Holding

Transportation charges for the barges from BFL to Dharamtar jetty cannot be added to the assessable value of the imported goods under Section 14 of the Customs Act, 1962.

Summary

ISPAT Industries Ltd imported iron ore pellets that were off‑loaded from the mother vessel at Bombay Floating Light (BFL) onto barges and taken to Dharamtar jetty. The Customs authorities added the barge transportation charges to the assessable value under Section 14 of the Customs Act, 1962, invoking Rule 9(2) of the Customs Valuation Rules, 1988. The Supreme Court held that Section 14 creates a legal fiction and the assessable value must be the ordinary price in international trade, which already includes freight under CIF/FOB contracts; therefore the additional barge charges constitute double counting. Rule 9(2) is subordinate to the Act and must be read in harmony with Section 14, applying the Gunapradhan principle that an accessory must serve the primary provision. The place of import (BFL or jetty) was deemed irrelevant. The appeal was allowed, the barge charges excluded from valuation, and the revenue duty refunded with interest.

Issues considered

The whether transportation charges for barges from BFL to Dharamtar jetty are to be included in the assessable value under Section 14 of the Customs Act, 1962.
Whether Rule 9(2) of the Customs Valuation Rules, 1988 can be interpreted independently of Section 14.
Whether the place of importation is BFL or Dharamtar jetty for the purpose of valuation.
Whether unloading at BFL without approval under Section 8 is lawful under Sections 33, 34 and 35 of the Customs Act.

Legislation cited

Customs Act, 1962s. 14(1), s. 14(1A), s. 2(23), s. 2(25), s. 2(27), s. 30(1), s. 31(1), s. 31(2), s. 32, s. 33, s. 34, s. 35, s. 46, s. 47, s. 7(1)(a), s. 8
Customs Tariff Act, 1975
Customs Valuation (Determination of Price of Imported Goods) Rules, 1988s. Rule 4, s. Rule 5, s. Rule 6, s. Rule 9(2), s. Rule 9(4)

Subjects

customs valuationassessable valueSection 14legal fictionRule 9(2)transportation chargesbarging chargesplace of importCIF contractFOB contractGunapradhan principlestatutory interpretation

Judgment

MIS. !SPAT INDUSTRIES LTD. A
v.
COMMISSIONER OF CUSTOMS, MUMBAI

SEPTEMBER 29, 2006

[ASHOK BHAN AND MARKANDEY KA TJU, JJ.] B

Customs Act 1962;

Section 14(/)-Assessable value of imported goods-Transportation
charges for the use of barges for carrying the cargo from the mother vessel C
to the jetty-Held, not to be added to calculate the assessable value.

Interpretation of statutes;

Legal fiction-Deeming provision creates legal fiction-Held, unless
prohibited from doing so, the consequence and incidents which, if the putative D
state of affairs had in fact existed, must inevitably have flowed from or
accompanied it has also be imagined as real.

Statutes-Provisions of Acts and Rule framed thereunder-
Interpretation of- Rule cannot be given an interpretation 'which is in E
violation of provision of the Act for the reason that the rules are subservient
to the Act and cannot deviate from the provisions of the parent Act.

Ratio decidendi-Essence in a decision-is its ratio and not every
observation found therein nor what logically follows from the various
observations made in it. F
The question involved in the instant appeal that whether the
transportation charges for the use of barges for ::arrying the cargo from the

I mother vessel from the approved place of anchoring to the approved place of
unloading are to be added to calculate the assessable value for the purpose of
duty under the Customs Act. G
Allowing the appeal, the court

HELD I.I. It is not actual value of the goods, but the value at which such
goods or like goods is ordinarily sold or offered for sale for delivery at the
733 H
734 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A time of import. 1746-AI

1.2. The value of the goods not for each specific transaction has to be
seen but the ordinary value which it would have in the course of international
trade at the time of its import.1746-8; 748-AI
.......
B Mis. Rajkumar Knitting Mills (P) ltd v. Collector of Customs, Bombay
AIR (1998) SC 2602, followed.

East End Dwelling Co. ltd. v. Finsbury Borough Council, 1195112 All
ER 587 and Commissioner of Income Tax, Bombay v. Bombay Corporation,
AIR (1930) PC 54, relied upon.
c
"Principles of Statutory Interpretation", Ninth Edition by G.P.Singh,
referred to

2.1. The rules are subservient to provision of the parent statute and
cannot deviate therefrom. Rule has to be read along with provision of the Act
D and it cannot be read independently. Hence, ifthere is any conflict between
the provisions of the Act and the provisions of the Rules, the former will
prevail. (747-C, H; 748-H; 749-AI

"The General Theory of law and State by Ke/sen, referred to.

E 2.2. If there are two possible interpretations of a rule, one which
subserves the object of a provision in the parent statute and the other which
does not, the former has to be adopted because adopting the latter will make
the rule ultra vires the Act. However, every effort should be made to give an
interpretation to the Rules to uphold its validity. This can only be possible if
F the rules can be interpreted in a manner as to be in conformity with-the
provisions in the Act, which can be done by giving it an interpretation which
may be different from the interpretation which the rule could have if it was
construed independently of the provisions in the Act. In other words, to uphold
the validity of the rule sometimes a strained meaning can be given to it, which
may depart from the ordinary meaning, if that is necessary to make the rule
G in conformity with the provisions of the Act. This is because it is a well settled
principle of interpretation that if there are two interpretations possible of a
rule, one of which would uphold its validity while the other which would
invalidate it, the former should be preferred. 1748-D; 749-A, B, C)

"Mimansa Rules of Inte1pretation (Second Edition( by K.L. Sarkar,
H
ISPAT INDUSTRIES LTD. i·. COMMNR. OF CUSTOMS, MUMBAI 735
referred to. A
3.1. Since the contracts entered into with the foreign sellers are either
CIF contracts or FOB contracts with Bills of Lading indicating nominated
place as the ports of discharge. As such the cost of transport is already
included in the price paid to the seller under the CIF contract or an
ascertainable freight determined and paid by the buyer from the foreign port B
to the Indian port Hence, a further addition to the transport charges under
Rule 9(2)(a) of the Customs Valuation Rules, 1988 is impermissible.
(747-E, Fl

3.2. Rule 9(2) has to be read along with Section 14 and it cannot be
read independently. Since, Section 14 creates a legal fiction, the ordinary value C
of the imported goods in the course of international trade at the place and
time of import has to be seen. Specific cases of import should be ignored. In
fact, it is for this reason that Rules 4, 5 and 6 of the Rules have been
promulgated. The actual price paid for the goods can only be taken into
consideration provided the sale is in the ordinary course of trade under fully D
competitive conditions and the other provisions of Rule 4 are satisfied. In cases
of under-invoicing or over-invoicing or for some other reasons the sale is not
under full competitive conditions, Rules 5 & 6 has to be resorted to and the
actual price has not to be seen. (747-H; 748-A, B, C(

3.3. The Gunapradhan principle is fully applicable to the interpretation E
of Rule 9(2). Rule 9(2) is subservient to Section 14. It must, therefore, be
interpreted in such a way as to make it in accordance with the main object
that is contained in Section 14 of the Customs Act. It may be that in isolation
Rule 9(2) conveys some other meaning, but when it is read along with Section
14 of the Act, it must be given a meaning which is in accordance with the F
object of Section 14. The object of Section 14 is 'primary' whereas the
conditions in Rule 9(2) are the 'accessories'. The 'accessory' must, therefore,
serve the 'primary'. (752-A, B(

3.4. It is really not necessary to decide whether the place of importation
is the jetty or the BFL. Whether the place of import is deemed to be the BFL G
or Dharamtar jetty it would make no difference to the conclusion we have
arrived at because the cost of transportation of the imported goods has already
been included for delivery at the Dharamtar jetty and has already been paid to
the seller in the CIF or FOB contract Hence, a further addition to the transport
charges in the form of barge charges for the transportation by barges cannot
be said to be contemplated by Section 14 of the Act [752-B, C, DJ H
736 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

Garden Silk Mills ltd. v. Union of India, (1999) 113 ELT 358 (SC);
Coromandal Fertilizer Ltd. v. Collector ofCustoms, (200011 SCC 448; Union
of India v. Apar Industries Limited, (1999) 5 JT 160; Dhiraj Lal H. Vohra &
Ors. v. Union of India and Ors., [1993( Supp.3 SCC 453; Kiran Spinning Mills
v. Collector of Customs, AIR (2000) SC 3448 and Mis. Bharat Surfactants
B (Pvt) Ltd. and Anr. v. Union of India and Anr., AIR (1989) SC 2054,
distinguished.

3.5. The unloading of goods from the mother ship on to the barge at
BFL, a place not approved as the landing place under Section 8 of the Act,
was not illegal as Section 33 permits unloading, with the permission of the
proper officer, at a place other than that approved under Section 8. Since
C permission had been obtained under Section 33 under the supervision of the
proper officer under Section 34, and the goods were accompanied by a Boat
Note under Section 35 of the Customs Act, the unloading of the goods from
the mother ship at the BFL was valid, since it was done in accordance with
Sections 33 and 34 of the Customs Act. No doubt, the BFL had not been
D approved as proper place under Section 8(a), but it was a place where the
mother ship could anchor.
4.1. A case is only an authority for what it actually decides. A decision
cannot be relied on without disclosing the factual situation. Circumstantial
flexibility, one additional or different fact may make a world of difference
E between conclusions in two cases. [755-F, G; 757-EI
State of Orissa v. Sudhansu Sekhar Misra, AIR (1968) SC 647; Ambica
Quarry Works v. State of Gujarat and Ors., 1198711 SCC 213; Bhavnagar
University v. Palitana Sugar Mills Pvt. Ltd, (2003( 2 SCC 111; Bharat
Petroleum Corporation Ltd and Anr. v. N.R. Vairamani and Anr., AIR (2004)
F SC 4778; London Graving Dock Co. ltd. v. Horton, (1951) AC 737; Home
Office v. Dorset Yachi Co., (19701 2 All ER 294 and Herrington v. British
Railways Boards, (1972) 2 WLR 537, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3972 of2001.
From the Order No. C-11/461/WZB/2001 dated 7.3.2001 of the Customs,
G Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai
in Appeal No. C/126-V/99-Mum.
WITH
Civil Appeal Nos. 5921-5924/2004, 6160-6161/2004, 6366/2004 & 1603/
H 2oos.
ISPAT INDUSTRIES LTD. r. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.J 73 7

Joseph Vellapally, Harish N. Salve, S. Ganesh, C.N. Sree Kumar, Atul S. A
Dayal, K.R. Sasiprabhu, Rohan Shah, Ashvin Dave, Chandrachud, Raghvesh,
Meenakshi Grover, Maninder Singh, Pratibha M. Singh, Gaurav Sharma, A.
Subba Rao, Navin Prakash, Ajay Sharma, B.K. Prasad, Mahesh Agarwal, Rishi
Agrawala, E.C. Agrawala, Gaurav God, Dhrupad Das, Vipin Kumar Jain,
Ravinder, Narain, Ajay Aggarwal, Sanjeev Dahiya and Rajan Narain for the B
appearing parties.

The Judgment of the Court was delivered by

MARKANDEY KATJU, J. Since common questions of law are involved
in all these appeals we are deciding them in a common judgment and for our
reference we are citing the facts of the case of !spat Industries Ltd. (Civil C
Appeal No. 3972 of 2001).

CIVIL APPEAL NO. 3972 of 2001

This appeal has been filed against the judgment and order dated 7th D
March 200 I passed by the Customs; Excise and Gold (Control) Appellate
Tribunal (hereinafter referred to as CEGAT), West Reg!onal Bench, Mumbai.

Heard learned counsel for the parties and perused the record.

The facts of the case are that the appellant is a regular importer of iron E
ore pellets falling under Chapter Sub-heading No. 2601.12 of the Customs
Tariff Act, 1975. The present appeal relates to 14 consignments of iron ore
pellets imported between 14.2.1996 to 21.2.1998. In all these cases, the mother
vessel coming from abroad and carrying the cargo anchored at Bombay
Floating Light (in short 'BFL '). The cargo on board the mother vessel was
then examined by the custom authorities and provisionally assessed to duty. F
After payment of this duty, the out of charge order was passed on the Bills
of Entry permitting clearing of such goods for home consumption. After
obtaining the out of charge order, the cargo was discharged at BFL from the
mother vessel to the barges which then ferried the cargo to the Dharamtar
Jetty.
G
It may be mentioned that the cargo could not be discharged directly
from the mother vessel to the Dharamtar Jetty due to lack of draft. Hence it
was discharged from the mother ship on to the barges at BFL, which carried
the goods to the Dharamtar Jetty. It may further be mentioned that while
Dharamtar has been approved as a place for unloading under Section 8(a) of H
738 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A the Customs Act, BFL has not been so approved but is only a placing for
anchoring the ship.

In the Bills of Entry filed by the appellant in respect of the imported
cargo, the assessable value of the iron ore pellets was arrived at by including
freight incurred on the imported cargo from the place of export to the port of
B discharge viz. Mumbai/JNPT/Dharamtar. However, by letter dated 7.2.1997
(Annexure P-2 to the Appeal), the Assistant Commissioner of Customs
informed the appellant that as per Rule 9 of the Customs Valuation Rules,
1988, the freight incurred on barges and other associated charges in
transportation of the goods from BFL to the Dharamtar jetty has also to be
C added for determining the correct assessable value for the purpose of
calculating duty.

