Customs valuation and freight loading require proven subsidy evidence and fair notice before any notional addition is sustained.

Customs valuation of petroleum imports cannot be increased on an alleged freight subsidy unless the evidentiary basis for that subsidy is established; material showed no freight payment for the relevant finished products and the supposed subsidy related only to crude oil, so the 20% freight loading was rejected. For C & F consignments, freight could not be notionally added where the declared price already included freight and only insurance would ordinarily be separately considered, so the 14% addition was set aside. The assessment of 35 FOB bills of entry was remanded because the valuation basis had widened beyond the notice and the importers were not given a full opportunity to meet the new ground.

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Issues: (i) Whether the freight element could be enhanced by estimating 20% under the Customs Valuation Rules on the premise that a freight subsidy had been paid by the Oil Coordination Committee to the Shipping Corporation of India for imports of finished petroleum products. (ii) Whether the addition of freight at 14% in respect of C & F consignments was justified. (iii) Whether the assessment relating to 35 FOB bills of entry required interference and remand for fresh examination.

Issue (i): Whether the freight element could be enhanced by estimating 20% under the Customs Valuation Rules on the premise that a freight subsidy had been paid by the Oil Coordination Committee to the Shipping Corporation of India for imports of finished petroleum products.

Analysis: The material produced before the Authority, including confirmations from the Oil Coordination Committee and the Shipping Corporation of India, showed that no payment towards freight had been made by the Oil Coordination Committee to the Shipping Corporation of India during the relevant period for the petroleum product imports in question. The alleged subsidy, if any, was related to crude oil and not to finished petroleum products. In the absence of any rebuttal to this material, the foundation for invoking the proviso to Rule 9(2) and estimating freight at 20% was not established.

Conclusion: The 20% freight enhancement on the basis of alleged subsidy was not sustainable and was rejected.

Issue (ii): Whether the addition of freight at 14% in respect of C & F consignments was justified.

Analysis: For consignments imported on C & F terms, the declared contract price already included freight, and the only permissible addition would ordinarily relate to insurance, not a further notional freight loading. The freight addition was made on the basis of another consignment, while the C & F price charged by the supplier was not otherwise disputed. That approach had no legal basis on the facts found.

Conclusion: The freight addition of 14% for the C & F consignments was unsustainable and was set aside.

Issue (iii): Whether the assessment relating to 35 FOB bills of entry required interference and remand for fresh examination.

Analysis: The basis on which freight was sought to be finalized for the FOB consignments was not confined to the ground disclosed in the notice, and the appellants had not been given a full opportunity to meet the additional aspect relied upon at adjudication. Since further material could be produced by the appellants, the matter required reconsideration after hearing them.

Conclusion: The part of the order relating to the 35 FOB bills of entry was set aside and remanded for fresh adjudication.

Final Conclusion: The assessees succeeded on the substantive freight additions, while the FOB portion was reopened for reconsideration after a fresh hearing.

Ratio Decidendi: A freight loading in customs valuation cannot be sustained on an alleged subsidy basis unless the evidentiary foundation for that subsidy is established, and any additional valuation ground introduced without adequate opportunity to meet it violates fair procedure.

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