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2003 (3) TMI 781
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....ng 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 : S. No. Name of the Vessel Bill of Lading Date Quantity (inMTs) Shipper 1. Maersk Santosa 2-9-1989 62,418.000 CVRD, Brazil 2. Sagay Stove 27-1-1990 62,006.000 CVRD, Brazil 3. Nand Nidhi 1-1-1990 33,597.514 GIIC, Bahrain 4. Prabhu Parvati 12-1-1990 39,882.000 GIIC, Bahrain 5. Jag Rashmi 8-12-1990 40,784.675 GIIC, Bahrain ....
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....l to India - Cargo quantity loaded as per Bill of Lading No. 62 on time charter vessel Maersk Santosa @ Rs. 336/- PMT Rs. 2,09,72,448/- (b) Being supervision charges at Rs. 50/- PMT for transportation of 62,418 MT of Iron Ore Pallets from Brazil-Vizag (should be Hazira) -Maersk Santosa 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/- 2. (a) Being the freight charges for 62,006 MT Iron Ore from Brazil to Hazira as per Bill of Lading No. 1 dated 27-1-1990 per M.V. Sagay Stove @ Rs. 342/- PMT Rs. 2,12,06,052/- (b) Being supervision charges at Rs. 50/- PMT for transportation of 62,006 MT of Iron Ore Pallets from Brazil/Bahrain/Hazira M.V. Sagay Stove Rs. 31,00,300/- (c) Iron Ore from Brazil to India Cargo quantity load as per Bill of Lading 62,006 MT on time charter vessel M.V. Sagay Stove @ US $ 11 PMT (Rs. 17 per US $) Rs. 1,16,29,225/- Provisional Invoice 3. (a) M.V. Nand Nidhi 29-11-1990 to 18-1-1990 Cost of transportation from Bahrain to Hazira - ....
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....mini bulk carrier from Bhavnagar to Hazira from M.V. Jag Ravi - Quantity 29,832.604 MT. Rs. 90.00/- PMT Rs. 26,84,934.00 9. (a) M.V. Jag Ravi Voy-5 - Being transportation for 39,593.01 MT of Iron Ore Pallets from Bahrain to Bhavnagar - Completed loading on 1-9-1991 at 14.55 hours. Rs. 1,22,61,449/- (b) Sailed Bahrain on 1-9-1991 - Being transportation charges for 33,593.01 MT of Iron Ore Pallets from Bahrain to Hazira. Rs. 26,19,338/- (c) Invoice for transportation from Bhavnagar to Hazira by many bulk carriers, from mother vessel M.V. Jag Ravi, sailed from Bahrain on 1-9-1991 to Hazira was not available, however, based on viii(a) above, the rate should be Rs. 90/- PMT. Accordingly the charges worked out for 33,593 MT Rs. 30,23,370/- 4. By order dated 30-2-1999 the Commissioner of Customs confirmed the duty demand raised on EGL in the notice and imposed penalties on EGL, ESL and officers thereof, holding as under : "33. I have carefully gone through the records of the case, submissions made by M/s. EGL from time to time both oral as well as written. I find that the basic issue in this case to be decided is as to what constitutes cost of tra....
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....ost of transportation even if in some cases the consignment does not constitute a full ship load. In such circumstances when there is no alternative means of delivering the cargo the actual cost of delivering the cargo by chartering the vessel etc. is to be taken as the cost of transportation. 35. Shri Nankani referred to the Supreme Court decision in the case of U.O.I. v. Gosalia Shipping Pvt. Ltd. wherein a distinction was drawn between the carriage of goods and hire of ship. In this case the payment received by the time charterers for use and hire of ship were sought to be taxed under Income-tax Act as a receipt towards carriage of goods. The Supreme Court held that since the agreement was for the hire and use of the ship and not for the carriage of the goods the same cannot be subjected to income-tax. This decision is not relevant because the facts of the present case differ. Here what is sought to be taxed is the cost of transportation of the goods incurred by M/s. EGL. M/s. EGL have asked their shipping company M/s. ESL to arrange for the delivery of the goods by chartering the vessels etc. Shri Nankani has confirmed that there was no written agreement between M/s. E....
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....f payment to the customs even though the manner of transport remained one and the same. The invoices were manipulated from M/s. ESL to show different charges under different heads and an absolute imaginary invoice was raised for the purpose of customs. The noticees tried to take a plea that they were not in the know of the customs requirement regarding the nature of charges which will constitute the cost of transportation but for this they never came to the department for seeking any clarification but instead resorted to manipulating the documents. 38. Shri Nankani has referred to the two letters written by Superintendent, Customs dt. 25-6-90 and 27-7-92 to show that the department was in the knowledge of the payments made by them to M/s. ESL. However, I find that the letter dt. 25-6-90 has asked for clarification regarding the actual insurance charges paid and has not referred to the freight at all. The second letter dt. 27-7-92 has been issued after the assessments have been made final and was part of investigations asking for certain documents which has ultimately resulted in the issue of the present SCN. In view of this it cannot be said that the department was in the ....