The appellant sent its reply on 19.5.1997 (Annexure P-3 to the Appeal)
stating that the transportation charges of iron ore pellets by barges from BFL
to Dharamtar jetty is not inclusive in the assessable value. The appellant
D alleged that the expression "place of importation" in Section 14 of the Customs
Act read with Rule 9 referred to the BFL and not Dharamtar jetty because the
goods in question passed out of customs control at BFL. The appellant
further alleged that the risk and title to the goods changes the moment the
cargo is discharged from the mother vessel on to the barges. Hence, it was
alleged that the Dharamtar jetty cannot be considered as the 'place of
E importation', and the assessable value of the cargo should be determined
without including the transportation charges of the barges from BFL to
Dharamtar jetty.

Thereafter, a show cause notice dated 22.4.1998 was issued by the
F Assistant Commissioner of Customs (Preventive) Alibag Division (Annexure
P-4 to the Appeal). In this show cause notice it was stated that duties which
were assessed provisionally under Section 18 of the Customs Act, 1962 had
been assessed finally and the appellant was requested to pay the duties short
paid within 10 days or to explain why an amount of Rs. 78,54, 112/- (the barge
charges) should not be recovered from the appellant. Similar show cause
G notice dated 17.7.1998 (Annexure P-5 to the Appeal) was also issued.

Thereafter the appellant gave its reply and was also heard personally
through its authorized representative, but by the order of the Assistant
Commissioner of Customs dated 5.10.1998 (Annexure P-6 to the Appeal) the
demand was confirmed. The appellant appealed against the said order which
H was rejected by the Commissioner of Customs (Appeals), Mumbai vide order

•
!SPAT INDUSTRIES LTD. 1•. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.) 739

dated 10.2.1999. A
Aggrieved, the appellant filed an appeal to the Customs, Excise & Gold
(Control) Tribunal which has been dismissed on 7.3.2001. Hence this appeal.

The short point before is as to whether the transportation charges for B
the use of barges for carrying the cargo from the mother vessel which
anchored at BFL to the Dharmatar jetty where the goods were unloaded are
to be added to calculate the assessable value for the purpose of duty under
the Customs Act.

Before dealing with the contention of the parties, we may refer to the C
provisions of the Customs Act, 1962 which are relevant in this case.

Section 2(23) defines import to mean 'bringing into India from a place
outside India'.

Section 2(25) defines 'imported goods' as follows: D
"imported goods" means any goods brought into India from outside
India but does not include goods which have been cleared for home
consumption"

Section 2(27) defines 'India' as follows: E
"India includes the territorial water of India".

Section 7(/)(a) of the Act states as follows:

"The Board may, by notification in the Official Gazette, appoint -
F
(a) the ports and airports which alone shall be customs ports or
customs airports for the unloading of imported goods and the loading
of export goods or any class of such goods".

Section 8 of the Act states as follows :
G
"Power to approve landing places and specify limits of customs area

The Commissioner of Customs may -

(a) approve proper places in any customs port or customs airport or
coastal port for the unloading and loading of goods or for any class H
740 SUPREME COURT REPORTS (2006) SUPP. 6 S.C.R.

A of goods;

(b) specify the limits of any customs area".

Section 14. Valuation of goods for purposes of assessment:

"(I) For the purposes of the Customs Tariff Act, 1975 or any other law
B for the time being in force whereunder a duty of customs is chargeable
on any goods by reference to their value, the value of such goods
shall be deemed to be the price at which such or like goods are
ordinarily sold, or offered for sale, for delivery at the time and place
of importation or exportation, as the case may be, in the course of
c [international trade, where

(a) the seller and the buyer have no interest in the business of
each other; or

(b) one of them has no interest in the business of the other,

D and the price is the sole consideration for the sale or offer for sale]:

PROVIDED that such price shall be calculated with reference to the
rate of exchange as in force on the date on which a bill of entry is
presented under Section 46, or a shipping bill or bill of export,i:ls the
case may be, is presented under Section 50;''
E
Section 14(1 A) of the Act states as under:

" Subject to the provisions of sub-section (I), the price referred
to in that sub-section in respect of imported goods shall be determined
in accordance with the rules made in this behalf."
F
Section 30(1) states as under:

"(I) The person-in-charge of - ,
(i) a vessel; or
G (ii) an aircraft; or
(iii) a vel:icle,
carrying imported goods or any other person as may be specified by
the Central Government, by notification in the Official Gazette, in this
behalf shall, in the case of a vessel or an aircraft, deliver to the proper
H
ISPAT INDUSTRIES LTD.'" COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.)7 4 J

officer an import manifest prior to the arrival of the vessel or the A
aircraft, as the case may be, and in the case of a vehicle, an import
report within twelve hours after its arrival in the customs station. in
the prescribed form and ifthe import manifest or the import report or
any part thereof, is not delivered to the proper officer within the time
specified in this sub-section and if the proper officer is satisfied that
there was no sufficient cause for such delay, the person-in-charge or B
any other person referred to in this sub-section, who causes such
delay, shall be liabie to a penalty not exceeding fifty thousand rupees".

Section 31(/) & (2) of the Act state as under:

"(I) The master of a vessel shall not permit the unloading of any C
imported goods until an order has been given by the proper officer
granting entry inwards to such vessel.

(2) No order under sub-section (I) shall be given until an import
manifest has been delivered or the proper officer is satisfied that there
was sufficient cause for not delivering it". D

Section 32 states as under:

"No imported goods required to be mentioned under the regulations
in an import manifest or import report shall, except with the pennission
of the proper officer, be unloaded at any customs station unless they E
are specified in such manifest or report for being unloaded at that
customs station''.

Section 33 states as under :

"Except with the permission of the proper officer, no imported goods F
shall be unloaded, and no export goods shall be loaded, at any place
... other than a place approved under clause (a) of Section 8 for the
unloading or loading of such goods".

Section 34 states as under :
G
"Imported goods shall not be unloaded from, and export goods shall
not be loaded on, any conveyance except under the supervision of
the proper officer":

PROVIDED that the Board may, by notification in the Official Gazette,
give general permission and the proper officer may in any particular H
742 SUPREME COURT REPORTS [2006) SUPP. 6 S.C.R.

A case give special permission, for any goods or class of goods to be
unloaded or loaded without the supervision of the proper officer".

Section 35 states as under :

"No imported goods shall be water-borne for being landed from any
B vessel, and no export goods which are not accompanied by a shipping
bill, shall be water-borne for being shipped, unless the goods are
accompanied by a boat-note in the prescribed form:

PROVIDED that the Board may, by notification in the Official Gazette,
give general permission, and the proper officer may in any particular
C case give special permission, for any goods or any class of goods to
be water-borne without being accompanied by a boat-note".

Section 46( I) states as under :

"The importer of any goods, other than goods intended for transit or
transshipment, shall make entry thereof by presenting to the proper
D
officer a bill of entry for home consumption or warehousing in the
prescribed form".

Section 47(1) states as under :

"Where the proper officer is satisfied that any goods entered for home
E consumption are not prohibited goods and the importer has paid the
import duty, if any, assessed thereon and any charges payable under
this Act in respect of the same, the proper officer may make an order
permitting clearance of the goods for home consumption".

Apart from the above-mentioned provisions in the Act, it is necessary
F
to mention certain provisions in the Customs Valuation (Determination of
Price of Imported Goods) Rules, 1988 (hereinafter referred to as 'The Rules').
,..
Rule 4 (I) & (2) state as under:

"(I) The transaction value of imported goods shall be the price actually
G paid or payable for the goods when sold for export to India, adjusted
in accordance with the provisions of Rule 9 of these rules.
(2) The transaction value of imported goods under sub-rule (I)
above shall be accepted :
H
!SPAT INDUSTRIES LTD. v. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.J 743

Provided that - A
(a) the sale is in the ordinary course of trade under fully competitive
conditions;
(b) the sale does not involve any abnormal discount or reduction
from the ordinary competitive price;
B
(c) the sale does not involve special discounts limited to exclusive
agents;
(d) objective and quantifiable data exist with regard to the adjustments
required to be made, under the provisions of rule 9, to the
transaction value; c
(e) there are no restrictions as to the disposition or use of the goods
by the buyer other than restrictions which -
(i) are imposed or required by law or by the public authorities
in India; or
D
(ii) limit the geographicaf area in which the goods may be resold;
pr

(iii) do not substantially affect the value of the goods;
(f) the sale or. price is not subject to same condition or consideration
E
for which a value cannot be determined in respect of the goods
being valued;
(g) no part of the proceeds of any subsequent resale, disposal or use
of the goods by the buyer will accrue directly or indirectly to the
seller, unless an appropriate adjustment can be made in accordance
with the provisions of Rule 9 of these rules; and F
(h) the buyer and seller are not related, or where the buyer and seller
are related, that transaction value is acceptable for customs
purposes under the provisfons of sub"rule (3) below".
Rule 5(1) states as under : G
"(l)(a) Subject to the provisions of Rule 3 of these rules, the value
of imported goods shall be the transaction value of identieal goods
sold for export to India and imported at or about the same time as the
goods being valued
(b) In applying this rule, the transaction value of identical goods in H
744 SUPREME COURT REPORTS (2006) SUPP. 6 S.C.R.

A a sale at the same commercial level and in substantially the same
quantity as the goods being valued shall be used to determine the
value of imported goods.

(c) Where no sale referred to in clause (b) of sub-rule (I) of this rule,
is found, the transaction value of identical goods sold at a different
B commercial level or in different quantities or both, adjusted to take
account of the difference attributable to commercial level or to the
quantity or both, shall be used, provided that such adjustments shall
be made on the basis of demonstrated evidence which clearly
establishes the reasonableness and accuracy of the adjustments,
whether such adjustment leads to an increase or decrease in the
c value".

Rule 6(1) states as under:

"(I) Subject to the provisions of Rule 3 of these rules, the value of
imported goods shall be the transaction value of similar goods sold
D for export to India and imported at or about the same time as the
goods being valued''.

Rule 9(2) states as under:

"(2) For the purpose of sub-section (I) and sub-section (IA) of
E Section 14 of the customs Act, 1962 (52 of 1962) and these rules, the
value of the imported goods shall be the value of such goods, for
delivery at the time and place of importation and shall include -

(a) the cost of transport of the imported goods to the place of
importation;
F
(b) loading, unloading and handling charges associated with the
delivery of the imported goods at the place of importation;
and
(c) the cost of insurance:
G
Provided that -

(i) where the cost of transport referred to in clause (a) is not
ascertainable, such cost shall be twenty per cent of the free
on board value of the goods;
H
ISPAT INDUSTRIES LTD."· COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.] 745

(ii) the charges referred to in clause (b) shall be one per cent of A
the free on board value of the goods plus the cost of transport
referred to in clause (a) plus the cost of insurance referred
to in clause (c);

• (iii) where the cost referred to in clause (c) is not ascertainable,
such cost shall be 1.125% of free on board value of the B
goods;

Provided further that in the case of goods imported by air,
where the cost referred to in clause (a) is ascertainable, such
cost shall not exceed twenty per cent of free on board value
of the goods: c
Provided also that where the free on board value is not
ascertainable, the costs referred to in clause (a) shall be twenty per
cent of the free on board value of the goods plus cost of insurance
for clause (i) above and the cost referred to in clause (c) shall be
1.125% of the free on board value of the goods plus cost of transport D
for clause (iii) above.

Provided also that in case of goods imported by sea stuffed in a
contained for clearance at an Inland Container Depot or Contained
Freight Station, the cost of freight incurred in the movement of
contained from the port of entry to the Inland Container Deport or E
Container freight Station shall not be included in the cost of transport
referred to in clause (a)." '
Rule 9 (4) states as under:

"No addition shall be made to the price actually paid or payable F
in determining the value of the imported goods except as provided for
in this rule".

From a perusal of the above provisions (quoted above), it is evident
that the most important provision for the purpose of valuation of the goods
for the purpose of assessmentis Section 14 of the Customs Act, 1962. Section G
14( I), has already been quoted above, and a perusal of the same shows that
the value to be determined is a deemed value and not necessarily the actual
value of the goods. Thus, Section 14( I) creates a legal fiction. Section 14( I)
states that the value of the imported goods shall be the deemed price at which
such or like goods are ordinarily sold or offered for sale, for delivery at the H
·,. ~... '•

f . ~
, I
746 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A time and place of importation in the course of international trade. The word
"ordinarily" in Section 14( I) is of great importance. In Section 14( I) we are
not to see the actual value of the goods, but the value at which such goods
or like goods are ordinarily sold or offered for sale for delivery at the time
of import. Similarly, the words "in the course of international trade" are also
B of great importance. We have to see the value of the goods not for each
specific transaction, but the ordinary value which it would have in the
co'trse of international trade at the time of its import.

The view we are taking in this case is in accordance with the three-
Judge Bench decision of this Court in Mis. Rajkumar Knitting Mills (P) ltd
C v. Collector of Customs, Bombay AIR (1998) SC 2602. In para 7 of the said
decision, it was observed thus:

"The words "ordinarily sold or offered for sale" do not refer to the
contract between the supplier and the importer, but to the prevailing
price in the market on the date of importation or exportation"
D
The above decision thus clearly held that it is not the actual price
mentioned in the contract between the supplier and the importer which has
to be seen, but the prevailing price in the market has to be seen. This again
lends support to the view we are taking that Section 14 is a deeming provision
and we have not to take specific cases for determining the value of the
E imported goods unless the same is in accordance with Section 14 of the Act.
Hence, while determining the value of Section 14, we must never lose
sight of the fact that Section 14(1) is a deeming provision which creates a
legal fiction.

F Legal fictions are well-known in law. In the oft-quoted passage of lord
Asquith in East End Dwelling Co. ltd. v. Finsbury Borough Council. [ 1951]
2 All ER 587, it was observed :

"If you are bidden to treat an imaginary state of affairs as real. you
must surely, unless prohibited from doing so, also imagine as real the
G consequence and incidents which, if the putative state of affairs had
in fact existed, must inevitably have flowed from or accompanied it.
The statute says that you must imagine a certain state of affairs; it
does not say that having done so, you must cause or permit your
imagination to boggle when it comes to the inevitable corollaries of
that state of affairs".
H
ISPAT INDUSTRIES LTD."· COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.J 74 7

The observation has been referred to in a large number of Supreme A
Court decisions which have been mentioned in G.P. Singh's 'Principles of
Statutory Interpretation', Ninth Edition (2004) at pp. 327-338, which may be
seen.

In Commissioner of Income Tax, Bombay v. Bombay Corporation, AIR
(1930) PC 54, Lord Dunedin observed thus: B
"Now when a person is 'deemed to be' something the only meaning
possible is that whereas he is not in reality that something the Act
of Parliament requires him to be treated as if he were."

Learned counsel for the respondent, no doubt, emphasized on Rule 9 C
of the Rules (quoted above), but it must be realized that Rule 9 cannot be
given an interpretation which is in violation of Section 14 of the Act. After
all, the rules are subservient to the Act and cannot deviate from the provisions
of the parent Act.

Learned counsel for the Revenue emphasized on Rule 9(2)(a) of the D
Rules in support of his contention that barging charges have also to be
included in the value of the imported goods as they are also transportation
charges.

On first impression the submission of learned counsel for the Revenue E
appears to be sound, because surely the transportation by barge is also part
of the transportation of the goods. However, on a deeper analysis, we are of
the opinion that the submission of the learned counsel of the Revenue is
clearly untenable. Admittedly, all the contracts entered into with the foreign
sellers are either CIF contracts or FOB contracts with Bills of Lading nominating
Bombay/JNPT/Dharamtar as the ports of discharge. As such the cost of F
transport has already been included in the price paid to the seller under the
CIF contract or an ascertainable freight determined and paid by the buyer
from the foreign port to the Indian port. Hence, a further addition to the
transport charges under Rule 9(2)(a) of the Customs Valuation Rules, I988 is
in our opinion clearly impermissible.
G
If we read Rule 9(2) of the Rules independently without considering it
along with Section 14 of the Act, then of course the submission of the learned
counsel for the Revenue could be sustained. However, in our opinion, Rule
9(2) has to be read along with Section 14 and it cannot be read independently.
As already stated above, Section 14 creates a legal fiction and we have to H
748 SUPREME COURT REPORTS [2006) SUPP. 6 S.C.R.

A see the ordinary value of the imported goods in the course of international
trade at the place and time of import. This means that specific cases of import
should be ignored. In fact, it is for this reason that Rules 4, 5 and 6 of the
Rules have been promulgated. The actual price paid for the goods can only
be taken into consideration provided the sale is in the ordinary course of
...
B trade under fu/~y competitive conditions and the other provisions of Rule 4
are satisfied

It is well-known that there are sales in which there is under-invoicing
or over-invoicing or for some other reasons the sale is not under full competitive
conditions. In such a case, Rules 5 & 6 have to be resorted to and the actual
C price has not to be seen. Thus, the Rules have been created to serve the
object of Section 14 which was to determine a deeming price and not the
actual price of the imported goods.

In our opinion if there are two possible interpretations of a rule, one
which subserves the object of a provision in the parent statute and the other
D which does not, we have to adopt the former, because adopting the latter will
make the rule ultra vires the Act.

In this connection, it may be mentioned that according to the theory of
the eminent positivist jurist Kelsen (The Pure Theory of Law) in every legal
system there is a hierarchy of laws, and whenever there is conflict between
E a norm in a higher layer in this hierarchy and a norm in a lower layer the norm
in the higher layer will prevail (see Ke/sen 's 'The General Theory of Law and
State).

In our country this hierarchy is as follows :

F (I) The Constitution of India;
(2) The Statutory Law, which may be either Parliamentary Law or
Law made by the State Legislature;
(3) Delegated or subordinate legislation, which may be in the form
of rules made under the Act, regulations made under the Act,
G etc.;
(4) Administrative orders or executive instructions without any
statutory backing.

The Customs Act falls in the second layer in this hierarchy whereas the
H rules made under the Act fall in the third layer. Hence. if there is any conflict
ISPAT INDUSTRIES LTD. v. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.1749

between the provisions of the Act and the provisions of the Rules, the fonner A
will prevail. However, every effort should be made to give an interpretation
to the Rules to uphold its validity. This can only be possible if the rules can
be interpreted in a manner as to be in confonnity with the provisions in the
Act, which can be done by giving it an interpretation which may be different
.... from the interpretation which the rule could have if it was construed
independently of the provisions in the Act. In other words, to uphold the B
validity of the rule sometimes a strained meaning can be given to it, which
may depart from the ordinary meaning, if that is necessary to make the rule
in confonnity with the provisions of the Act. This is because it is a well
settled principle of interpretation that if there two interpretations possible of
a rule, one of which would uphold its validity while the other which would C
invalidate it, the fonner shou Id be preferred.

In this connection we may also refer to the Gunapradhan Axiom of the
Mimansa Principles of Interpretation, which is our indigenous system of
interpretation (see K.L. Sarkar's 'Mimansa Rules of Interpretation, Second
Edition p. 71). D
It is deeply regrettable that in our Courts of Law, lawyers quote Maxwell
and Craies but nobody refers to the Mimansa Principles of Interpretation. Few
people in our country are aware about the great intellectual achievements of
our ancestors and the intellectual treasury they have bequeathed us. The
Mimansa Principles of Interpretation is part of that intellectual treasury, but E
it is distressing to not(; that apart from a reference to these principles in the
judgment of Sir John Edge, the then Chief Justice of Allahabad High Court,
in Beni Prasad v. Hardai Devi, (1892) ILR I4 All 67 (FB), and in the judgments
of one of us (Markandey Katju, J.) while a Judge of Allahabad High Court
(which have been annexed to the Second Edition ofK.L. Sankar's book), there p
has been almost no utilization of these principles even in our own country.

It may be mentioned that the Mimansa Rules of Interpretation were our
traditional principles of interpretation laid down by Jaimini in the 5th Century
B.C. whose Sutras were explained by Shabar, Kumarila Bhatta, Prabhakar,
etc. The Mimansa Rules of Interpretation were used in our country for at least G
2500 years, whereas Maxwell's First Edition was published only in I 875.
These Mimansa Principles are very rational and logical and they were regularly
used by our great jurists like Vijnaneshwara (author of Mitakshara),
Jimutvahana (author of Dayabhaga), Nanda Pandit, etc. whenever they
found any conflict between the various Smritis or any ambiguity or incongruity H
750 SUPREME COURT REPORTS (2006) SUPP. 6 S.C.R.

A therein. There is no reason why we cannot use these principles on appropriate
occasions even today. However, it is a matter of deep regret that these
principles have rarely been used in our law Courts. It is nowhere mentioned
in our Constitution or any other law that only Maxwell's Principles of

B
Interpretation can be used by the Cou11. We can use any system of
interpretation which helps us solve a difficulty. In certain situations Maxwell's
principles would be more appropriate. while in other situations the Mimansa
principles may be more suitable. One of the Mimansa principles is the
-
Gunapradhan Axiom, and since we are utilizing it in this judgment we may
describe it in some detail. 'Guna' means subordinate or accessory, while
'Pradhan' means principal. The Gunapradhan Axiom states:
c "If a word or sentence purporting to express a subordinate idea
clashes with the principal idea, the former must be adjusted to the
latter or must be disregarded altogether".

This principle is also expressed by the popular maxim known as 'matsya
D nyaya ', i.e. 'the bigger fish eats the smaller fish'. According to Jaimini, acts
are of two kinds, principal and subordinate. In Sutra 3 : 3 : 9 Jaimini states:

"Guna mukhya vyatikramey tadarthatvan mukhyen vedasanyogah ,.
E
Kumarila Bhatta, in his Tantravartika (See Ganganath Jha's English Translation
Vol. 3, p. 1141) explains this Sutra as follows:

"When the Primary and the Accessory belong to two different Vedas,
the Vedic characteristic of the Accessory is determined by the Primary,
F as the Accessory is subservient to the purpose of the primary."

It is necessary to explain this Sutra in some detail. The peculiar quality
of the Rigveda and Samaveda is that the mantras belonging to them are read
aloud, whereas the mantras in the Yajurveda are read in a low voice. Now the
difficulty arose about certain ceremonies, e.g. Agnyadhana, which belong to
G the Yajurveda but in which verses of the Samaveda are to be recited. Are
these Samaveda verses to be recited in a low voice or loud voice ? The
answer, as given in the above Sutra, is that they are to be recited in low voice,
for although they are Samaveda verses, yet since they are being recited in
a Yajurveda ceremony their attribute must be altered to make it in accordance
H with the Yajurveda.
ISPAT INDUSTRIES LTD. .-. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.] 751

In the Shabar Bhashya translated into English by Dr. Ganga Nath Jha, A
published in the Gaekwad Oriental Series, the Sutra is read as follows :

"Where there is a conflict between the use and the substance greater
regard should be paid to the use"

Commenting on Jaimini 3 : 3 : 9 Kumarila Bhatta says : B
"The Siddhanta laid down by this Sutra is that in a case where there
. is one qualification pertaining to the Accessory by itself and another
pertaining to it through the Primary, the fonner qualification is always
to be taken as set aside by the latter. This is because the proper
fulfilment of the Primary is the business of the Accessory also as the C
latter operates solely for the sake of the fonner. Consequently if, in
consideration of its own qualification it were to deprive the Primary
of its natural accomplishment then there would be a disruption of that
action (the Primary) for the sake of which it was meant to operate.
Though in such a case the proper fulfilment of the Primary with all its D
accompaniments would mean the deprival of the Accessory of its own
natural accompaniment, yet, as the fact of the Accessory being
equipped with all its accompaniments is not so very necessary (as
that of the primary}, there would be nothing incongruous in the said
deprival". (See Ganganath Jha's English translation of the
Tantravartika, vol. 3 p. 1141). E
The Gunapradhan Axiom can also be deducted from Jaimini 6 : 3 : 9
which states :

"When there is a conflict between the purpose and the material, the
purpose is to prevail, because in the absence of!he prescribed material p
a substitute can be used, for the material is subordinate to the purpose".

To give an example, the prescribed Yupa (sacrificial post for tying the
sacrificial animal) must be made of Khadir wood. However, Khadir
wood is weak while the animal tied may be restive. Hence, the Yupa
can be made of Kadar wood which is strong. Now this substitution G
is being made despite the fact that the prescribed wood is Khadir, but
this prescription is only subordinate or Accessory to the perfonnance
of the ceremony, which is the main object. Hence if it comes in the
way of .the ceremony being performed, it can be modified or
substituted."
H
752 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A In our opinion, the Gunapradhan principle is fully applicable to the
interpretation of Rule 9(2). Rule 9(2) is subservient to Section 14. We must,
therefore, interpret it in such a way as to make it in accordance with the main
object that is contained in Section 14 of the Customs Act. It may be that in
isolation Rule 9(2) conveys some other meaning, but when it is read along
B with Section 14 of the Act, it must be given a meaning which is in accordance
with the object of Section 14. The object of Section 14 is 'primary' whereas
the conditions in Rule 9(2) are the 'accessories'. The 'accessory' must,
therefore, serve the 'primary'.

In our opinion, it is really not necessary to decide whether the place of
C importation is the jetty or the BFL. Whether the place of import is deemed
to be the BFL or Dharamtar jetty it would make no difference to the conclusion
we have arrived at because the cost of transportation of the imported goods
has already been included for delivery at the Dharamtar jetty and has already
been paid to the seller in the CIF or FOB contract. Hence, a further addition
to the transport charges in the form of barge charges for the transportation
D by barges cannot be said to be contemplated by Section 14 of the Act.

Learned counsel for the Revenue has relied upon a decision of this
Court in Garden Silk Mills Ltd v. Union of India, (1999) ( 113) EL T 358(SC),
in which it was observed thus:

E "It was further submilted that in the case of Apar 's Private Limited
this Court was conce .1ed with Sections 14 and 15 but here we have
to construe the word "imported" occurring in Section 12 and this can
only mean that the moment goods have entered the territorial water,
the import is complete. We do not agree with the submission. This
Court in its opinion in Re. The Bill to Amend Section 20 of the Sea
F
Customs Act, 1878 and Section 3 of the Central Excises and Salt Act,
1944, [1964] 3 SCR 787 at page 823 observed as follows:
"Truly speaking, the imposition of an import duty. by and large,
results in a condition which must be fulfilled before the goods
can be brought inside the customs barriers i.e. before th~y form
G
part of the mass of goods within the country."
It would appear to us that the import of goods into India would
commence when the same cross into the territorial waters but continues
and is completed when the goods become patt of the mass of goods
within the country; the taxable event being reached at the time when
H
!SPAT INDUSTRIES LTD. v. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.]753

the goods reach the customs barriers and the bill of entry for home A
consumption is filed".

On the strength of the above observation in the Garden Silk case
(supra), learned counsel has submitted that the place of importation is not
where the ship is anchored (BFL), but the jetty which has been approved for
unloading of the goods under Section 8 of the Act. Hence, he submitted that B
the transportation charges for carrying goods from the mother ship by barges
to the jetty has also to be included in the valuation of the goods for imposing
duty. In our opinion, the decision of this Court in Garden Silk (supra) is
clearly distinguishable.

