TMI Blog2022 (11) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... at design engineering and site run had already been assessed separately under Chapter 49 . In the synopsis presented by the learned counsel before us, it has been submitted that the technical documents had already been allowed assessment under Chapter 49 at Nil rate of duty. Therefore, once their assessment has been finalized independently, the value of the same cannot be included in the value of the fermenters . Once an order permitting clearance of goods for home consumption is issued by the proper officer, they cease to be imported goods and the person who imported them ceases to be an importer. Since the duty, if applicable, has to be paid before the order for clearance of goods for home consumption can be issued, such goods also cease to be dutiable goods. No duty can be assessed under section 17 of the Act on such goods because duty can be charged on the goods imported into India as per Section 12 (the charging section) and once the goods are no longer imported goods, no duty can be charged. The process of assessment, whether the assessment is done by the officer (as in this case) or it is a process of self-assessment is completed with the order permitting clearance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the valuation is concerned with consequential benefits, if any, to the appellant - the impugned order cannot be sustained - appeal allowed - decided in favor of appellant. - CUSTOMS EARLY HEARING APPLICATION NO. 50565 OF 2022 IN CUSTOMS APPEAL NO. 449 OF 2001 - FINAL ORDER NO. 51028/2022 - Dated:- 28-10-2022 - MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) AND DR. MS. RACHNA GUPTA, MEMBER (JUDICIAL) Shri T.R. Rustagi, Advocate for the appellant. Shri Rakesh Kumar, Authorized Representative for the Department ORDER This appeal was filed assailing order-in-original [ Impugned order ] dated 07.08.2001 passed by the Commissioner of Customs, Air Cargo, New Delhi and it was disposed of by this tribunal by final order dated 08.11.2002 in which the valuation of the goods was decided against the appellant but the remaining aspects, such as, confiscation, imposition of redemption fine and penalty were decided in favour of the appellant. Aggrieved, the appellant filed Civil Appeal No. 222/2003, which was decided by the Supreme Court on 06.08.2008, remanding the matter to this tribunal with respect to the determination of the value. Insofar as the confiscation and penalty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... printed material which was assessable to nil rate of duty during the relevant period. 3. The bill of entry No. 107394 for design engineering and site run was assessed by the Appraising Officer as per the claim of the appellant. Both bills of entry were presented in the Air Cargo for examination of the goods. On examination, the examining officer found that the design engineering and site run were not separate goods but pertain to the Fermenters and control panel assembly imported by the appellant. 4. The purchase order and related proforma invoices were called for from the appellant by the officer and it was found that two items were imported under one master airway bill but separate Bills of Entry were filed for the two items and they were assessed separately by the different appraising groups. The examining officer found that the two were related to each other. A show cause notice [ SCN ] was issued to the appellant seeking to add the value of the design engineering and site run to the value of the Fermenters along with control panel assembly as per Rule 9(1) (b) and 9(1) (e) read with Rule 4 of the Customs Valuation Rules, 1988 [ Rules ]. The importer was required to sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records. 8. According to the learned Counsel for the appellant, the design engineering and site run were allowed clearance on nil rate of duty under Heading 491191. He refers to page 55 of the appeal book, which is part of the show cause notice issued to the appellant. In the third paragraph, it is recorded as follows: Similarly in bill of entry No. 107394 dated 13.02.2001 the items under import were design engineering and site run for Fermenter system 15 LT and 600 LT valued at Rs. 73,59,000/- The same were classified under CTH 491191 at nil rate of duty; they were as such assessed and marked for examination to the air cargo shed. Both the bills of entry were presented in the air cargo shed for examination of goods. Examination of goods of bill of entry No. 107394 dated 13.02.2001 revealed that the technical drawings were for the Fermenter system imported vide bill of entry No. 107278 dated 13.02.2001. It was observed the technical drawings were part of the entire project. The purchase order and related imported documents were called for from the importer . 