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M/s. Schwing Stetter (India) Pvt. Ltd. Versus Commissioner of Customs (Imports) , Chennai

2016 (2) TMI 615 - CESTAT CHENNAI

Valuation - loading on the goods imported from their related supplier by the Special Valuation Branch - inclusion of value towards design and drawing fees - The appellant amended the collaboration agreement by deleting the clause relating to payment of design and drawings. - Held that:- it is evident that the invoice price of Euro 1,62,350/- of pumps imported, sold to third parties on High Sea Sale Basis are not comparable goods with the goods imported by the appellants @ Euro 1,49,000. The reje .....

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ce the agreement is effective 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:- 17-2-2 .....

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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 ordered that an amount of ₹ 4.25 Crores towards design and drawing fees to be added to the assessable value as and when the same is paid. The appellant amended the collaboration agreement by deleting the clause relating to payment of design and drawings. The said SVB order was reviewed and follo .....

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(iv)& (vi) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. b) I reject the invoice value of 49 Nos. of Schwing Mobile Concrete Pump Placers of 90/120 CUM/ HR capacity, of Model No. S36 referred in para 37 above under Rule 12(1) of CVR, 2007 read with Section 14(1) of the Customs Act, 1962. c) I re-determine the value of 49 Nos. of Schwing Mobile Concrete Pump Placer of 90/120 CUM/HR capacity, of Model No. S36 referred in para 37 as EUR 79,50,950 (Ex-works) as .....

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14(1) of the Customs Act, 1962. e) I re-determine the value of 27 Nos. of Schwing Mobile Concrete Pump Placer of 90/120 CUM/ HR capacity, of Model No. S36 referred in para 38 as EUR 43,83,450 (Ex-works) as against the declared value of EUR 40,23,000 (Ex-works) under Rule 4 of CVR, 2007 and appropriate duty leviable at the time of importations on the differential value of EUR 3,60,450 (Three Lakh Sixty Thousand Four hundred and Fifty only) shall be demanded in terms of Sec. 28(4) of the Customs A .....

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rticular 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 ord .....

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nt for that particular financial year at the rates applicable to the said goods imported under every Bill of Entry for a particular Year. k) I order to load ₹ 5,48,67,280 /- (Rupee Five Crore Forty Eight Lakh Sixty Seven Thousand Two Hundred and Eighty) to the Transaction Value of parts, spare parts amd components of construction/ concrete machineries imported during the Year 2012-2013 in terms of Rule 10(1)(e) of CVR,2007. l) The importer shall be given an option to pay appropriate duty o .....

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ue of the imported goods in terms of Rule 10(1) (c)/ Rule 10(1)(e) of CVR,2007 as the case may be. n) Provisions under Section 28(4) of the Customs Act shall be invoked in case of goods imported beyond one year period. o) Provisions under section 28AA shall be invoked for collection of interest at appropriate rate. p) Penal provisions under section 114A shall be invoked against the importers for suppression of fact/ willful misstatement. q) The progress made thereof shall be intimated to the Spe .....

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n in force. The imported goods thereafter will be assessed provisionally with Extra Duty Deposit (EDD) equivalent to 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 C .....

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ll 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 concrete handling equipment Concrete Boom Pump Placer, which are imported from their related company. He drew attention to page 98, 99, 102 and 102A of the paper book containing technical literature/cat .....

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Placer and cleared on payment of excise duty. The adjudicating authority held that the price of Boom Placer is based on their own imported invoices relating to fully assembled which contains Pumps. The adjudicating authority held that the price of knowhow fee paid to the overseas supplier has been loaded to the transaction value and also loaded the fees paid towards reimbursement of repair and maintenance expenses for the services rendered by the foreign collaborator. He submits that both the a .....

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lume-II and submits that out of total 60 units agreed upon, they have imported only 27 units and included the development cost of EUR 12,000 in their invoice price. He submitted the copy of the invoices, wherein it clearly shows out that of total invoice price of EUR 1,49,000, less 12,000 which was already received as per the agreement. He further submits that the customs have already taken into account, which was paid including the technical knowhow fee while calculating the transaction value. .....

