) Cus/Commr(A) dtd. 23/12/2003
passed by the Commissioner of Customs (Appeals), Ahmedabad.
Date of Hearing: 11/08/2004
Date of Decision: 01.09.2004
M/s ESSAR OIL LIMITED
COMMISSIONER OF CUSTOMS, AHMEDABAD
Appellant (Rep. by Shri Vipin Jain, C.A.)
Respondent (Rep. by Shri Vilesh Kumar, SDR &
Shri R. B. Pardeshi, JDR)
Shri Krishna Kumar, Member (Judicial)
Shri C Satapathy, Member (Technical)
ORDER NO. A/775/WZB/2004-C-II
Per: Shri C. Satapathy, Member (Technical):
Heard both sides. The differential duty amount of Rs. 38,622/- in this case is not high, but the principle of valuation involved is of considerable importance to all cases of import where the vessel carrying the imported goods anchors in the sea way off from the wharf/jetty on account of insufficient draft and the goods are transported by draughter vessels/barges etc. to the landing point. The issue to decided is whether the cost of such carriage should be separately added to arrive at the assessable value of the imported goods.
2. The brief facts of the case as noted in paragraph 1 of the impugned order-in-appeal areas follows:-
"M/s. Essar Oil Ltd. (hereinafter as 'the appellant") imported a consignment of 77mw Cogeneration Plant meant for their Crude Oil Refinery vide Bill of Entry No.F-27/24.02.1999 and F-38/24.02.1999. Some of the goods under these Bills of Entry were cleared for home consumption whereas others were cleared for warehousing. These Bills of Entry were provisionally assessed. A Show Cause Notice was issued to them calling them to show cause as to why the transportation charges from the anchorage of the vessel to the jetty should not be included in the assessable value as admittedly the charges of the barges which brought the imported goods from the anchorage to the jetty were paid by the appellant and was not included in the CIF price of the goods. The appellant, in reply to the show cause notice, claimed that the place of importation cost till the anchorage point only was to be added. They also claimed that the vessel could not reach the jetty only because of insufficient draft and these activities of bringing the goods from the anchorage to the jetty were undertaken by the buyer on their own account and the same could not be considered as indirect payment to the seller."
3. The appellants themselves have described the crux of the issue in paragraph 6 of their appeal memorandum as follows:-
"The Appellant had incurred some transportation cost for the transportation of the imported goods through barges from the vessel to jetty, which as explained earlier has to be done due to the uneven draft availability within the Vadinar port limit. Such transportation charges, which were incurred by the Appellant, were in the nature of post importation expenses. It may be highlighted in this context that the Appellant has paid landing charges @ 1% of the CIF value, such landing charges representing the totality of all the cost to bring the imported goods to land."
4. From the above-cited averment in the appeal memorandum it is clear that the cost of carriage of the imported goods from the vessel at the anchorage to the landing point at the jetty is in the nature of transport charges. It is also not in dispute that the same is includible in the assessable value. The dispute is whether the same should be separately added in addition to the landing charge of 1% CIF value. Shri Vipin Jain, learned C.A. appearing for the appellants states that the issue is already settled in favour of the appellants by the Tribunal's decision in the case of M/s Reliance Industries ltd. and others V/s CC (P) ahmedabad and CC (P) Mumbai-Order No. A/262 to 267/WZB/2004-C-II dated 21.05.2004 and therefore, barge charges should be excluded from the assessable value and the appeal allowed.
5. Shri Vimlesh Kumar, Ld SDR and Shri R.B. Pardeshi, Ld DR. appearing on behalf of the Department support the impugned order and contend that barge charges being transportation charges are includible in assessable value. They also state the Department has not accepted the said decision of the Tribunal in the case of M/s Reliance (supra) and has gone in appeal to the Apex Court. They further contend that the said decision does not have the effect of binding precedent as it has been passed contrary to the ratio of the earlier decisions of the Apex court and Tribunal in the following cases:-
They also bring to our notice the recent circular No. 29/2004-Cus dated 13/04-2004 issued by the Board in consultation with the Law Ministry on the issue of includibility of barge charges in addition to landing charge of 1%.
6. Since the aforesaid Circular dated 13.04.2004 has been issued by the Board for ensuring uniformity in assessment throughout the country, we take note of its contents which are as follows:-
"Subject: Customs Valuation Rules, 1988-Inclusion of barging/lighterage charges in the assessable value-regarding.
Representation have been received in the Board to clarify whether barging/lighterage charges are includable in the assessable value of the imported goods as "extended cost of transportation" under rule 9(2) (a) of the customs Valuation rules, 1988 or the same are covered under the 1% "landing charges" levied by the Department under Rule 9(2)(b) of the customs Valuation Rules, 1988. It has been reported that the standard practice is to include the same in the assessable value, except in the case of Mumbai Custom House.
