WIPRO LTD.versusASSISTANT COLLECTOR OF CUSTOMS & ORS.

                         [2015] 4 S.C.R. 640


A                            WIPRO LTD.
                                   v.
         ASSISTANT COLLECTOR OF CUSTOMS & ORS.

               (Civil Appeal Nos. 9766-9775 of 2003)
B
                           APRIL 16, 2015

               [A.K. SIKRI AND R. F. NARIMAN, JJ.]

C        Customs Valuation (Determination of Price of Imported
    Goods) Rules, 1988: r.9(2), proviso (ii) - Constitutional
    validity of - Impugned provision entitling authorities to add
    1% of F 0. 8. value of goods on account of loading, unloading
    and handling charges - Held: This proviso, introduces fiction
o 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 - It
    is contrary to the provisions of s. 14 and would clearly be ultra
    vires this provision - When the actual charges paid are
E available and ascertainable, then introducing a fiction for
    arriving at the purported cost of loading, unloading and
    handling charges is clearly arbitrary with no nexus with the
    objectives sought to be achieved - It goes against the
    objective behind s. 14 namely to accept the actual cost paid
F 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 F.0.8. value is thus, in the circumstance, clearly
    arbitrary and irrational and would be violative ofArticle 14 of
    the Constitution - The said provision is not sustainable and
G has to be read down to mean that the clause would apply
    only when actual charges are not ascertainable - Constitution
  · of India, 1950-Art. 14 - Customs Act, 1962 - s. 14.


H                                 640
WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 641


  · Allowing the appeals, the Court                              A

     HELD: 1.1. A conjoint reading of Rules 3 and 4 would
make it clear that the value of the imported goods has to
be the transaction value and in those cases where
transaction value cannot be determined, such a value is          B
to be determined by resorting to Rules 5 to 8 thereof in a
sequential order. As per the formula contained in sub-
rule (1) of Rule 4, 'the authorities are to find out the price
actually paid or payable for the goods when sold for
exports to India, to arrive at the value of the goods. Once      C
this value is arrived at, it is to be adjusted in accordance
with the provisions of Rule 9 of the said Rules. The final
outcome, after such an adjustment made, is to be treated
as transaction value to attract the import duty thereupon.
As per Rule 5, in those cases where the transaction value        D
is indeterminable, transaction value of "identical goods"
is to be taken into consideration. Rule 6 mentions about
transaction value of "similar goods". If this is also
inapplicable then "deductive value" is to be arrived at in
terms of formula contained in Rule 7. If that is also            E
inapplicable, residual method is provided in Rule 8 which
prescribes that the value shall be determined using
"reasonable means" consistent with the principles of
general provisions of these Rules and sub-section (1)            F
of Section 14 of the Customs Act. [Paras 5, 6] [647-H]
[648-A-B, F-G]
     1.2. Once the transaction value is arrived at by
applying the formula applicable in a given case in terms
of aforesaid provision, exercise is still incomplete.            G
Adjustments to this value are still to be made in
accordance with the provision of Rule 9. Rule 9 deals
with "cost of services". It lays down that in determining
the transactional value, cost of certain services is to be
added to the price actually paid or payable for the              H
642      SUPREME COURT REPORTS                [2015] 4 S.C.R.


A imported goods, as mentioned in clauses (a) to (e) of sub-
  rule (1) of Rule 9. Rule 9 was amended in the year 1989
  and 1990. Clause (ii) of first proviso mandated addition
  of one per cent of the F.O.B. value of the goods plus the
  cost of transport referred to in clause (a) plus the cost of
B insurance referred to in clause (c). In the present case, it
  was on the strength of this proviso, even when the actual
  handling charges were shown as Rs.69.98 paisa, that
  too as fixed by the International Airport Authority, the
  customs authorities added further sum of Rs.15,214.69
C paisa to the value of goods of handling charges, being
  one per cent free on board value of the goods. The
  appellant was aggrieved by this addition and handling
  charges on notional basis pursuant to the said proviso.
D [Paras 7 to 11] [649-E-G; 652-E; 654-B-E; 653-C]
       2. Scheme of customs duties as payable under the
  Act. The yardsticks for arriving at the value of the goods
  imported and exported are contained in Section 14 of
  the Customs Act. This provision was amended in the year
E 2007. Under the new provision, the valuation is based
  on the transaction price namely, the price "actually paid
  or payable for the goods". The underlying principle
  contained in amended sub-section (1) of Section 14 is
  to consider transaction value of the goods imported or
F exported for the purpose of customs duty. Transaction
  value is stated to be a price actually paid or payable for
  the goods when sold for export to India for delivery at
  the time and place of importation. [Para 19 to 22] [660-
G A,D; 661-H; 663-G; 664-G-H; 665-A]
       3. Rule 9 categorically 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. Clause (a) of sub-rule
H (1) of Rule 9 which specifies the said heads, cost whereof
WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 643


is to be added to the price, again mandates that it is to   A
be "to the extent they are incurred by the buyer". That
would clearly mean the actual cost incurred. Clause (b)
of sub-rule (2) of Rule 9 deals with loading, unloading
and handling charges associated with the delivery of
imported goods at the place of importation, which are to    B
be included to arrive at the value of such imported
goods. The provision of sub-rule (2) of Rule 9, as
originally stood, made it clear that wherever loading,
unloading and handling charges are ascertainable i.e.
actually paid or payable, it is those charges that would    C
be added. Proviso to the said Rule contained the
provision that only in the event the same are not
ascertainable, it shall be 25% of the free on board value
of such goods. Even when the said proviso was
                                                            0
amended vide notification dated 19.12.1989, the spirit
behind the unamended proviso was maintained and kept
intact. Only difference was that instead of addition of
25% of free on board value of goods in respect of all the
three kinds of charges, under the amended proviso, this     E
percentage fixed was different in respect of each of the
said charges. Insofar as loading. unloading and handling
charges were concerned, it was reduced to 1% of the
free on board value of goods and in case of insurance
charges, the amended provision provided for such cost       F
at 1.125% free on board value of goods. However, the
spirit behind this proviso continued to be the same viz.
the proviso was to made applicable only when the actual
cost was indeterminable. In contrast, however,
impugned amendment dated 05.07 .1990 changed the            G
entire basis of inclusion of loading, unloading and
handling charges associated with the delivery of the
imported goods at the place of importation. The proviso
now stipulates 1% of the free on board value of the
goods irrespective of the fact whether actual cost is       H
644         SUPREME COURT REPORTS                 [2015] 4 S.C.R.