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....de - (a) the cost of transport of the imported goods to the place of importation. (b) ........... (c) .............." The 'cost of transport of the imported goods to the place of importation' means the cost incurred for the voyage from the place of exportation of the goods to the place of importation. This means that the expenses limited to the carriage of the imported goods starting from the loading thereof at the port of exportation to the unloading thereof at the port of importation alone are covered by Rule 9(2)(a) and consequently only these expenses can be added to the transaction value. The expression "of the imported goods" appearing in Clause (a) of Sub-rule (2) of Rule 9 clearly indicate that the cost of transport must be directly related to the imported goods. The so-called "freight ascertained" as alleged in the show cause notice, does not represent the cost of transport of the imported goods to the place of importation. The "freight ascertained" in the show cause notice represents the adjustments/reimbursements made by the company to ESL for hire of the vessels on time charter basis on account of the company. This is an admitted po....
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....hen 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 Hazira. 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 agreements 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 chartering of the vessels but overall charges for carriage of the goods from the place of export to the place of import is incorrect, particularly w....
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....in India." 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 ch....
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....he FOB price of the goods was shown as US $ 44/- PMT. The same order also refers to LC amount being amended by amount of US $ 3 PMT for converting the bill of lading from "freight paid" to "freight payable". This being so, there was no warrant or justification for the Commissioner to make any addition on account of freight in respect of the three C&F shipments, particularly in the absence of any material on record that the freight was otherwise. In the light of the foregoing discussion, we set aside the duty demand. 14. We now deal with the plea that the demand is barred by limitation. It is a matter of record that along with each Bill of Entry M/s. EGL also filed Bill of Lading bearing the endorsement "freight payable as per charter party agreement". Assessments which were initially provisional were finalised without any objections by accepting the freight declared in the Bills of Entry with the full knowledge that the freight was payable as per charter party agreement. The Commissioner, however, holds that at the same time EGL submitted invoices which showed price declared on C&F basis even though no such price was agreed to and that this amounted to mis-declaration with the i....
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....ed 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 or exportation. Rule 9(2) of the Customs Valuation Rules, 1988, provided for inclusion in such value of the cost of transport of the imported goods to the place of such importation. The only issue for consideration in this appeal is that of interpretation of the phrase "cost of transport". 18. Section 14 of the Act speaks of the forces of demand and supply operating in the free market. In such a situation the prices for the same goods and the similar goods would also tend to move in a narrow spectrum. The cost of transport of goods is made an element of the value of the goods. Since the transportation rules also stand determined by market forces, the C&F prices of the same or similar goods would remain in a narrow bandwidth. In other words, there would be a very few cases where the values quoted are exceedingly high or low when compared to the mean prices. 19. This thought is acknowledged in the proviso to the said Rule 9 (2), which fixes a cap of 20% on the free on board value of the goods as the cost of the transport. This figure has bee....
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....to be determined at the price at which such or like goods were ordinarily sold or offered for sale. The Tribunal, therefore, concluded that they were ordinarily sold or offered for sale after including the sea freight and not air freight and on that finding of fact it came to the conclusion that the value of the goods had to be determined by adding sea freight and not air freight thereto. In the circumstances we do not see any reason to interfere with the finding of fact on the basis of which the ultimate conclusion was reached. Hence, we dismiss this appeal with no order as to costs." 23. In the case of Bombay Dyeing & Manufacturing Co. v. Collector of Customs [1993 (63) E.L.T. 557], the Tribunal had held that where some goods were ordinarily imported by sea, the sea freight had to be added to the assessable in arriving at CIF value, even when the goods were imported by air at a much higher rate. In doing so, the Tribunal followed the earlier order of the Tribunal in the case of Orwo Films v. Collector of Customs [1991 (56) E.L.T. 805]. 24. The principle of "normalcy" has to be followed when making additions to the assessable value. In their judgment in the case of IOC v. CC....
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....cided that wharfage and demurrage are not landing charges and are not to form part of the assessable value. That decision was distinguished by the two Member Bench holding that wharfage and demurrage in the case were not paid to the port authorities. They were charges for detention of vessel and so are pre-landing stage charges. Consequently, it was taken that those charges would form part of assessable value. We do not find our way to agree with this distinction sought to be made by the Bench in Panchmahal Steel Ltd. case. Demurrage is paid on account of the delay in clearing the goods from the vessel. That cannot form part of the value of the goods. Further, since the two Member Bench which decided the Panchmahal Steel Ltd. case was not appraised of the existence of the circular issued by the Board, the said decision cannot be said to be one correctly decided." 26. The ratio of this judgment was followed by the Tribunal in their later order in the case of Exim India Oil Co. v. CC, Calcutta [2001 (131) E.L.T. 207 (T) = 2001 (42) RLT 181]. 27. The law stated requires that extraordinary circumstances be disregarded. Thus where the carrier may transport some goods, entirely fre....