2. Due to non-availability of deep draught all ports are not navigable up to the Jetty and therefore the goods have to be discharged/transshipped at the outer anchorage. Further, in many busy ports, goods are off-loaded at the anchorage on barges in order to ease the congestion in the docks. Odd dimensional cargo/heavy lifts/hazardous cargo often has to be off-loaded at anchorage for technical/safety reasons. Such charges associated with the delivery of cargo at outer anchorage are known as barging/lighterage charges. The Tariff Conference held at Chennai in January 2000 observed that the freight charges to be added to the assessable value shall include all elements of cost incurred in the transportation of the goods from the point of exportation to the place of importation, i.e., the final jetty at which the goods are unloaded.
3. The issue was examined in consultation with the Ministry of Law. The Law Ministry has observed that the Hon'ble Supreme Court's observations in the case of M/s Garden Silk Mills Limited v. Union of India reported in 1999 (113) ELT 358 (SC) appears to be more relevant that the value of goods is 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. The importation is complete when the goods reach the landmass of the Country and not at the outer anchorage point. In other words, all the expenses incurred by the importer in bringing the goods to the landmass of the country will be includible in the assessable value. It is understood that some of the importers are filing declaration of value as CIF/C&F in spite of the fact that the said "freight" paid by the Shipper does not include the barging/lighterage charges. Taking a cue from the Supreme Court judgment in the Garden Silk Mills case cited above, the above charges borne by the importer in bringing the goods from the outer anchorage to the landmass has to be included in the assessable value as "extended cost of transportation" under Rule 9(2) (a) of Customs Valuation Rules, 1988. The 1% landing charges collected by the department under rule 9(2)(b) of Customs Valuation Rules, 1988, are towards the loading, unloading and handling charges at the place of importation, which is the landmass of the Country. Mis-declarations, if any, may be proceeded against in accordance with law.
4. Difficulties, if any, in implementing the Circular may be brought to the notice of the Board forthwith."
7. We reproduce below relevant portions of rule 9 (2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 which are germane to the issue at hand:-
"9. Cost and Services:-
(2) For the purposes 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-
Provided that -
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 relation to in clause (a) plus the cost of insurance referred to in clause (c).
Place of importation
8. Rule 9 (2)(a) refers to the 'cost of transport' to the place of importation and Rule 9(2)(b) refers to "loading, unloading and handling charges" associated with the delivery at the place of importation. As such, for the resolution of the issue at hand, it is important to understand what is meant by the phrase "place of importation" which occurs both in Section 14(1) and in Rule 9(2). Relevant portion of Section 14(1) has not undergone any amendment and hence the earlier judicial pronouncements on interpretation of the phrase 'place of importation' occurring therein are binding on this Tribunal. Some of these are noted below:-
Prabhat Cotton and Silk Mills Ltd. V/s UOI - 1982 (10) ELT. 203 (Guj.)
The valuation of goods on importation has to be made at the point of time and place when the goods are landed on the landmass of India and not when the ship enters the territorial waters of India.
(2) Shriram Fibres Ltd. Vs. UOI - 1994 (69) ELT 4 (Mad.)
"Place of importation" in Section 14(1) of the Customs Act, 1962 means landmass of India and not territorial waters - "For delivery" in the same section means delivery ex-wharf and not delivery ex-ship.
(3) Garden Silk Mills Ltd. Vs. UOI - 1999 (113) ELT. 358 (SC).
The import of goods into India would commence when the same cross into the territorial waters but continue and is completed when the goods become part of the mass of goods within the country.
9. These decisions were no doubt given in the context of inclusion of landing charges in the assessable value, but these are very relevant for interpreting the phrase 'place of importation' occurring in Section 14(1) of the Act as well as in rule 9(2). We note that the Apex Court decision in Garden Silk Mills Ltd. (supra) is rendered by a 3 Judges bench and hence is binding on all sub-ordinate Courts and Tribunals. Applying the ratio of the said judgment, the inevitable conclusion is that the place of importation is not the anchorage point where the ship anchors but the place of unloading on the landmass of India usually called a wharf or a jetty. We find that under Notification no.3/98 (CCP) dated 26/04/1998, the Commissioner of customs, Ahemdabad, as per provisions of the Customs Act 1962, has approved the landing place for unloading imported goods and had also declared the area around such places to be customs area under Section 8(b) of the Act. The Schedule to the notification is reproduced below:-
|Name of the Port||Place of Loading And Unloading||Area||Limit|
|Vadinar Port||(i) Ro Ro Jetty||37.3 Mtr. X 20||North: KPT|
|Lat:||-||Mtr = 746 mt2||Control Building|
|Long:||(i)||68 mtr x 20||North: Sea|
|69.40'27E||-||mtr = 1360 mt2||Water Front|
|(iii) Barge Unloading Facility||13.4 mtr Dia Ringer Crane||North Sea Water Front|
|Backed up by Sand bags|
|(iv) Back up Area||50,975 mt2||East Approach Road|
Following the ratio of the Garden Silk Mills (supra), we come to the conclusion that the notified places of unloading are indeed the 'place of importation' referred to in Section 14(1) and Rule 9(2).
