ORDER
S.S. Sekhon, Member (T)
1. The appellants are importers of iron ore pallets/iron ore lumps falling under Chapter 26 of the Customs Tariff Act, 1975 at Revdanda port. Ocean going ‘foreign mother vessel’ carrying the import cargo anchors in the sea, at Revdanda Anchorage about 16 to 20 Nautical miles, away from the Revdanda port jetties on account of low water draught. The Mini BulkCarriers (hereinafter referred to as ‘Barges’) come alongside the foreign mother vessel and with the aid of a ‘Floating Crane’ the imported cargo is water borne from the “mother vessel” in to the barges, the barges bring the imported cargo of Vikram Jetty at Revdanda Port. At the jetty, there is no stock yard for storage. There is however an arrangement of Continuous Barge Unloader (hereinafter referred to as ‘CBU’), Figee Crane, H.B.L. Loader System and Conveyor Belt System installed with the help of CBU, & other instruments the cargo in the barges is loaded on to the convey belt system which moves the cargo from the jetty to the factory of the appellant to storage areas situated about 2 to 33 KMs away from the jetty. When the cargo is unloaded from the “mother vessel” on to the barges, the pay loaders/unloaders belonging to the appellants are used in the hatches of the ‘foreign mother vessel’ to bring the cargo from the corners of the hatch to the centre of the hatch, under its mouth, to facilitate the Floating crane to lift the cargo from the hatches and discharge the same into the Barges. The cleaning of hatches is also done by these Payloaders/Uniloaders. The Barges/Floating Crane are required to be moored/unmoored, manually by the seamen, to and from the ‘foreign mother vessel’ at the anchorage for effective discharge of cargo, from the foreign ‘mother vessel’ on to the barges. The barges containing the imported cargo have to traverse about 16 to 20 nautical miles to bring the imported cargo at Vikram Jetty, a declared place of landing, for unloading/loading of import cargo under the Customs Act, 1962. Following expenses are incurred on these operation:
(a) Expenses towards use of payloaders and also manual cleaning of the hold (hatches) to bring the imported cargo together at the Centre & under the mouth of the said holds to enable the Floating Crane to discharge the Cargo into the Barges.
(b) Expenses towards mooring/unmooring of the Floating Crane/Barges to/from the Foreign ‘mother vessel’ at the point of anchorage for effective transhipment of Cargo from the “Mother Vessel” to the Barges.
(c) Expenses towards the use of Floating Crane for transhipment of the cargo from the Foreign ‘mother vessel’ to the Barges.
(d) Expenses on Barges for bringing the Cargo from the anchorage of Revdanda Port to Vikram Jetty.
2. Bills of Entry pertaining to the cargo for the period 1994-95 to 1998-99 were provisionally assessed under Section 18 of the Customs Act, 1962 for want of information and surety bonds were executed. The above-said expenses incurred with respect to the goods imported vide these provisionally assessed Bills of Entry and mentioned hereinabove were considered, as per provisions of Section 14 of the Customs Act, 1962 read with Rules 3, 4 and 9 of the Valuations Rules, 1988, as to be added for finalisation of the assessable value. The importers were issued a Show Cause Notice as to why:
(a) the Customs duties amounting to Rs.3,57,87,316 on the barges expense as per Clause (d) of para 1 above mentioned and incurred by them during the period 1994-95 to 1998-99, and (b) expenses as per Clause (b) hereinabove amounting to Rs. 2,29,05,320 as expenses incurred by the importer on the use of their Floating crane for transhipment of imported goods from mother vessel to the barges at the point of anchorage, expenses on the use of payloaders/uniloaders and manual labour for cleaning the hatches as of the foreign mother vessel as mentioned in Clauses (a), (b) and (c) of para 1 above should not be demanded and recovered under Section 28 of the Customs Act, 1962, and since the importer had failed to produce total and correct expenses incurred by them on the use of barges for bringing the imported raw materials from the point of anchorage to the Vikram Jetty and they did not produce necessary documents to facilitate the working of actual expenses in respect of lapse of long period and repeated reminders, the barge expenses were taken at the rate of Rs. 96.38 per metric tonne, as the expenses incurred by another importer, M/s Ispat Industries Ltd., Dharamtar inasmuch as it was felt that the circumstances of the barge lighterages of the present importer and that in the case of M/s Ispat Industries Ltd. was similar. As the importer had failed to make available total expenses incurred on the floating crane as well as failed to produce relevant documents to facilitate the working of actual expenses incurred on the use of Floating crane for transhipment of imported cargo to the barges, inspite of several letters/reminders, the expenses on Floating crane on the basis of notional hire cost/repair and maintenance expenses/overheads/bunker cost and profit margin taken to reckon the demand made.
3. The lower authority after considering the reply and hearing the importers found:
(a) since the mother vessel is anchpraged 16 to 20 nautical miles away from Revdanda port, a declared port under of the Customs Act, 1962, there was no option to the importer but to tranship the cargo on to barges and bring the same to the Vikram Jetty at Revdanda Port. The barges, go alongside the mother vessel and with the aid of Floating crane the imported cargo is transferred/transhipped from mother vessel to barges. During such transhipment the cargo services of payloaders and stevedores are employed. At the Revdanda Port (Vikram Jetty) there is a conveyor belt system where the imported cargo is taken from the Jetty to the factory godown situated two to three kilometres away.
(b) The importer presents Bills of Entry under Section 46 of the Customs Act, 1962 before the delivery of the Import Manifest as provided under. Section 30 of the Customs Act, 1962 and produces necessary documents and the goods are assessed provisionally pending production of relevant documents/information, test etc. Customs duty provisionally assessed is paid. On delivery of the Import Manifest the Customs officer prima facie examines the import cargo as regards its nature at the point of anchorage of mother vessel and grants entry inward to the said vessel and permits transhipment of the import cargo into the barges with the directions that the barges shall unload the cargo at Vikram Jetty at Revdanda Port alone.