It may be noted that Garden Silk (supra) was a case where the question C
was whether landing charges could be included in the value of the imported
goods for the purpose of valuation of the goods for imposing custom duty.
That was not a case relating to transportation charges nor was it a case
relating to charges for transportation of goods from the mother ship on a
barge to the place (jetty) approved under Section 8(a) of the Act. For the same D
reason the decision of this Court in Coromandal Fertilizer Ltd v. Collector
of Customs, [2000] I SCC 448, also is not relevant because that decision also
is a case relating to landing charges and has nothing to do with the question
as to whether transportation charges for transporting the goods from the
mother ship by barge to the place approved under Section 8(a) has to be
added for the purpose of valuation of the goods for imposing custom duty. E

Similarly, the decision in. Union of India v. Apar Industries Limited,
( 1999) 5 JT 160 is also not relevant. In that case the facts were that the day
when the goods entered the territorial waters, the rate of duty was nil but
when they were removed from the warehouse, the duty had become leviable.
In this context, this Court held that what is material is not the date when the F
goods entered the territorial waters of India but the date mentioned in Section
15 of the Act. Thus, Apar Industries case (supra) has also nothing to do with
the question which we were dealing with in the present case.

In Dhiraj Lal H. Vohra and Ors. vs. Union of India and Ors., [1993) G
Supp.3 SCC 453, the facts were that the appellants' ship arrived on February
20, 1989 at Madras port and was ready to discharge the cargo. It delivered
the import manifest under No. 116 on the said date but due to continued strike
the cargo could not be handled. On February 27, 1989 the petitioner presented
the bill of entry "for clearance of goods for home consumption" and it was
entered at No. 012036 which was received in the appraising section of the H
754 SUPREME COURT REPORTS [2006f SUPP. 6 S.C.R.

A group on February 28, 1989. The ship arrived into the port and was berthed
on March 2, 1989. The entry inward was granted on March 2, 1989. From
March I, 1989 the rate of excise duty was altered. It was increased to 150 per
cent ad valorem plus Rs. 300 per piece for certain sizes and for other sizes
duty was raised to 150 per cent ad valorem plus weight-based duty. The result
B was that pre-tariff duty was Rs. 15, 73,611.05 while as per the new tariff levy
effective from March I, I989 the difference came to Rs. 1,80,46,092.64.

On these facts, the Supreme Court observed thus:

"The contention, therefore, that the ship entered Indian territorial
waters on February 20, 1989 and was ready to discharge the cargo is
c not relevant for the purpose of Section 15( I) read with Sections 46
and 31 of the Act. The prior entries regarding presentation of the bill
of entry for clearance of the goods on February 27, 1989 and their
receipt in the appraising section on February 28, 1989 also are
irrelevant. The relevant date to fix the rate of customs duty, therefore,
D is March 2, 1989. The rate which prevailed as on that date would be
the duty to which the goods impo11ed are liable to the impost and the
goods would be cleared on its payment in accordance with the rate
of levy of customs prevailing as on March 2, 1989".

A careful perusal of the decision in Dhiraj Lal's case (supra) again
E shows that this decision is not relevant for deciding the present case as it
was not a case where the goods were discharged from the mother ship on to
barges from where they were taken to the places approved under Section 8(a)
of the Act.

In Kiran Spinning Mills v. Collector of Customs, AIR (iOOO) SC 3448,
F this Court observed :
"That apart, this Court has held in Sea Customs Act, (1964] 3 SCR 787
at pag'! 803: AIR ( 1963) SC 1760 that in the case of duty of customs
the taxable event is the import of goods within the customs barriers.
In other words, the taxable event occurs when the customs barrier is
G crossed. In the case of goods which are in the warehouse the customs
barriers would be crossed when they are sought to be taken out of
the customs and brought to the mass of goods in the country". ·-
A perusal of the facts of the abo\"e case reveals that it was not a case
H in which the que:.tion whether the transportation charges for carrying the
JSPAT INDUSTRIES LTD.''· COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU. J.]755

goods from the mother ship by barges to the place approved under Section A
8(a) was to be added was involved. Hence this decision is also distinguishable.

Learned counsel for the Revenue relied upon a Constitution Bench
judgment in Mis. Bharat Swfactants (Pvt) ltd. and Anr. v. Union of India
and Anr., AIR (1989) SC 2054, in para 14 of which it was observed:
B
"We do not find it possible to accept this submission. The provisions
of S.15 are clear in themselves. The date on which a Bill of Entry is
presented under S. 46 is, in the case of goods entered for home
consumption, the date relevant for determining the rate of duty and
tariff valuation. Where the Bill of Entry is presented before the date C
of Entry Inwards of the vessel, the Bill of Entry is deemed to have
been presented on the date of such Entry Inwards".

In our opinion, this case has no relevance in the present case. The facts
there were that although the ship in question entered Bombay port and
registered itself there but was unable to secure a berth in the port of Bombay D
at that time. Hence the vessel under pressing circumstan.:es left for Karachi
port for unloading other cargo intended for that port. On return to Bombay
port, it was asked to pay a higher rate of duty which had been increased in
the meantime. It was in that connection that the aforesaid observation was
made by the Constitution Bench. Clearly, this decision has nothing to do with
the present case, because it was not concerned with transportation charges E
by a barge.

Thus, it appears that most of the decisions cited by learned counsel for
both the parties in this case are not very relevant for deciding the controversy
in issue here.
F
It must be remembered in this context that a case is only an authority
for what it actually decides. As observed by the Supreme Court in State of
Orissa v. Sudhansu Sekhar Misra. AIR (1968) SC 647 (vide para 13):

"A decision is only an authority for what it actually decides. What
is of the essence in a decision is its ratio and not every observation G
found therein nor what logically follows from the various observations
made in it. On this topic this is what Earl of Halsbury, LC said in
Quinn v. Leathern (1901) AC 495:

Now before discussing the case of Allen v. Flood, (1898) AC 1 and
H
756 SUPREME COURT REPORTS [2006) SUPP. 6 S.C.R.

A what was decided therein, there are two observations of a general
character which I wish to make, and one is to repeat what I have very
often said before, that every judgment must be read as applicable to
the particular facts proved, or assumed to be proved, since the
generality of the expressions which may be found there are not intended
to be expositions of the whole law, but governed and qualified by the
B particular facts of the case in which such expressions are to be
found. The other is that a case is only an authority for what it actually
decides. I entirely deny that it can be quoted for a proposition that
may seem to follow logically from it. Such a mode of reasoning
assumes that the law is necessarily a logical Code, whereas every
c lawyer must acknowledge that the law is not always logical at all".

In Ambica Quarry Works v. State a/Gujarat and Ors., (1987] l SCC 213,
this Court observed :

"The ratio of any decision must be understood in the background of
D the facts of that case. It has been said long time ago that a case is
only an authority for what it actually decides, and not what logically
fol10ws from it".

