Legal principle

Loading, unloading and handling charges must be added to the assessable value at their actual ascertainable cost, and the notional 1% of F.O.B. value under proviso (ii) to Rule 9(2) of the Valuation Rules, 1988 can apply only when such actual charges are not ascertainable, since the actual cost principle is the golden thread of valuation under Section 14 of the Customs Act, 1962.

Court decision

The Supreme Court allowed Wipro's appeals and set aside the Madras High Court's judgment. It held that proviso (ii) to sub-rule (2) of Rule 9, introduced vide Notification dated 05.07.1990, is unsustainable and bad in law in its present form, and read it down to apply only when the actual loading, unloading and handling charges referred to in clause (b) are not ascertainable. No order as to costs.

Facts

Wipro Ltd., a manufacturer of mini and micro computer systems and peripherals, imported components including software and presented Bill of Entry No.15020 dated 15.04.1993 for a 315 kg consignment. Actual loading, unloading and handling charges per the International Airport Authority of India (Madras) tariff were only Rs.65.40, but Customs, invoking proviso (II-i) to Rule 9(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (inserted by Notification No.39/90 dated 05.07.1990), added 1% of the F.O.B. value — Rs.15,214.69 — as notional handling charges, raising duty from Rs.69.98 to Rs.16,209.20. Wipro challenged the constitutional validity of that proviso in writ petitions under Article 226 before the Madras High Court as ultra vires Sections 14(1) and 14(1A) of the Customs Act, 1962 and violative of Articles 14 and 19(1)(g). The High Court repelled the challenge and dismissed the writ petitions/writ appeals by judgment dated 11.10.2002, leading to these appeals by special leave.

Key provisions

• Section 14(1), Customs Act, 1962 — Valuation of goods
• Section 12, Customs Tariff Act, 1975 — Repeal and saving
• Section 156, Customs Act, 1962 — General power to make rules
• Section 22, Customs Act, 1962 — Abatement of duty on damaged or deteriorated goods
• Section 2(q), The Foreign Exchange Management Act, 1999 — Definitions.