Per: P.G. Chacko:
In this batch of appeals filed by exporters of iron ore, who were not agreeable for payment of export duty on the FOB value of the goods without deduction of the duty element from such value in respect of exports made after 01/01/2009, the short question which arises for consideration is whether, under Section 14 of the Customs Act, the duty element was liable to be deducted from the FOB value of the export goods in determining the assessable value of the goods for the purpose of payment of export duty during the said period. The appellants paid duty under protest on the full FOB value of the goods (iron ore) exported by them after 01/01/2009. The assessed shipping bills were taken in appeal to the Commissioner (Appeals), but the appellate authority only sustained the assessments. There are three assessees before us, aggrieved by four orders of the Commissioner (Appeals). The appellate authority passed one order in relation to a set of shipping bills filed by one of these assessees. It passed a separate order in relation to another set of shipping bills filed by the same assessee. Similar orders were passed by the Commissioner (Appeals) in respect of the shipping bills filed by the other two assessees.
2. In all these appeals, the appellants have raised identical grounds, which are summarised below:
(a) According to Section 14 of the Customs Act, the value of export goods shall be the transaction value of such goods, i.e. to say, the price actually paid or payable for the goods when sold for export from India for delivery at the time and place of exportation. The transaction value is related to the sale price of the goods and not to the duty to be imposed on such goods when sold. [Reliance placed on the Hon'ble Supreme Court's judgment in Commissioner vs. Maruti Udyog Ltd. 2002 (141) ELT 3 (SC)]. If duty element is to be included in the price of the goods sold, then it would mean levy of tax on the duty element itself and not on the price of goods sold only. There is no provision under Section 14 of the Customs Act for levy of tax on the duty element itself.
(b) It has been held by this Tribunal in Service Tax cases that the tax element has to be excluded while arriving at the taxable value of the service for the purpose of levy of service tax. [Reliance is, particularly, placed on Commissioner of Service Tax vs. Prompt and Smart Security 2008 (9) STR 237 (Tri.-Bang.)]. Similarly the duty element has to be excluded from FOB price of export-goods in arriving at the assessable value of such goods for the purpose of levy of export duty.
(c) The Customs (Export of Tea to United Kingdom on Consignment Account) Valuation Rules, 1968 had specifically provided for deduction of duty of customs from the price of the goods in arriving at the assessable value of tea exported to UK. This principle of valuation should be traced to Section 14 of the Customs Act.
(d) Levy of duty on cum-duty price is a levy on customs duty itself. But export duty is not 'goods' within the meaning of Section 2 (22) of the Customs Act. Therefore, no duty is leviable on export duty itself, which proposition is in keeping with exclusion of export-duty from FOB price of export goods under Section 14 of the Customs Act for the purpose of levy of duty.
(e) Quasi-judicial authorities are not bound by departmental clarifications and have to apply their mind independently to arrive at correct conclusions. In the present case, the Assistant Commissioner chose to justify the assessments by citing Circular No. 18/2008-Cus dated 10/11/2008 issued by CBEC, wherein it was clarified that, w.e.f. 01/01/2009, export duty would be assessed on the transaction value as defined under Section 14 of the Customs Act, which would be the FOB price of the goods at the time and place of exportation. The learned Commissioner (Appeals) also relied on the Board's circular. It was not open to these quasi-judicial authorities to rely on the said circular which was issued under Section 151A of the Act. [Reliance placed on the apex court's judgment n Varsha Plastics vs. Union of India 2009 (235) ELT 193 (SC) and a few other decisions also].
(f) Applying the principles propounded by 'Salmond on Jurisprudence', the ratio decidendi of the apex court's judgment in Maruti Udyog (supra) case and the Tribunal's decision in Prompt and Smart Security's case should be squarely applicable to the instant case.
3. The learned counsel has reiterated the above grounds and has endeavoured to amplify some of them. The gist of his arguments is that the price of export-goods, referred to under Section 14 of the Act, is cum-duty price. In other words, the FOB price of export goods is to be treated as cum-duty price. In this connection, the learned counsel has vehemently argued for borrowing the principle laid down by the apex court in Maruti Udyog's case (supra) in the context of dealing with a valuation dispute as also the principle laid down by this Tribunal in service tax cases in the context of examining issues pertaining to taxable value of taxable services. The argument is that the price of the goods should be treated as cum-duty price.
