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TMI Blog2015 (11) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... tself of the benefit of the exemption notification No.21 of 2002 dated 1.3.2002 in respect of the goods imported under two bills of entry dated 25.6.2003. Assessee's Appeal 2. The appellant had imported a naphtha based power plant with five gas turbines which was mounted on a barge which floated in a river at a Tanir Bavi Village near Mangalore for purposes of power generation. The capacity of the said power plant is 220 MW and the entire power generated is uploaded into the grid of the Karnataka Power Transmission Corporation Limited. The power plant had to be kept in good running condition as the contract with KPTCL is to supply power to them continuously. For this purpose, the appellant entered into an agreement for service and supply of parts with GE, USA being a Long Term Assured Parts Supply Agreement dated 12.12.2000, (hereinafter referred to as "LTAPSA"). In terms of the said agreement, the appellant was to make payments based on either fired hour charges or maintenance charges. Various parts of the Gas Turbine Hot Section of the said plant, which had to be imported under the LTAPSA were imported under two bills of entry dated 25.6.2003 after 12,500 fired hours had com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts these used parts, for the exports made, no export sale proceeds are realized and M/s GE, USA makes no payment to M/s GEL. However, when M/s GEL imports the hot path parts, the price fixed is based on the rotable exchange programme. The cost of the returned used hot path parts by M/s GEL is taken care, and an abatement is given and thereafter, the price is arrived at. (v) Thus the invoice furnished by M/s GE, USA, to M/s GEL, Bangalore is a discounted price based on the rotable exchange programme. The prices under the rotable exchange programme though are discounted prices, the same are widely in use and are popularly called catalogue prices or published price lists. (vi) The invoice produced to the Customs along with the Bill of Entry is only the rotable exchange price. The abatement given towards the cost of the exported used hot path part is not reflected in the invoice. Therefore, for the purpose of Customs assessment, the declared price requires an adjustment by way of addition equal to the cost of returned hot path part, which was discounted. (vii) This abatement / discount is to the extent of 1/3 rd of the catalogue price under the rotable exchange programme. M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be confiscated under Section 111(m) of Customs Act, 1962. (f) the goods imported and cleared under Bills of Entry Nos.9140 dated 25.06.2003 and 598675 dated 12.04.2004, valued at Rs. 13,20,93,674/-, forming part of goods indicated at (a) above should not be confiscated under Section 111(o) of the Customs Act, 1962, apart from their liability to confiscation under Section 111(m) of the Customs act, 1962, (g) Penalty under Section 112(a) and/94 Section 114A of the Customs Act, 1962 should not be imposed." 5. The reply to the show cause notice sent by the assessee disputed all the allegations made and stated in particular as follows:- "H. VALUE DECLARED FOR INSURANCE IS THE BEST REFERENCE TO DETERMINE THE INTRINSIC VALUE OF THE GOODS IMPORTED H.1 it is well known that the imported goods are invariably covered by a marine insurance policy or air insurance policy, as the case may be. Such insurance is necessary from the point of the view of the parties involved so that they may be able to recover the value of the goods in case the goods are lost/damaged during transportation from one country to another. H.2 In this case, GE has a worldwide practice of insuring the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me clearly stipulates return of the removed part within 30 days of receipt of the replacement Hot Path Gas Parts. The Programme also states that parts not returned within 30 days would be subject to a surcharge of 10% of the catalog price. J.5 The condition stipulated in the Programme that a surcharge of 10% of the catalog price would be charged for receipts after 30 days can only be implemented after the expiry of the period of 30 days. Therefore, the statement of Shri Naresh Manchanda is only a reiteration of the position explained in the Programme. J.6 The Noticees, therefore, submit that no conclusion can be drawn from the statement of Shri Naresh Manchanda to the effect that the prices under the Rotable Exchange Programme have been deliberately depressed after taking into account the return of the removed part. J.7 On the contrary, the Noticees submit that the return of the removed Hot Path Gas Parts under the Rotable Exchange Programme is as per the established international practice of GE and clearly brought out in the brochure itself. J.8 It is not the case of the department that the Noticees have declared a price which represents the published price of GE less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbished Part." 9.8 It is clear from the Agreements that the appellant is required to export the replaced old part while receiving the refurbished part from the foreign supplier. The above mentioned para 2.8 makes it very clear that the value furnished in the Commercial Invoice is only an incremental value and also the same was provided to limit the assessment of customs duties. This is very clear evidence indicating that the value declared at the time of import is not the true value of the goods. The Revenue was right in rejecting the said value. 9.10. It has been urged that the value indicated in the Insurance Policy for the imported goods should be accepted. That value happens to be the value under the Rotable Exchange program. The Adjudicating Authority has stated that in that case, the value should cover even the value of the returned part on the ground that the insurance amount is split between imported parts and old parts exported back to M/s. GE as both have a value of their own. Therefore, taking the insurance amount applicable only to the imported parts and arriving at the conclusion as contended by the appellant is not correct." 8. Shri Sridharan, learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s department to furnish any agreement so that they could justifiably state that there was willful suppression on its part. He referred to Section 17(3) and Section 46(1) and (4) of the Customs Act to buttress this submission. He cited several judgments in support of the plea that there could not, in law, be suppression on his part on account of failure to produce the LTAPSA. He further submitted that identical goods had been imported by BSES, and the Assistant Commissioner of Customs, by order dated 17.4.2002, had taken the invoice value of the imported items without any add-ons. Since this would be the value of identical goods imported at or about the same time as the goods being valued, Rule 5 of the Customs Valuation Rules would apply and, therefore, any reference to Rule 8 would be incorrect. Under Rule 5 of the said rules, as in the case of BSES, only the invoice value of the imported items could be taken into account without 1/3rd more being added. 9. Shri Radhakrishnan, learned senior counsel appearing on behalf of the revenue refuted each of these allegations and argued before us that the case was squarely covered by Rule 4(2)(g) read with Rules 9(1)(d) and 9(1)(e). In any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese rules, the value of imported goods shall be the transaction value of identical goods sold for export to India and imported at or about same time as the goods being valued." 8. Residual method. - (1)Subject to the provisions of rule 3 of these rules, where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of section 14 of the customs Act, 1962 (52 of 1962) and on the basis of data available in India. 9. Cost and services - (1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, - (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 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 pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported goods by the buyer to the seller. This being the case, we have now to see whether Rule 5 of the Rules would apply as contended by learned counsel for the assessee. 12. We have gone through the order dated 17.4.2002, passed by the Assistant Commissioner of Customs, Cochin, in the case of another assessee, namely, BSES. The entire discussion in that order proceeds only on whether various other charges should be added on to the invoice price and it was held that all such charges should be so added on. We do not find any reference to any argument or finding to the effect that a certain portion of the invoice price should be added on because of re-export of used parts. This case would therefore be distinguishable, as has rightly been held by the Tribunal. Further, we find that the bill of entry in the present case is dated 25.6.2003, long after the imports effected in the BSES case. The imports made in that case were of the year 1998, which was four years before the present import, and would not, therefore, be identical goods imported at or about the same time as the goods being valued. It is, therefore, correct to say that Rule 5 would have no application in the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USA. This being the case on facts, we are afraid that both the Commissioner's order and the Tribunal's order would have to be set aside on this ground alone. 16. Relying upon Shri Manchanda's statement and Shri Deb's statement would, therefore, not carry the matter much further as it is found that on facts, the commercial invoices do not take into consideration the fact that existing used parts are to be sent back to GE, USA, which parts would have a value - that is 1/3 rd of the invoice price of the imported items. 17. Shri Radhakrishnan has argued that it was incumbent upon the assessee to submit a declaration disclosing full and accurate details relating to the value of imported goods under Rule 10 of the Customs Valuation Rules, 1988. He has also argued that under sub-clause (b) of Rule 10(1), it was incumbent upon the assessee to have handed over the entire LTAPSA to the Customs authorities and as the assessee has breached the aforesaid rule, there has been a mis-declaration by the assessee of the value of the goods consequent to which the assessee is liable to additional duty and penalty. 18. Rule 10(1) which has been set out earlier in this judgment consis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Radhakrishnan. 22. As the assessee succeeds on merits, it is unnecessary to go into the point of limitation. The assessee's appeal is, therefore, allowed and the judgment of the Tribunal is set aside. Revenue's appeal 23. The impugned judgment has held that exemption notification No.21/2002 dated 1.3.2002 would apply to the assessee's case. The relevant portion of the said notification is reproduced below:- S. No. Chapter Description of Standard Additional Condition No. Heading No. goods Rate Duty rate or sub-heading No. 236. 84 or any All goods for 5% 16% 45 Chapter renovation or modernization of a power generation plant (other than captive power generation plant) 45. If,- (i) in the case of a power (except a nuclear power plant),- (a) in the case of Central Power Sector Undertakings, the Chairman of the concerned Undertaking or an officer authorized by him certifies that the scheme for renovation or modernization as the case may be, of such power plant, has been approved and an officer not below the rank of Deputy Secretary to the Government of India in the Ministry of Power recommends, in each case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso been mentioned. The General Manager of the Karnataka Power Transmission Corporation Ltd. has certified that the spares listed in the letter of the appellant dated 29.09.2003 are essential for the proper upkeep of the generating units. The Revenue contends that the impugned goods are not for renovation but only for upkeep. In our view, one cannot take such a narrow view. What is the meaning of renovation? To renovate means to make new. We talk of renovating a house or building etc. In the present case it is the renovation of the Power Plant. In their letter addressed to the Government of Karnataka, the appellants have stated that they have been undertaking the renovation of the Gas Turbines at their plant. On going through that letter, we do not find that there is any misrepresentation. They have emphasized the point that after 12,500 fixed hours, renovation is necessary. We also find that the old parts are exported and the re-furbished parts are imported for replacement. In a way, this can be understood to be a sort of renovation. In any case, the State Government has accepted the proposal of the appellants and the Certificate has been issued by the Principal Secretary, Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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