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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. .....

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ete pumps of model S 36X and the declared price is EUR 1,63,250. He drew our attention to page 157 of the paper book volume-II the copy of invoice dated 19.08.2011, and submitted that the said invoice relates to import of fully assembled equipment, which was sold on high sea sales. The said equipment includes Pump kit. In this case, what was imported is without pump kits as they have started manufacturing the pump kits in their own factory itself. He drew attention to page 151 of the paper book .....

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orted only the pump kits and the declared weight of 8516 kgs for four pump kits fully assembled. He further submits that if both the invoices referred at page 155 and 159 are taken together, the total gross weight will match to the gross weight of fully assembled kit. He also submits that the invoice price of EUR 1,49,000 of equipment without pump declared under the invoice at page 159 and the price of pump kit of EUR 13350 of pump kits is added together, the total price comes to EUR 1,62,350. T .....

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nce audit, (on site audit) and verified the records and no irregularities were noticed. 6. Various payments made to their principal company On the issue of various payments made to their principal company towards common expenses incurred by them. He submits that as per their agreement dated 07.03.2011, 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 serv .....

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d 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 importe .....

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rcular and submits that the Commissioner (Appeals) direction of loading of 5% EDD is totally contradictory to the Boards Circular. He also drew attention to the Commissioners interim order dated 17.06.2014, at the time of granting waiver, the Commissioner has clearly recorded that the appellant is a regular importer with a long standing track record of import and export and insisting of security may be avoided whereas the same authority in the final order took a different stand which is totally .....

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ement, the appellants are required to bring it to the notice of SVB. Whereas, in the present case, the appellants subsequently entered into the service agreement on 2.03.2011 and also renewed the agreement dated 25.1.2015 and in their agreement dated 24.1.2012 of technical knowhow fee, which they did not bring it to the notice of SVB. 9. On the merits, the Ld. AR countered the arguments of the appellants. On the loading of value on payments based on the price variation, the adjudicating authorit .....

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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 .....

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e adjudicating authority never gave an indication that the department propose to load the value had it been informed they could have explained the details before the adjudicating authority on the price variations as well as on the loading of technical knowhow. He submits that these facts can be verified at any time from the records available with them. He further submits that the comparable invoice relied by the Department, where they have imported fully assembled equipment with pump kit and sam .....

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he short issue in this appeal relates to determination of value and loading on the goods imported from their related supplier by the Special Valuation Branch. From the facts already set out above, there is no dispute on the relationship between the appellant and the overseas company as the appellant company is a wholly owned subsidiary of M/s.Schwing Project Indien GmbH, Germany (Schwing Group of Companies). The appellants started importing components and parts of mobile concrete pump from M/s.S .....

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ears and there was no dispute. 13. It is pertinent to see that all the DC SVB orders dt. 22.12.2000, 9.11.2004, 10.12.2007 and dt. 22.12.2010 all were accepted by the department and the assessment had attained finality for the said period. We also find from the records that the revenue preferred appeal against DC's first order dt. 22.12.2000 and the Commissioner (Appeals) in his OIA No.126/2002 dt. 16.4.2002 rejected the revenue appeal and upheld the order and the same was accepted by the De .....

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tion 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 .....

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mp kits ready to use by the user industry whereas what they imported were pumps without pump kits as the pump kits were manufactured indigenously at their plant and the same were supplied along with pumps after discharging excise duty. We have perused import invoices No.61535189/11R 1453 dt. 19.8.2011 relating to high sea sale annexed at page 157 of paper book and Invoice No.61546090/12 R1031 dt. 09.02.2012 relating to their own imports of pumps without pump kits annexed at Sl.No.5 of typed set. .....