4. On the other hand, the learned SDR submits that Section 14 of the Act is free from ambiguities inasmuch as it clearly lays down that the transaction value of export goods shall be the price paid or payable for such goods when sold for delivery at the time and place of export. The place of export is the port of shipment and the time of export is the time of shipment. The price of the export goods is its FOB price and the same shall be the transaction value under Section 14 of the Act and, therefore, export-duty has to be paid on this value. Nowhere in Section 14 is there any provision for abatement of the duty element from the FOB price in determination of the transaction value (assessable value) for the purpose of levy of export-duty. It is submitted that, the legal provision being very clear, there is no scope for adding anything to, or deleting anything from, the text of Section 14(1) of the Act so as to give effect to the legislative intent. It is argued that the legislative intent underlying section 14(1) of the Act is clear on the plain language of the provision. In this connection, the learned SDR has relied on the following decisions:
(i) Grasim Industries Ltd. vs. Collector 2002 (141) ELT 593 (SC);
(ii) Commissioner of Income tax vs. Tara Agencies 2007 (214) ELT 491 (SC);
(iii) Commissioner of Agricultural Income tax vs. Plantation Corporation of Kerala Ltd. (Judgment of the Supreme Court dated 29/11/2000 in Civil Appeal 2243-2249 / 1993); and
(iv) Peshawar Soap and Chemical Works vs. Commissioner 2001 (138) ELT 855 (Tri. -
Del.)
5. The above decisions are to the effect that, where the words of a statutory provision are clear and there is no obscurity or ambiguity, there is no scope for the court to take up on itself the task of amending or altering the statutory provision. The learned SDR further submits that, prior to 13/06/2008, export-duty was leviable on iron ore at the rate specified in the second schedule to the Customs Tariff Act and that, from the said date, export-duty is leviable on the said goods ad valorem. The Board's clarification under Section 151A of the Act was occasioned by the reference made by the assessing authority who assessed the shipping bills in question and was requested to make speaking orders of assessment by the present appellant. The Board's circular was eventually communicated to the assessee. The learned SDR submits that the Board correctly interpreted Section 14 of the Act in relation to export-goods and the same was binding on subordinate authorities in the department. It is further submitted that there is no parallel between Section 14 of the Customs Act and Section 4 of the Central Excise Act insofar as the structure of the 'transaction value' is concerned and, therefore, any principle laid down under Section 4 of the Central Excise Act is not liable to be borrowed by the assessing authority functioning under Section 14 of the Customs Act. Learned SDR has also referred to Section 67 of the Finance Act, 1994, which deals with valuation of taxable services for charging service tax. He has particularly referred to Explanation 2 to Section 67 ibid, which reads thus:
"Where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged".
With reference to this provision of law, SDR submits that the principle of cum-duty price of excisable goods stands adopted for the purpose of determination of taxable value of taxable services. The purport of these arguments is that Section 14 of the Customs Act stands on a different footing vis-a-vis the provisions for valuation of excisable goods and taxable services and that Section 14, ibid, at no point of time, intended to treat FOB price of export goods as cum-duty price. It is this legal position which was clarified by CBEC in its circular dated 10/11/2008. On the basis of the above distinction between Section 14 of the Customs Act on the one hand and the valuation provisions relating to excisable goods and taxable services on the other, the learned SDR has further endeavoured to distinguish the case law cited by the learned counsel. It is submitted that the ratio of the apex court's judgment in Maruti Udyog's case or the Tribunal's judgment in Prompt and Smart Security's case, by any stretch of imagination, is inapplicable to valuation of export goods for the purpose of levy of export duty under Section 14 of the Customs Act.
6. In his rejoinder, the learned counsel has referred to the proviso to Section 151A of the Customs Act and has submitted that the orders, instructions or directions issued by the Board under the said Section are not binding on any assessing authority or any appellate authority. In this manner, it is sought to be made out that the Board's circular dated 10/11/2008 could not have been relied upon by the lower appellate authority.
