Legal principle

Whether floating crane/unloading charges incurred in moving cargo from a vessel to barges are transport costs includible in assessable value under Section 14 or loading-unloading costs covered by the statutory 1% is a factual question that cannot be decided on the amended Section 14(1) alone and must be remanded for verification.

Court decision

A third member (R. Muralidhar, Judicial) was appointed to resolve the divergence between the Member (Technical) (who would have dismissed the appeals holding the charges includible as transport cost) and the Member (Judicial) (who favoured remand for factual verification); agreeing with the Member (Judicial), the majority allowed the appeals by way of remand to the adjudicating authority for verification of the factual points (a) to (f) listed at para 19 and the directions at paras 20 and 21 of the Interim Order, including verification of the provisional assessment finalization point.

Facts

Nayara Energy Limited, engaged in manufacturing petroleum products at Vadinar, imported 10 consignments of coal by gearless vessels at Bedi port for captive power generation; due to insufficient draft, the vessels anchored at anchorage where coal was unloaded from mother vessels to barges using floating cranes hired from United Shippers Ltd (Rs 85/MT) and Essar Bulk Terminal (Rs 90/MT). At provisional assessment, the department included FOB value, sea freight, insurance, barge charges @ Rs 45/MT and statutory 1% loading/unloading/handling charges, but not the floating crane charges. The department later treated the floating crane charges as an extended element of freight includible in assessable value under Section 14 of the Customs Act, 1962 read with Rule 10 of the Customs Valuation Rules, 2007, and issued a show cause notice dated 10.02.2015; the demand, along with redemption fine of Rs 2.5 lakhs and related interest/penalty, was upheld by the adjudicating authority and the first appellate authority (OIA dated 19/02/2016). Shah Coal Pvt Ltd was a co-appellant raising the same issue, in cases initiated at the instance of DRI.

Key provisions

• Section 14, Customs Act, 1962 — Valuation of goods
• Section 33, Customs Act, 1962 — Unloading and loading of goods at approved places only
• Section 18(2), Customs Act, 1962 — Provisional assessment of duty
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 35, Customs Act, 1962 — Restrictions on goods being water-borne
• Section 34, Customs Act, 1962 — Goods not to be unloaded or loaded except under supervision of customs officer
• Rule 10, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Cost and services
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 8(a), Customs Act, 1962 — Power to approve landing places and specify limits of customs area
• Rule 9(2)(b), Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Residual method
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation