TMI Blog2019 (9) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... ribute together and attain a clearly defined function as dealt with in Note 4 of Section XVI as stated above, but also indicate that software that was embedded through cards in the main unit, was not any post-importation activity. The value of the software and the concerned services were therefore rightly included and taken as part of the importation. The facts on record as stated above further disclose that the Department was therefore right in invoking principle under said Note 4 and considering the imported items as part of one apparatus or machine to be classifiable under the heading appropriate to the function. The submission advanced by the Appellant in that behalf therefore has to be rejected. Even if the governing rule is taken to be Rule 9 of 1988 Rules, there would be no difference in the ultimate analysis. Appeal dismissed. - Civil Appeal No. 2498 of 2018 - - - Dated:- 27-9-2019 - Uday Umesh Lalit And Vineet Saran, JJ. JUDGMENT Uday Umesh Lalit, J. 1. This Appeal under Section 130E of the Customs Act, 1962 (hereinafter referred to as the Act ) arises out of Order No.C/A/57743/2017 dated 09.11.2017 pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises. Further, it was noticed that the purchase order placed by the importer was revised to show as CIF instead of FOB. 3. In the aforesaid circumstances, Show Cause Notice dated 27.06.2014 was issued by the Department stating inter alia :- 18. In view of the above, it appears that the Importer had fabricated documents by way of splitting of value of the goods and declared lesser value to the Customs Department with the sole intention to evade payment of Customs Duties. Therefore, it appeared that the Importer had intentionally not declared the true and correct value of the goods imported to the customs for the purpose of payment of Customs Duty. Further the cost of services was to be paid separately by the Importer to their supplier. Hence, the Importer failed to make true declarations. Therefore, the goods imported vide Bill of Entry No.260085 dated 26.06.2003 filed at Air Cargo Complex, New Delhi also appear to be liable for confiscation under Section 111(m) of the Customs Act, 1962 due to their aforesaid act of omission and commission. It also appears that they have rendered themselves liable for penal action under Section 112(a) and/or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achine. He in connivance with the supplier of goods fabricated document by splitting the values between the goods imported and the other services rendered by the supplier in connection with the imported goods and as such, I find that the declaration of the Noticee(s) was false in material particular. In view of above, I hold both the Noticee(s) are liable to penalty under Section 114AA of the Customs Act, 1962. The Principal Commissioner of Customs (Import) then redetermined the value of all the goods imported under said Bill of Entry as under:- (a) The value of all the goods imported under the said B/E taken together is re-determined under Rule 9(1)(e) of the said Rules as US $ 361633 CIF and consequently after loading 1% towards landing charges and applying the relevant exchange rate, the assessable value is determined as ₹ 1,72,03,243/-(Rupees One Crore Seventy Two Lakhs Three Thousand Two Hundred and Forty Three Only) for the purpose of Section 14 of the Customs Act, 1962 read with Rule 9(1)(e) of the Customs Valuation (Determination of Price of Imported Goods), Rules, 1988. (b) The classification of all the componen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards software and post import services; and that Note 4 to Section XVI of the First Schedule to Customs Tariff Act, 1975 ( the Act , for short) had no application in the matter. It was alternatively submitted that the goods in question merited classification under Central Excise Tariff Heading (CETH) 8525 2019 as transmission apparatus and not under 8543 as contended by the Department. In response, it was submitted on behalf of the Department that out of 19 items indicated in the Bill of Entry, only 8 items were physically presented, as several cards were already assembled in the main unit; that the appellant had not given proper description in the Bill of Entry and the goods imported were complete Head End and not parts; that the charges covered by the relevant invoice amounting to US $ 1,00,019 were rightly included since they pertained to charges where the software covered by the invoice was already embedded in the equipment and that the goods were rightly classified under 8543. 