Page 213 - ELT_15th August 2020_Vol 373_Part 4

2020 ] IFFCO LTD. v. PRINCIPAL COMMISSIONER OF CUSTOMS, JAMNAGAR 547

would be the determinative factor. Only in the absence of actual cost, fic-
tionalised cost is to be adopted. Here again, the scheme gives an ample
message that an attempt is to arrive at value of goods or services as well as
costs and services which bear almost near resemblance to the actual price of
the goods or actual price of costs and services. That is why the sequence
goes from the price of identical goods to similar goods and then to deduc-
tive value and the best judgment assessment, as a last resort.
(27) In the present case, we are concerned with the amount payable for
costs and services. Rule 9 which is incorporated in the Valuation Rules and
pertains to costs and services also contains the underlying principle which
runs though in the length and breadth of the scheme so eloquently. It cate-
gorically mentions the exact nature of those costs and services which have
to be included like commission and brokerage, costs of containers, cost of
packing for labour or material etc. Significantly, Clause (a) of sub-rule (1) of
Rule 9 which specifies the aforesaid heads, cost whereof is to be added to
the price, again mandates that it is to be “to the extent they are incurred by
the buyer”. That would clearly mean the actual cost incurred. Likewise,
Clause (e) of sub-rule (1) of Rule 9 which deals with other payments again
uses the expression “all other payments actually made or to be made as the
condition of the sale of imported goods”.
… … …
(31) In contrast, however, the impugned amendment dated 5-7-1990 has
changed the entire basis of inclusion of loading, unloading and handling
charges associated with the delivery of the imported goods at the place of
importation. Whereas fundamental principle or basis remains unaltered in-
sofar as other two costs, viz., the cost of transportation and the cost of in-
surance stipulated in clauses (a) and (c) of sub-rule (2) are concerned. In re-
spect of these two costs, provision is retained by specifying that they would
be applicable only if the actual cost is not ascertainable. In contrast, there is
a complete deviation and departure insofar as loading, unloading and han-
dling charges are concerned. The proviso now stipulates 1% of the free on
board value of the goods irrespective of the fact whether actual cost is as-
certainable or not. Having referred to the scheme of Section 14 of the Rules
in detail above, this cannot be countenanced. This proviso, introduces fic-
tion as far as addition of cost of loading, unloading and handling charges is
concerned even in those cases where actual cost paid on such an account is
available and ascertainable. Obviously, it is contrary to the provisions of
Section 14 and would clearly be ultra vires this provision. We are also of the
opinion that when the actual charges paid are available and ascertainable,
introducing a fiction for arriving at the purported cost of loading, unload-
ing and handling charges is clearly arbitrary with no nexus with the objec-
tives sought to be achieved. On the contrary, it goes against the objective
behind Section 14 namely to accept the actual cost paid or payable and even
in the absence thereof to arrive at the cost which is most proximate to the
actual cost. Addition of 1% of free on board value is thus, in the circum-
stance, clearly arbitrary and irrational and would be violative of Article 14
of the Constitution.
… … …
(34) In the present case before us, the only justification for stipulating 1%
of the F.O.B. value as the cost of loading, unloading and handling charges is
that it would help customs authorities to apply the aforesaid rate

EXCISE LAW TIMES  15th August 2020  213