9. According to learned Counsel the design engineering and site run were allowed clearance at nil rate of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Entry with the respective appraising groups. He prays that the impugned order insofar as it includes the value of the design engineering and site run in the value of the fermenters and confirms the demand of duty may be set aside and the appeal may be allowed. He relies on the case of Steel Authority of India Ltd. [2020 (372) E.L.T. 478 (S.C.)] in which the Supreme Court was examining a case where the appellant had given a turnkey contract to the overseas supplier to import and set up the plant and it was held that the value of various goods imported under the same contract and in the same invoice cannot be combined. He submits that the appellant in this case is in a much better position as there is no turnkey contract and only two goods were imported under the same invoice and through the same airway bill. 12. Learned authorised representative for the Revenue made the following submissions: (a) The appellant filed two bills of entry on 13.2.2001 one for the Fermenter with related items and the other for design engineering site run for the Fermenter system supplied by the same overseas supplier under the same Master Airway Bill. The classification claimed for the Ferme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods which would enable the appellant to manufacture goods as per WHO s GMP which would not be possible without the design engineering site run. Accordingly, the order was placed, the pricing was done. Therefore, it cannot be said that sale of these is not a condition for sale of the fermenter. Therefore, their value must be included in the assessable value of the fermenter. They cannot be assessed separately. (h) The case of Steel Authority of India Ltd. was on a different footing inasmuch as the drawings and specifications did not relate to the equipment and were meant for post importation activities. (i) This case is similar to the case of Mukund Limited vs Commissioner of Customs [2000(120)ELT 30] in which the Hon ble Supreme Court held upheld the decision of the Tribunal including the value of design, engineering, etc. as the supply was part and condition of the same contract. (j) He also relied on the case of Collector of Customs (Prev) Ahmedabad vs Essar Gujarat Ltd. [1996(88) ELT 609 (SC)] and Star Entertainment Pvt. Ltd. vs Commissioner of Customs(Adjudication) Mumbai [2015(327)ELT 238(Tri-Mum)]. 13. We have considered the submissions on both sides. This matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en submitted that the technical documents had already been allowed assessment under Chapter 49 at Nil rate of duty. Therefore, once their assessment has been finalized independently, the value of the same cannot be included in the value of the fermenters . To answer this question, we proceed to examine the process of assessment under the Customs Act and when it will come to an end and what remedies available against an assessment. 15. Assessment was defined in Section 2 (2) of the Customs Act as applicable during the period as follows: assessment includes provisional assessment , reassessment and any order of assessment in which the duty assessed is nil;' This has since been substituted by a more comprehensive definition from 29-3-2018 and it now reads as follows: assessment means determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the Customs Tariff Act) or under any other law for the time being in force, with reference to- (a) the tariff classification of such goods as determined in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually some other metal was found to have been imported, the duty has to be paid on the metal actually imported and not on the iron indicated in the documents. However, it is cumbersome to the importer if goods are checked the goods in each and every case before assessing the duty because the importer will have to make extra trips between the import shed of the port where the goods are physically present and the Custom house where the duty is assessed. Therefore, this process of first examining the goods and then assessing the duty (commonly known as first appraisement or first check) is rarely followed and usually the procedure of second appraisement or second check is followed in which the duty is assessed based on the documents presented and thereafter the goods are examined. In vast majority of the cases the documents reflect the goods which are actually imported and therefore, this process of second check works well. If the goods are found to be different or some other discrepancy is found by the examining officer, he writes his examination report and sends the papers back to the Appraising Group to re-assess the duty. In a few rare cases, this back and forth between the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise that any statement in such entry or document or any information so furnished is not true in respect of any matter relevant to the assessment the goods may, without prejudice to any other action which may be taken under this Act, be re-assessed to duty. (5) where any assessment done under sub-section 2 is contrary to the claim of the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification, therefore, under this Act, in cases other than those where the importer or the exporter, as the case may be, confirms his acceptance of the said assessment in writing, the proper officer shall pass a speaking order within fifteen days from the date of assessment of the bill of entry or the shipping bill, as the case may be. 18. Section 47 under which the proper officer gives an order permitting clearance of goods for home consumption reads as follows: Section 47. Clearance of goods for home consumption. (1) Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods; (b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof or re-assessment, as the case may be; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest. 22. Thus, when the officer issues an order permitting clearance of goods for home consumption under section 47, the assessment ends and the clock starts ticking for limitation under section 28. Similarly, when the importer receives the order of the officer permitting clearance of goods for home consumption, the clock starts ticking for filing the appeal. Before such an order is issued, the assessment is still open and the Bill of Entry can be re-assessed by the proper officer. 