Holding

Landing charges are rightly taken into consideration in determining the assessable value of imported goods under Section 14(1)(a) of the Customs Act, and the onus of proving their inclusion in the CIF price rests on the importer.

Summary

Garden Silk Mills Ltd. and other importers brought several appeals challenging the Customs Department’s addition of landing charges to the CIF price of polyester yarn imported under CIF contracts for the purpose of determining assessable value under Section 14(1)(a) of the Customs Act, 1962. The appellants argued that the CIF price already included freight, insurance and landing costs, that "delivery" meant the port of discharge, and that import was complete upon entry into territorial waters, so landing charges could not be added. The Supreme Court held that landing charges are a necessary element of the value of goods at the time of physical delivery at the customs barrier and must be included in the assessable value; the onus lies on the importer to prove that such charges are already covered in the CIF price. The Court also upheld the constitutional validity of Section 3(a) of the Customs Tariff Act, 1975 and rejected the claim for exemption of packaging value. All the appeals and petitions were dismissed.

Issues considered

The legality of including landing charges in the assessable value of imported goods under Section 14(1)(a) of the Customs Act, 1962.
Interpretation of "delivery at the time and place of importation" in the context of CIF contracts.
Whether the import is deemed complete upon entry into territorial waters for valuation purposes.
Who bears the burden of proof regarding inclusion of landing charges in the CIF price.
Constitutional validity of Section 3(a) of the Customs Tariff Act, 1975 under Article 14.
Applicability of Notification No. 184/76-Cus for exemption of packaging value.

Legislation cited

Customs Act, 1962s. 12, s. 14(1)(a), s. 2(23), s. 2(27), s. 29, s. 30, s. 31, s. 32, s. 33, s. 34, s. 45, s. 46, s. 47
Customs Tariff Act, 1975s. 3(a)
Customs Valuation (Determination of Price of Imported Goods) Rules, 1988

Subjects

Customs dutyValuation of imported goodsLanding chargesCIF contractSection 14 Customs ActImport valuationCustoms Tariff ActPackaging exemptionConstitutional validityBurden of proof

Judgment

,>
GARDEN SILK MILLS LTD. AND ANR. ETC. ETC. A
v.
• UNION OF INDIA AND ORS .
-~
SEPTEMBER 29, 1999

[B.N. KIRPAL, A.P. MISRA AND R.P. SETHI, JJ.] B

Customs Act, 1962 :

Ss.14(1)(a), 12, 29 to 34, 45 to 47, 2(23) and 2(27)-lmport of
goods-Customs duty-Levy of-Assessable value of goods--J)etermi11atio11
of-Import of goods under ClF contracts-Valuation of goods by customs
c
authorities-Addition of landing charges to CIF value-;-Validity. of-held,
~ landing charges were rightly taken into consideration in determining the
assessable value of goods-Price fU:ed by the parties under CIF. contracts
cannot be accepted as final valuatioll-Determi11atio11 of value by Customs
Authorities required-Onus to prove the inclusion of landing charges .in CIF D
contract lies 011 the importer.

Ss.14, 12, 29 to 34 and 45 to 47-lmport of goods-Valuation of-Duti-
"' able eye11t-Comme11ceme11t of-Held, the dutiable event occurs after the
goods reach the customs barriers and the bill of entry for home consumption
I
is filed. E
~~
Customs Tariff Act, 1975-S. 3(a)-(;onstitutional validity of-Held,
not ultra vires the Co11stitution-co11stitution of India, 1950-Article 14.

Words & Phrases :
F
"Delivery"-Meaning of in the context of S.14(l)(a) of the Customs
Act, 1962.

Appellant-Companies imported certain goods from abroad; The im-
port transactions were in the nature of CIF contracts, i.e. price paid
included costs, insurance and freight charges. Customs Authorities, while G
.,... determining assessable value of goods added landing charges to the CIF
price. Appellants unsuccessfully challenged before the High Court, the
levy and addition of landing charges. In some of the appeals, High Court
... disallowed the claim for excluding packaging charges from customs duty
_, in terms of a Notification. In one of the appeals, importer's claim for the H
295
296 SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R. «
A benefit of a Notification imposing lower countervailing duty on the goods
imported was rejected. Hence the present appeals.

On behalf of appellant-companies it was contended that the words
,,
"for delivery at the time and place of importation" occurring in S. 14 of
the Act could only mean delivery on the date and the port of discharg~
B and the price must, therefore, be an ordinarily available price at about
the same time and place of discharge. It could not be a price anterior or
posterior to the point of time when the goods arrived and therefore,
landing charges which were levied after the delivery. of the goods could
not be imposed; in view Qf S. 12 of the Act read with Ss. 2(23) and 2(27),
c the import of goods into India would be completed when they enter the
territorial waters of India and it is the value at that point of time which
alone can be taken into consideration for the purposes of assessing the
customs duty; in the case of CIF contracts it was the shipper who pays
the landing charges and the Indian importer does not incur these expen-
ses in addition to what he has paid on the basis of the CIF contract.
D Therefore, landing charges which were already included in the CIF value
of the goods as part of the freight and recovered by the Port Trust
Authorities directly from the steamer agents cannot be charged again; the
onus of proving that the transaction value does not represent the value
for the purposes of S. 14 of the Act and that it must be loaded with any
I
E other elements such as landing charges, was on the Department.