(c) Another detailed examination and drawl of sample is carried out by Custom Officer at Revdanda Port. The barges bring the imported cargo from point of anchorage of mother vessel to Revdanda Port under Boat Notes in the prescribed form. This procedure was found to be followed primarily to facilitate the importer in transhipment of the cargo from the mother vessel to barges and it was in vogue due to peculiar/unusual circumstances of the case.
(d) It was also found that in all cases in terms of Section 33 of the Customs Act, 1962 no imported goods shall be unloaded other than a place approved under Clause (a) of Section 8 of the Customs Act, 1962. Section 29 prohibits the person in charge of the vessel or aircraft entering India from any place outside India from permitting such vessel or aircraft to call or land at any place other than custom port or customs airport.
(e) After examining the definition of India in Section 2 (27) of the Indians Customs Act, 1962, it was found that in the present case there were exceptional circumstances and therefore there existed compelling reasons to attribute the meaning to the expression ‘India’ as comprising only of land mass and the word ‘import into India’ to mean when the imported goods are unloaded on the and mass and not otherwise. Therefore, the definition clause was required to be abandoned and the word was required to be understood in common parlance. It was concluded that importation goods is an integrated process which culminates when the goods are landed on the landmass of India so that they can be introduced in the stream of supplies to form a part of the mass of goods within the country. Therefore, it was concluded that the place of importation in this case for the purpose of Section 14 is nothing but the Vikram Jetty at Revdanda Port a declared port.
(f) He differentiated the case of Apar Pvt. Ltd. of the Bombay High Court and found that the facts and circumstances in the present issue were different and relying upon the case of Shriram Fibres Ltd. v. Union of India, 1994 (45) ECC 17 (Mad) : 1994 (69) ELT 4 (Madras), Barium Chemicals Ltd. v. Union of India, 1988(17) ECC 201 (AP): 1988 (37) ELT 327 (AP) and Govindram Agarwal v. Collector of Customs, 1988 (35) ELT 280 (Cal) holding that landing charges have to be included in the assessable value for the reason that they are incurred for bringing the goods from the ship to the port and the place of importation means land mass of India and territorial waters, and the words ‘for delivery’ means ‘delivery ex-wharf and not ‘delivery ex-ship’ and therefore have concluded that assessable value must include besides transaction value, landing charges payable by importer before delivery of goods given to him and other handling charges were includible in the assessable value and also so assessable.
(g) After considering the provisions of Rule 9 of the Customs Valuation Rules, 1988 (hereinafter referred to as Valuation Rules) especially Sub-rule (2) thereof, it was found that the expenses incurred of barges were for the purposes of bringing imported goods from the point of anchorage in the sea about 16 to 20 nautical miles away from the Revdanda Port to the place of import i.e. Vikram Jetty, Revdanda port, and these expenses incurred by the importer were part of the cost of transport to the place of importation and are covered by Clause (a) of Rule 9(2) and are distinct from the concept of landing charges mentioned in Clause (b) of the said Rule 9(2).
(h) He further held that the expenses incurred by the importer during transhipment of imported goods from mother vessel to the barges in the deep sea on the use of Floating crane, use of Stevedores on mother vessel, use of payloaders/uniloaders in the hatches of mother vessel, are all incurred by the importer prior to the expenses incurred by him on barge charges, therefore they are distinct and different from the landing charges specified in Rule 9(2). He noted that the landing charges are nothing but loading unloading and handling charges associated with the delivery of imported goods at the time of importation i.e. landing charges were nothing other than loading unloading and handling charges incurred at Vikram Jetty and therefore distinct from the expenses incurred in deep sea at the point of anchorage and the price of imported goods determined under Section 14 shall include all fixed and variable costs plus margin of profit of importer and therefore includible in the assessable value.
(i) After considering the computation of delivery stevedoring charges submitted by the importer, he found that the imported (sic) had failed to give correct and total information as regards the expenses incurred by them under various heads and the Chartered Accountant’s Certificate submitted as regards the expenses incurred of Floating crane and fuel cost were not included while computing operational cost and since the importer had failed to give complete and total expenses incurred and considering the floating crane capacity, he found that he had no option to adhere to the theoretical method for inclusion of expenses.
(j) As regards the comparison of the activity with that of M/s Ispat Industries Ltd., as proposed in the Show Cause Notice to determine the barge expenses, he found that since the importer had failed to provide the relevant documents and the Chartered Accountant’s Certificate did not reveal the total and correct expenses, and the fact that the circumstances in the operations of ‘Barge lighterage’ of the importer and that of M/s Ispat Industries Ltd. was similar, the expenses incurred on such activities are comparable, the expenses of M/s Ispat Industries Ltd. and barge lighterages calculated on the basis of actual expenses could be made applicable in the importer’s case and therefore he confirmed the demand of Rs. 5,86,92,636 under Section 28 of the Customs Act, 1962
4. In appeal, the Commissioner (Appeals) upheld the order of the Assistant Commissioner. Hence, this appeal.
5. After hearing both sides and considering the submissions and the material on record it is found:
(a) Commissioner (Appeals) has considered expenses incurred till delivery of imported cargo at Revdanda Port as part of cost of transport of imported goods till the place of importation as stipulated under Rule 9(2) of Valuation Rules, and in addition held, that in addition the appellants are liable to pay 1% of free onboard value as loading, unloading and handling charges associated with delivery of imported goods at Redvanda Port in terms of Rule 9(2)(b).
(b) All costs, as mentioned in the show cause notice are being incurred after the ‘Out of Customs Charge’ order is given is not under contest. They are being incurred after the Custom Officer goes onboard the vessel and draws a sample after examining the cargo and thereafter gives the ‘Out of Customs Charge Orders’. This fact has been found by the Assistant Commissioner. ‘Out of Charge Order’ is granted under the provisions of Section 47(1) of the Customs Act, 1962.
(c). The effect of an order under Section 47(1) on a BE, by the proper officer, onboard the mother vessel at Anchorage, will result in an order of clearance for home consumption ex-mother vessel at the anchorage. The legal consequence, of this order, would be, change in possession and dominion on goods which would be getting automatically vested in the importer declared on the BE. Thus, this order would be effecting a delivery of the imported goods to the importer. The goods, in the hold of the mother vessel a t anchorage standing delivered, would transfer the title of the imported goods to the appellants, that right, as accrued, cannot be taken away. (Munna Scrap Traders, 2000 (69) ECC 60 (Guj) : 2000 (116) ELT 453, 458-460 (Guj). The Tribunal has held in the case of CC v. Metro Exports (P) Ltd., 1989 (24) ECR 594 at 616.
“An officer acting under Section 47 merely acts like a security officer guarding the entry/exit of a prohibited area to which access is permissible only by a “Pass” and therefore, the security officer or the guard at the gate is required to examine the “Pass” and see whether it has been issued by the appropriate authority in respect of the person holding the same and was valid for the day or time of seeking entry or exist. Such security officer does not by himself decide as to whether the holder of the “Pass” was otherwise eligible for such a “pass”. Similarly, the proper officer acting under Section 47 does not adjudicate. He merely sees as to whether all the prescribed formalities have been duly completed and allows the goods to go out of Customs charge if he is satisfied in this respect…”
Thus, this place and point of time of order under Section 47(1) would constitute ‘Crossing the Customs barrier”. Once the goods clear such Customs Barrier, costs incurred thereafter, by a “pass” holder, cannot be added by any stretch of imagination to be costs to go to add to compute the value being incurred up to the crossing of ‘Customs Barrier’ for Custom duly computation. The lower authorities have held and proceeded to add all such costs to be added for computation as up to delivery, that in fact and in view of the delivery being affected onboard the motor vessel cannot be upheld.
(d). The lower authorities have come to a finding as it appears from the order, by use of the words “transhipped/transported in the barges” that the imported goods were ‘transhipped’. Examining this aspect, it is found, Section 32 of the Customs Act, 1962 stipulates that no imported goods, required to be mentioned in the Import Manifest i.e. Cargo brought by the ‘vessel’ be unloaded, till the Import General Manifest is filed. In exercise of powers under Section 157 of the Customs Act, 1962, Central Board of Excise & Customs have framed Regulations on the Import Manifest to be filed by a vessel under this section. These Regulations called Import Manifest (Vessels) Regulations, 1971 vide Regulation 5 provide that separate sheets have to be made for (i) cargo to be landed; (ii) goods to be transhipped. There is no finding that the goods in this case as per IGM of the Mother vessel were declared in the ‘transhipment sheet.’ No BE can be noted for clearance at a Port, against such entry in transhipment sheet of ah IGM. These goods have been cleared on BE with IGM number of Mother vessel. Therefore, the goods cannot be ‘transhipped goods’. Section 35 of the Customs Act, 1962 prohibit the ‘imported goods’ in the ‘mother vessel’, from being water borne, for being landed or transhipped, till orders of entry inwards are granted and without issue of a prescribed and designated boat note. Thus, the cargo in the ‘mother vessel’ could not be unloaded and be water borne onto the barges, at the anchorage, till the Boat Note issued under ‘Boat Note Regulations, 1976 framed under Section 157 of the Customs Act, 1962 and procedure thereunder were complied with. Examining the Regulations, it is found, they prescribe three kinds of Boat Note for — (i) Export cargo, (ii) landing of import cargo, (iii) tranship cargo. The appellants have produced a copy of the Boat Notes used in these operations. They are for landing imported cargo from anchorage to Revdanda Port Jetty in Form II prescribed under the Boat Note Regulations, 1976. Once the Boat Notes, as statutorily provided, are for landing of the imported goods and not for ‘transhipment’ into the barge or other vessels, and have been accepted and cleared on BE’s noted bearing IGM of mother vessel as for goods to be landed at that port, the finding of ‘transport/transhipment’ being effected, in this case, as arrived at by the original authority, is not correct on facts and in law.
(e) The finding in the impugned orders of the lower authority that disputed expenses are towards.’transhipment/transport’ not only are not correct on facts and law but also travel beyond the Show CauseNotice issued, it cannot be upheld. Since Boat Notes vised in this case are found to be in Form II issued under Boat Notes Regulation 4(ii), whereas Boat Notes for Transhipment of cargo are issued under different provision of Regulation 4 (iii). ‘Transhipment’ of goods is governed by Goods Imported (Condition of Transport) Regulations 1995, issued by the Central Board of Excise & Customs under the provisions of Section 158 of the Customs Act, 1962. These regulations provide for ‘Transport’ of imported goods by another vessel or by a different mode of transport i.e. Road, Sea, Air as the case may be, of imported goods brought by a vessel and mentioned separately as such in the Import General Manifest as for ‘transhipment’ to another Port/Custom Station and allowed by Proper Officer on separate requests made on execution of a Bond. The elaborate ‘duty free clearance’ of ‘transhipped goods,’ as provided for by these Regulations will have to be complied to constitute ‘transhipment’ of goods. No bill of transhipment under Section 54 of the Customs Act, 1962 as required by law or the goods to have been cleared without duty have been found to be existing. The provisions of law have not been followed/complied, nor a cognisance of violations of these Statutory Provision taken ‘Transhipment’ has to be effected, from one mode or more of conveyance to another mode or same mode, but has necessarily to be for a different destination. “Transhipment” of cargo Within same Customs Station/Port/Airport is not envisaged, it cannot be effected and or permitted within the same port, i.e. from Anchorage to a jetty. The Regulations speak of Custom Station of Destination (Transfer) reading of the same confirm that no ‘transhipment’ as arrived at by the lower authority in law could have been effected in this case. The mother vessel at an Anchorage not at another port area, but is in the anchorage of the same port area. The finding of ‘transhipment’ as arrived at cannot be upheld. Since no ‘transhipment’ has taken place, the decisions in the case of India Oil Corporation Ltd. (2003) (54) RLT 926 directing the additions of actual cost of transportation by daughter vessel required to be added under Rule 9(2)(a) are not applicable to Costs of barge movements within the same port area as in this case cannot be added.