6. After hearing rival submissions, following issues were framed by the Tribunal for consideration:- 1. First is the classification of the imported goods wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and measurement b. The following are the major components imported from other supplier by the Appellant: i. CAM Modules Aston and Nagravision ii. Encoders iii Power Vu receivers Scientific Atlanta iv. Integrated receiver De-coder s (IRD s) Purchased from the channels directly v. Encryption System -Nagravision c. The Head End is the physical location in your area where the television signal is received by the provider, stored, processed and transmitted to their local customers (subscribters). d. Undisputedly the Appellant being a Multi System Operator ( MSO ) i.e. a cable network operator, receives encoded and scrambled signals from Network Broadcasters. The major function of a Head End is to decode and unscramble, the encoded and scrambled signals received from the Broadcasters. Such function admittedly could not be achieved without Encoders, IRD s, Power Vu Receivers and Encryption System which were imported by the Appellant from other suppliers. e. Without these equipments working in conjunction network, the enco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1988 Rules , for short) being almost identical to Rule 10 of 2007 Rules, the reliance was not misplaced. c) In any case, Rule 10 of 2007 Rules which seeks to explain certain matters is clarificatory in nature and the meaning would be consistent with Rule 9 of 1988 Rules. d) The submission that there were post import charges which were getting included in the valuation was incorrect and what was found as a fact was that all those software cards were embedded in various parts when the import had taken place. 11. It must be stated that the finding of the Tribunal that the imported goods would be classifiable under Tariff Item 8525 and not under 8543, has not been challenged by the respondent. Thus, insofar as issue of classification is concerned, the question is whether the items imported ought to be considered individually or whether the treatment given by the Department, with the aid of Note 4 to Section XVI was correct. Note 4 appears in Section XVI of the First Schedule to the Act. Said Section XVI has the heading:- Section XVI- Machinery and mechanical appliances; electrical equipment; parts thereof; soun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or payable for the goods when sold for export to India adjusted in accordance with the provisions of Rule 9 of the said Rules. Rule 9 of the Rules provides for determination of transaction value, stating: 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,- (a) the following cost and services, to the extent they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods, namely- (i) commissions and brokerage, except buying commissions; (ii) the cost of containers which are treated as being one for customs purposes with the goods in question; (iii) the cost of packing whether for labour or materials; (b) the value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of imported goods, to the extent that such value has not been included in the price actually paid or payable, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise. The Rules have been framed for the purpose of carrying out the provisions of the Act. The wordings of Sections 14 and 14(1-A) are clear and explicit. The Rules and the Act, therefore, must be construed, having regard to the basic principles of interpretation in mind. 28. Reliance, as noticed hereinbefore, however, has been placed by the learned Additional Solicitor General on Essar Gujarat Ltd. Thereafter, the decision of this Court in Essar Gujarat Limited (1997) 9 SCC 738 was considered and it was observed: 36. Therefore, law laid down in Essar Gujarat Ltd. and J.K. Corpn. Ltd. is absolutely clear and explicit. Apart from the fact that Essar Gujarat Ltd. was determined on the peculiar facts obtaining therein and furthermore having regard to the fact that the entire plant on as-is-where-is basis was transferred subject to transfer of patent as also services and technical know-how needed for increase in the capacity of the plant, this Court clearly held that the post-importation service charges were not to be taken into consideration for determining the transaction value. 37. The observations made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and assistance from time to time designated by the licensor. (b) In the event of the preceding para (a), the licensee shall pay the licensor all fees, and all costs and expenses incurred by the licensor in developing and furnishing such know-how, information, documents and/or assistance. (c) If the assistance rendered under para (a) hereof is technical assistance or engineering assistance concerning the licensed products, such assistance will be provided in accordance with the procedures and conditions set forth in Appendix E attached hereto. The subsequent decisions of this Court in Commissioner of Customs, Ahmedabad vs. Essar Steel Ltd. 2015 (319) ELT 202 = (2015) 8 SCC 175 , and in Commissioner of Customs (Import), Mumbai vs. Hindalco Industries Ltd. (2015) 320 ELT 42 (SC) = (2015) 14 SCC 750 have followed the same principle that technical agreements involved in said cases pertained to post-importation activity. To similar effect was the conclusion by this Court in an earlier decision in Commissioner of Customs, New Delhi v. Prodelin India (P) Ltd. 2006 (202) ELT A130 = (2006) 10 SCC 280 that technical know how fee w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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