7. We have given careful consideration to the submissions. The learned counsel has, at the outset, referred to one of the contracts under which iron ore was supplied to a foreign buyer. One of the provisions of this contract is to the effect that all levies on export of iron ore in the country of origin shall be for account of seller and all levies on import in the country of destination shall be for buyer's account. This provision of the contract further says that, if, during the tenure of this contract, the country of origin imposes any levy on export of ore higher than what existed on the date of commencement of the contract, or if the rate of levy is substantially increased, the unshipped balance under the contract may be cancelled by the seller or the buyer upon receipt of notice of such event. Another provision of this contract made it obligatory for the buyer to pay the FOB price as agreed between them and the seller. These provisions of the contract would appear to show that these appellants received the FOB price of the goods from the overseas buyers and further that the seller and the buyer would be liable to pay all the levies by the governments of their respective countries. In other words, the contract did not permit the incidence of such levy (e.g. export duty) in any of the countries to pass on to the other country. This aspect of the contract, in our view, is in keeping with the legal principle embodied in Section 14 of the Customs Act, which provides that the transaction value of export goods, for the purpose of export duty, shall be the price paid or payable for the goods when sold for export at the time and place of export. It is not in dispute that the time and place of export referred to under Section 14 are, respectively, the time and place of shipment of the goods. The price of the goods at the time and place of shipment is its FOB price, whether paid or payable. The law declares that this shall be the transaction value for the purpose of levy of export duty. It does not make provision for abatement of duty element from the FOB price so as to arrive at the assessable value for the purpose of levy of export duty. As rightly submitted by the learned SDR, the provisions of Section 14 are clear and free from any ambiguity. The Hon'ble Supreme Court, it the case of Grasim Industries (supra) held as under:
"8. No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used. It is said that every statute is an edict of the legislature. The elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the legislature. Where the words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the Court to take upon itself the task of amending or alternating the statutory provisions. Wherever the language is clear the intention of the legislature is to be gathered from the language used. While doing so what has been said in the statute as also what has not been said has to be noted. The construction which requires for its support addition or substitution of words or which results in rejection of words has to be avoided. As stated by the Privy Council in Crawford v. Spooner [(1846) 6 Moore PC 1] "we cannot aid the Legislature's defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there". In case of an ordinary word there should be no attempt to substitute or paraphrase of general application. Attention should be confined to what is necessary for deciding the particular case. This principle is too well settled and reference to few decisions of this Court would suffice. [See : Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests, Palghat and Anr. (AIR 1990 SC 1747), Union of India and Anr. v. Deoki Nandan Aggarwal (AIR 1992 SC 96), Institute of Chartered Accountants of India v. Price Waterhouse and Anr. (1997 (6) SCC 312) and Harbhajan Singh v. Press Council of India and Ors. (JT 2002 (3) SC 21)]." [emphasis supplied]
In the case of Tara Agencies (supra), the apex court held that:
"The intention of the legislature has to be gathered from the language used in the statute which means that the attention should be paid to what has been said as also to what has not been said."
In the case of Plantation Corporation of Kerala (supra), the apex court reiterated the above rulings and held that, if the intendment was not in the words used it was nowhere else and so long as there was no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent became impermissible. The court further held that the need for interpretation arose only when the words in the statute, were on their own terms, ambivalent and did not manifest the intention of the legislature. The above rulings were followed by this Tribunal in the case of Peshawar Soaps and Chemical Works (supra). We have to interpret the provision of Section 14(1) of the Act, keeping in view the above rulings of the apex court. Section 14 reads as follows:
"SECTION 14. Valuation of goods. - (1) For the purposes of 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 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 consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf :"
According to the above provision, the value of the export goods shall be the transaction value of such goods, i.e. to say, the price actually paid or payable for the goods when sold for export from India for delivery at the time and place of exportation. As it is not the case of the Revenue that the sellers (exporters) and the overseas buyers of the goods are related, what needs to be examined in this case is whether the FOB price of the subject-goods should be taken as the transaction value of the goods. It is not in dispute that the price actually received by the appellants from their overseas customers as consideration for iron ore exported by them was FOB price. The only case of the appellants is that the export duty element should be allowed to be deducted from this FOB price to arrive at the transaction value of the goods for the purpose of assessment to export duty. We have not been able to discern anything from the above provision of law so as to accept the appellants' case. In our view, the above provision of law is plain and clear and the same does not allow abatement of duty element from the FOB price in determining the transaction value for the purpose of assessment to export duty.