(f) There is an accepted well known practice, that when goods from a ‘Chartered Ship’ are unloaded, well within the prescribed time, an incentive ‘given by the carrier to the importer known as ‘despatch money’. That amount is considered and allowed as deductions from freight costs and refunds have been granted of duty paid on such components (See Corromondal Fertilizers Ltd. 2000 (67) ECC 206 (SC) : 2000 (115) ELT 7 (SC) & Associated Cement Co. Ltd. 1998 (61) ECC 374 (T): 1998 (104) ELT 395 (Tri). Correspondingly, if the charter vessel is delayed and has to overstay, in that case after considering the Board’s Circular 467/21/89-Cus V dated 14.8.1991 wherein it was opined that demurrage and despatch money were in the nature of penalties or rewards by virtue of contract charters and could not be added as freight the Larger Bench in the case of Indian Oil Corporation Ltd. 2000 (122) ELT 615 (Tri-LB) laid down the items which were to be included under Valuation Rule 9 as expenses towards freight; as only those, which were incurred in ordinary circumstance and extra-ordinary expenses which could not be added thereunder to enhance an assessable value. Department in the present case cannot therefore take a stand contrary to its own instructions and being bound by this Larger Bench decision, since confirmed by the Supreme Court, as all extra-ordinary costs of transport, incurred, to bring and land the goods ashore, due to the peculiar situation at a port cannot be added. After noting the provisions of the Customs Act, 1962 definition as per Section 2 (23) for Import, 2 (24) Import Manifest, 2 (27) India, 2 (28) Indian Customs Waters & the provision of Section 30 of the Customs Act, in the case of Union of India v. Mustafa Najibai Trading Co., 1998 (62) ECC 266 (T): 1998 (101) ELT 529 (SC), after observing that Outer Anchorage, was part of Bombay Port held as follows:
“25. In view of Section 30(1) of the Act the Import General Manifest should have been delivered within twenty four hours of the arrival of the vessel at the outer Anchorage. The High Court was in error in holding that the vessel would be treated to have arrived at the Customs Port of Bombay on August 23, 1983 after the Bombay Port Trust charges had been paid and the signal had been given for the vessel to be brought into the inner anchorage on or after August 23, 1983….”
It has therefore to be held in this case that, when a vessel is proved to be on a date at the designated ‘Anchorages’, and Port Trust Dues have been paid on that day or thereafter, then that vessel, on that voyage, would be considered to have arrived & be in that Port, and is not at sea. The period of 24 hours under Section 30 of the Customs Act, 1962 shall begin for submission of the IGM and Entry Inwards would have to be granted, as in this case it has been, to the ‘foreign mother vessel’. When Entry Inward could be granted, on and at such arrivals, under Section 30 of the Customs Act, 1962 for such vessel, then such laden vessel could lighten themselves at outer, inner anchorages or at other location in stream, starboard side off loading alongside a jetty, goods brought by such vessels on to barges. Such laden barges could then go to other locations in the port and unload at those sites. The mother vessel after lightening, itself can leave port after such lighterage effected without coming alongside a jetty or berthing there. Therefore, cost incurred in the unloading and subsequent movement of imported cargo, within the Port area, from the hold of a ship or a barge, or to landmass, cannot be a cost on transport of the goods from a ‘foreign port of export’ to the ‘port of import in India’,
(g) The term used in Rule 9(2)(a) of the Valuation Rules, is —
“9 (2) for the purpose of Sub-section (1) and Sub-section 1 (A) of Section 14 of the Customs Act, 1962 (52 of 1962) and the rules, the value of the imported goods shall be the value of such goods, for delivery at the time and place of import and shall include–
(2) The cost of transport of imported goods to the place of importation; Once the vessel has called at an appointed Custom Port, even at Outer Anchorage, and delivered an Import Manifest, the goads have to be considered as ‘imported’ goods and the provisions of Customs Act, 1962 as per Sections 31 to 38 of that Act would apply. In the present case, the vessel has been boarded and permission by proper officer under Section 47 of the Customs Act, 1962 after examination of cargo have been granted after due payment and goods are allowed to be water borne, then the transport of the imported goods, would cease at that stage/place is at anchorage in this case. Further movement of the goods, would be amounting to ‘shifting of the cargo’ by barge to a jetty and from one jetty to another site on Ports land, within the Port area. Such shifting could be carting of cargo by water and or on land. It cannot be equated to transport of cargo, to the port of importation. The word ‘transport’ especially ‘trans’ in the New Shorter Oxford English Dictionary is defined to mean as a prefix in English language in the sense of ‘across beyond in or other side’ and the word ‘transport’ is defined to mean “move or carry from one place or person to another convey across.’ Therefore, the term ‘costs of transport of the imported goods to the place of importation’ as used in Rule 9(2)(a) of the Valuation Rules rules would be limited to movement of cargo involving change of place from a Foreign port up to the door steps of the Indian Customs Station/Port, which would be ‘outer anchorage.’ All costs incurred thereafter, if any, would not be costs under Rule 9(2)(a) but would be costs covered by the terms of Rule 9(2)(b) of Valuation Rules, which uses the words–
“Loading, unloading and handling charges associated with the delivery of the imported goods at the place of importation.”
The coverage of costs thereunder is vast, it would cover all kinds of costs being incurred ex-Anchorage to bring and unload, load the cargo in to the conveyor system at Vikram jetty of Revdanda Port in this case. There can be no doubt on the fact of the charges, in this case, to be covered by the terms of the provision of Rule 9(2)(b), since they are being incurred after the door of the place of importation, for delivery and up to eventual evacuation of the goods from the Port area for home consumption. The Supreme Court in the case of Corromondal Fertilizers Ltd., 2000 (67) ECC 206 (SC) : 2000 (36) RLT 1 (SC) in paras 7 to 9 have held as under:
7. “Landing charges” are exactly what the words mean, the expenditure incurred by an importer for bringing goods on board ship to land. Landing charges, in law, must be assessed on actuals, but, as a matter of practice, particularly to facilitate expeditious clearance, landing charges are assessed at a percentage of the value of the goods and such assessment is accepted. When so assessed, landing charges cover the totality of all that an importer expends to bring imported goods to land.
8. In the present case, the Customs authorities assessed the landing charges that the appellants incurred at 1.4 per cent of the CIF value of the goods. There “Is no objection by the appellants to this. It is not the case that such percentage exceeds the costs in this behalf that they have actuary incurred and that they should get a refund. What they do contend is that the 1.4 per cent landing charges represent all that they have had to expend to bring the said goods to land and that, therefore, no addition of stevedoring or unloading charges can be made.
9. In our view, the submission made on behalf of the appellants is unexceptionable. It is open to the Customs authorities not to assess landing charges at a percentage and to assess them at actuals. But if they do assess them on a percentage basis, they cover thereby all aspects of landing charges and it is not open to them then to seek to add any amount thereto on the basis that this or that or the other was not covered thereby.
In this case, the disputed expenses have been incurred for the purpose of landing the goods from the ship on to land i.e. terra firma. Hence, being bound and by applying the law as settled by the Apex Court in Corromondal Fertilizers Ltd.’ case (supra), these charges in dispute herein arc nothing to be understood but ‘landing charges’ and Be covered under Rule 9(2)(b) and not Rule 9(2)(a). However, as the appellants have already added 1% towards these charges on to value & paid duty on the same, then following the very same decision of Corromondal Fertilisers Ltd., no further amounts can be ordered to be added on to the value under Section 14 of the Customs Act, 1962 and duty demands made thereafter.
(h) Stevedoring charges, as in this case, have been held and accepted as loading/unloading charges by the CBEC pursuant to judgment of Corromondal Fertilisers (supra) vide M.F. C.A. (DR) Circular No. 80/2002 dt 29th November, 2002 at para 4 stipulated:
“4. In view of the above, in has been decided not to include the stevedoring charges, in the assessable value of the imported goods, as they are adequately covered by the one per cent of F.O.B. value levied towards loading/unloading and handling charges under Rule 9(2)(b) of the Customs Valuation Rules, 1988.”
In this view and the binding nature of CBEC views circulated, D.R.’s pleading to hold them to be inclusive as ‘transport’ or for addition for deciding the value of imported goods cannot be heard and or upheld, (i) The order of this Tribunal in the case of Ispat Industries Ltd. 2001 (45) RLT 850 (T) relied upon by the department is not applicable, in this case, as-
(i) The proposition that expenses towards stevedoring and barge charges were included in 1% already included in the assessable value was not considered and the Tribunal. In para 24 of the decision they have held–
“24. If these costs were to be termed as handling charges i.e. landing charges, then the importer would have no problem. This is because in the Bill of Entry handling charges are shown as 1%. The relevant rules lay down that where the actual handling charges are not available, they should be charged @1% of the value. It is then presumed that the actuals would be less than assumed cost. In that case the additional cost would not merit inclusion.”
This finding would help the appellants case herein, when the costs impugned are found to be charges etc. as prescribed under Rule 9(2)(b) of the Customs Valuation Rules, 1988 and would thus be considered to be included in 1% added to value as per Apex Court’s decision in Corromondal Fertilisers.
(ii) The issue of expenses being as on “transhipment” were not before that bench.
(iii) In para 20 of that decision, it has been observed “…the Assistant Commissioner has referred to number of sections and confirmed the duty but without putting any label on the charges that is, whether they were freight charges or they were land charges..” leads to a conclusion that there was no determination of the nature of the charges or the cost, due to no classification about the same having been arrived at. (iv) that decision has completely omitted to consider the decision of the Hon’ble Supreme Court in case of Corromondal Fertilizers Ltd, 2000 (67) ECC 206 (SC) : 2000 (36) RLT 1 (SC) as to the scope of term “landing charges” defined by the Apex Court. In Ispat Industries’ case 2001 (75) ECC 688 (T) : 2001 (45) RLT 850 (T), as it appears from para 3 of that decision which reads.
“…..in terms of Rule 9(2)(b) the charges of transportation from the mother vessel were for loading, unloading and handling for the delivery for the importation and therefore would warrant inclusion. We would take this as the charge and the ground for confirmation of the demand…”
Therefore, that was a case under Rule 9(2)(b) and not of inclusion under Rule 9(2)(a) i.e. cost of transportation. However, that Bench in para 23 of that decision, applied Rule 9(2)(a) to include the charges impugned therein, which was not the issue, as found and admitted by them to be before them or was the case of department in the notice in that case.
(v) Did not consider the provision of Sections 33 & 35 of the Customs Act, 1962 have not been considered. (vi) did not consider Rule 9(2)(b).
(j) The Tribunal in the case of Essar Steels Ltd. and Ors. vide Order No. CI/844 to 53/WZB/2003 wherein the issue of amount of freight costs of a time charter, the amount paid is a rent and in the facts of that case, the freight already added at 20% of FOB or as per actual freight was the entirety of the freight which could be added to the assessable value. Therein the Hon’ble Member (T) took to view that what is added to value is the cost of transport of the imported goods and not the actual cost incurred by the carried. In other words, what is addable is only the normal cost of transport. This decision does not dilute the proposition that ordinary cost of transport to the place of importation could be only added and no further addition are called for. It is also found that the Ld. Member (T) in this case at para 16 of the decision has finally concluded and held:
“16. As we have observed above, the cost of transport in terms of Rule 9(2) must be interpreted as the normal cost. A glance at the figures given in para 3 in the order of Member (J) would show the abnormality of the charges presumed to be on account of cost of transport.” And allowed the appeals filed by the importer of iron pallets at Hajira Port in Gujarat setting aside the proposal of addition of freight to ‘transport cost’. Member (T) in this case of M/s Essar and the cast of M/s Ispat Industries case incidentally was the same and this subsequent view in Essar’s case therefore would be relevant, when the finding has been arrived at by Member (J) & confirmed by Member (T) in M/s Essar’s case that 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 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 along are covered by Rule 9(2)(a) and consequently only those expenses can be added to the transaction value…” would apply in this case to cover the transport costs only up to the point of unloading of this vessel i.e. the Anchorage, would be covered in this case) Following this decision of the Tribunal and nothing contrary being shown, the barge hire charges within the port area cannot be added as ‘transport costs.’
