M/S. ISPAT INDUSTRIES LTD. versus COMMISSIONER OF CUSTOMS, MUMBAI

Citation: [2006] SUPP. 6 S.C.R. 733 · Decided: 29-09-2006 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

I 
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. 
The question involved in the instant appeal that whether the 
transportation charges for the use of barges for ::arrying the cargo from the 
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 
F 
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 
c 
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. 
"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) 
H 
"Mimansa Rules of Inte1pretation (Second Edition( by K.L. Sarkar, 
......
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 R

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