A ascertainable or not. This proviso, introduces fiction 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. It is contrary to the provisions of Section
B 14 and would clearly be ultravires this provision. When
  the actual charges paid are available and ascertainable,
  introducing a fiction for arriving at the purported cost of
  loading, unloading and handling charges is clearly
  arbitrary with no nexus with the objectives sought to be
C 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.
D Addition of 1% of free on board value is thus, in the
  circumstance, clearly arbitrary and irrational and would
  be violative of Article 14 of the Constitution. [paras 27 to
  31] [668-B-E, H; 669-A, D-G; 670-A-G]
         Kunj Behar Lal Bula// v. State of H.P (2000) 3 SCC 40:
 E    2000 (1) SCR 1054- relied on.

          Garden Silk Mills Ltd. v. Union of India (1998) 8 SCC
      744; Indian Acrylics v. Union of India and Anr. (2000) 2 SCC
      678 - referred to.
 F
                          Case Law Reference

       1998) 8 sec 744           referred to.         Para 14

       (2000) 2 sec 678          referred to.         Para 16
G
       2000 (1) SCR 1054         relied on.           Para 35
         CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
      9766-9775 of 2003
H         From the Judgment and Order dated 11.10.2002 of the
 WI PRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 645


Division Bench of High Court of Judicature at Madras in Writ       A
Petitions No. 14833 to 14836of1994 and Writ Appeals No.
1079, 1080 and 1213 to 1216 of 2000.

                              with
                                                                   B
     C. A. Nos. 1950-1951 of 2004.

   K. T. Anantharaman, Vasudevan Raghavan for the
Appellant.

    K. Radhakrishnan, Arijit Prasad, Rashmi Malhotra, B.           C
Krishna Prasad, for the Respondents.

    The Judgment of the Court was delivered by

     A.K. SIKRI, J. 1. These appeals are preferred by the          D
appellant challenging the validity of judgment dated
11.10.2002 passed by the Division Bench of the High Court
of Judicature at Madras. The High Court has, vide the said
judgment, disposed of few writ petitions filed under Article 226
of the Constitution of India as well as certain writ appeals       E
which were filed against the orders of the single Judge. All
the aforesaid writ petitions and writ appeals were preferred
by the appellants herein.

     2) The subject matter of those writ petitions/writ appeals F
was the constitutional validity of proviso (11-i) of Rule 9(2) of
the Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988 (hereinafter referred to as the 'Valuation
Rules"). This proviso has been inserted by Notification No.39/
90 dated 05.07.1990 issued by the Ministry of Finance, G
Department of Revenue, Union of India. As per the appellant,
this proviso is not only ultravires Section 14(1) and Section
14( 1-A) of the Customs Act, 1962 (hereinafter referred to as
the 'Act') but is also violative of Article 14 and Article 19( 1)(g)
of the Constitution of India. The challenge, however, stands H
646         SUPREME COURT REPORTS                  [2015) 4 S.C.R.


A     repelled by the High Court in the impugned judgment leading
      to dismissal of writ petitions and writ appeals. This is how
      these appeals have come up in this Court, via special leave
      petition route, in which leave was granted.

 s      3) In order to understand the controversy, purpose would
   be served in taking note of the facts from the Writ Appeal
   No.1079/2000 which was filed by the appellant in the High
   Court. The appellant is engaged in the manufacture and
   marketing of Mini and Micro Computer Systems ar:id
 C peripheral devices like printer, drivers etc. It, inter alia,
   imported various components including software from time to
   time. The appellant presented a Bill of Entry No.15020 dated
   15.04.1993. The chargeable weight of the consignment was
   315 kgs and the actual loading, unloading and handling
 D charges amounted to Rs.65.40 paisa as per the tariff of the
   International Airport Authority of India, Madras (now Chennai).
   However, the Customs Authorities, on the basis of the
   impugned notification added a sum of Rs.15,214.69 paisa to
   the value of the goods as handling charges as the impugned
 E provision entitles the authorities to add 1% of the F. 0 .B. value
   of goods on account of loading, unloading and handling
   charges. The actual duty charged, as a consequence of
   addition of the notional handling charges, amounted to
 F Rs.16,209.20 paisa instead of Rs.69.98 paisa.

       4) At this juncture, instead of proceeding further with the
  factual narration, we would like to deviate a bit and take note
  of the relevant valuation rules and the amendments made
  therein from time to time. These rules are made in exercise
G of powers conferred under Section 156 of the Customs Act,
   1962, read with Section 22 of the General Clauses Act, 1897.
  The purpose of these rules is to arrive at the valuation of the
  imported goods to enable the customs authorities to levy duty
H thereupon, on the basis of the value so arrived at. Rule 2 is
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 647
                    [A.K. SIKRI, J.]

the "definition" clause whereunder certain terms are defined.    A
Rule 2(f) defines "transaction value" to mean the value
determined in accordance with Rule 4 of these Rules. This
is to be read along with Rule 3. We, therefore, reproduce Rule
3 and relevant portion of Rule 4 hereunder:
                                                                 B
     "3. Determination of the method of valuation-

       For the purpose of these rules, -

     (i) the value of imported goods shall be the transaction
     value;                                                      C

     (ii) if the value cannot be determined under the
     provisions of Clause (i) above, the value shall be
     determined by proceeding sequentially through Rules 5
     to 8 of these rules.                                  D

     4. Transaction Value - (1) The transaction value of
     imported goods shall be the price actually paid or
     payable for the goods when sold for export to India,
     adjusted in accordance with the provisions of Rule 9 of E
     these rules.

     (2) The transaction value of imported goods under sub-
     rule (1) above shall be accepted.
                                                                 F
     Provided that ......... "

     5) A conjoint reading of the aforesaid two provisions
would make it clear that the value of the imported goods has
to be the transaction value and in those cases where
transaction value cannot be determined, such a value is to be G
determined by resorting to Rules 5 to 8 thereof in a sequential
order. Therefore, first attempt has to ascertain the transaction
value. As per the formula contained in sub-rule (1) of Rule 4,
the authorities are to find out the price actually paid or H
648         SUPREME COURT REPORTS                    [2015] 4 S.C.R.


A payable for the goods when sold for exports to India, to arrive
  at the value of the goods. Once this value is arrived at, it is
  to be adjusted in accordance with the provisions of Rule 9 of
  the said Rules. The final outcome, after such an adjustment
  made, is to be treated as transaction value to attract the
B import duty thereupon. As per sub-rule (2) of Rule 4, the
  transaction value of the imported goods under sub-rule (1) is
  to be accepted, except in certain circumstances mentioned
  in proviso to sub-rule (2). If any of those circumstances exists,
  then the value is to be determined as per sub-rule (3) of Rule
C 4. However, we are not concerned with such a situation in
  the present case.

