Page 205 - ELT_15th August 2020_Vol 373_Part 4

2020 ] IFFCO LTD. v. PRINCIPAL COMMISSIONER OF CUSTOMS, JAMNAGAR 539

further sale by the Government of India to IFFCO on High Sea Sale basis, the re-
lationship between STE and Government of India cannot be treated as a relation-
ship between a principal and agent and these are two independent High Sea
Sales. To arrive at this conclusion, reliance was placed on a decision of the Su-
preme Court in Hyderabad Industries Ltd. The Principal Commissioner also ob-
served that mere deduction of TDS by the Government of India would not mean
that this amount has not to be added in the assessable value. The Principal
Commissioner, therefore, concluded that service charges Rs. 17/- per MT paid by
the Government to STE is required to be added in the assessable value in terms
of Rule 10(1)(e) of the 2007 Valuation Rules.
18. As noticed above, it is after assessing the import requirement, that
the Department of Fertilizer intimates the said requirement periodically to the
canalising agencies. This is for the reason that under the export and import poli-
cy, goods which are canalised, can be permitted to be imported by a canalising
agency only. Urea is a canalised item under the Foreign Trade Policy and, there-
fore, import can be done only by the canalising agency called STEs. The STEs call
for a global tender and after identifying the foreign supplier, purchase urea in
bulk. According to the Appellant, the import of urea by the canalising agency
takes place on behalf of the Government of India and the amount of Rs. 17/- per
MT which the Government pays to the STEs is the agency charges which the
STEs get for providing the services of identifying and indenting the import of
urea from foreign suppliers. To support this fact, the Appellant has placed reli-
ance upon a letter dated 12th November, 1991 sent by the Ministry of Chemicals
and Fertilizers in the Government of India to the Deputy Controller of Accounts
in connection with service charges payable to MMTC for import of fertilizer on
behalf of the Ministry of Chemical and Fertilizers. It has been stated in this letter
that service charges for import of fertilizers on behalf of the Ministry have been
revised in consultation with the Ministry of Finance and for urea it has been stat-
ed that the service charges would be Rs. 17/- per MT.
19. In this connection, the Appellant has also placed the letter dated 2
February 2015 sent by the Ministry of Chemicals and Fertilizers in the Govern-
ment of India to the Deputy Commissioner, Krishnapatnam Port in connection
with the finalisation of provisional Bills of Entry in respect of urea imported
through the said port. The contents of the letter are reproduced below :
“I am directed to refer to your letter dated 22-1-2015 on the subject cited
above and to say that urea is the only fertilizer under statutory price control
and it is imported for direct agriculture use on Government account
through State Trading Enterprises (STEs) i.e. MMTC Limited (MMTC),
State Trading Corporation Limited (STC) and Indian Potash Limited (IPL).
These agencies are paid Rs. 17/- per MT as service charges on the urea im-
ported by them on Government account for direct agricultural use. Fertiliz-
ers other than Urea are imported under Open General License (OGL).
Companies import these fertilizers as per their commercial judgment.”
20. The contents of these two letters do support the contention of the
Appellant. Both these letters are in connection with the amount of Rs. 17/- per
MT paid as service charges on urea imported by the STEs. In the first letter dated
12 November 1991, it has been clearly stated that Rs. 17/- per MT shall be paya-
ble by the Government of India to MMTC (which is also a STE apart from State
Trading Corporation) as service charges for import of urea on behalf of the

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