2005 INSC 0858
                                    SUPREME COURT OF INDIA

                                Commissioner of Customs, Ahmedabad

                                                      Vs.

                                            Essar Steel Limited

                                       C.A.Nos.6940-6949 of 2003

                                 (Mrs.Ruma Pal and S. H. Kapadia JJ.)

                                                 28.09.2005

                                                JUDGMENT

Ruma Pal, J.

1. The respondent No. 1 had imported Iron Ore Pellets from Brazil and Bahrain to Hazira in
the State of Gujarat between March, 1990 and September, 1991. For this purpose, the
respondent No. 1 had arranged with its sister concern, the respondent No. 4, to take five
vessels from the Time Charter. Of the five vessels, one belonged to respondent No. 4. The
respondent No. 1 paid the duty on the cost of transportation as certified by the respondent
No. 1. Pursuant to investigations made by the appellants, certain invoices raised by the
respondent No. 4 on the appellants were found. The invoices were relied upon by the
appellants for issuing show cause notices to the respondent No. 1 and the respondent No. 2
by which it was, inter alia, proposed to increase the value of the cost of transportation.

2. It is undisputed that under Section 14(1) of the Customs Act, 1962 read with Rule 9(2) of
the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, the cost of
transportation is includible in the value of the goods.

3. The Commissioner confirmed the demand as raised in the show cause notices and imposed
penalty on the respondents 1 and 2 as well as on some officers and levied interest on, what
was claimed to be, the difference between the cost of transportation as disclosed by the
respondent No. 1 and the cost of transportation as ascertained. The matter ultimately came up
before the Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal held that
the demand was not sustainable and set aside the impugned order of the Commissioner. The
decision of the Tribunal appears to be correct having regard to this Court's opinion as
expressed in Union of India v. Gosalia Shipping Pvt. Ltd. reported in (relied).

4. According to the appellants, the Tribunal erred in setting aside the order of the
Commissioner. It was contended that the Tribunal failed to notice that the respondents had
been unable to establish the actual cost of transportation incurred or relatable the import of
the goods in question.

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5. Learned Counsel appearing on behalf of the respondents supported the decision of the
Tribunal and have submitted that the show cause notices proceeded on the basis that the
quantum payable on account of Time Charter was includible in the value of the goods
imported. It is said that this Court in GosaHa's case (supra) had clearly held that the price
payable on a Time Charter could not be treated as the cost of transportation. We have already
held that this submission of the respondent is correct. The respondents have also relied upon
the fact that as far as the Bahrain import was concerned, they had charged the actual
difference between C&F cost of importation and the FOB cost of importation which worked
out to approximately US $ 3(three) per metric tonne. As far as the Iron Ore Pellets imported
from Brazil were concerned, since the cost of transportation was not ascertainable, in terms
of Rule 9 sub-rule (2) proviso (i), the cost should have been taken at 20% of the FOB value
of the cost. That was exactly what the respondents had in fact done. They had added 20% of
the FOB value of the goods by way of transportation charges as far as the Brazil imports
were concerned. This submission of the respondents is also correct.

6. As far as the Bahrain imports are concerned, the respondents may be correct in their
submission that they had given a firm basis for the cost of transportation and that the
Customs Authorities themselves had not been able to adduce any contrary evidence on the
basis of which they could impugn the rate disclosed. Be that as it may, we note that at the
time of the hearing before the Commissioner, Counsel for the respondent No. 1 did put
forward an alternative submission to the effect that since in all the cases of import the freight
was not readily ascertainable the same could be determined on the basis of 20% of the FOB
value and he expressed his readiness to pay the duty so calculated. Before us, the appellants
submit through the learned Additional Solicitor General that, they are willing to accept this
offer.

7. In the circumstances and without disturbing the other findings of the Tribunal relating to
the quashing of the Penalty and interest and to the Brazil imports, we dispose of these
appeals by directing the respondent No. 1 to pay the cost of transportation in respect of the
Bahrain imports at 20% of the FOB value. It is being made clear that this direction will not
be the basis of any penalty or interest to be levied against respondent No. 1 any of their
officers

8. No order as to costs.

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