            6) Thus, normally, the value of imported goods has to be
      the transactional value which means the price "actually paid"
D      or "payable" for the goods imported. Moreover, the value as
      specified in sub-rule (1) is to be generally accepted with the
      exception of certain contingencies stipulated in proviso to sub-
       rule (2) of Rule 4. Only when such a value cannot be
      determined, one has to resort to Rules 5 to 8, in a sequential
E      manner which would mean that the authorities would first refer
      to Rule 5 and in case it is inapplicable, then Rule 6 and so
      on. As per Rule 5, in those cases where the transaction value
       is indeterminable, transaction value of "identical goods" is to
F      be taken into consideration. Rule 6 mentions about
      transaction value of "similar goods". If this also inapplicable
      then "deductive value" is to be arrived at in terms of formula
      contained in Rule 7. If that is also inapplicable, residual
      method is provided in Rule 8 which prescribes that the value
G     shall be determined using "reasonable means" consistent with
      the principles of general provisions of these Rules and sub-
      section (1) of Section 14 of the Customs Act and on the basis
      of data available in India. At the same time, sub-rule (2) of
      Rule 8 excludes certain methods which are not to be applied
H     to determine the value under these Rules. Precise language
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 649
                    [A.K. SIKRI, J.]

of sub-rule (2) of Rule 8 is reproduce as under:                 A

      "2. No value shall be determined under the provisions
      of these rules on the basis of -

      (i) the selling price in India of the goods produced in
                                                                 8
      India;

      (ii)    a system which provides for the acceptance for
      customs purposes of the highest of the two alternative
      values;
                                                                 c
      (iii) the price of the goods on the domestic market of
      the country of exportation;

      (iv) the price of the goods for the export to a country
      other than India;                                          o
      (v) minimum customs values; or

      (vi) arbitrary or fictitious values."

      7) Once the transaction value is arrived at by applying the E
formula applicable in a given case in terms of aforesaid
provision, exercise is still incomplete. Adjustments to this
value are still to be made in accordance with the provision of
Rule 9. Only thereafter, exact "transaction value" gets
determined on which customs duty is to be paid. It is so F
stated in Rule 4 itself. So, at this stage, Rule 9 comes into
play, with which we are concerned in the present case. It deals
with "cost of services". It lays down that in determining the
transactional value, cost of certain services is to be added
to the price actually paid or payable for the imported goods, G
as mentioned in clauses (a) to (e) of sub-rule (1) of Rule 9.
We would like to reproduce this Rule, as it originally stood,
in its entirety:

     "9. Cost of services - (1) In determining the transaction   H
650   SUPREME COURT REPORTS                    [2015] 4 S.C.R.


A     value, there shall be added to the price actually paid or
      payable for the imported goods, -

      (a) the following cost and services, to the extent
      they are incurred by the buyer but are not included
B     in the price actually paid or payable for the
      imported goods, namely -

      (i) commissions and brokerage, except buying
      commissions;
c     (ii) the cost of containers which are treated as being
      one for customs purposes with the goods in question;

      (iii) the cost of packing whether for labour or materials;

o     (b) the value, apportioned as appropriate, of the
      following goods and services where supplied directly or
      indirectly by the buyer free of charge or at reduced cost
      for use in connection with the production and sale for
      export of imported goods, to the extent that such value
 E    has not been included in the price actually paid or
      payable, namely:-

      (i) materials, components, parts and similar items
      incorporated in the imported goods;
 F
      (ii) tools, dies, moulds and similar items used in the
      production of the imported goods;

      (iii) materials consumed in the production of the
      imported goods;
G
      (iv) engineering, development, art work, design work,
      and plans and sketches undertaken elsewhere than in
      India and necessary for the production of the imported
      goods;
H
WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 651
                   [A.K. SIKRI, J.]

   (c) royalties and licence fees related to the imported A
   goods that the buyer is required to pay, directly or
   indirectly, as a condition of the sale of the goods being
   valued, to the extent that such royalties and fees are not
   included in the price actually paid or payable.
                                                                 B
   (d) the value of any part of the proceeds of any
   subsequent resale, disposal, or use of the imported
   goods that accrues, directly or indirectly, to the seller;

   (e) all other payments actually made or to be made            c
   as a condition of sale of the imported goods, by the
   buyer to the seller, or by the buyer to a third party to
   satisfy an obligation of the seller to the extent that such
   payments are not included in the price actually paid or
   payable.                                                      D

   2. For the purposes of sub-section (1) and sub-section
   (1A) of 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    E
   and place of importation and shall include -

   (a) the cost of transport of the imported goods to the
   place of importation;

   (b) loading, unloading and handling charges                   F
   associated with the delivery of the imported goods
   at the place of importation; and

   (c) the cost of insurance :
                                                                 G
    Provided that in the case of goods imported by air, the
   cost and charges referred to in clauses (a), (b) and (c)
   above,-

   (i) where such cost and charges are ascertainable, shall      H
652         SUPREME COURT REPORTS                  [2015] 4 S.C.R.


A          not exceed twenty per cent of the free on board value
           of such goods,

           (ii) where such cost and charges are not ascertainable
           such cost and charges shall be twenty per cent of the
 B         free on board value of such goods;

           Provided further that in the case of goods imported other
           than by air and the actual cost and charges referred to
           in clauses (a), (b) and (c) above are not ascertainable,
c          such cost and charges shall be twenty-five per
           cent of the free on board value of such goods.

           (3) Additions to the price actually paid or payable shall
           be made under this rule on the basis of objective and
           quantifiable data.
D
           (4) No addition shall be made to the price actually paid
           or payable in determining the value of the imported
           goods except as provided for in this rule."

E          8) Rule 9 was amended in the year 1989 vide Notification
      dated 19.12.1989. With this amendment, the provisos
      appearing below sub-rule (2) of Rule 9 were substituted with
      the following proviso:

 F           "Provided that -

           (i) Where the cost mentioned in clause (a) are not
           ascertainable, such cost shall be twenty per cent of the
           free on board value of the goods;
G          (ii) Where the charges mentioned at clause (b) are not
           ascertainable, such charges shall be one per cent of the
           free on board value of the goods;

           (iii) Where the cost mentioned at clause (c) are not
H
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 653
                    [A.K. SIKRI, J.]

     ascertainable, such cost shall be 1.125% of free on A
     board value of the goods.

     Provided further that in the case of goods imported by
     air, where the cost mentioned in clause (a) are
     ascertainable, such cost shall not exceed twenty per     s
     cent of free on board value of the goods."

    9) In the year 1990 i.e. vide amendment Notification
                                 •
dated 05.07.1990, the said provisos underwent further
modification with the substitution of following provisos:     c
     "Provided that -

     (i) Where the cost of transport referred to in clause (a)
     is not ascertainable, such cost shall be !Wenty per cent
     of the free on board value of the goods;                  D
     (ii) the charges referred to in clause (b) shall be
     one per cent of the free on board value of the
     goods plus the cost of transport refered to in
     clause (a) plus the cost of insurance referred to in     E
     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 goods;                                F

    Provided further that in the case of goods imported by
    air, where th cost referred to in clause (a) is
    ascertainable, such cost shall not exceed twenty per
    cent of free on board value of the goods;              G

    Provided also that where the free on board value of the
    goods 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) H
654         SUPREME COURT REPORTS                    [2015] 4 S.C.R.