Dismissing the appeals, the Court

HELD : 1.1. Landing charges were rightly taken into con~ideration
in determining the assessable value of the imported goods for the pur-
F poses of S. 14(l)(a) of the Customs Act, 1962. [311-F]

2. S.14(1) (a) of the Act clearly indicates that it is not the price stated
in the CIF contract which alone is to be accepted as being the value of such
goods for the purposes of S. 14 of the Act. S. 14 of the Act is a deeming
provision. The legislative intent is clear that the actual price of the imported
G goods, namely, the landing cost, cannot alone be regarded as the value for
the purpose of calculating the duty. lfit is held that the CIF price represents
the value of the imported goods, then S. 14 would have been differently
-- I

worded. It could, for instance, have easily been stated that the value of the
imported goods would be the transaction value of the goods. The language of .
'-
H S.14 clearly indicates that though the transaction value may be a relevant
GARDEN SILK MILLS LTD. v. U.O.I. 297
consideration, the value for the purpose of customs duty will have to be A
determined by the Customs Authorities. [302-G; 304-D; E-F]

Prabhat Cotton and Silk Mills v. Union of India, [1982) 10 ELT 203
Gujarat; Super Traders and Anr. v. Union of India & Ors., (1983) 12 ELT
258 Delhi; Bhaniya Plastic Udyog v. Union of India, (1983) 12 ELT 661
Delhi; Oswal Woolen Mills Ltd. v. Union of India, (1984) 18 ELT 235 B
Punjab & Haryana; Govind Ram Agarwal v. Collector of Customs, (1985)
35 ELT 280 Calcutta; B.S. Karnath & Co. v. Union of India, (1986) 24 ELT
456 Karnataka; Ashok Traders v. Union of India, (1987) 32 ELT 2263
Bombay; Ceat Tyres v. Union of India, (1992) 57 ELT 221 Bombay; Barium
Chemicals Ltd. v. Union of India, (1988) 37 ELT 327 Andhra Pradesh and c
Shri Ram Fibres Ltd. v. Union of India, (1994) 69 ELT 4 Madras, approved.

2.1. Ss. 29 to 34 and 45 to 47 of the Act clearly show that after the
imported goods. are discharged from the vessel at the wharf the importer
cannot immediately take delivery thereof. The imported goods remain in D
the custody of the Port Trust Authorities till they are, inte~ alia, cleared
for home consumption. Thus, the goods cannot be cleared and delivery
taken without their being valued and assessed and, thereafter, duty being
paid. S. 14 of the Act provides that the value of the. goods shall be deemed
to be the price of the goods for the delivery at the time and place of
importation in course of international trade. The word "delivery" must E
necessarily mean the point of time when the goods can be physically
delivered to the importer. In other words "delivery" and "discharge" are
not synonymous. Merely by the shipper discharging the goods at the port
of import it does not ipso facto give the importer a right to take the
delivery thereof. The value has to be determined withrrelation to the time F
when physii:al delivery to the importer can take place. Physical delivery
can take place only after the bill of entry, inter alia, for hoine consumption
is filed and it is the value at that point of time which would be relevant.
The landing charges which are imposed at or after the time of the dis-
charge of the goods and prior to the clearance being granted under S. 47
of the Act, necessarily have to be an· element which have to be taken into G
account determining the value thereof for the purpose of assessing the
customs· duty which would be chargeable. [:103-A-B-H; 304-A-B; C-D]
. .
2.2. The import.of goods into India would commence when the same
cross into the territorial waters but continues and is completed when the H
298 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A goods become part of the mass of goods within the country; the taxable
event being reached at the time when the goods reach the customs barriers
and the bill of entry for home consumption is filed. [305-E-F]

Union of India v. Apar Industries Ltd. (1999) 5 J.T. 160; In Re. The
Bill to Amend Section 20 of the Sea Customs Act, 1878 and Sedion 3 of
B the Central Excises and Salt Act, 1944 (1964) 3 SCR 787, relied on.

Bharat Surfactants (M/s.) (Private) Ltd. & Anr. v. Union of India &
Anr., [1989] 4 SCC 21 and Dhiraj Lal H. Vohra and Ors. v. Union of India
& Ors., [1993] Supp. 3 SCC 453, referred to.
c 3. The onus to prove that the element of landing charges were
included in the CIF contract lies on the importer and Department cannot
be asked to prove the negative. Similarly, it is only if the importer estab·
lishes that the obligation to pay the landing charges is on the seller and
not on the importer and that the seller or his agent has, in fact paid the ~
D said landing charges to the Port Trust Authorities, that the importer can
claim that the landing charges should not be again added to the price.
In the instant cases, it has not been found by any fact finding authority
even in cases of CIF contracts, that the Port Trust Authorities did receive
the landing charges from the shipper or the foreign seller and that the
E said charges were included in the CIF contracts. (307-A-B-GH; 308-A]

4. S. 3(a) of the Custoins Tariff Act 1975 is not ultra vires of Article
14 of the Constitution of India. (310-G]

Jain Brothers v. Union of lndia, (1999) 112 ELT 5 S.C., relied on.
I)
F
5. The Notification dated 2.8.76 as well as S. 14 of the Act did not
contemplate deduction of value of packages from the invoice value. Thus,
the contention of appellants claiming benefit of exemption from customs
duty on the value of packages cannot be accepted. (311-D] -
G Hind Plastics v. Collector of Customs, (1994) 71 ELT 325, relied on.

