Customs valuation must follow actual ascertainable charges; fixed FOB additions work only as a fallback when actuals are unavailable.

A Supreme Court decision on customs valuation held that delegated rules must follow the actual price or transaction value principle under Section 14 of the Customs Act. The 1990 amendment to proviso (ii) to Rule 9(2), which required a 1% FOB addition for loading, unloading and handling charges even when actual charges were ascertainable, was treated as inconsistent with the parent statute and Article 14. The fixed-percentage addition was upheld only as a fallback where actual charges could not be determined, and handling costs had to be based on actuals whenever objectively ascertainable.

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Issues: Whether proviso (ii) to Rule 9(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, as inserted by Notification dated 05.07.1990, was valid to the extent it required addition of 1% of FOB value towards loading, unloading and handling charges even where the actual charges were ascertainable; and whether that provision was ultra vires Section 14 of the Customs Act, 1962 and violative of Article 14 of the Constitution of India.

Analysis: The valuation scheme under Section 14 of the Customs Act, 1962 and the Valuation Rules is founded on the actual price or transaction value principle. Where actual cost is available, that cost is the determinative factor, and notional valuation is justified only when the actual figure is not ascertainable. Rule 9(2), as originally framed and as amended in 1989, preserved that approach by allowing fixed percentages only when the relevant charges could not be ascertained. The impugned 1990 amendment departed from this scheme by mandating a 1% FOB addition for handling charges irrespective of whether actual charges were known. That introduced a fiction inconsistent with Section 14 and had no rational nexus with the object of valuation, especially when handling charges were fixed by the airport authority and were objectively ascertainable. The rule-making power could not be exercised to create a substantive burden repugnant to the parent statute.

Conclusion: The impugned proviso (ii) to Rule 9(2), in its unqualified form, was held unsustainable. It was valid only to the extent that the 1% FOB addition would apply where the actual loading, unloading and handling charges were not ascertainable.

Final Conclusion: The appeals succeeded, the High Court judgment was set aside, and the impugned amendment was read down so that handling charges are to be determined on actuals whenever ascertainable.

Ratio Decidendi: A delegated valuation rule cannot substitute a notional figure for an objectively ascertainable actual cost where the parent statute and scheme require valuation to track the actual price, and a fixed-percentage addition is valid only as a fallback when actual charges cannot be determined.

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