A           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 for clause (iii) above."

            10) Clause (ii) of first proviso, as is clear from reading
 B    thereof, mandated addition of one per cent of 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).

 C      11) Reverting to the facts of the present case, it is on the
   strength of this proviso, even when the actual handling charges
   were shown as Rs.69.98 paisa, that too as fixed by the
   International Airport Authority, the customs authorities added
   further sum of Rs.15,214.69 paisa to the value of goods of
 D handling charges, being one per cent free on board value of
   the goods. Obviously, the appellant was aggrieved by this
   addition and handling charges on notional basis pursuant to
   the aforesaid proviso whereby the charges for loading,
   unloading and handling associated with the delivery of
 E imported goods at the place of importation had been fixed
   at one per cent free on board value of the goods plus the cost
   of the transport of the imported goods to the place of
   importation plus cost of insurance.

 F     12) This became the reason for filing the writ petition in
  the High Court to question the validity of the said proviso by
  way of impugned amendment. In brief, the case set up by
  the appellant was that such a notional fixation of the handling
  charges with the addition of one per cent of free on board
G value of the value of goods, irrespective of the nature of goods,
  size of the cargo, was in total disregard to the total handling
  charges, even when such actual handling charges could be
  ascertained. It was also the submission of the appellant that
  the said one per cent so fixed without reference to the nature
H of the goods, size of the cargo and value of the goods is
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 655
                    [A.K. SIKRI, J.]

irrational, in the sense, high value items like components of      A
computer, involving little or no expenses by way of handling,
whereas heavy weight items like machinery, hardware might
involve substantial expenditure for loading, unloading and
handling. It was submitted that the handling services are
rendered by the sea port and airport authorities. The handling     B
charges are levied on the basis of either the gross weight or
chargeable weight, whichever is higher. Both these weights
are incidentally available in the air bill accompanying the
consignment. The international Airport Authorities and the port
trust are having schedule of tariff and the appellant have from    C
time to time been paying the handling charges to the
authorities as per the tariff. On this basis, it was argued that
such an addition was totally irrational and arbitrary, thus
violative of Article 14 of the Constitution and was also
                                                                   0
ultravires Section 14(1) and Section 14(1)(A) of the Customs
Act.

     13) The respondents defended the aforesaid amendment
by pointing out that over last number of years, it was found
impossible to ascertain the actual amounts incurred towards E
loading, unloading and handling charges while making the
assessment as they varied depending upon the quantities and
place of import. Finding this difficulty in actual practice and
in order to achieve certainty, one per cent of the F.O.B. value F
was fixed to be included in the assessable value. It was
argued that once this uniformity is achieved with the aforesaid
provisions, merely because some would be getting the benefit
while others would suffer certain detriment, is no reason for
invalidating the provision when many others would be getting G
the benefit thereof as well. The percentage had been fixed
by the rule making authority after taken into consideration the
overall picture.

    14) The High Court, in the impugned judgment, after            H
656          SUPREME COURT REPORTS                    [2015] 4 S.C.R.


A     referring to various decisions of this Court, accepted the plea
      of the Government holding that rule making authority had the
      requisite power to make a provision of this nature by including
      landing charges for the purpose of valuation as valuation on
      such a basis was held to be valid by this Court in Garden
 B    Silk Mills Ltd. v. Union of lndia 1• The justification for adding
      one per cent of F.O.B. value in determination handling
      charges can be discerned from paras 17 and 18 of the
      impugned judgment which read as under:

c             "17. We are not able to uphold the contents of the
            learned counsel for the petitioner for the reason that prior
            to the impugned notification, the same one percent of
            F.O.B. value was taken by the authorities as loading,
            unloading and handling charges for determination of the
D           assessable value of the goods, when the actuals are not
            assessable. Even prior to that, 3/4th of the F.O.B. value
            has been added to the value of the goods as loading,
            unloading and handling charges for the purpose of
            assessment pursuant to the GATI agreement. The one
 E          per cent F.0.B. value would be very nominal to the
            importers and that the percentage has been fixed
            on the basis of objective and quantifiable data
            taking onto consideration of the experience gained
            by the authorities and the difficulties in
 F
            ascertaining the actuals.

            18. The method of collection or the manner of collection
            may be prescribed either under the Act or under the
            rules framed by the delegated authority. In the case on
G           hand, instead of actuals, rules have prescribed a fixed
            percentage which in some cases may be too harsh
            where the value of the goods imported is much more


H     1 (1998) a   sec 744
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 657
                    [AK. SIKRI, J.]

     and the weight of the commodity is less. There may be A
     number of other items where the value of the imported
     goods are less and weight of the commodity is very
     much. The machinery provision so provided for
     collection of duty, taking into consideration the
     administrative convenience cannot be considered B
     beyond the scope of the rule making power and it cannot
     be said to be levying duty on amount which is not within
     the purview of the Customs Act or Section 14(1) simply
     because the rule making authority have prescribed a
     fixed percentage based on experience instead of C
     actual.

     Section 14 of the Customs Act itself made it clear the
     value of such imported goods shall be deemed to be
     the price at which such goods are ordinarily sold or          D
     offered for sale for delivery at the time and place of
     importation or exportation in the course of international
     trade and the price referred to shall be determined in
     accordance with the rule made in this behalf. For the
     purpose of determination of the value, rules have been        E
     made and taking into consideration the difficulties
     experienced in the past in fixing the handling charges
     on the actuals, it is fixed at one percent of the CIF value
     of the goods. When the statute confers the power to           F
     make rules for determination of the value, such
     determination of the value by imposition of the same as
     a percentage cannot at any stretch of imagination be
     considered as repugant to Section 14(1) or
     discriminatory."                                              G
     15) The High Court in support of the aforesaid view,
referred to certain judgments of this· Court touching upon the
principle that when a power is conferred on the Legislature
to levy a tax, that power itself must be widely construed.         H
658         SUPREME COURT REPORTS                   [2015] 4 S.C.R.


