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2016 (9) TMI 726 - CESTAT MUMBAI

2016 (9) TMI 726 - CESTAT MUMBAI - 2016 (341) E.L.T. 155 (Tri. - Mumbai) - Valuation - enhancement in assessable value - engineering information, drawing and design - post importation expenses or pre importation expenses - project imports - Project Import Regulations, 1986 - provisional assessment - rule 4(1) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 read with Rule 9(1)(e) - rule 9(b)(iv) of the Rules - whether the declared value of imported goods necessarily ha .....

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nized for ascertainment as pre-importation component for addition to the assessable value. - The value of ‘engineering drawings’ is a post-importation cost. No evidence has been adduced to show that the provision of these ‘drawings’ is conditional to placing order for equipment or that it is a pre-importation cost - mere supply of drawings at a value in the same agreement does not, ipso facto, have the support of law resort to rule 9 - cost of drawings and engineering services not included i .....

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the assessable value made while finalising the provisional assessment relating to project imports effected by M/s Kinetic Technology India Ltd (now known as Technip KT India Ltd) for M/s Gujarat Godrej Innovative Chemicals during 1991. The first appellate authority held the enhancement of assessable value by inclusion of value of price attributable to engineering information, drawing and design to be contrary to rule 4(1) of Customs Valuation (Determination of Price of Imported Goods) Rules, 198 .....

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ply of materials and the engineering information and design and drawings in which the price agreed as a consolidated sum was deliberately segregated at the insistence of the respondent. According to Revenue, this component of the agreement, valued at US$175000, included in the assessable value by the adjudicating authority in accordance with rule 9(1)(e) of Rules supra on finding that both aspects were part of the same agreement with the supply of engineering information as a condition of sale h .....

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n of the contract under the Project Import Regulations, 1986. On a writ petition against this order, the Hon ble High Court of Bombay directed that bond for the Extra Duty Deposit be furnished and the goods cleared provisionally by classification as project imports under 9801 of the First Schedule to the Customs Tariff Act, 1975. The agreement for purchase at US$ 140000 and US$ 175000 for equipment in part and for engineering information, design and drawings respectively from M/s UOP Inter Ameri .....

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declared in the bill of entry, relied upon the mandate for adjusting the value declared under Rule 4 in accordance with Rule 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 to arrive at the price to be finally assessed to duty. First appellate authority, per contra, accepted the contention of the importer that there is no nexus between imported goods and the engineering drawings which relate to goods that are to be fabricated by them locally before incorporating in .....

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e first appellate erred in concluding that there was no evidence of sale of goods being contingent upon payment for engineering drawings and that engineering drawings were intended for use in post-importation activity; that the parts imported are integral to the plant which would require engineering drawings to make it functional and that rule 9(1) of Rules supra requires drawings and designs to be includible in assessable value. It is further submitted that the price of engineering drawings bei .....

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ron & Steel Co Ltd in the impugned order was sought to be assailed on the ground that it dealt with a different includible element while the disregard of the decision of the Tribunal in Otto India Pvt Ltd v. Commissioner of Customs Kolkatta [2002 (149) ELT 477 (Tri)] affirmed by the Hon ble Supreme Court was sufficient to render the impugned order as not tenable. 6. Considering the criticality assigned in the appeal to the decision of the Tribunal in re Otto India Pvt Ltd, we have perused it .....

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agreements for execution of the project to evince that the two aspects of the agreement were not connected. It was also pointed out that research and development cess had been remitted on the amount charged for the engineering drawings in two tranches. Decisions of the Hon ble Supreme Court in Commissioner of Customs Ahmedabad v. Essar Steel Ltd [2015 (319) ELT 202 (SC)], Commissioner of Customs (Import) Mumbai v. Hindalco Industries Ltd [2015 (320) ELT 42 (SC)] and Tata Iron & Steel Co Ltd .....