Nature of Barging charges
10. Rule 9(2)(a) requires cost of transport to the place of importation to be added to the value whereas Rule 9(2)(b) requires loading, unloading and handling charges at the place of importation to be added to the value. The proviso (ii) to Rule 9(2) fixes the latter at 1% of 'f.o.b. value + cost of transport + cost of insurance'. Thus the amount of 1%, commonly known as landing charges, refer to charges representing loading, unloading and handling charges at the place of importation. On the other hand, barging charges represent cost of transportation to the place of importation, i.e. cost of carriage from the anchorage to the place of landing which is the notified place of unloading. The appellants themselves refer to these charges as transport cost in paragraph 6 of their appeal memorandum as noted earlier. There is no dispute that these costs were incurred by the appellants themselves and not by the supplier. It is obvious that barging charges, being cost of transport to the notified place of unloading come within the purview of Rule 9 (2)(a). The contention of the appellants that barging charges are part of the charges incurred at the place of importation within the purview of Rule 9(2)(b) is totally misplaced. In view of the Apex Court decision in Garden Silk Mills (supra), once the place of unloading is held as the place of importation, the cost of transport to such place can not be confused with unloading charges incurred at such place. The use of the words 'to' and 'at' respectively as prefixes to the phrase 'place of importation' in Rule 9(2)(a) and 9(2)(b) clearly brings out the distinction between transport charges on the one hand and unloading and handling charges on the other. While calculating the amount for charges under Rule 9(2)(b), the1% has to take into account the f.o.b. value, transport cost and insurance cost as the basis. Obviously, the charges under Rule 9(2)(b) do not include the transport cost itself which comes under the purview of Rule 9(2)(a).
11. We, therefore, hold that barge charges being part of the transport cost to the place of importation are includible in the assessable value. It would have been different if the c.i.f. price paid to the supplier had included this cost and the barge charges were incurred by the carrier and not by the importer. In such cases, the c.i.f. price would have been inclusive of barge charges and no further additions would have been required. In the present case, this was not so as the carrier the goods upto the anchorage only and the price paid to the supplier did not include the barge charges.
12. The appellants have referred to interpretative notes to Rule 4 that the cost of transport after importation is not to be included in the value. Following the Apex Court decision in the case of Garden Silk Mills (supra), we have held that the place of importation is the place of unloading and hence barge charge to such places can not be considered as cost of transport after importation. The note is meant to exclude transport charges from jetty/wharf to a warehouse or inland container depot and not the transport charges incurred prior to the goods reaching a jetty/wharf.
13. The appellants as well as the D.R.s. have referred to the Apex Court decision in the case of Coromandal Fertilisers Ltd. vs. C C - 2000 (115) ELT 7 (SC). In the said case, the Apex Court had ruled that stevedoring charges and unloading charges can not be again added to the value, once a fixed percentage towards landing charges has been added. It was also a case where the importers maintained their own wharf, unloading equipment and staff for the same. The charges considered by the Apex court in this case (vide para 1 and 5 of the order) wee related to unloading of the goods from the ship berthed at the wharf. It did not deal with transport charges incurred in bringing goods from anchorage to the wharf. In the present case, we are dealing with a case where barge charges were incurred in transporting goods from the ship at the anchorage to the notified place of unloading at the jetty. Hence the ratio of Coromandal (supra) does not support the case of the appellant.
14. Revenue has placed reliance on the earlier decision of the Tribunal in the case Ispat Industries Ltd. vs. C.C.(P), Mumbai - 2001 (135) ELT 646. It was decided in the said case that barge charges upto Dharamtar which was notified as a place of unloading has to be included in the vlaue. Our view is in conformity with the said decision of the Tribunal. We are unable to agree with the contrary view taken by the Tribunal in the case of M/s Reliance (supra) that barge charges are not includible in the assessable value or that the place of importation shifts to the anchorage point in the sea. The ratio of the 3-Judge Bench of the Apex Court in Garden Silk Mills (supra) clearly defines the term 'place of importation', following which we hold it to be the notified place of unloading. Consequently, we also hold that barge charges representing the cost of transport to such place to be includible in the assessable value. The place of importation cannot shift depending on when and where the customs documents are filed and signed nor can the customs value be made dependent on such eventuality. Certain customs formalities relating to boat notes, transshipment etc. have ben prescribed for facilitating safe landing of the goods in the notified customs area under customs control for subsequent clearance. Such procedural provisions can not be interpreted to shift the place of importation to a point in sea against specific judicial pronouncement to the contrary.
15. In view of our findings above, we hold barging charges to be includible in assessable value. The appeal is dismissed.