A     Reliance'upon the judgment in Garden Silk Mills is placed
      by the High Court in the following manner:

             "19. The Supreme Court in Garden Silk Mills Ltd. v.
           Union of India reported in AIR 2000 Supreme Court 33
s          has observed that Section 14 is a deeming provision.
           The legislative intent is clear that the actual price of
           imported goods viz., the landing costs cannot alone be
           regarded as the value for the purpose of calculating the
           duty. The language of Section 14 clearly indicates that
C          though the transaction value may be relevant
           consideration, the value for the purpose of custom duty
           will have to be determined by the customs authority,
           which value can be more and at times even less than
           what is indicated in the document of purchase or sale."
D
            16) Questioning the correctness of the aforesaid view
      taken by the High Court, Mr. Dushyant Dave, learned senior
      counsel appearing for the appellant in all these appeals,
      submitted that prior to the impugned notification dated
E     05.07.1990, the Rule in this regard was to the effect that the
      handling charges were reckoned on the actuals and only
      where the actual cost could not be ascertained, one per cent
      of the F.O.B. of the goods was to be added as charges on
      this account. However, with the impugned amendment in the
 F    Rules, the actual cost incurred and or ascertainable is totally
      ignored in the matter of "handling charges" and is to be arrived
      at fictionally by adding one per cent of the F.O.B. value of the
      imported goods and its transportation and insurance charges.
      It was pointed out that the appellant is engaged in the
G     manufacture and marketing of computer systems and
      peripherals, and in the course of its business, imports various
      components worth crores of rupees, which are of high value
      but of low weight and dimensions. Further, the actual cost
H     incurred towards the handling charges in accordance with the
       WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 659
                          [AK. SIKRI, J.]

       prescribed charges by the international Airport Authority of A
       India was not even a fraction of the "notional handling charges"
      arrived at by applying the formula contained in the amended
       Rule. In nutshell, it was pointed out that in the present case,
      where actual cost could be ascertained, the same had to be
      taken into consideration to determine the valuation of the B
      goods for the purpose of custom duty and it is only in those
      cases where actual cost could not be arrived at the fictional
      formula should be made applicable. Making such a
      provision, it was argued, even where the actual cost was
      known was clearly ultravires Section 14( 1) and Section c
      14(1A) of the Customs Act. It was also argued that there was
      no rationale in adding one per cent of the F.O.B. value in such
      cases and this smacked of arbitrariness making it violative
      of Article 14 of the Constitution as well. Mr. Dave also
                                                                        D
      referred and relied upon the judgment of this Court in Indian
      Acrylics v. Union of India and Anr. 2 in support of his
      aforesaid submissions. He also referred to the provisions of
      the General Agreement on Tariffs and Trade (GATI) which
      inter alia laid down the yardsticks/methodology for arriving at E
      cost of transport and the prescription therein is the actual cost
      of transport of the imported goods to the port or place of
      importation plus the handling charges and cost of insurance.

...        17) Mr. Radhakrishnan, learned senior counsel
      appearing for the respondents, on the other hand, defended
                                                                       F
      the judgment by adopting the reasoning given by the High
      Court sustaining the validity of the impugned provision.

           18) We have given our due consideration to the
      submissions of the learned counsel for the parties with G
      reference to the material on record as well as various statutory
      and other provisions, placed at our disposal.


      2 c2000) 2 sec 678                                               H
660       SUPREME COURT REPORTS                   [2015] 4 S.C.R.


A      19) In order to arrive at the answer to the issue raised,
  we shall have to go through the scheme of customs duties as
  payable under the Act. Chapter V is the relevant chapter
  which deals with "Levy of, and Exemption from, Customs
  Duties". It contains the provisions from Section 12 to Section
B 28BA. Section 12 which talks of "dutiable goods", provides
  that duties of customs shall be levied at such rates as may
  be specified under the Customs Tariff Act, 1975, or any other
  law for the time being in force, on goods imported into, or
  exported from, India. Thus, the rates at which the customs
C duties is to be imposed are specified in the Customs Tariff
  Act, 1975. That rate is on the value of goods imported or
  exported, as the case may be. Therefore, there is a need to
  determine the value of the goods imported and exported. The
D yardsticks for arriving at this value are contained in Section
  14 of the Act. This provision as originally stood and was
  prevalent at the relevant time with which we are concerned,
  reads as under:

         "14. Valuation of goods for purposes of assessment.-
 E       (1) For the purposes of the Customs Tariff Act, 1975 (51
         of 1975), or any other law 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-
 F
         the price at which such or like goods are ordinarily sold,
         or offered for s~le, fot delivery at the time and place of
         importation or exportation, as the case may be, in the
         course of international trade, where-
G
         (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
H        other, and the price is the sole consideration for the sale
WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 661
                   [A.K. SIKRI, J.]

   or ofer for sale:                                             A

     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, as the case may be,     B
   is presented under section 50;

     (1A) Subject to the provisions of sub-section (1 ), the
   price referred to in that sub-section in respect of
   imported goods shall be determined in accordance with         c
   the rules made in this behalf.

     (2) Notwithstanding anything contained in sub-section
   (1) or sub-section (1A) if the Board is satisfied that it
   is necessary or expedient so to do, it may, by notification
                                                               0
   in the Official Gazette, fix tariff values for any class of
   imported goods or export goods, having regard to the
   trend of value of such or like goods, and where any such
   tariff values are fixed, the duty shall be chargeable with
   reference to such tariff value.                             E
   (3) For the purposes of this section-

   (a) "rate of exchange" means the rate of exchange-

   (i) determined by the Board, or                               F
   (ii) ascertained in such manner as the Board may direct,
   for the conversion of Indian currency into foreign currency
   or foreign currency into Indian currency;

   (b) "foreign currency" and "Indian currency" have the         G
   meanir:igs respectively assigned to them in clause (m)
   and clause (q) of section 2 of the Foreign Exchange
   Management Act, 1999 (42of1999)."

  20) This provision was amended in the year 2007.               H
662         SUPREME COURT REPORTS                    [2015] 4 S.C.R.


A     Though, we are not concerned with this amended provision,
      we are taking note of the same in order to examine as to
      whether any change, in principle, is brought about or not. The
      amended provision reads as follows:

 B          "14. Valuation ofgoods.-(1) For the purposes of the
            the Customs Tariff Act, 1975 (51 of 1975), or any other
            law for the time being in force, the value of the imported
            goods and export goods shall be the transaction value
            of such goods, that is to say, the price actually paid or
C           payable for the goods when sold for export to India for
            delivery at the time and place of importation, or as the
            case may be, for export from India for delivery at the time
            and place of exportation, where the buyer and seller of
            the goods are not related and price is the sole
D          .consideration for the sale subject to such other
            conditions as may be specified in the rules made in this
            behalf:

           Provided that such transaction value in the case of
E          imported goods shall include, in addition to the price as
           aforesaid, any amount paid or payable for costs and
           services, including commissions and brokerage,
           engineering, design work, royalties and licence fees,
           costs of transportation to the place of importation,
F          insurance, loading, unloading and handling charges to
           the extent and in the manner specified in the rules made
           in this behalf:

           Provided further that the rules made in this behalf may
G          provide for,-

           (i) the circumstances in which the buyer and the seller
           shall be deemed to be related;

           (ii) the manner of determination of value in respect of
H
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 663
                    [A.K. SIKRI, J.]

     goods when there is no sale, or the buyer and the seller A
     are related, or price is not the sole consideration for the
     sale or in any other case;

     (iii) the manner of acceptance or rejection of value
     declared by the importer or exporter, as the case may         B
     be, where the proper officer has reason to doubt the truth
     or accuracy of such value, and determination of value
     for the purposes of this section:

     Provided also that such price shall be calculated with        C
     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 of export, as the case may be, is
     presented under section 50.
                                                                   D
     (2) Notwithstanding anything contained in sub-section
     ( 1), if the Board is satisfied that it is necessary or
     expedient so to do, it may, by notification in the Official
     Gazette, fix tariff values for any class of imported goods
     or export goods, having regard to the trend of value of       E
     such or like goods, and where any such tariff values are
     fixed, the duty shall be chargeable with reference to such
     tariff value."