(k) A reading of Rule 9(2) shows that not only normal costs as per clauses (a), (b) & (c) could be included, to the extent they have not been already included, in the price agreed to be paid by the buyer to the seller, there is also a cap prescribed on all such costs addable as per the proviso under Rule 9(2). CIF price in Halsbury Law is defined as-“CIF (cost, insurance, freight) contracts (or contract) where the goods are sold at a price which includes their cost, freight & destination; and the premium on a policy of insurance covering the transit; the buyer’s duty is to pay the price upon delivery not on the goods, but on documents covering them, which typically include the bill of lading, policy of insurance & invoice. (41 Halbury’s Laws (4th Edn) Page 612)
from the aforesaid, it is clear that where the transaction value is negotiated price between the buyer and the seller, to include freight elements up to the destination stipulated in the contracts, nothing further is required to be added, when the destination is the port of import. In other words, transaction value has to be at the doorsteps of the stipulated port of destination. Therefore, additions are required to be made of transport cost up to the destination port doorsteps only under Rule 9(2)(a) and thereafter all costs incurred to bring the goods laden onboard a vessel, to be brought to land on terafirma at the appointed point of landing would be charges under Rule 9(2)(b).
(1) The activity undertaken in respect of imported goods viz taking them from onboard the mother vessel to the appointed place (Vikram jetty in this case) by barges would be an activity covered under the term ‘unloading, loading & handling charges’ is supported from the authoritative commentary on Customs Valuation by Saul Sharman & Hendrich Glash in respect of Article 8.2(b) of the Agreement of Implementation of the GATT Valuation Code on which Rule 9(2)(b) is based and corresponds to the learned authors book at pages 165 and para 465 reads as:
“The mention of unloading cost may raise certain doubts because unloading normally takes place after the goods have arrived in the country of importation and every often (e.g. in case of transport by truck or railway) after the goods have been cleared. In these cases unloading costs are not ‘associated with the transport of the imported goods to be at port or place of importation. Only unloading in case of a change of the carrier before the arrival at the place of importation can be meant. Therefore, the EEC, applying the C & F system, in its legislation has reduced this provision to ‘loading and handling charges’ associated with the transport of the imported goods.”
India being C & F country, this elucidation by the Learned Authors would be applicable. A reading of the definition of ‘landing charges’ by the Supreme Court in the case of Corromondal Fertilizers Ltd., 2000 (67) ECC 206 (SC) : 2000 (115) ELT 7 (SC), dealing with the inclusion of costs prior to amendment of Section 14 of the Customs Act, 1962, would be also binding and percentage as fixed under Rule 9(2)(b) would be applicable.
(m) In respect of charges mentioned in Rule 9(2)(b) viz. ‘loading, unloading and handling’ associated with the delivery of the imported goods, proviso (ii) of Rule 9(2). provides that these shall be 1% of the free onboard value of the goods, plus transport cost in Clause 9 (2)(a) and plus the cost of insurance under Clause 9 (2)(c)… Therefore, the activity for loading, unloading and handling and ascertainment cost thereof as per actuals or comparable costs as arrived at, is not required. In this connection, it is significant to record that prior to its substitution by M.F. (D.R.) Notification No. 39/90 (NT)-Cus dated 5.7.1990, this proviso (ii) to Rule 9(2) provided for the ascertainment of such charges and if such actual ascertainment was not possible, 1% of free onboard value was to be reckoned as charges on this account. When by this substitution of a standard 1% provided and prescribed in all cases and the same said 1% is found to be included, same is not being disputed, then again adding any further costs or charges under Rule 9(2)(b) cannot be approved or resorted. All charges, costs, as incurred, are being found in this case are found to be covered by the terms used in Rule 9(2)(b), therefore they cannot be added over the above the 1% which already stands added to determine the assessable value under Section 14 of the Customs Act, 1962 read with Valuation Rules, after the substitution with effect from 5.7.1990. In this view of the finding, it is not necessary to go into the challenge of compilation of each charge pleaded by the appellants.
(n) The contention of the Ld. DR for Revenue and the finding of the lower authority that barge charges and other charges incurred in situation where the mother vessel cannot navigate up to the declared place of unloading or does not navigate, requiring a smaller vessel (barge/lighter) to take the goods from the mother vessels position to the identified stipulated place the activity is a continuation of the cost of transportation incurred by the importer and not reimbursed by the supplier nor claimed from the supplier, when place of unloading at the jetty is declared and then since Section 14(1)(a) & (b) of the Customs Act, 1962 provide determination with reference to place of imporation, “which would be the designated jetty at the port it should cease all such costs have to be added, following the settled law in-
(i) Prabhat Cotton & Silk Mills Ltd., 1982 ELT 203 (Guj)
(ii) Shriram Fibres Ltd., 1994 (45) ECC 17 (Mad): 1994 (69) ELT 4
(iii) Garden Silk Mills, 1999 (113) ELT 358 (SC)
(iv) Ispat Industries, 2001 (75) ECC 688 (T) : 2001 (45) RLT 850 (T)
(v) Indian Oil Corporation Ltd., 2003 (53) ELT 926
are considered. The detailed findings in Ispat Industries, 2001 (75) ECC 688 (T) : 2001 (45) RLT 850 (T) and why the same cannot be upheld in view of the Supreme Court’s decision has been considered and held be not applicable as per finding in Sub-para (i) supra elsewhere. The decisions in the case of Prabhat Cotton & Silk Mills Ltd. and Shri Ram Fertilizers Ltd. relied upon by the Ld. DR, are decisions, on inclusion of landing charges, which have been approved by the Supreme Court in the case of Garden Silk Mills Ltd., 1999 (113) ELT 358 (SC) relied upon by the learned DR, they need not be considered separately. A perusal of the decision in the case of Garden SilkMills Ltd., 1999 (113) ELT 358 (SC) reveals that it was arrived in the context of addition of ‘landing charges’ on imports, made prior to 1988, when the Valuation Rules applicable in this case were not enacted. Para 6 of this decision in the case of Garden Silk Mills Ltd. reads as under:
6. By an amendment in 1988, a new provision Sub-section (1A) has been incorporated in Section 14, after deleting Clause (b) of Sub-section 1. The new Sub-section (1A) stipulates thatsubject to the provisions of Sub-section 1, the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf. Pursuant thereto Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 have been framed. Post 1988, therefore, the value of the imported goods has to be determined in accordance with the rules which, according to the respondents, are based on the GATT Valuation Code (also called Article VII of the General Agreement on Tariff and Trade) which was adopted in 1979. With these Rules, however, we are not concerned in the present case because all the goods were imported prior to the incorporation of Sub-section (1A) of Section 14 of the Act.
