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2015 (12) TMI 1201 - CESTAT CHENNAI

2015 (12) TMI 1201 - CESTAT CHENNAI - TMI - Valuation - related parties - Import of goods at concessional rate of duty against EPCG Licence - Inclusion of Technical Knowhow fee - Invocation of extended period of limitation - Held that:- technical knowhow fee is for design, drawing and technical information provided to appellant by overseas supplier for setting up of "Instant Coffee" plant which is purely a post-importation activity and not related to imported goods. As held by Hon'ble Supreme Co .....

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wing the Hon'ble Supreme Court judgment (supra) and the final order of Tribunal in the case of Godrej Agrovet Ltd. (2015 (11) TMI 1025-CESTAT Chennai), we hold that technical knowhow of US$ 1,30,000 is not addable to the value of imported goods. We set aside the demand on merits. Correspondingly, the imposition of redemption fine and penalty is also set aside. - Decided in favour of assessee. - Appeal No. C/227/2001 - FINAL ORDER No.41722/2015 - Dated:- 15-12-2015 - Shri R. Periasami, Technical .....

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through Chennai Port and partly through Mumbai Port. The goods were imported from M/s.Brazilian Food Projects, Brazil (BFP, for short). It appeared that appellant entered into agreement dt. 6.3.94 with BFP for supply of technical know how, design and drawings as a consideration an amount US$ 2,88,000 was payable to the supplier. The total assessable value of the goods declared as ₹ 4,22,44,230/-. The goods were allowed for clearance at concessional rate of payment of duty. The imported cap .....

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f limitation under Section 28 (1) for demanding differential duty and also proposed for penalty. The Chief Commissioner of Customs, Chennai adjudicated the case and held that US$ 1,30,000 being part of lump sum know-how payment is addable to the value of imported equipment under rule 9 (1) (b) (iv) and Rule 9 (1) (c) of Customs Valuation Rules, 1988 and confirmed the differential duty of ₹ 15,38,062/- and also imposed equivalent penalty. The adjudicating authority has also ordered for conf .....

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, the appellant filed ROM application to rectify the mistake of the Tribunal' finding that assessments are provisional and consequently held that question of limitation does not rise. The ROM was dismissed by Misc Order No.49/2006 dt. 25.1.2006. The appellant filed a C.M.A before the Hon ble High Court against Tribunal s final order. The Hon ble High Court by their order dt.7.11.2014 in C.M.A.No.2379/2006 set aside the Tribunal s order and remanded to the Tribunal. Para-8 of the High Court s .....

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essment is final and the importer does not deny it to plead a case of no suppression or misstatement. We, therefore, find that the Tribunal has misdirected itself to consider the issue on a total new plea, which was not canvassed by the Revenue in the show cause notice. That apart, the Commissioner was not called upon to adjudicate on that issue as to whether the assessment is provisional or otherwise. We find that the Tribunal erred in considering such new plea and coming to the conclusion that .....

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will be entitled to canvass all the issues on merits. No costs. Consequently, M.P.No.2 of 2006 is closed." 3. Ld. Advocate appearing for the appellant reiterated the grounds of appeal. On the preliminary issue, regarding the scope of remand, he submits the Honble High Court order clearly stated that assessee-appellants are entitled to canvass all the issue on merits. He submits that period involved in the present appeal relates September 1994 to March 1995. The total value of the goods inc .....

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learly held this relationship does not influence the price. Whereas at para 32, the adjudicating authority lists out seven points (I to VII) on the technical knowhow fee. Out of US$ 2,88,000 in respect of total technical knowhow fee, the Adjudicating authority taken the value of only three points (III) (IV) and (VII) to the extent of US$ 1,30,000 and ordered for enhancement of value by invoking Rule 9 (1) (b) (iv) and Rule 9 (1) (c) of CVR. He drew our attention to copy of the agreement entered .....

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the Licence Fee can be only included only if it is a condition of sale of the imported goods. The payment of technical know how is not towards imported goods and it is not a condition of sale of imported goods. Therefore he submits that both the rules are not applicable in their case. Drawings and Design, technical know how are clearly related to setting up of plant for manufacture of Spray Dried Instant Coffee in India for which technical knowhow fee was paid to the supplier. He also submits .....

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w our attention to para-39 of the OIO where the adjudicating authority has invoked longer period only on the ground of non-declaration and concluded it amounts to wilful misstatement and invoked extended period. He submits that there is no wilful suppression with intent to evade payment of duty as the goods are imported under EPCG licence for fulfilment of export obligation and they have duly completed the export obligation and the Bonds were cancelled. Since technical knowhow is not includible .....

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nalty under section 114A does not arise. 4. On the other hand, Ld. A.R reiterated the findings of the order. He drew our attention to para-23 of the OIO where the adjudicating authority has clearly brought out that the goods imported are patented product; technical know paid for drawing and design for setting up of machinery and without these technical know, drawing and design, the machinery could not have been set up. Both are interlinked and technical know fee are directly related to imported .....