     21) A reading of the unamended provision would show F
that the earlier/old principle was to find the valuation of goods
"by reference to their value". It introduced a deeming/fictional
provision by stipulating that the value of the goods would be
the price at which such or like goods are "ordinarily sold, or
offered for sale". Under the new provision, however, the G
valuation is based on the transaction price namely, the price
"actually paid or payable for the goods". Even when the old
provision provided the formula of the price at which the goods
are ordinarily sold or offered for sale, at that time also if the
goods in question were sold for a particular price, that could H
664       SUPREME COURT REPORTS                   [2015] 4 S.C.R.


A be taken into consideration for arriving at the vaiuation of
  goods. The very expression "ordinarily sold, or offered for
  sale" would indicate that the price at which these goods are
  actually sold would be the price at which they are ordinarily
  sold or offered for sale. Of course, under the old provision,
B under certain circumstances, the authorities could discard the
  price mentioned in the invoice. However, that is only when it
  is found that the price mentioned in the invoice is not the
  reflection of the price at which these are ordinarily sold or
  offered for sale. To put it otherwise, the reason for discarding
C the price mentioned in the invoice could be only when the said
  price appeared to be suppressed one. In such a case, the
  authorities could say that generally such goods are ordinarily
  sold or offered for sale at a different price and take that price
  into consideration for the purpose of levying the duty. It could,
0
  however, be done only if there was evidence to show that
  ordinarily the price at which these goods are ordinarily sold
  or offered for sale is higher than the price mentioned in the
  invoice. In fact, this fundamental concept is retained even now
E while introducing the concept of "transaction value" under the
  amended provision. More importantly, the rules viz. Valuation
  Rules, 1988 had incorporated this very principle of "transaction
  value" even under the old provision. No doubt, as per this
  provision existing today generally the price mentioned is to
F be accepted as it is the transaction value. However, this very
  provision stipulates the circumstances under which that price
  can be discarded. In any case, having regard to the question
  with which we are concerned in the present appeals, such a
  change in the provision may not have much effect.
G
       22) The underlying principle contained in amended sub-
  section ( 1) of Section 14 is to consider transaction value of
  the goods imported or exported for the purpose of customs
  duty. Transaction value is stated to be a price actually paid
H or payable for the goods when sold for export to India for
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 665
                    [A.K. SIKRI, J.]

delivery at the time and place of importation. Therefore, it is A
the price which is actually paid or payable for delivery at the
time and place of importation, which is to be treated as
transaction value. However, this sub-section (1) further makes
it clear that the price actually paid or payable for the goods
will not be treated as transaction value where the buyer and B
the seller are related with each other. In such cases, there
can be a presumption that the actual price which is paid or
payable for such goods is not the true reflection of the value
of the goods. This Section also provides that normal price
would be the sole consideration for the sale. However, this C
may be subject to such other conditions which can be
specified in the form of Rules made in this behalf.

     23) As per the first proviso of the amended Section 14(1 ),
in the transaction value of the imported goods, certain D
charges are to be added which are in the form of amount paid
or payable for costs and services including commissions and
brokerage, engineering, design work, royalties and licence
fees, costs of transportation to the place of importation,
insurance, loading, unloading and handling charges to the E
extent and in the manner which can be prescribed in the rules.
Sub-section (2) of Section 14, which remains the same, is an
over-riding provision which empowers the Board to fix tariff
values for any class of imported goods or export goods under F
certain circumstances. We are not concerned with this aspect
in the instant case.

     24) In contrast, in the unamended Section 14, we had
provision like sub-section (1A) which stipulated that the price
referred to in sub-section (1) in respect of imported goods G
shall be determined in accordance with rules made in this
behalf. Therefore, rules can be made in determining the price.
However, these rules have to be subject to the provisions of
sub-section (1 ), the underline principle whereof, as stated H
666              SUPREME COURT REPORTS                        [2015] 4 S. C.R.


A     above, is to taken into consideration actual price of the goods
      unless it is impermissible because of certain circumstances
      stipulated therein. Keeping in mind this fundamental aspect,
      we have to examine the scheme of the Valuation Rules, 1988.

s      25) It can very well be seen from the Valuation Rules,
  1988 that these Rules are made to facilitate arriving at the
  valuation of goods in all the contingencies provided in sub-
  section (1) of Section 14. We have already reproduced the
  relevant Rules and indicated the scheme thereof. To
C recapitulate in brief, Rule 3 echoes the principle enshrined in
  sub-section (1) of Section 14 by mentioning that value of the
  imported goods would be the transaction value 3 . Likewise,
  Rule 4 again reproduces the concept behind sub-section (1)
  of Section 14 by stipulating in no uncertain terms, that the
D transaction value shall be the price actually paid or payable
  for the goods when sold for exports to India. The adjustments
  which are made in accordance with the provisions of Rule 9
  are nothing but the costs and services, as specified in first
  proviso to Section 14( 1) of the Act. It is only in those cases
E where value of the imported goods i.e. transaction value
  cannot be determined, that we have to resort to Rules 5 to 8
  of the said Rules. The purpose of these Rules is to fix the
  transaction value of the goods notionally. However, even
F when the fiction is applied, the scheme and spirit behind Rules
  5 to 8 would amply demonstrate that the endeavour is to have

      3 It ii: interesting to note, which is somewhat strange, that though concept
      of transaction value was introduced in sub-section (1) of Section 14 by
G     amendment in the year 2007, which before that in the Valuation Rules, 1988,
      the expression " transaction value" is incorporated.       This also lends
      credence to our observations that the concept of unamended provision was
      also to arrive at to take into consideration the actual value wherever it was
      available and was not excluded by any of the circumstances mentioned
H     therein.
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 667
                    [A.K. SIKRI, J.]