6. The claim for benefit of exemption notification imposing a
reduced duty of 10% on import of Polyvinyl Alochol manufactured from
Vinyl Acetate Monomer cannot be granted in view of the decision of this
H Court in Motiram Tolaram's* case. [312·G·H]
GARDEN SILK MILLS LTD. v. U.0.1. [KIRPAL, J.) 299.

M/s .. Motiram Tolaram and Anr. Etc. Etc. v. The Union of India & A
Anr., (1999] 4 Scale 666, relied on.

CIVIL APPELLATE JURISDICTION: Civil-Appeal No. 2976/91
and 2674 of 1982 Etc. ' . ·

From the Judgment and Order dated 22.3.91 and 18.12.81/9.3.82 of B
the Gujarat High Court in S.C.A. No. 1645 and 1640 of 1981.

• C.S. Vaidyanathan, Additional Solicitor General, Dushyant Dave,
G.L. Sanghi, Shanti Bhushan, M.L. Verma, Dipankar P Gupta, Joseph
Vellapally, Kailash Vasdev, Sativik Varma, Krishan Mahajan, Rahul Roy,
P.H. Parekh, (Ms. Monica Singal) for Ms. Bina Gupta, Ramesh Singh, S.J. C
Goswami, Ms. Vanita Bhargava, (Vineet Kumar) (NP), Ms. Bina Mad-
havan, Ms. Musharaf Choudhary, Ravinder Narain, Lalit Chauhan, (Gopal
Jain) for Ms. Manik Karanjawala, Prashant Bhushan, Sanjiv Kapoor,
Dinesh Chandr1;1, Sunil Dogra, Ms. Monica Sharma, (Ms. Manju Sharma)
(NP) K.R. Nambiar, Ms. Gauri Shanke.r Murthy, N.K. Bajpai, K.C. D
Kaushik, Hemant Sharma, R.N. Verma, P. Panneshwaran, C.V. Subba Rao
and S:N. Terdol (Ms. Sushma Suri) (NP) for the appearing parties.

The Judgment of the Court was delivered by

KIRPAL, J. The main question which arises in all these appeals by E
special leave is whether while assessing customs. duty payable in respect of
imported goods, the customs authorities can add/include landing charges
in arriving at the value of those goods. The facts which are relevant for
deciding the issue.are similar. For the sake of convenience we will refer to
the facts in the case of Garden Silk Mills' Limited in greater detail.
F
The appellants in these appeals had imported polyester yarn from
abroad. The transactions for sale and purchase between the foreign sup-
plier and the appellant company were in the nature of CIF contracts i.e.
price included costs, insurance and freight charges. These contracts nor-
mally· provide CIF price for the port of discharge. It is not in dispute that G
under a CIF contract the price which was paid included not only the cost
of the goods but also the insurance and freight charges.

The customs authorities, in determining the value of the goods for
the purpose of ascertaining the amount of duty payable, added to the CIF
price the landing charges which were paid to the Port Trust Authorities. H
300 SUPREME COURT REPORTS (1999] SUPP. 3 S.C.I< .

A On the payment of the customs duty being made, the goods were clearnl
and used by the appellants.

The appellant company then filed writ petitions in the High Court cf
Gujarat, inter alia, contending that the landing charges which were paid <t
the rate 3/4% of the CIF value of goods had been wrongly added while
B arriving at the assessable value of those goods and, therefure, the Hig ii
Court should direct a refund of Rs. 69030.60 which was the amount of duty
relatable to the landing charges. The High Court came to the conclusio 1
that the Customs Authorities had rightly added the landing charges to the
.
CIF value of the goods for the purpose of determining the customs duly
C and, therefore, no refund was due to the appellants. Hence, these appeals
by special leave.

Section 12 of the Customs Act, 1962 (hereinafter referred to as "the
Act") provides for the levy of duty of customs on the goods imported int J
or exported from India at such rates as may be specified under the Custorr s
D Tariffs Act, 1975. Prior to its amendment in 1988, Section 14 of the Act
read as follows :

"14. Valuation of goods for purposes of assessment.

(1) For the purposes of Customs Tariff Act, 1975 (51 of 19751,
E or any other law for the time being in force whereunder a
duty of customs is chargeable on any goods by reference t D
their value, the value of such goods shall be deemed to be :

(a) the price at which such or like goods are ordinarily sold, c r
offered for sale, for delivery at the time and place of impo1 ·-
F tation or exportation, as the case may be, in the course <1f
international trade, where the seller anc! the buyer have no
inrerest in the business of each other and the price is the so~ e
consideration for the sale or offer for sale.

