TMI Blog2016 (2) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... from January 2012 the Technical know how fee cannot be added to the imports made in 2011 and not applicable to other models as well other than the pumps model S36X. - the original authority ordering of loading of Technical know how fee of Euro 720,000 to the Transaction value of 76 Nos Pumps under Rule 10 (1) (c) is not sustainable and not backed with any evidence. - Decided in favor of assessee. - Appeal No. C/40309/2015 - Final Order No.40280/2016 - Dated:- 17-2-2016 - SHRI R. PERIASAMI, TECHNICAL MEMBER AND SHRI P. K. CHOUDHARY, JUDICIAL MEMBER For the Petitioner : Shri S. Murugappan, Advocate And Ms. Sridevi, Advocate For the Respondent : Ms. Indira Sisupal, AC (AR) ORDER PER R. PERIASAMI The present appeal is filed against the OIA dated 18.09.2014 passed by the Commissioner of Customs (Appeals), Chennai. 2. The brief facts of the case are that the appellants imported machinery i.e. Schwing mobile concrete pump placers from their related supplier M/s. Schwing GmbH, Germany. Though both the supplier and the appellants are related, as per the OIO of the Dy. Commissioner of Customs (SVB) dated 22.12.2000, the transaction value was accepted. He also o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transaction Value of 76 Nos of Schwing Mobile Concrete Pump Placers of 90/120 CUM/ HR capacity, of Model No S36, in terms of Rule 10(1)(c) of CVR,2007. g) The importer shall be given an option to pay duty on Technical Know How Fee as lump sum payment for the particular financial year at the rate of duty prevailing for the imported pumps or at the rates applicable to the pumps imported under every Bill of Entry for a particular Year. h) The declared invoice value of parts, components and spares of Construction machineries shall continue to be accepted as Transaction Value in terms of Rule 3(3)(a) of the CVR, 2007 with due additions under Rule 10(2) ibid, in line with the Original Order and subsequent renewal orders for a further period of three years . However, if contemporary imports at higher prices are noticed, Groups may evaluate the goods as per the provisions of the Customs Valuation Rules,2007. i) I order to load the expenditure on Repairs and Maintenance of ₹ 5,27,25,594 /- ( Rupee Five Crore Twenty Seven Lakh Twenty Five Thousand Five Hundred and Ninety Four only ) incurred during the Year 2011-12 to the Transaction Value of parts, spare parts and / or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1% of the Assessable Value. In case, there is any factual error or omission, the same shall be brought to the notice of this office suo motto by the importer without delay. w) All pending provisional assessments if any shall be finalized accordingly. x) This order is operative for three years up to 04.03.2017. 2. Aggrieved by this order, the appellant preferred appeal before the Commissioner (Appeals). The Lower appellate authority in his impugned order C.Cus. No. 1703/2014 dated 18.09.2014 upheld the order of the adjudicating authority and rejected the appeal. Further, the Commissioner (Appeals) has also ordered modification of OIO at S.No. (r), where he ordered that till finalization of the proceedings under Section 28 (4) and Section 28 AA and Section 114 A of the Customs Act, 1962, the assessment shall continue to remain provisional and 5% EDD shall be collected on all future imports. Further, he has also ordered the department to procure suitable security/bank guarantee for the past imports. Hence the present appeal. 3. The Ld. Advocate appearing on behalf of the appellant reiterated the grounds of appeal and submits that the appellants are manufacturers of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They have not imported the remaining 33 units and therefore no appropriation was indicated in the invoices. Further he drew attention to pages 180 181 of paper book Volume-II, where in their reply dated 19.02.2014, to the Dy. Commissioner at para 5 6, they have clearly brought out these facts before the adjudicating authority informing that the development costs of EUR 12,000 for all the 27 units imported as per the list already included in the invoices. The customs duty has been discharged on the total price of 1,49,000 EUR. He further submits that balance 33 units were not imported, the development cost will be added as and when the imports takes place. Regarding 15 Boom Placer shipped during the year 2011, they do not fall under the purview of the agreement entered in 2012. He further submits that the balance of 3,96,000 EUR paid to their principal as advance still remains in the books of accounts as advance. He further submits that as per the agreement dated 24.01.2012, the payment of development cost relates to only S 36 X model and not applicable to other Pumps of other models. 5. On Price Variation On the issue of price variations, he submitted that the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2011, principle company has entered with service agreement with all their subsidiary units located all over the world. As per the scope of the service, the principle company will provide management service, sales service, joint administration service etc. to all their sister units and in consideration service fee is payable by the appellant to the principle holding company. He submits that the service fee calculated as per the agreement based on the actuals and the service fee is calculated on quarterly basis. He drew attention to page 181 of volume II and explains that their principle company has raised invoices towards purchase of machineries, sales promotion etc. they have already registered with service tax and service tax has been discharged and TDS have also been deducted and the same cannot be taken for customs valuation. Whereas, the adjudicating authority has loaded these expenses on import of equipments under Rule 10(1) (c) of CVR. Under this Rule only the amount which is related to the cost of the imported goods can only be included. Since these amounts are service charges/reimbursable expenses towards repair and maintenance, the same cannot be added to the cost of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment are in correspondence with each other in the form of questionnaire and reply and thereafter heard the appellants, the adjudicating authority passes the SVB order. 10. Regarding loading of technical knowhow fee, she reiterated the findings of appellate authority at page 46 to 51, where the Commissioner (Appeals) has reproduced the OIO. She submits that the adjudicating authority has rightly loaded the technical knowhow fee with the cost of imported equipment. As regards the invocation of Section 28, 28(4) 28 AA, the appellate authority has correctly held that at page 58 of the paper book and ordered for 5% EDD is fully justified. She relied on the decision of the Hon ble Supreme Court in the case of Commissioner Vs. Aquamall Water Solutions Ltd. 2006 (193) ELT A197 (S.C.), wherein the Hon ble Supreme Court has held that the sale made to third parties is admissible. 