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TMI Blog2008 (1) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants entered into an agreement with HMC for Consultancy and Engineering Services in the realization of the project, for which lump sum payment of Swiss francs 9,89,000 was paid by the respondents. In terms of clause 1.2 of the agreement, HMC provided consultancy services in the areas of plant design, production and manufacture techniques. The nature of the services provided were in the areas of preparation of technical concept to meet state-of-the-art technologies, ease of operation and maintenance, recommendation for selection and ordering of equipment, supervision of design for preparation of final general arrangements, drawings, supervision of suppliers design drawings, quality assurance of imported equipment, quality inspection for site manufacturing of equipment and erection, supervision of commissioning/post-commissioning assistance jointly and in close collaboration with an Indian Company, M/s. Holtec Engineers Pvt. Ltd. (for brevity called as Holtec). 3. The Adjudicating authority examined the above agreement and held that no loading was required to be done since firstly both supplier and importer were not related person in terms of the definition of the related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the buyer and not the seller, the value thereof would be liable to e added to the value of the imported goods for determining the transaction value and the requirement seems to be that the engineering, development, design work etc. were under-taken abroad at the cost of the importer. (v) In a case the importer pays for these services, it has to be taken to be a case of indirect supply of the services to the manufacturer of the imported goods, who manufactures the goods on the basis of those services like engineering, design and drawings. (vi) The invoice values of the goods imported are loaded pro rata with S.Fr. 10,51,000/- being the remuneration for transfer of technical know-how and engineering services, supervision of site manufacture and supervision of commissioning in terms of Section 14(1) of the Customs Act, 1962 read with Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. (vii) The Commissioner of Customs (Appeals), Mumbai, while rejecting the Appeal of the Revenue, held that the decision of Hon'ble Supreme Court in Essar Gujarat Ltd., (supra) was inapplicable as there is no condition of sale and that the technical/supervision of design services etc. were extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal and in reply to the Revenue's Appeal are that: (i) HMC were engaged by the Respondents as Consultants. (ii) The Respondents have imported plants machinery etc. from six different suppliers to whom they are not related and to whom no payment by way of technical know-how, license fees, royalty etc. is payable and dealing with them is at arm's length. Therefore, the technical know-how, which was paid to HMC cannot be loaded to the plant machinery etc. imported from the said six suppliers as it was not a condition of the sale of machinery for payment of technical know-how fee to HMC. (iii) The importer, HMC or Holtec or the suppliers of machinery being not in any way related, any attempt to load the same by the Department would fall outside the scope of Rules 9(1)(b)(iv), 9(c) and 9(e) of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988. (iv) HMC had no role to play with regard to the machinery equipment design by the foreign supplier. Reputed foreign supplier design machinery/equipment themselves and these designs are of proprietary nature. (v) Only with a view to realise the project, the Respondents had sought consultancy services of HMC and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm of technical/engineering consultancy (in the form of assisting and approving the designs and drawings leading to the manufacture and supply of plant machinery & equipments), rendered by HMC and Holtec which are directly related to the manufacture and supply of the plant, machinery and equipments imported by the respondent. (v) As per Rule of Customs Valuation Rules, 1988, if the invoice price does not represent the actual price or total payment, it has to be adjusted with additions stipulated under Rule 9(1)(b)(iv) and 9(1)(c). In the subject case, since the cost of the services incurred by the respondents are directly related to the imported goods, same have to be added to the invoice price as per Rule 9(1)(b)(iv) and 9(1)(c) of the Customs Valuation Rules. 1988. 7. Shri Ajay Saxena, SDR appeared for the Department while Shri Anil Balani appeared for the Respondents. While reiterating the grounds of appeal as well as the cross objection as above, the SDR citing the decision of the CESTAT in the case of Andhra Petro Chemicals Ltd. - 1997 (91) E.L.T. 349 (Tri.), submitted that the Design and engineering charges were loadable when the goods imported are specially manufactured o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess licence fees and cost of technical services for transfer of technology paid to third party were held to be includible in the price of the plant, because the plant could not be made operational without the same. In so far as the charges for the technical services were concerned, only expenditure incurred for dismantling the plant at Germany and making it ready for delivery was ordered to be added to the value of the plant. We agree with the findings of the Commissioner (Appeals) that in the present case no such circumstances exist. We also agree that it is not the case of the Revenue that the technical/supervision of design services etc. was extended to the Respondents by HMC outside India. Therefore, the charges for technical services to the extent of Swiss Francs 9,89,000/- cannot be considered as addable to the declared invoice value. (viii)Addition in terms of Rule 9(1)(b)(iv) of Customs (Valuation) Rules, 1988 cannot be done as the designs/drawings were ready with the suppliers of the machinery and HMC had no supervisory control over the manufacturer/suppliers of the machinery, who were all independent. In view of the above, Rule 9(1)(b)(iv) would not be applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as factually in the present case, the case is consultancy services rendered by HMC, who are a consultant and it is not on the basis of the services rendered by this company that the imported equipments are specially manufactured on the basis of their consultancy and that the technical specification, drawings and design are provided by the foreign supplier directly to the importer and there is no third party in this case. They neither designed the imported equipments nor supplied the engineering drawings for the manufacture of the imported equipments. The Indian company, Holtec were also not equipment designers. Such equipment designs were entirely left to the machinery suppliers and the technical know-how and engineering services as referred to in the agreement of HMC and JBC are not related to the equipment designs but are for the purpose of preparation of tender documents and for recommendations for selecting the equipments. The consultancy for JBC was rendered jointly and in close collaboration between HMC and Holtec with Holtec to perform the lead role and ensure that a complete integrated technical consultancy is provided to JBC. As per the "scope of services", Holtec were t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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