Provided that such price shall be calculated with reference to
G
the rate of exchange as in force on the date of which a bill of entJ y
is presented under Section 46, or a shipping bill or bill of expo1 t,
•as the case may be, is presented under Section 50.

(b) Where such price is not ascertainable, the nearest asce :-
H tainable equivalent thereof determined in accordance with
GARDEN SILK MILLS LTD. v. U.O.I. [KIRPAL,J.] 301

the rules made in this behalf." A

By an amendment in 1988, a new provision to sub-section (lA) has
been incorporated in Section 14, after deleting c;lause (b) of sub-section 1.
The new sub-section (lA) stipulates that subject to the provisions of
sub-section 1, the price referred to in that sub-section in respect of im-
ported goods shall be determined in accordance with the rules made in this
B
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 Valua-
tion Code (also called Article VII cif the General Agreement on Tariff and c
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 (lA) of Section 14 of the Act.

On behalf of the appellants it was contended that under Section 12 D
of the Act the duty was leviable on goods imported into India and the value
of the goods must be fixed at the time and place of importation. In the case
of C.I.F. contracts, it was contended that the contracts reflect the price for
sale in the course of international trade and for delivery at the time and
place of importation, which, in the case· of appellants, was Bombay. The
expressions "time" and the "place" of importation must be understood in E
an ordinary sense. In commercial world and in international trade, time
and place of importation could only mean (a) the date of import and (b)
the place of import i.e. port of import. It was submitted that place of
importation could not mean wharf, dock, port, quays or the customs
barrier. Similarly the expression "delivery", it was contended, had to be F
construed in ordinary sense which, in the case of C.I.F. contracts, would
mean the port of discharge i.e. Bombay and not the wharf at the port of
Bombay. According to the appellants the words "for delivery at the time
and place of importation" occurring in Section 14 of the Act could only
mean delivery on the date and the port of discharge and the price must,
therefore, be an ordinarily available price at about the same time and place G
of discharge. It could not be a price anterior or posterior to the point of
time when the goods arrived and, therefore, landing charges which are
levied after the delivery of the goods could not be imposed. Our attention
was also invited to Sections 2(23) and 2(27) of the Act which read as
follows: H
302 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A "2(23) "import" with its grammatical variations and cognate
expressions, means into India from a place outside India;

2(27) "India" includes the territorial waters of India."

A submission was sought to be raised that reading Section 12 of the
B Act with Sections 2(23) and 2(27), the import of goods into India would
be completed when they enter the territorial waters of India and it is the
value at that point of time which alone can be taken into consideration for
the purposes of assessing the customs duty. If this be so the question of
there being any addition of landing charges to the C.I.F. value can under
C no circumstances arise because landing charges are levied in relation to
goods after they have been off-loaded from the ship.

On a careful analysis it is evident that the principles of valuation
incorporated in Section 14(1) (a) of the Act therein show that :

D (a) the price is a deemed price;

(b) at which such or like goods are ordinarily sold or offered for
sale;

(c) for delivery at the time and the place of importation or
E exportation;

. (d) in the co.urse of international trade;

(e) where the seller and the buyer have no interest in the business
of each other and
F
(t) the price is the sole consideration for the sale or offer for
sale.

This Section clearly indicates that it is not the price stated in the CIF
contract which alone is to be accepted as being the value of such goods for
G the purpose of Section 14 of the Act. The said Section requires determina-
tion of the value of the imported goods. The appellants are right in
contending that this is a deeming provision. The value of such· goods is to
be 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
H course of international trade, where the seller and the buyer have no
GARDEN SILK MILLS LTD. v. U.0.1. [KIRPAL, J.] 303

interest in the business of each other and the price is the sole consideration A
- for the sale or offer for sale. The price of the imported goods, in other
words, has to be determined in respect of import of those goods for
delivery at the time and place of importation. It appears to us that the word
"delivery" must necessarily mean the point of time when the goods can be
physi~ally delivered to the importer. In other words, "delivery" anq I B
"discharge" are not synonymous. As we shall presently see, merely by the
shipper discharging the goods at the port of import does not ipso facto give
the importer a right to take the delivery thereof.

Chapter VI of the Act contains the provisions relating to conveyances
carrying imported or exported goods. Chapter VII of the Act contains c
provisions regarding the clearance of imported goods and export goods.
. Reading the provisions contained in the said chapters, it becomes apparent
that all goods carried by vessel or aircraft entering from any place outside
India has to land the goods at a customs port or customs airport and that
too with the permission of the Customs Officer (Section 29).
D
The import manifest of the vessel is required to be delivered to the
Customs Officer in terms of Section 30. Unloading of imported goods can
take place only after the import manifest has been delivered and an order
permitting entry inwards of the vessel has been given by the Customs
Officer in terms of Section 31. Section 32 provides that unloading of only
E
those goods is permitted as are mentioned in import manifest. The goods
are to be un-loaded as per Section 33 only at the place which is approved
for that purpose and the same cannot be un-loaded except under the
supervision of the Customs Officer (Section 34).