which clarified that the controversy settled by the Supreme Court therein was, as regards inclusion of ‘landing charges’ to determine value of imported goods prior to 1988. There is no conflict with the additions of ‘landing charges.’ There can be no dispute that after 1988 as per Rule 9(4) of Valuation Rules, the charges prescribed under Rule 9(2)(a), (b) & (c) could only be added, which include ‘landing charge costs.’ At para 16, Garden Silk Mills Ltd’s judgment provides–
“It would appear to us that the import of goods in to India would commence when the same cross into the territorial waters and continues and is completed when the goods became part of the mass of goods within the country; the taxable extent being reached at the time when the goods reach the Customs barriers and the bill of entry for home consumption is filed.”
i.e. the point at which import commences and where the taxable extent occurs and thereafter since the activity is ongoing expenses relating to activities associated with bringing goods to land are held to be included in the assessable value. This discussion cannot be stretched to interpret the landing place at the jetty to be the only place to be regarded as the place of importation, as conclusions, which have been arrived at by the lower authorities and pleaded by the Ld. DR. The judgment of Garden Silk Mills does not exactly pinpoint a single place or event as the place of importation in terms of the provisions of the Customs Act, it only prescribes a barrier to be a place where the ‘goods became part of the mass of goods within the country’ in time, when the taxable event occurred. That would be a place and time where and when the Bill of Entry filed is assessed, duty paid and order ‘permitting clearance for home consumption’ under Section 47 made on such Bill of Entry by the proper officer. That would depend on the facts of each case. It can be at any place in the Port Area, under Section 8 of the Customs Act, read with Section 33 of the Act on land or the goods permitted to be water borne under Section 35 of the Customs Act, and cleared, read with Section 47 of the Customs Act. Once such goods are duty paid goods being removed from the holds of the ship for home consumption, further expenses incurred to take such goods ‘home’ would be expenses incurred on duty paid goods and would be expenses beyond the Customs area/barrier. The Privy Council in Ford Motor Company v. Secretary of State, AIR 1938 PC 15, while considering the provisions of Section 30 of the Sea Customs Act, 1.878, observing the finding of Lord Blandsburg in an earlier case, ‘price being relieved of loading representing post importation expenses’ held that ‘legislation intended to excluded post importation expenses need not be doubted, but it had to do this in a practicable manner without undue refinement…” Therefore when extent of charges/costs that could be included, have since been legislated in a practical manner under Rule of the Valuation Rules in 1988 as amended, nothing else could further be added to arrive at a value.
(o) As regards the applicability of the case of Indian Oil Corporation Ltd., 2003 (53) RLT 926 (CEGAT-Kol) the decision would be squarely applicable, to add the extra transport costs, if in facts and law, transhipments occurred, and costs incurred in transporting the cargo to destination port. That case was a clear case of transhipment. In that case, the deductions from the ‘transport costs’ already included up to the port of destination were held to be granted, if the de-escalation clauses were entered into the relevant contracts. There cannot be a de-escalation clause applicable on transport, within the same port area, as in this case. If the barge/lighter is traversing from a different Custom in India Port to the Port of actual import in India, then the law as laid in the Indian Oil Corporation Ltd’s case 2003 (53) RLT 926 (CEGAT) would apply. It cannot apply to add barge charges as transport charges, when such charges are for movements within the same port and no transhipment is involved.
(p) When Import General Manifest of foreign mother vessels have been accepted by the proper officer and entry inwards is granted, then the date of entry inward would be the date of the final noting for the advance Bills of Entry and the goods would be accepted to have been imported on that date at that port by the vessel declared in the Bill of Entry. In this case, such a vessel is the motor vessel. Therefore, there is no transhipment for foreign mother vessel to the barge.
6. In view of the findings arrived herein, it is to be held–
(a) The charges incurred, subsequent in time at and place to an order passed under the provisions of Section 47 of the Customs Act, 1962 cannot be added to value under Section 14.
(b) Barge/lighterage charges incurred on barges/lighter vessels, when they move within the same port area from the foreign mother vessel at Anchorage to the designated jetty on landing Proforma II to Boat Notes, it cannot be added as cost of transport, under Rule 9(2)(a).
(c) Charges on barges unloading, loading and handling, including all kinds of stevedoring incurred in the operations at anchorage of the port of import in India, and in conducting transferring of the cargo from mother vessel to the jetty designated area in the same Port in India are to be added under Rule 9(2)(B). These charges need not be individually determined or ascertained if 1% costs are loaded on to value as per proviso to Rule 9(2). They are required to be added to the assessable value on actuals, if less than 1%.
(d) If the movement of the barges in pursuant to a ‘transhipment of cargo’ from one Port/anchoraged Port in India to an anchorage of another port jetty in India, then costs could be added under Rule 9(2)(a), as cost of transport, subject to the de-escalation clauses, if any, to be read as provided and in terms of decisions in the case of Indian Oil Corporation Ltd. 2003 (53) RLT 926 (CEGAT). In such cases, transhipment cost could also be included.