closest proximity with the actual price. That is why Rules 5       A
to 8 are to be applied in a sequential manner, meaning
thereby we have to first resort to Rule 5 and if that is not
applicable only then we have to go to Rule 6 and in the case
 of inapplicability of Rule 6, we have to resort to Rule 7 and
even if that is not applicable, then Rule 8 comes into play. In    B
 order to find out as to what would be the closest real value of
the goods, Rule 5 mentions that transaction value of "identical
goods" is to be taken into consideration. Thus, wherever the
value of identical goods is available, one can safely rely upon
the said value in the event transaction value of the goods in      C
question is indeterminable. Value of the identical goods is
most proximate. If that is also not available, next proximate
value is provided in Rule 6 which talks of value of "similar
goods". In the absence thereof, we come to the formula of
                                                                   0
applying the "deductive value" as contained in Rule 7. In those
cases, where even deductive value cannot be arrived at, one
has to resort to residual method provided in Rule 8 which
prescribes that the value shall be determined using
"reasonable means". This would indicate adopting "Best             E
Judgment Assessment" principle. However, even while having
best judgment assessments, Rule 8 reminds the authorities
that such reasonable means or best judgment assessments
has to be in consonance with the principles of general
provisions contained in the Rules as well as sub-section (1)       F
of Section 14 of the Act and also on the basis of data available
in India.

      26) On the aforesaid examination of the scheme
contained in the Act as well as in the Rules to arrive at the G
valuation of the goods, it becomes clear that wherever actual
cost of the goods or the services is available, that would be
the determinative factor. Only in the absence of actual cost,
fictionalised cost is to be adopted. Here again, the scheme
gives an ample message that an attempt is to arrive at value H
668       SUPREME COURT REPORTS                 (2015] 4 S.C.R.


A  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 deductive value and the best judgment assessment,
 B 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
C services also contains the underlying principle which runs
  though in the length and breadth of the scheme so eloquently.
  It categorically mentions the exact nature of thQse costs and
  services which have to be included like commission and
  brokerage, costs of containers, cost of packing for labour or
D 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-
E 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".

       28) Keeping in mind this perspective, we need to look
F into clause (b) of sub-rule (2) of Rule 9 which deals with
  loading, unloading and handling charges associated with the
  delivery of imported goods at the place of importation, which
  are to be included to arrive at the value of such imported
  goods. It is these charges with which we are directly
G concerned with in the instant case.

      29) The provision of sub-rule (2) of Rule 9, as originally
  stood, made it clear that wherever loading, unloading and
  handling charges are ascertainable i.e. actually paid or
H payable, it is those charges that would be added. Proviso to
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 669
                    [A.K. SIKRI, J.]

the said Rule contained the provision that only in the event    A
the same are not ascertainable, it shall be 25% of the free
on board value of such goods. In fact, sub-rule (3) of Rule 9
leave no manner of doubt when it mentions that additions are
to be made on the basis of objective and quantifiable data.
                                                                 B
     30) It would be pertinent to mention here that sub-rule (2)
talks of three kinds of charges. Apart from loading, unloading
and handling charges which are mentioned in Clause (b),
Clause (a) deal with cost of transport of imported goods to
the place of importation and Clause (c) dealt with cost of C
insurance. All these costs were to be included on actual
basis. Only when such costs were not ascertainable, proviso
got attracted which stipulated that such costs and charges
shall be 25% of the free on board value of such goods. Even
when the aforesaid proviso was amended vide notification D
dated 19.12.1989, the spirit behind the unamended proviso
was maintained and kept intact. Only difference was that
instead of addition of 25% of free on board value of goods
in respect of all the three kinds of charges, under the
amended proviso, this percentage fixed was different in E
respect of each of the aforesaid charges. As far as cost of
transport is concerned, it was changed at 20% of the free on
board value of goods. Insofar as loading, unloading and
handling charges are concerned, it was reduced to 1% of the F
free on board value of goods and in case of insurance
charges, the amended provision provided for such cost at
1.125% free on board value of goods. However, as
mentioned above, the spirit behind this proviso continued to
be the same viz. the proviso was to made applicable only G
when the actual cost was indeterminable.

     31) In contrast, however, the impugned amendment dates
05.07.1990 has changed the entire basis of inclusion of
loading, unloading and handling charges associated with the     H
670          SUPREME COURT REPORTS                     [2015] 4 S.C.R.


A      delivery of the imported goods at the place of importation.
       Whereas fundamental principle or basis remains unaltered
       insofar as other two costs, viz., the cost of transportation and
       the cost of insurance stipulated in clauses (a) and (c) of sub-
       rule (2) are concerned. In respect of these two costs, provision
B      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 handling charges are concerned. The proviso
       now stipulates 1% of the free on board value of the goods
C      irrespective of the fact whether actual cost is ascertainable
       or not. Having referred to the scheme of Section 14 of the
       Rules in detail above, this cannot be countenanced. This
       proviso, introduces fiction as far as addition of cost of loading,
       unloading and handling charges is concerned even in those
0
       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 ultravires this provision .
      .We are also of the opinion that when the actual charges paid
E      are available and ascertainable, introducing a fiction for
       arriving at the purported cost of loading, unloading and
       handling charges is clearly arbitrary with no nexus with the
       objectives sought to be achieved. On the contrary, it goes
       against the objective behind Section 14 namely to accept the
 F     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
       circumstance, clearly arbitrary and irrational and would be
       violative of Article 14 of the Constitution.
G
           32) We find that the High Court, instead of examining the
      matter from the aforesaid angle, has simply gone by the
      powers of the rule making authority to make Rules. No doubt,
      rule making authority has the power to make Rules but such
H     power has to be exercised by making the rules which are
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 671
                    [A.K. SIKRI, J.]

consistent with the scheme of the Act and not repugnant to A
the main provisions of the statute itself. Such a provision
would be valid and 1% F.O.B. value in determining handling
charges etc. could be justified only in those cases where
actual cost is not ascertainable. The High Court missed the
point that Garden Silk Mills Ltd. case was decided by this B
Court in the scenario where actual cost was not ascertainable.
That is why we remark that first amendment to the proviso to
sub-rule (2) of Rule 9 which was incorporated vide notification
dated 19.12.1989 would meet be justified. However, the
impugned provision clearly fails the test.                      C

      33) We would like to refer to the judgment of this Court
in Indian Acrylics (supra) at this juncture. Though, the issue
in that case related to the rate of exchange touching upon the
provision in respect whereof contained in sub-section (3) of      D
Section 14 (unamended provision), the question of law
decided therein would support the view we are taking in the
instant case. A reading of sub-section (3) of Section 14 would
make it clear that such rate of exchange can be determined
by the Board or can be ascertained in such manner as the          E
Board may direct, for the conversion of Indian currency into
Foreign currency or Foreign currency into Indian currency.
Thus, Board had been given power to determine the rate of
exchange or stipulate the manner in which such rate of            F
exchange is to be determined. Armed with this power, the
customs authorities notified the rate of exchange for the
purposes of Section 14 at one US dollar equal to Rs.31.44.
Notification in this behalf was issued by the Board on
27.03.1992. On 29.04.1992, the Reserve Bank of India had          G
notified the exchange rate of one US dollar equal to Rs.25.95.
On the basis of this fixation by the Reserve Bank of India, the
notification dated 27.03.1992 stipulating exchange rate of one
US do 1iar equal to Rs.31.44 was challenged as arbitrary
fixation of the exchange rate. This Court sustained the           H
672         SUPREME COURT REPORTS                    [2015] 4 S.C.R.