All imported goods unloaded in a customs area are required to F
remain under the customs authorities until they are cleared for home
consumption or are warehoused or are transshipped (Section 45). The
goods can be cleared by the importer only after, as provided by Section 46,
the importer files a bill of entry for home .consumption or warehousing
pursuant to which clearance of goods is granted under Section 47 by the G
Customs Officer. This clearance is given after the officer is, inter alia,
satisfied that the importer has paid the import duty assessed on the
imported goods.

The aforesaid provisions of the Act, therefore, clearly show that after
the imported goods are discharged from the vessel at the wharf the H
304 SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R.

A importer cannot immediately take delivery thereof. The. imported goods
remain in the custody of the Port Trust Authorities till theY. are,. inter alia,
cleared for home consumption. This being the position the goods cannot
be cleared and delivery taken without their being valued and assessed and,
thereafter, duty being paid. Section 14 of the Act provides that the value
of the goods shall be deemed to be the price of the goods for the delivery
B at the time and place of importation in the course of international trade.
The value has to be determined with relation to the time when physical
delivery to the importer can take place. Physical delivery can take place
only after the bill of entry, inter alia, for home consumption is filed and it
is the value at that point of time which would be relevant. It is evident that
C there normally will be some lapse of time between the time when the
shipper discharges the goods and the time when the bill of 'entry is filed.
The ·landing charges, which are imposed at or after the time of the
discharge of the goods and prior to the clearance being granted under
Section 47 of the Act, necessarily have to be an element which have to be
D taken into account in determining the value thereof for the purpose of
assessing the customs duty which would be chargeable.

Section 14 is a deeming provision. The legislative intent is clear that
the actual price of the imported goods, namely the landing cost, cannot
alone be regarded as the value for the purP,,ose of calculating the duty. If
E the submission of the learned Counsel for the appellants is correct namely
that the C.I.F. price represents the value of the imported goods, then the
Section 14 would have been differently worded. It could, for instance, have
easily been stated that the value of the imported goods would be the
transaction value of the goods. The language of Section 14 clearly indicates
F ~hat though the transaction value may be a relevant consideration, the value
for the purpose of Customs duty will have to be determined by the Customs
Authorities which value can be more, and at times even less, than what is
indicated in the documents of purchase or sale.

The question as to whether the import is completed when the goods
G entered the territQrial waters and it is the value at that point of time which
is to be taken into consideration is no longer res integra. This contention
was raised in Union of India v. Apar Industries Limited, (1999) 5 J.T. 160.
Ir that case the day when the goods entered the territorial waters, the rate
of duty was nil but when they were removed from the warehouse, the duty .
H ·had become leviable. The contention which was sought to be raised was
GARDEN ~ILK MILLS LTD. v. U.0.1. [KIRPAL,J.)
1 305

that what is material is:' the day when the goods had entered the territorial A
· waters because by virtue ' of Section 2(23) read with Section 2(27) the
import into India had taken place when the goods entered the territorial
waters. Following the decision of this Court in Bharat Surfactants (Mis)
(Private) Ltd. and Ano(he~ v. Union of India and Another, (1989] 4 SCC 21.
and Dhiraj Lal H. Vohra and Others v. Union of India and Others, (1993]
Supp. 3 SCC 453, this Court came to the conclusion in Apar's Private
B
Limited case that the duty has to be paid with reference to the relevant
date as mentioned in Section 15 of the Act.

It was further submitted that in the case of A par's Private Limited
this Court was concerned with Sections 14 and 15 but here we have to C
construe the word "imported" occurring in Section 12 and this can only
mean that the moment goods have entered the territorial waters, the import
is complete. We do not agree with the submission. This Court in its opinion ·
in Re. The Bill to Amend Section 20 of the Sea Customs Act, 1878 and
Section 3 of the Central Excises and Salt Act, 1944, 1964 (3) SCR 787 at
page 823 observed as follows :

"Truly speaking, the imposition of an import duty, by and large,
results in a.condition which must be fulfilled before the goods can
be brought inside the customs barriers i.e. before they form part
,
,_ of the mass of goods within the country."
E
It would appear to us that the import of goods into India would
commence when the same cross into the territorial waters but continues
and is completed when the goods become part of the mass of goods within
the country; the taxable event being reached at the time when the goods
reach the customs barriers and the bill of entry for home consumption is F
filed.

It was submitted by the learned counsel for the appellants that in
actual effect in the case of CIF contracts like the present, it is the shipper
who pays the landing charges and the Indian importer does not incur these
expenses in addition to what he has paid on the basis of the CIF contract. G
In other words the submission was that the landing charges are already
included in the CIF value of the goods as they form part of the freight paiq
to the steamer agent and the said charges are recovered by the Port Trust
authorities directly from the steamer agents and, therefore, a second
inclusion of such landing charges by loading a flat percentage of the CIF H
306 SUPREME COURT REPORTS (1999) SUPP. 3 S.C.R.

A value is uncalled for. In this connection, reliance was placed on clause 15
of the terms and conditions of a sample of a Bill of Landing which deals
with loading, discharge and delivery and reads as under :

"any expenses, costs, dues and other charges which incur before
loading and after discharge of the goods shall be borne by the
B Merchant."