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1016105.00/1 5. Sl.No. 1015607 1016105 6. HS Code 84134000 84134000 7. Quantity 1.000 pc 1.000 pc 8. Net Unit Price EUR 162,350.00 EUR 149,000.00 9. Packing 1 unpacked. 1 case 1unpacked. 2 cases 10. Gross Wt. 18560.00 kgs. 17260.00 kgs 11. Net wt. 18510.00 kgs. 17130.00 kgs. From the above table, it is seen that the description of the goods declared in the invoices are not same as held by the lower authorities. In (I) invoice of highsea sale to third party, after the description the model numbe .....

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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 furt .....

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No. of pumpkit is P2023/110-75 RB and this model number exactly figuring in the invoice of high sea sale dt.19.8.11 as-S36 X P2033/110-75 RB. It is evident that S36X refers to pump and P2023/110-75 RB refers to the pump kit. The unit price of pumpkit declared in the said invoice dt. 13.8.2012 in Euro 13,350 per piece. In their own imports covered under Invoice dt.9.2.12, the declared price of pump is Euro 1,49,000 and if the per unit price of pump kit i.e. Euro 13,350/- is added to the appellant .....

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facture of pump kits indigenously by using various components. Once the pump kits are manufactured and the same are fitted with mobile concrete pump which are imported and cleared by the appellants. The whole unit is cleared to the customer as complete pump with pump kit as one unit after value addition and payment of appropriate excise duty. This is evident from the Central Excise Invoice No.000 000 1666 dt.22.12.2011 (annexed at page 201 of Paper Book) where the appellant had cleared mobile co .....

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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 manufactu .....

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(hereinafter referred to as -SSI), a Company registered under the Indian Companies Act, 1956 and having its Registered Office at F-71, SIPCOT Industrial Park, Irungattukottai, Sriperumbudur - 602 105, Kancheepuram Distrct, Tamil Nadu, India, represented by Mr.A.Sundaresan, Managing Director, on the other part, for the transfer of technical Knowhow relating to manufacturing of SCHWING Concrete Boom Pump Model S36 (hereinafter referred to as Concrete Boom Pump or Boom Pump ) by Schwing to SSI, fo .....

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during the January to December 2012, by Euro 12,000 per unit i.e. From Euro 149,000 per unit to Euro 137,000 per unit. The invoices for these first 60 units should separately mention that the development cost of EURO 12,000/- per unit has already been remitted, giving the break-up of such deduction and referring to the invoice for EURO 720,000/- including reference to this agreement. 3. Schwing also agrees to re-price all supplies beyond these 60 units, based on the then level of indigenization .....

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from the Clause (2) of the above agreement, the supplier had agreed to reduce the price of the Boom Pump from Euro 1,49,000/- to Euro 1,37,000/- by taking into account Euro 12,000/- per unit towards development cost already received from the appellant 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. Appel .....

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ated 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 imported. Customs duty has been discharged the development cos .....

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. Since the agreement is effective 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. 22. In view of the above facts, we are of the considered view that 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. Accordingly we set aside the imp .....

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cipal agreed to provide Management Services, Sales Services, General Administrative Services which includes, marketing legal and IT Support Services etc. and the consideration is payable on actual on quarterly basis. The copy of Invoice No.920028 dt.29.2.2012 raised by the Schwing GmbH, Germany clearly shows that the amount raised for the services rendered for the month of Feb.2012. 25. It is evident from the above facts that these charges are related post-manufacturing activities and not connec .....

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wing 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 appell .....

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CVR. Accordingly, we set aside the impugned order loading of the amount of service charges. 28. Having discussed the main issues the last issue remains to be decided is the provisional assessment and 5% EDD ordered by the LAA for the future imports. We find from the impugned order the LAA on one hand upheld the original order of adjudicating authority who finalised the loading of value but proceeded beyond the scope of appeal and directed the Appraising Group that all future imports should be pr .....

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ng group to finalize the assessment accordingly as per his order. Therefore, the LAA order to continue provisional assessment for all future imports does not arise. 29. It is interesting to note that the Commissioner (Appeals) in his interim order dt. 17.6.2014 (annexed at page 219) while granting the stay and waiver of predeposit stated that the appellants have long standing track record of imports and exports and directed that insisting of security deposit to be avoided. The relevant paragraph .....

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