8. Learned counsel has emphatically submitted that, if such abatement is not allowed, duty will have to be paid on an amount of duty comprised in the FOB value. In this context, he has argued that duty is not 'goods' and hence not exigible to duty. We are unable to accept this proposition of the counsel inasmuch as, in the case of export of goods, what is assessed to duty is goods and its value only provides a quantitative basis for the duty to be paid by the exporter. According to the learned counsel, the FOB price is cum-duty price and the duty element cannot be charged to export duty. We have not accepted the FOB price to be a cum-duty price. In this case, we have come across a contract dated 01/04/2005 which provided for export of iron ore by the appellant to overseas buyer at the FOB price agreed between the parties. This contract was meant to be in operation from year to year. To say that the FOB price agreed between the parties is cum-duty price would mean that the contracting parties were aware of the rate of export duty for the goods exported in a given calendar year, at the very commencement of the year. If the rate of export duty changes midway in the particular year, how could the contracting parties incorporate the duty element in FOB price at the commencement of the year in respect of goods sold after such change of rate of duty? The above proposition made by the learned counsel is, therefore, unworkable under the contracts referred to by him, nor is it in accord with the provisions of Section 14(1) of the Act. It is in this scenario that we have rejected the plea that the FOB price of the export goods was a cum-duty price. We have already held that the FOB price of the goods was the price actually paid or payable by the buyer to the exporter in respect of the goods exported for delivery at the time and place of export and the same would not contain any duty element. Therefore, there is no question of any duty being levied on any amount of duty.
9. We are not impressed with the reliance placed by the learned counsel on Maruti Udyog (supra) being a Central Excise case or the Tribunal's decision in a service Tax case. As rightly argued by the learned SDR, nothing contained in Section 4 of the Central Excise Act or Section 67 of the Finance Act, 1994 can be borrowed by the assessing authority in the context of determining the assessable value of the export goods under Section 14 of the Customs Act. Section 4(4)(d)(ii) of the Central Excise Act specifically provides for exclusion of duties and other taxes from the sale price of the excisable goods, in the determination of the assessable value of such goods for the purpose of levy of duty of excise. Section 67 of the Finance Act, 1994 read with Explanation-2 thereto also provides for similar exclusion of tax from the gross amount collected by the service provider from the service recipient, in determining the taxable value of the service for the purpose of levy of service tax. As rightly submitted by the learned SDR, Explanation-2 ibid is only clarificatory of Section 67and hence must have retrospective operation. This aspect, however, would not enable the appellant to plead that Section 14 of the Customs Act also should be held to have incorporated therein a provision for abatement of duty element from the FOB value of the export goods for the purpose of levy of export duty. This is because Section 14(1) of the Act itself is self-explanatory insofar as valuation of export goods for the purpose of levy of export duty is concerned. As we have already noted, this provision is free from ambiguity and is couched in plain language which declares the law clearly.
10. We have also not found any substance in the reliance placed by the learned counsel on certain rules relating to valuation of tea exported from India to UK. Both sides agree that these rules are obsolete today and hence these rules are not worth being referred to.
11. Both sides have also extensively referred to the Board's circular. They agree that this circular was issued under Section 151A of the Customs Act, which provision authorises the Board to issue orders, instructions or directions for the sake of uniformity in classification of goods under the Customs Tariff Act or with respect to levy of duty on such goods, and such orders, instructions, and directions are binding on the subordinate authorities in the department. The proviso to the above section says that the Board shall not, under the above section, instruct any assessing authority to assess the goods in a particular way in a particular case. Any instructions issued to the contra will not bind such assessing authority or the first appellate authority. This is what we understand from the proviso, which does not say that the orders / instructions / directions issued by the Board under Section 151A of the Act are not binding on the assessing authorities or appellate Commissioners. The circular in question is certainly binding on quasi-judicial authorities under the Board, who may be called upon to decide on identical issues. In this connection, we have perused the apex court's judgment in Varsha Plastics (supra) case cited by the counsel. In this judgment, we have not seen any ruling which supports the argument advanced by the learned counsel in relation to the Board's circular.
12. The learned counsel has also claimed support from an order-in- appeal passed by the Commissioner of Customs (Appeals), Kolkata, wherein the FOB price of iron ore exported by one of the present appellants was held to be cum-duty price and accordingly abatement of duty element from the FOB price was allowed to the assessee. The appellate Commissioner's order is not binding on us. Apart from this, we note that the said appellate authority took the above view after a perusal of the contract of sale of iron ore by the exporter. But the order is silent on the terms of the contract, nor does it refer to the Board's circular.
13. In the result, the impugned orders have only to be sustained. Accordingly, we dismiss these appeals.