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transmitters, pressure switches and temperature indicators. A third order was placed on 24th January 1991 for control panels of specified description. We also note that there is a separate approval for procurement of engineering drawings and designs. 9. A three-way agreement bound the overseas supplier to consign the listed parts to the respondent-importer who, in accordance with the contract entered into with M/s Gujarat Godrej Innovative Chemicals Ltd, commissions the plant after local procure .....

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ing supplied the drawings as well as a few valuable parts, it is only reasonable to devolve some level of responsibility on the overseas entity. We do not find in any of the records that the overseas entity has linked supply of all or some parts as condition for providing drawings. It would appear that the drawings relate to post-importation activity. 10. Having heard both sides and noted the facts, we are of the view that the crucial point for determination is whether the declared value of impo .....

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espondent had purchased various capital components from other parties and the goods for which the agreement was signed with OEC constituted only 16% of thee total value. On these facts, we 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 [20115 (319) ELT 202 (SC)]. xxxxxxx 10. The consideration of these three agreements is laid into t .....

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[Civil Appeal No. 3042 of 2004] decided on 13th April, 2015 [20115 (319) ELT 202 (SC)]. 12. Accordingly, we have perused the decision of the Hon ble Supreme Court in Commissioner of Customs, Ahmedabad v. M/s Essar Steel Ltd [20115 (319) ELT 202 (SC)], in which it was held thus: 7… … A cursory reading of the Section makes it clear that Customs duty is chargeable on goods by reference to their value at which such goods or like goods are ordinarily sold or offered for sale at the tim .....

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red it a pre-import transaction, the Hon ble Court went on to lay down the scope for resolution of such disputes thus: 8 … …In the present appeal, arguments have veered around the applicability of Rule 9(1)(e). In this appeal, we are concerned only with the first part of Rule 9(1)9(e). The narrow question that arises before us is whether the payment made for the technical services agreement is to be added to the value of the plant that is imported inasmuch as such payment has been .....

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ustment provision moored to rule 4. This decision has taken note of Commissioner of Customs (Port), Kolkata v. JK Corporation Limited [(2007) 9 SCC 401 = 2007 (208) ELT 485 (SC)] to distinguished the judgment in re Essar Gujarat by drawing on Tata Iron & Steel Co. Ltd v. Commissioner of Central Excise & Bhubaneswar thus: 16. Reliance has been placed by Mr. Radhakrishnan on a decision of this Court in Essar Gujarat Limited (supra). In that case, the licence fee was paid to the supplier of .....

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rted to protect EGL. Without a licence from Midrex, the plant would be of no use to EGL. That is why this overriding clause was inserted. This overriding clause was clearly a condition of sale. It was essential for EGL to have this licence from Midrex to operate this plant and use Midrex technology for producing sponge iron in India. Therefore, in our view, obtaining a licence from Midrex was a pre-condition of sale. In fact, as was recorded in the agreement, the sale of the plant had not taken .....

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that "the Purchaser and the Seller have today respectively purchased and sold a Direct Reduction Iron Plant, on the following terms and conditions", which, according to this Court , indicated that the purchase and sale of the plant had taken place on 24th March, 1987, but in clause (2) it was stated that the purchaser would purchase the property from the seller at the stated price. Upon construing the terms of the conditions, it was opined: "24.Therefore, the process licence fees .....

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ue of imported goods subject to satisfying the requirement of the proviso that the charges were distinguishable from the price actually paid or payable for the imported goods. This part of the Interpretative Note cannot be so read as to mean that those charges which are not covered in clauses (a) to (c) are available to be included in the value of the imported goods.." and noted with approval that 15 …..In an instructive passage on principle, this Court also laid down: "9. The b .....

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alia, by way of transfer of licence or technical know-how for the purpose of setting up of a plant from the machinery imported or running thereof, the same would not be computed for the said purpose. Any amount paid for post-importation service or activity, would not, therefore, come within the purview of determination of assessable value of the imported goods so as to enable the authorities to levy customs duty or otherwise. The Rules have been framed for the purpose of carrying out the provisi .....

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