11. The Ld. Advocate in his rejoinder countered the arguments of the Revenue and once again summarized all the four issues. On the principles of natural justice, he submits that though they where under correspondence, the adjudicating authority never gave an indication that the department propose to load the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted by the Department and no appeal filed against the said OIA. 14. With the above back drop of events, we find that the DC (SVB) while renewing the period from 23.12.2013 onwards rejected the transaction value which was hitherto accepted by the department and ordered for loading of value on various heads as set out in his order reproduced at para (2) above. On appeal by the appellant, the LAA not only upheld the order but also ordered for provisional assessment and 5% EDD on the future imports till finalization of demands on past imports. 15. The appellants put forth the very same grounds before LAA as contended before this Tribunal against all the issues and it is seen that the LAA in the impugned order has not discussed or countered the arguments of the appellant, instead merely generalized and affirmed the OIO and extracted and reproduced the OIO paragraph on each issue and affirmed with his statements like L.A analyzed the issue in detail or LA order is based on legal backing etc. and no clear findings given on the appellant's arguments. 16. Be that case, we proceed to discuss the each issue on merits. (i) On enhancement of value of Model S 36X pumps T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... highsea sale to third party, after the description the model number is described as S36 X P 2023 110/75 RB, 380L whereas the (II) invoice relating to their own imports after description the model is indicated only as S36X . The imported goods are packed in 1-unpacked, 1 case in the first invoice and 1-unpacked, 2 cases in the second invoice. Similarly, the gross weight and net weight is 18560 kgs. and 18510 kgs as compared to 17260 kgs. and 17130 kgs in the appellant case. The difference in description and model numbers and gross weight and net weight and the difference in price all these features clearly confirms that the pumps imported by the appellants and sold to third parties as described in the above invoice dt. 19.8.2011 are complete pump with pump kit. The difference in description and Model No.S36XP 2023-110/75 RBI 380L is distinct when compared to the appellant's own imports where the description model is indicated only as S36X and it cannot be construed as missing or omission as held by the LA. This is further supported with difference in gross weight and net weight of both the imports. Further, on perusal of invoice No.61556451 dt. 13.8.2012 at page 159 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants @ Euro 1,49,000. The rejection of declared price and loading EURO 1,62,350 ordered by the authority is not sustainable. We hold that the declared value of the pumps imported is the correct transaction value. Accordingly, we set aside the loading ordered by adjudicating authority at b,c,d,e of the operative part of OIO relating to re-determination of value of import of Schwing mobile concrete pump placer and allow the appeal. 20. Now we proceed to discuss the second issue on the loading of Technical Know how fees to the Transaction value of imported goods. The adjudicating authority loaded the Technical Know how fee of EURO 7,20,000/- paid to overseas company towards transfer of technical know how relating to manufacturing of SCHIWING Concrete Boom Pump Model S36 by the appellant. The appellant entered into agreement with their principal supplier. The relevant extract of Agreement dt.29.1.2012 is reproduced as under :- This agreement is being signed on 24th day of January, 2012 between M/s.Schwing GmbH (hereinafter referred to as Schwing ), a body corporate having its Office at Postfach 20 03 62, D-44647 Herne, Germany represented by Mr.Gerhard Schwing on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant of Euro 7,20,000. The reduction in price is limited to first 60 units to be supplied during January to December 2012. It is also stipulated the invoice of 60 units should separately mention the Development Cost of Euro 12,000/- per unit. 21. Appellant contended that out of 60 units, they have imported only 27 units and the balance 33 units are yet to be imported and also contended that they have paid Custom duty on the total invoice value of Euro 149,000 after adding the development cost of Euro 12,000/- to the invoice price EURO of 1,37,000 and the same cannot be loaded again. They submitted copies of all the invoices and Bills of Entry. On perusal of one Invoice No.61546050/ 12 R10 dt.9.2.2012 it is seen that the supplier clearly indicated Development Cost Euro 12,000 and priced the goods less development cost. As seen from the copies of Bills of Entry, the Transaction value has been computed by taking Euro 149,000 and not Euro 137,000 and customs duty has been discharged on the above value. This confirms the development cost of Euro 720,000 paid is apportioned to 60 units and taken Euro 12,000/ per unit and the Department has added this amount to 27 units already impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities and not with importation of goods and dismissed Revenue's appeal. The ratio of the apex Court judgement is squarely applicable to the present case. By following the above apex Court decision and the High Court decisions, this Division Bench in the case of Saint Gobain Glass India Ltd. Vs. Commissioner of Customs, Chennai 2014-TIOL-1406-CESTAT-MAD = 2014 (310) ELT 757 (Tri. Chennai), and in Final Order No. 41538 41539/2015 dt. 17.7.2015 in the case of Godrej Agro Ltd. VS CC Chennai on identical issue of know how fees and other charges allowed the appeals. Therefore, we maintain the same in the present case. 27. Further, we find that the appellants are registered with Service Tax Department and discharged service tax on the said service charges paid to the overseas service supplier under reverse charge basis which is not in dispute. In view of the above facts, we hold that service charges and other charges paid to their overseas supplier towards various services has no nexus with import of pumps and accessories and the said amount not addable to the transaction value of imported goods covered in their appeals under Rule 10 (1) (c) of CVR. Accordingly, we set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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