A     challenge in the following words:
           "5. the counter filed by the respondent before the High
           Court, as also before this Court, does not indicate why
           the rate was fixed at Rs.31.44. The affidavits do not
           indicate that the prevalent Reserve Bank of India rate
 B
           had been taken into consideration. Strangely, the High
           Court, adverting to this contention, stated that" ... In the
           absence of any other material brought on record, it
           cannot be held that the rate of exchange by the Central
c          Government under Section 14(3)(i) is arbitrary" and it
           said this after noting the contention on behalf of the
           appellant that the Central Government rate was arbitrary
           being different from that fixed by Reserve Bank of India.
           6. The exchange rate fixed by Reserve Bank of India
 D         is the accepted and determinative rate of exchange for
           foreign exchange transactions. If it is to be deviated
           from to the extent that the notification dated 27 03.1992
           does, it must be shown that the Central Government had
           good reasons for doing so. Reserve Bank of India's
 E         rate, as we have pointed out, was Rs.25.95, the rate
           fixed by the notification dated 27 03.1992 was
           Rs.31.44, so that there was a difference of as much as
           Rs.5.51. In the absence of any material placed on
           record by the respondents and in the absence of so
 F
           much as a reason stated on affidavit in this behalf, the
           rate fixed by the notification dated 27.03.1992 must be
           held to be arbitrary."

       34) In the present case before us, the only justification for
G 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 uniformly. This can be
  a justification only if the loading, unloading and handling
H charges are not ascertainable. Where such charges are
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 673
                    [A.K. SIKRI, J.]

known and determinable, there is no reason to have such a A
yardstick. We, therefore, are not impressed with the reason
given by the authorities to have such a provision and are of
the opinion that the authorities have not been able to satisfy
as to how such a provision helps in achieving the object of
Section 14 of the Act. It cannot be ignored that this provision B
as well as Valuation Rules are enacted on the lines of GATT
guidelines and the golden thread which runs through is the
actual cost principle. Further, the loading, unloading and
handling charges are fixed by International Airport Authority.
                                                                c
                                                 4
    35) In Kunj Behari Lal Butail v. State of H.P. this Court
made following pertinent observation which are apt and
contextual and, therefore, we are reproducing the same:

     "13. It is very common for the legislature to provide for D
     a general rule-making power to carry out the purpose
     of the Act. When such a power is given, it may be
     permissible to find out the object of the enactment and
     then see if the rules framed satisfy the test of having
     been so framed as to fall within the scope of such E
     general power confirmed. If the rule-making power is
     not expressed in such a usual general form then it shall
     have to be seen if the rules made are protected by the
     limits prescribed by tile parent act. (See: Sant Saran Lal
     v. Parsuram Sahu, AIR 1966 SC 1852). From the F
     provisions of the Act we cannot spell out any legislative
     intent delegating expressly, or by necessary implication,
     the power to enact any prohibition on transfer of land.
     We are also in agreement with the submission of Shri
     Anil Divan that by placing complete prohibition on G
     transfer of land subservient to tea estates no purpose
     sought to be achieved by the Act is advanced and so

4 (2000) 3 sec 40                                               H
674    SUPREME COURT REPORTS                   [2015] 4 S.C.R.


A     also such prohibition cannot be sustained. Land forming
      ' part of a tea estate including land subservient to a tea
      plantation have been placed beyond the ken of the Act.
      Such land is not to be taken in account either for
      calculating area of surplus land or for calculating the
 B    area of land which a person may retain as falling within
      the ceiling limit. We fail to understand how a restriction
      on transfer of such land is going to carry out any purpose
      of the Act. We are fortified in taking such view by the
      Constitution Bench decision of this Court in Bhim Singhji
c     v. Union of India, (1981) 1 SCC 166 whereby sub-
      section (1) of Section 27 of the Urban Land (Ceiling and
      Regulation) Act, 1976 was struck down as invalid insofar
      as it imposed a restriction on transfer of any urban of
      urbanisable land with a building or a portion only of such
 D
      building which was within the ceiling area. The provision
      impugned therein imposed a restriction on transactions
      by way of sale, mortgage, gift or lease of vacant land
      or buildings for a period exceeding ten years, or
 E    otherwise for a period of ten years from the date of the
      commencement of the Act even though such vacant land,
      with or without a building thereon, fell within the ceiling
      limits. The Constitution Bench held (by majority) that
      such property will be transferable without the constraints
 F    mentioned in sub-section (1) of Section 27 of the said
      Act. Their Lordships opined that the light to carry on a
      business guaranteed under Article 19(1 )(g) of the
      Constitution carried with it the right not to carry on
      business. It logically followed, as a necessary corollary,
G     that the right to acquire, hold and dispose of property
      guaranteed to citizen under Article 19(1 )(f) carried with
      it the right not to hold any property. It is difficult to
      appreciate how a citizen could be compelled to own
      property against his will though he wanted to alienate it
H
 WIPRO LTD. v. ASSISTANT COLLECTOR OF CUSTOMS 675
                    [A.K. SIKRI, J.]

      and the land being within the ceiling limits was outside A
      the purview of Section 3 of the Act and that being so
      the person owning the land was not governed by any of
      the provisions of the Act. Reverting back to the case at
      hand, the learned counsel for the State of Himachal
      Pradesh has not been able to satisfy us as to how such B
      a prohibition as is imposed by the impugned
      amendment in the Rules helps in achieving the object
      of the Act.

      14. We are also of the opinion that a delegated power C
      to legislate by making rules "for carrying out the
      purposes of the Act" is a general delegation without
      laying down any guidelines; it cannot be so exercised
      as to bring into existence substantive rights or
      obligations or disabilities not contemplated by the D
      provisions of the Act itself."

     36) We are, therefore, of the opinion that impugned
amendment, namely, proviso (ii) to sub-rule (2) of Rule 9
introduced vide Notification dated 05.07.1990 is                E
unsustainable and bad in law as it exists in the present form
and it has to be read down to me<:!;t that this clause would
apply only when actual charges referred to in Clause (b) are
not ascertainable.
                                                                F
    37) As a result, judgment of the High Court is set aside
and the appeals are allowed in the aforesaid terms with no
order as to cost.
Devika Gujral                                Appeals allowed.
                                                                G




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