7. This Appeal heard together with other appeals, on similar issues, are being disposed of in view of the finding above as —
(i) Appeal No. C/618/00 Mum of M/s Vikram Ispat Ltd. is allowed, after setting aside the order with consequential relief as per law.
(ii) Appeal No. C/593/00 Bom or M/s. Ispat Industries Ltd. is also allowed, since the facts therein are similar as in the case of M/s Vikram Ispat Ltd. and the clearances have been effected after Section 47 order as per the following letter (F.No. S/19-Misc-56/94 Docks dated 7.9.1994) of Docks Appraising Unit, Bombay Custom House and on Boat Notes issued in proforma for landing.
“Please refer to your letter dated 18.8.94. It is observed from your letter that the foreign vessel carrying Iron Ore Pellets is proposed to be anchored in the waters of B.P.T. Port at BFL and your company desires to unload the raw materials directly into the barges/lighter vessels and into the lorries parked on the wharf. Your request has been examined by this Custom House and it has been decided to allow the unloading/discharge directly into the barges. The operations can commence only after filing of the Bills of Entries in the Bombay Customs and after paying of Customs duty. The Customs Officer shall inspect the cargo on board the vessel. Thereafter, shall give pass out of customs charge.
Only after completion of these formalities, the imported material shall be discharged from the mother vessel into the smaller barges. On completion of discharge of the cargo, you shall also forward the village report to this Customs House within 15 days froin the date of sailing of the vessel.”
(iii) Appeal No. C/580/02 Mum filed by M/s Sandoz Textile and Appeal No. C/582/02 Mum filed by M/s Lavanya Holding Trading Pvt. Ltd. are allowed, in view of the findings hereinabove since the costs thereof incurred are within the Port of Magdalla (Gujarat).
(iv) In Appeal No. C/380/02 of M/s Reliance Industries Ltd., additionally it is found, it was the submission made during the hearings, that the goods herein have been cleared on IGM and the Entry Inwards is accepted for the Mother vessel by the Magdalla Customs and accordingly Bills of Entry were filed, though the barging/lighterage was done also at Bombay Port Anchorage and Boat Notes/transhipment permits were also issued. It was contended that the CCF and CIF value were the same for both the ports of discharge. Out of 364 BEs involved, 276 BEs, the anchorage was submitted to Hajira and Boat Notes were issued by Magdalla Customs in case of 276 BEs therefore was one CIF or C&F price for alternate port of discharge viz Hajira or Mumbai and in this case of 88 BEs, it was an admitted position that due to unusual condition, Boat Notes transhipment, permits were issued at Mumbai. Since there were Boat Notes of transhipment admitted to have been issued in this case, the matter would require detailed examination of each BE vis-a-vis the place where a Mother Vessel “transhipped”, the cargo on to barges i.e. Magdalla or Hajira port anchorage or Bombay port and that were the nature of movement of the cargo in barges i.e. whether the goods were cleared on Boat Note Proforma II or proforma required under the Regulations for Transhipment of Cargo. These facts have to be found & thereafter considered alongwith if the goods of relevant IGMs to find out, whether the cargo in question was declared as transhipment cargo within the port of lighterage or was described for home clearance at the port of lighterage or actual landing on jetty of Port at Magdalla/Hajira. Since the facts are required to be established, the appeal is allowed as remand, after setting aside the matter to redetermine the nature of the transfer of the cargo on to the barges and THE POINT OF Section 47 order in each BE and thereafter determine the inclusion or exclusion of the relevant costs as proposed in the notice. This appeal is to be allowed as remand.
(v) In Appeal No. C/454/02 M/s Essar Steel Ltd., also there are BEs/which are showing Bhavnagar Port Anchorage as the Port of the lighterage of the Mother Vessel and barges moved from Bhavnagar Port to Hajira Port. Since Bhavnagar Port and Hajira Port are two different Ports or Customs Stations, the nature of the movement of the cargo from Bhavnagar Port to Hajira Port on barges has to (sic) established. Only thereafter, the cost can be added or not, to determine the duty after applying the findings hereinabove and in the case of Indian Oil Corporation, 2003 (153) ELT 626 (CEGAT). Since facts are to be established to quantify the demands of duties, if any, the order is to be set aside and the matter remitted back for redetermination, after hearing the parties.
8. Ordered accordingly.
Krishna Kumar, Member (J)
9. While agreeing with my learned brother, I consider it appropriate to add to enable the adjudicating authority to readjudicate the matter in respect of Appeals of Reliance Industries Ltd. and Essar Steel Ltd.:
(a) All cases where the mother vessel unloads the cargo at the anchorage of Magdalla Port (where the jetties are situated), the cost of barging operations would be clearly in the nature of loading, unloading and handling charges associated with the delivery of the imported goods for which a notional addition of 1% has already been made by the appellants themselves in the Bills of Entry and therefore no further addition on this account would be warranted. Since the impugned orders do not indicate the precise number of cases where the mother vessel discharged the cargo at the anchorage at Magdalla Port, the adjudicating authority will now first identify cases of this, type and exclude such cases from consideration while working out the demand for differential duty in the remand proceedings.
(b) The remaining imports will be there where the mother vessel discharged the cargo at a distant port such as Mumbai and Bhavnagar from where the cargo was carried in barges to jetties situated at Hazira (Magdalla Port). The question which needs to be determined in remand proceedings is whether such movement from one port to another is transhipment or not. If the movement from one port to another is in fact “transhipment”, the cost of barge operation would be includible in the assessable value. If, however, such is not the case, the cost of barge operations would not be includible. As my learned brother has observed, the mere mention of the word “transhipment” on some documents is not determinative of this issue. What the adjudicating authority is inter alia required to do in remand proceedings is whether or not such movement from Mumbai/ Bhavnagar to Hazira was in fact and in law “transhipment” or not.