Learned Additional Solicitor General is correct in submitting that
the aforesaid clause 15 does not in any way indicate that the CIF value
includes therein the charges levied by the Port Trust Authorities after the
C discharge of the goods. It is difficult to imagine that at the time when the
contract is entered into, and the CIF price is fixed, as to how the parties
could envisage as to what the port charges at the destination are likely to
be. It does appear
.
that
I
any expense which is incurred with regard to the
loading or un-loading of the goods to and from the ship would be included
D in the CIF price paid by the importer. But there is nothing on record to
show that in actual effect landing charges were collected by the Port Trust
Authorities from the shipper. No document in this regard showing the
discharge of ~uch a liability by the shipper to the Port Trust Authorities
has been produced. There can be little doubt that if the importer is able
to establish that the obligation to pay the landing charges was on the seller
E or by the shipping agent, and not by the buyer, and the said charges have
infact been paid to the Port Trust Authorities not by or on behalf of the
importer, then the importer can claim that the landing charges should not
once again be added to the price because in such an event, where payment
is made of landing charges by the seller or the shipper, the CIF price must
F be regarded as including the said landing charges. There is however, in
these cases, no factual basis for contending that the landing charges were
included in .the CIF price and, consequently the said obligation was dis-
charged not by the importer or by its agent but by the seller or the shipper.

It is also submitted on behalf of the appellants that onus of proving
G that the transaction value does not represent the value for the purposes of
Section 14 of the Act and that it has to be loaded with any other elements
such as landing charges, is on the Department. We are unable to agree
with the submission. The value at which the goods are to be assessed is
indicated by the importer when he makes a declaration while submitting a ·
H bill of entry under Section 46 of the Act. Once, we come to the conclusion
GARDEN SILK MILLS LTD. v. U.O.I. [KIRPAL, J.] 307

that the landing charges ~ould be included in the determining of the value A
of the goods imported then the onus has to be on the importer to show
that the price indicated \n the CIF contract includes therein this element
of landing charges. If su¢h an element is included in the CIF contract, that
would be within the knotledge of the importer and the Department cannot
be asked to prove the begative, namely that the CIF contract does not
include therein the element of landing charges.
B

It was contended that legal fictions are created only for some definite
purposes and here the purpose is to take the transaction value in interna-
tional trade as the basis for valuation. Therefore, whichever view is taken
of Section 14(1) (a) of the Act, it should be limited to the purpose the c
legislation makers had in view when they incorporated it. It was further
submitted that in the present case the fiction was clearly limited to the
parameters provided in Section 14(1)(a) (ordinary price in international
trade at the time and place of importation) and cannot be extended further
to be settled with elements like landing charges. Once that is done, the
whole purpose of legal fiction stands defeated and, therefore, landing
D
charges cannot form part of the value of goods for assessment.
,.,.,..
_We do not agree with the aforesaid submission because what has to
be arrived at is a deemed price in the manner indicated in the said Section.
-~
In determining this deemed price in international trade the element of port E
charges which have to be borne by the importer, in addition to the CIF
value, before the goods can be cleared for human consumption must
necessarily form a part or an element of the value. The said Section does
not accept as final the price fixed by the purchaser and the seller in the
course of international trade as reflected in the CIF contract but it requires F
determination of value by the customs authorities in the manner indicated
therein. What has to be seen is the value or cost of the imported articles
at the time of importation i.e. at the time when they reach the customs
barrier. Landing charges which have to be paid to the Port Trust must,
therefore, be taken into consideration while determining the value of the
imported goods for the purpose of assessment of duty. It is only if the G
-importer establishes that the obligation to pay the landing charges is on the

-
seller and not on the importer and that the seller or his agent has, in fact,
paid the said landing charges to the Port Trust Authorities, that the
importer can claim that the landing charges should not be again added to
the price. In none of the cases before us has it been found by any fact H
308 SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R.

A finding authority, even in cases of CIF contracts, that the Port Trust
Authorities did receive the landing charges from the shipper or the foreign
seller and that the said charges were included in the CIF contract.

We notice that various High Courts in India since 1982 have held
that for the purpose of arriving at the value at which goods are delivered
B to the buyer at the time and place of importation into India, the concept
of value as understood in Section 14 of the Act necessarily requires the
landing charges to be included in the value. These decisions are :

"(a) 1982(10) ELT 203 (Gujarat High Court) Prabhat Cotton and
c Silk Mills v .. Union of India judgment dated 9.3.1982.

(b) 1983(12) ELT 258 (Delhi High Court) Super Traders andAnr.
...
v. Union of India and Others, judgment dated 23.9.1982,
followed by another judgment in 1983(12) ELT 661 (Delhi
High Court) in Bhartiya Plastic Udyog v. Union of India,
D judgment dated 7.1.1983.

(c) 1984(18) ELT 235 (Punjab and Haryana High Court) Oswal
Woollen Mills Ltd. v. Union of India, judgment dated
22.2.1983.
-
E
(d) 1985(35) ELT 280 (Calcutta High Court) Govind Ram Agar-
wal v. Collector of Customs, Calcutta, judgment dated
21.1.1985.

(e) 1986(24) ELT 456 (Karnataka High Court) B.S. Karnath &
F Co. v. Union of India, judgment dated 12.3.1986.