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l countered the arguments of the department, and submits that it is the appellant who imposed the condition on the supplier and not the other way round. As per agreement the supplier has to execute bank guarantee for the assured input-output specifications as per technical knowhow. Therefore, there is no condition of sale of the imported goods. 6. We have carefully considered the submissions of both sides and perused the Hon'ble High Court's order dt. 7.11.2014. As directed by the Hon .....

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rt is covered under EPCG licence and appellants also fulfilled the export obligation under the said EPCG Licence which is not under dispute. The demand of differential duty of Customs was confirmed by invoking section 28 (1) covering the extended period. Appellant contended both on merits as well as on limitation. Appellant contended that the Technical Knowhow agreement dt. 6.3.94 entered with M/s.BFP is only for providing technical know how including design, manufacture and assembly, inspection .....

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00 003 (hereinafter called 'CCL', which expression shall where the context so admit, include its successors in interest and assigns) of the ONE PART and BRAZILIN FOOD PROJECT COMERCIO EXPORTACAO LTDA, having its Office at ... Indonesia, which office shall transfer all the Technical Knowhow intended under this Agreement, represented by... (hereinafter called the 'BFP', ...." Whereas 'BFP' is a limited company, manufactures Food Processing Equipment and is engaged in e .....

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oned. ... .... .... .... CLAUSE-II DEFINITIONS 2.1 The term 'technical knowhow' means extention of detailed drawings with localization of equipment and specifications of work to be done by CCL's sub-contracted suppliers, detailed drawings for erection of machineries, pipings, power distribution, wiring and instrumentations. ... ... ... .... CLAUSE-IV SERVICES FOR PROCESS KNOW-HOW & ASSISTANCE 4.1 'BFP' shall impart to 'CCL' upon request or as soon thereafter as ma .....

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ons and hand books in the English language for production, planning, detailed maintenance manuals and quality control of the product, plant and equipment. 4.3 'BFP' shall procure and supply to 'CCL' all technical information that may be necessary for the machinery/equipment to achieve the operational capacity of 500kgs./hr. Production of Instant Coffee. Should there be any deficiencies or imperfections discovered in such technical information supplied either b 'BFP' or th .....

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ow how it has contracted for herein and that it is not infringing any copyrights or patents in providing these services. 4.6 For purpose of this agreement, the Drawings, technical information, if any are understood to have been delivered outside India. .... ..... ..... CLAUSE-VI PFRORMANCE OF PLANT AND EQUIPMENT 6.1 'BFP' shall extend an irrevocable Bank Guarantee in terms acceptable to CCL to the extent of 5% of the contract value of US$ 2,88,000 at US$ 14,400 from a prime first class i .....

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he date of full satisfactory erection and commissioning of the plant or 12 months from the date of commercial production, whichever is earlier. Such satisfactory erection would be evidenced by a certificate to that effect by 'CC". ... ... ... CLAUSE-X PRICES AND PAYMENT TERMS 10. Inconsideration of Purchase of Technical knowhow, the first named party, namely, CONTIENTNTAL COFFEE LIMITED shall pay to BFP a total lump sum knowhow fee amounting to US$ 2,88,000 (United States Dollars Two La .....

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te irrevocable bank guarantee to the appellant to the extent of 5% of the contract value of the technical know of US$ 2,88,000 for the performance of the plant and machinery for the assured input-output specifications. It is evident from the above that the said agreement is purely on supply of technical knowhow and nowhere in the said agreement, any condition stipulated that appellant shall import machinery only from the supplier. The technical knowhow is purely related to transfer of technology .....

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ot affect the pricing of the goods. 8. It is also pertinent to see that is not the case of Department that appellants have imported the entire plant and machinery from the overseas supplier. As clearly admitted by the adjudicating authority in his order, only 22% of parts & machineries were imported from the supplier and rest of the imports were made indigenously and through other imports. 9. In this regard, we rely Hon'ble Supreme Court's recent judgement in the case of CC Mumbai Vs .....

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usion that neither the fees paid under the Licence Agreement nor under the Basic Engineering, Training and Technical Services Agreement related to the import of the capital goods nor was it a condition of sale and on that basis it has recorded the finding that the provisions of Rule 9(1)(b)(iv) or Rule 9(1)(c) or Rule 9(1)(e) of the aforesaid Rules would apply to the facts of the case. 6. That apart, it further finds that both the Agreements, viz., Licence Agreement as well as Basic Engineering, .....

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e are of the opinion that the matter is squarely covered by the recent judgment of this Court in Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Ltd. [Civil Appeal No. 3042 of 2004] decided on 13th April, 2015 [2015 (319) E.L.T. 202 (S.C.)]. 8. For all these reasons, we do not find any infirmity in the impugned order of the CESTAT. Thus, this appeal, which is bereft of any merit, is accordingly dismissed." The ratio of the above Supreme Court decision squarely applies to the present .....

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