Include Barge Charges in Assessable Value under Customs Valuation for 2007

[CBEC Circular No. 34 dated 30^th November 2009]

Subject: Inclusion of barge charges incurred for transporting imported goods from the Mother Vessel at outer anchorage point to the place of unloading in the assessable value of goods for purpose of charging Customs Duty in terms of Customs (Valuation) Rules, 1988.

The issue of inclusion of barge charges in the assessable value for the purpose of charging customs duty in the case of goods imported where the goods are transported from Mother Vessel at outer anchorage point to the place of unloading by barges has been under dispute. It has been brought to the notice of the Board that a large number of show cause notices and provisional assessments on the issue are pending finalization.

2. The matter has been examined by the Board in the light of the decision of the Hon’ble Supreme Court in the case of M/s. Ispat Industries Ltd. v. Commissioner of Customs [2006 (202) E.L.T. 561 (S.C.)] further reiterated vide orders in the cases of M/s. Reliance Industries Ltd., M/s Essar Oil Ltd. and M/s Gujarat State Fertilizers & Chemicals. The Supreme Court has ruled in the aforesaid decision that “all contracts entered into with foreign sellers are either CIF contracts or FOB contracts with Bills of Lading nominating Bombay/JNPT/Dharmatar as the parts of discharge. As such the cost of 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) of the Customs (Valuation) Rules, 1988 is impermissible”.

It was further held that “It is not disputed that the freight up to the Dharmatar jetty had been paid by the buyer. Hence, we cannot agree that additional transportation charges being the charges for earring the goods by barges from the mother ship to the Dharmatar jetty have to be added to the valuation. The fact that the mother ship could not come up to Dharmatar jetty is an extraordinary situation (due to lack of draft) and hence any extra transportation charge to meet this situation cannot, in our opinion, be added to the value of the goods. The bills of lading show that the port of discharge was Mumbai port/JNPT/Dharmatar. In the bill of entry, the FOB price, freight and insurance were shown separately in US dollars. Since Dharmatar 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 up to BFL but also to Dharmatar”.

2.1 The Review Petition filed by the department in this case on the advice of the Ministry of Law was dismissed by the Apex Court holding that “Having gone through the Review petitions and the papers connected therewith, we do not find any ground to review the aforesaid judgement. The Review Petitions are dismissed accordingly. “The Curative Petition was also dismissed on February 10, 2009. Therefore, the decision of the Supreme Court in this case has become final.

3. It may be noted that the above decision was rendered in the context of the provisions of Section 14 of the Customs Act, 1962 and the Customs (Valuation) Rules, 1988 prevailing prior to October 10, 2007. Hence, all pending assessments with respect to the includibility of barge charges under the provisions of Customs (Valuation) rules, 1988 that are covered by the ratio of the decision of the Hon’ble Supreme Court, should be finalized adopting the said ratio.

4. The present Customs Valuation Rules were notified on September 13, 2007 effective from October 10, 2007. The explanation to Rule 10(2) of the said rules provides that the cost of transport of the imported goods referred to in clause 10(2)(a) includes the ship demurrage charges on charted vessels, lighterage or barge charges. Hence, the issue of includibility of barge charges in the value will be governed by the provisions of Section 14 of the Customs Act, 1962 read with the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 for the assessments arising in the period from October 10, 2007 onwards.

5. Difficulties, if any, faced in the implementation of this circular, may be immediately brought to the notice of the Board.