(t) 1987(32) ELT 2263 (Bombay High Court) Ashok Traders v.
Union of India, judgment dated 9.10.1987 followed by another
judgment in 1992 (57) ELT 221 (Bombay High Court) in Ceat
Tyres v. Union of India
G
(g) 1988 (37) ELT 327 (Andhra Pradesh High Court) Barium
Chemicals Ltd. v. Union of India, judgment dated 4.12.1987.

(h) 1994(69) ELT 4 (Madras High Court) Shri Ram Fibres Ltd.
H v. Union of India, judgment dated 5.8.1993-."
GARDEN SILK MILLS LTD. v. U.0.1. [KIRPAL, J.] 309

· In our opinion these decisions have correctly interpreted the relevant A
provisions of the Customs Act and the submissions on behalf of appellants
cannot be accepted.

For the aforesaid reasons; we do not find any m ..rit in the contentions
of the appellants and, in our opinion, landing charges were rightly t~ken
into consideration in determining the assessable value of the imported
B
goods for the purposes of Section 14(1)(a) of the Act. There being no other
point for consideration, Civil Appeal Nos. 2976 of 1991 and 2674 of 1982
are accordingly dismissed.

C·
-·
CIVIL APPEAL NOS. 8459-60, 8864, 8865, 8866, 11897 OF 1983 AND 7675
OF 1996:

The only contention raised in these appeals by Mr. J. Vell11pally, Sr.
Advocate related to the addition of the landing charges to the CIF value
for the purpose of determining the assessable value under Section 14(1)(a) D
of the Act. The emphasis of the learned counsel was that in the case· of
CIF contract the freight which is paid included the landing cost and,
therefore, the same cannot be added once again to the CIF value.

As we have already indicated earlier, it is a question of fact whether
E
landing cost was included in the freight which was paid by the importer in
the case of a CIF contract. There is nothing on record to indicate that in
actual effect the landing cost was paid to the Port Trust Authorities by the
shipper or the seller or their agents out of the freight which had been paid
by the importer as a part of CIF price. Even if landing and delivery is the
F
responsibility of shipper, it appears to us that the landing charges are
demanded after the goods have been discharged from the vessel and it is
not correct to state· that the discharge of the goods from the vessel is
synonymous with the landing and delivery of the goods to the buyer. These
appeals are also, accordingly, dismissed.
G
CA. NOS. 7352 OF 1983 AND 4216-26 OF 1995 :

The only question, in these appeals, related to landing charges. In
view of the aforesaid discussion, we do not find any merit in this contention
and the appeals are, accordingly, dismissed. H
310 SUPREME COURT REPORTS (1999] SUl'P. 3S.C.R.

A CA. NOS. 3070-75 OF 1989:
Addition of landing charges is the only question raised in these
appeals. For the reasons stated hereinabove, we do not find any merit in
this submission and, therefore, these appeals are dismissed.

B WRIT PETITION NOS. 7221-23 AND 7295 OF 1982

The only contention raised in these petitions pertains to the addition
of landing charges. For the reasons stated hereinabove, we do not find any
merit in this submission and, therefore, these petitions are dismissed.

C WRIT PETITION (C) NOS. 7224, 7296 OF 1982 AND. 40 OF 1983:
The only contention raised in these petitions pertains to the addition
--
of landing charges. For the reasons stated hereinabove, we do not find any
merit in this submission and, accordingly, these petitions are dismissed.

D CIVIL APPEAL NO. 2902 OF 1991 :

The only contention raised in this appeal pertains to the levy and •
addition of landing charges. For the reasons stated hereinabove, we do not
find any merit in this submission and, therefore, this appeal is dismissed.
E
CIVIL APPEAL NO. 5661 OF 1999 ARISING OUT OF SPECIAL LEAVE
PETITION C. NO. 4120 OF 1989:

Special leave granted. Three contentions were urged in this appeal.
The first was whether landing charges can be included for determining the
F assessable value of imported goods under Section 14 of the Act. In view of
the foregoing discussion, it is clear that the charges paid to the Port Trust
Authorities priot to the clearance of goods would be included in determin-
ing the assessable value and, therefore, this contention is rejected.

The second contention was whether Section 3(a) of the Customs
G Tariff Act is ultra virus of Article 14 of the Constitution of India and/or
whether the customs authorities are correct in charging additional duty on
the sum total of assessable value, basic customs duty and auxiliary duty,
instead of only on additional duty. In the case of Jain Brothers v. Union of
India, (1999) 112 E.L.T.5 S.C., a similar contention was not accepted and
H it was held that the said provision is valid.
''

GARDEN SILK MILLS LTD. v. U.O.L [KIRPAL,J.] 311

The third contention was that the appellant had imported consign- A
ment of HDPE Blow moulding Grade from M/s. Inter Trade, Yugoslavia.
The total invoice price of the consignment was US $ 830 per M.T. The said
invoice price also included in it the cost of packing materials. The cost of
packing materials 'was US $ 40 per M.T. The appellant claimea benefit of
exemption from customs duty on the value of packages in terms of Notifica-
tion No. 184/76-Cus; dated 2.8.76.
B