In Bhavnagar University v. Palitana Sugar Mills Pvt. Ltd., (2003] 2
SCC 111, this Court observed :
E
"It is well settled that a little difference in facts or additional facts
may make a lot of difference in the precedential value of a decision".

In Bharat Petroleum Corporation Ltd. and Anr. v. N.R. Vairamani and
Anr., AIR (2004) SC 4778, it was held that a decision cannot be relied on
F without disclosing the factual situation. In the same judgment this Court held
as under:

"Courts should not place reliance on decisions without discussing as
to how the factual situation fits in with the fact situation of the
decision on which reliance is placed. Observations of courts are
G neither to be read as Euclid's theorems nor as provisions of the
statute and that too taken out of their context. These observations
must be read in the context in which they appear to have been stated.
Judgment of Courts are not to be construed as statutes. To interpret
words, phrases and provisions of a statute, it may become necessary
for judges to embark into lengthy discussions but the discussion is
H
!SPAT INDUSTRIES LTD. v. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KA TJU, J. ]7 57

meant to explain and not to define. Judges interpret statutes, they do A
not interpret judgment. They interpret words of statutes; their words
are not to be interpreted as statutes".

In London Graving Dock Co. Lid. v. Horton, ( 1951) AC 737 at p. 761,
t"ord Mac Dermot observed:
B
"The matter cannot, of course, be settled merely by treating the
ipsissima verba of Willes, J as though they were part of an Act of
Parliament and applying the rules of interpretation appropriate thereto.
This is not to detract from the great weight to be given to the
language actually used by that most distinguished Judge".
c
In Home Office v. Dorset Yacht Co., [1970) 2 All ER 294 Lord Reid said,
"Lord Atkin's speech is not to be treated as if it was a statute definition. It
will require qualification in new circumstances." Mcgarry, J in (1971) I WLR
I062 observed: "One must not, of course, construe even a reserved judgment
of Russell L. J as if it were an Act of Parliament". And in Herrington v. British D
Railways Boards, (1972) 2 WLR 537, Lord Morris said:

"There is always peril in treating the words of a speech or judgment
as though they are words in a legislative enactment, and it is to be
remembered that judicial utterances made in setting of the facts of a
~~~ E
Circumstantial flexibility, one additional or different fact may make a
world of difference between conclusions in two cases. Disposal of
cases by blindly reliance on a decision is not proper.

The following words of Lord Denning in the matter of applying
precedents have become locus classicus: F
"Each case depends on its own facts and a close similarity between
one case and another is not enough because even a single significant
detail may after the entire aspect. In deciding such cases, one should
avoid the temptation to decide cases (as said by Cordozo) by matching G
the colour of one case against the ~olour of another. To decide
therefore, on which side of the line a case falls, the broad resemblance
to another case is not at all decisive.

H
758 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A "Precedent should be followed only so far as it marks the path of
justice, but you must cut the dead wood and trim off the side branches
else you will find yourself lost in tickets and branches. My plea is to
keep the path of justice clear of obstructions which could impede it".

Hence, the decisions of the Court cited by the appellant's counsel are
B confined to their own facts and can have no application to the present case.
In the present case, the vessel had been anchored and permission by
the proper officer under Section 47 after examination of the cargo had been
granted after due payment, and goods were allowed to be water-borne through
a Boat Note under Section 35.
c
The goods were unloaded from the mother ship on to the barge at BFL
which, do doubt, had not been approved as the landing place under Section
8 of the Act. However, Section 33 permits unloading at a place other than that
approved under Section 8 with the permission of the proper officer, and there
D is no doubt that permission had been obtained under Section 33 under the
supervision of the proper officer under Section 34, and the goods were
accompanied by a Boat Note under Section 35 of the Customs Act. Hence,
unloading of the goods from the mother ship at the BFL was valid, since it
was done in accordance with Sections 33 and 34 of the Customs Act. No
doubt, the BFL had not been approved as proper place under Section 8(a),
E but it was a place where the mother ship could anchor. Hence, in our opinion,
there is no illegality.

In the impugned order dated 7.3.200 I the Tribunal has based its decision
on its conclusion that the place of import was the Dharamtar Jetty and not
the BFL (vide paragraphs 9 to 18 of The Tribunal's order). Without commenting
F on the correctness or otherwise of this view, we are of the opinion that
whether we treat the place of import as BFL or the Dharamtar jetty it will make
no difference to the conclusion we have reached viz. that charges for transport
of the goods by barges from BFL to Dharamtar jetty cannot be included in
the valuation of the goods.
G
It is not disputed that the freight upto the Dharamtar jetty had been
paid by the buyer. Hence we cannot agree that additional transportation
charges being the charges for carrying the goods by barges from the mother
ship to the Dharamtar Jetty have to be added to the valuation. The fact that
the mother ship could not come upto the Dharamtar Jetty is an extraordinary
H situation (due to lack of draft) and hence any extra transportation charge to
!SPATINDUSTRIES LTD. r. COMMNR. OF CUSTOMS, MUMBAI [MARKANDEY KATJU, J.J 759

meet this situation cannot, in our opinion, be added to the value of the goods. A

The bills of lading show that the port of discharge was Mumbai Port/
JNPT/Dharamtar. In the bill of entry, the FOB price, freight and insurance were
shown separately in U.S. dollars. Since Dharamtar was also shown as the port
of discharge, the freight charges paid by the buyer to the shippers included
the charges for freight not only upto BFL but also to Dharamtar. B
The view we are taking is in accordance with the view expressed in
Halsbury's Laws ofEngland, Fourth Edition Vol.43(2): Shipping and Navigation
pa·ra 1707 where it is stated :

"170 7. Proceeding - so near to port of discharge as ship can safely C
get'. In practice, the contract usually provides that the ship is to
proceed to the port of discharge or so near to it as she can safely get.
This provision is intended to benefit the ship owner, and its effect is
to substitute another destination to which the ship may proceed. By
proceeding to this other destination and delivering the cargo there, D
the ship owner equally completes the voyage in accordance with the
terms of the contract, and is thus entitled to be paid the full freight."

For the reasons given above, this appeal is allowed and the impugned
order of the Tribunal as well as of the Customs authorities are set aside, and E
it is held that the charges for transportation of the goods by barges from the
mother ship at BFL to the Dharamtar Jetty cannot be added to the valuation
of the imported goods for the purpose of levying customs duty.

Any amount collected by the revenue as duty on barge charges shall
be refunded forthwith to the assessee with statutory interest from the date F
of payment to the date of refund, which must be within three months from
today. No costs.

Civil Appeal Nos. 636612004, 160312005, 6160-616112004 & 5921-
592412004
G
In view of the decision in Civil Appeal No. 3972 of 200 I, Civil Appeal
Nos. 6366/2004 and 1603/2005 are allowed and Civii Appeal Nos. 6160-6161/
2004 and 5921-5924/2004 filed by the Revenue are dismissed. No costs.

BK. Appeal allowed.
H