23. Though not directly relevant for this case, we proceed to examine two other aspects of the assessment for the sake of completeness. In 2011, Section 17 has been amended replacing the assessment by the proper officer with self assessment by the importer giving powers to the proper officer to re-assess the duty so self assessed. Thus, both the self-assessment by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment is completed with the order permitting clearance of goods for home consumption except in cases of provisional assessment where the assessment is completed with the order finalizing the assessment. 26. In this appeal, in respect of design engineering and site run a Bill of Entry was filed under Chapter 49 and it was assessed based on the documents by the Appraising Group and thereafter, during examination it was found that these goods were relatable to the fermenter which was also imported and not separate goods. Therefore, a Show Cause Notice was issued proposing to include the value of these goods in the Bill of Entry filed for the fermenter itself. Thus, the process of assessment was not completed as the examination necessitated re-assessment for which purpose a Show Cause Notice was issued. Thus, the Bill of Entry was filed under Chapter 49 and only the first step in completing the assessment was taken by the appraising group and no order permitting their clearance for home consumption was issued. Therefore, the assessment under Section 17 as discussed in the above paragraphs was still open. Therefore, the submission of the appellant before the Supreme Court that des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed an order for and imported the fermenter along with the design engineering and site run. The mere fact that the fermenter could have been imported without the design engineering and site run is irrelevant because duty has to be charged on what is actually imported and NOT what could have been imported. Without these, the fermenter could not have produced vaccines which meet the WHO GMP which was the purpose of the appellant in importing the goods. 30. Further, according to the learned Authorized Representative, they were imported as per a common purchase order, under a single invoice and were imported through the same airway bill. Simply because the invoice indicates the cost of the fermenter and the cost of design engineering and site run separately, the design engineering and site run do not become separate goods which are to be assessed separately. They are part of the same goods and must be assessed together. It is his submission that in terms of Rule 9(1)(b) and Rule 9(1) (e) of the Valuation Rules, the cost of the design engineering and site run must be included in the value of the fermenters. 31. According to the learned counsel for the appellant, the cost of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence, that the appellant importer had supplied anything including the designs to the overseas exporter free of charge. In fact, the undisputed fact is that the designs in the form of design engineering and site run were provided by the overseas supplier to the appellant and not the other way round. Secondly, the supply was for a consideration and not free of charge. Thirdly, the design engineering and site run were not necessary for production of the imported goods (fermenters) at all. They are required if the imported goods (fermenters) are to be used in India after their import in a manner so as to meet the requirements of WHO GMP. Thus, we find that Rule 9(1) (b) of the Valuation Rules does not apply to this case at all. 34. Rule 9(1) (e) deals with any other payments made by the buyer to the seller as a condition of sale of the imported goods. According to the Revenue, the payment made for design engineering and site run was a condition for sale of the fermenters because they are sold together as per a single contract and were imported together in the same airway bill and are meant to be used together. The importer wanted to manufacture vaccines as per WHO GMP which wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. It also sells fermenters without the former. We do not find anything in the records to show that there was any condition in the agreements or invoices that unless the importer buys the design engineering and site run, it will not be sold the fermenters. Merely because more than one goods are bought by the buyer from the seller under the same agreement and under the same invoice, the sale of one good does not become the condition of sale for another. This is also true even if the goods so bought are related in terms of their use. For instance, one may buy a car and also buy some accessories of the car. Unless there is a condition in the sale contract that if the accessories are not bought, the car will not be sold at all or will not be sold at that price, the purchase of the accessories does not become a condition for sale of the car. It does not matter if the accessories will be used with the car to improve its appearance or have some additional conveniences in the car. Unless the purchase of the accessories is a condition for the sale of the car as per the contract, it is merely a case of purchase of the car and purchase of one or more accessories as per the same written or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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