The High Court dis-allowed the aforesaid benefit on the ground that
the effect of aforesaid notification was not to exclude the value of packages
from the total assessable value of the imported goods (which includes the
value of the packages as the invoice value includes the value of the C
.. packages) but to exempt the levy of duty on the packages separately, since
in law these are two separate imposts one ·on the value of the contents
(which is the invoice value and which includes the value of packages) at
the rate applicable to the contents and the other on the value of the
package itself. This question now stands concluded wi~h the judgment of D
this court in the case of Hind Plastics v. Collector of Customs, [1994] 71
ELT 325 wherein this very notification had been construed and it was held
that this notification as well as Section 14 did not contemplate deduction
of value of packages from the invoice value. This contention of the appel-
lant cannot, therefore, be accepted.
E
For the aforesaid reasons this appeal is accordingly dismissed.

CIVIL APPEAL NO. 338] OF 1991 :

Three contentions were raised. The first was whether landing charges
could be included for determining the assessable value of imported goods F
under Section 14 of the Act. In view cif the foregoing discussion, this
contention of the appellants is rejected.

The second contention related to the validity of Section 3(a) of the
Customs Tariff Act. In view of the decision of this Court in Jain Brothers
case, this issue has been decided against-the appellants.
G

The third contention related to the claim for exemption by virtue of

- Notification No. 184176-Cus dated 2.8.1976 of customs duty and packing
material. In view of the decision of this Court in Hind Plastics case, this
submission of the appellants can also be not accepted. This appeal is H
l
L
312 SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.
A accordingly dismissed.
CIVIL APPEAL NO. 5974 OF 1994 :

In the written submissions filed on behalf of the appellants it was
stated that the appellants had filed a declaration under the Kar Vivadh
B Samadhan scheme, 1998. The Assistant Commissioner, Kar Vivadh Samad-
han Scheme, Central Excise, Mumbai had conveyed to the appellants that
the declaration is not based on the show cause notice or demand notice
prior to 31st March, 1998 and, therefore, the said declaration was not
tenable and was rejected. This letter of March, 1999 has been challenged
C in the Writ Petition No. 2528 of 1999 in the Bombay High Court and the
same is pending in the High Court. In the written submissions it was stated
that either this appeal being C.A. No. 5974 of 1994 be kept pending or the
same be heard after the disposal of Writ Petition No. 2528 of 1999 by the
-
Bombay High Court or in the alternative, this Civil Appeal No. 5974 of
1994 may be allowed to be withdrawn. In our opinion, the latter course is
D a preferable one and, therefore, Civil Appeal No. 5974 of 1994 is dismissed
as withdrawn in view of the pendency of the Writ Petition No. 2528 of 1999.
before the Bombay High Court.

CIVIL APPEAL NO. 5014 OF 1989:

E Three contentions were raised in this appeal. The first was whether
the countervailing duty at the rate of 42% could be levied on the goods
viz., Polyvinyl Alcohol imported by the appellant or whether the appellant
was entitled to benefit of the exemption notification imposing a duty of
10% as the Polyvinyl Alcohol imported is manufactured only from Vinyl
F Acetate Monomer.

This issue has to be decided against the appellant in view of the
decision of this Court in Mis. Motiram Tolaram and Anr. Etc. Etc. v. The
Vnion of India and Anr., (1999) 4 Scale 666.

The second contention related to the landing charges and the said
G
contention cannot be accepted in view of our discussion hereinabove.

The third contention related. to value of packing charges and the

-
grant of benefit of exemption notification. The same has to be rejected in
view of the decision of this Court in Hind Plastics case (supra). This appeal
H is, accordingly, dismissed.
I

GARDEN SILK MILLS LTD. v. U.O.I. [KIRPAL, J.] 313

-
CIVIL APPEAL NOS. 5983/83, 786/89, 788-90 OF 1989 : A
The contentions, which were raised in these appeals are (a) vires of
Section 3 of the Customs Tariff Act; (b) demand of duty by including
landing charges, (c) adding on of customs duty for the purposes of assess-
ing the countervailing duty and ( d) exemption of duty on the packing
material under Notification No. 184/76- Cus. Dated 2.8.1976. B
For the reasons stated hereinabove none of these contentions can be
accepted and the appeals are, consequently dismissed.

CA. NOS. 3163/91, 8194/95 AND CIVIL APPEAL NO. 5662/99 ARISING
OUT OF S.L.P. (C) 9814 OF 1990: c
L~ave granted in S.L.P. (C) No. 9814 of 1990. In view of the discus-
sion hereinabove, the contentions raised in the above-said appeals cannot
be accepted and the appeals are, consequentfy dismissed.
D
Civil Appeal No.4082 of 1995 :

The only contention raised by the appellant before the High Court
related to the packing charges. For the reasons stated hereinabove that
contention must fail here also, as no other ground was urged before the
High Court the question of the appellant being allowed to raise any E
additional ground does not arise. The appeal is dismissed.

CONCLUSION

While Civil Appeal No. 5974 of 1994 is dismissed as withdrawn, the
other appeals and petitions are dismissed with costs. F

S.V.K. Appeals/petitions dismissed.