TMI Blog2019 (9) TMI 1723X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity. 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, 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. Rule 9(1)(b) of 1988 Rules as quoted above in the decision in Toyota Kirloskar [ 2007 (5) TMI 20 - SUPREME COURT ], case shows that the value in respect of materials, components, parts and similar items incorporated in the imported goods has to be added while determining the transaction value. Said Rule 9 is almost identical to Rule 10 of 2007 Rules. Thus, even if the governing Rule is taken to be Rule 9 of 1988 Rules, there would be no difference in the ultimate analysis. Consequently, we do not find any merit in the present appeal. Affirming the view taken by the Tribunal, we dismiss this appeal. - U.U. LALIT AND VINEET SARAN, JJ. For the Appellant : Tarun Gulati, Sr. Adv., Monish Panda, Mrinal Bharat Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d consignments at Delhi and Mumbai. They had suppressed the value of embedded software as well as value of services payable to the foreign supplier for carrying out integration of the system prior to shipment and provide complete commission and installation services at the customers 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nde (Retd.), Vice President, Technical of the importer had admitted his awareness in his statement dated 10.07.2003 that software was embedded in the machine. 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 redetermined 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 Rs. 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 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms 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-whether 8543 as ordered by the adjudicated authority or 8525 as claimed by the Appellant. 2. Second issue is of valuation-whether the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the physical location in your area where the television signal is received by the provider, stored, processed and transmitted to their local customers (subscribers). 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 encoded and scrambled signals from Broadcasters could not be received at the Head End ( Power Vu Receivers ) and neither can they be decoded (Encoders and IRD's) or unscrambled ( Encryption System ) and thereafter could not be broadcasted to the recipient/subscribers. Therefore, the intended function of a Head End could not be achieved without Encoders, IRD's, Power Vu Receivers and Encryption System. These equipments admittedly were not part of the imported consignment under dispute. Adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; sound records and reproducers, television image and sound recorders and reproducers; and parts and accessories of such articles Note 4 of Said Section XVI is to the following effect: 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. Tariff Item 8525 appearing in Chapter 85 is as under: Transmission apparatus for radio telephony, radio-telegraphy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, namely-- (i) materials, components, parts and similar items incorporated in the imported goods; (ii) tools, dies, moulds and similar items used in the production of the imported goods; (iii) materials consumed in the production of the imported goods; (iv) engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods; (c) royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; (d) the value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues, directly or indirectly, to the seller; (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 18 must be understood in the factual matrix involved therein. The ratio of a decision, as is well known, must be culled out from the facts involved in a given case. A decision, as is well known, is an authority for what it decides and not what can logically be deduced therefrom. Even in Essar Gujarat Ltd.1 a clear distinction has been made between the charges required to be made for pre-importation and post-importation. All charges levied before the capital goods were imported were held to be considered for the purpose of computation of transaction value and not the post-importation one. The said decision, therefore, in our opinion, is not an authority for the proposition that irrespective of nature of the contract, licence fee and charges paid for technical know-how, although the same would have nothing to do with the charges at the pre-importation stage, would have to be taken into consideration towards computation of transaction value in terms of Rule 9(1)(c) of the Rules. 38. The transaction value must be relatable to import of goods which a fortiori would mean that the amounts must be payable as a condition of import. A distinction, therefore, clearly exists between an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from supply of equipment, necessary software had to be embedded in the equipment before the supply was effected. The facts also disclose that out of 19 items indicated in the Bill of Entry, only 8 items were physically presented while the rest were already embedded in the main unit. These facts are not only reflective that the individual components were intended to contribute 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. 15. 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. 16. Rule 9(1)(b) of 1988 Rules as quoted above in the decision in Toyota Kirloskar 2007 (213) ELT 4 (SC) : (2007) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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