TMI Blog2000 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... R.C. Lahoti and Ruma Pal, JJ. [Judgment per : R.C. Lahoti, J.]. - The Tata Iron Steel Company Ltd. (TISCO, for short), the appellant before us, has imported certain equipments and drawings and engineering documents from Siderugia National of Portugal - a Government of Portugal Undertaking. It appears that some time in the year 1981 Italimpianti, Genevo, Italy supplied materials, designs and engineering drawings etc. to Siderugia National Portugal (hereinafter SNP, for short) for setting up rolling mill project in Portugal. The supplies consisted of equipments for blast furnace, LD converter, steel plant bellet castors, wire rod mills, torpedo ladle cars etc. However, before the equipments could be installed, Portugal decided to join European Economic Community (EEC) consequent whereupon Portugal could not have expanded its steel making capacity, SNP decided to cancel its investment plan and to sell the equipments and materials which were lying unused from 1981 to 1986. On 14th April, 1988 a protocol was signed between the seller and purchaser companies (i.e. SNP and TISCO) which inter alia stated that the total price will be price for the equipment plus price for the engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that the contract MD 302 registered under the Project Import Regulations was actually a sub-contract of another contract of the same date and the value thereof was 26 MDM. The Assistant Collector of Customs, Paradeep, vide communication dated 7th July, 1990, called upon the appellant to submit all the documents including the correspondence with the foreign supplier, copy of the import licence etc. The appellant submitted the required documents including copy of the agreement MD 301. An exchange of correspondence between the Assistant Collector of Customs and the appellant followed. On 16th July, 1990 the Assistant Collector of Customs, Paradeep issued a show cause notice to the appellant calling upon it to show cause why the sum of 12.5 MDM being the value of the goods covered by contract MD 301 should not be included in determining the assessable value of the goods imported under the contract MD 302 followed by other consequences flowing from under-valuation of the goods imported. Vide order dated 10-8-1990 the Assistant Collector permitted clearance of the goods upon furnishing of bank guarantees of Rs. 7,44,80,300/- and extra duty deposit of Rs. 2,82,01,636 as also payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit of Interpretative Note to Rule 4 abovesaid was not available to the appellant and the entire value of the two contracts was liable to be clubbed together for the purpose of levying customs duty. 8. It will be useful to extract and reproduce verbatim a few findings from the order of the Tribunal as under :- "It is pertinent to mention on first appellant's own admission that where an item has been partly supplied and partly not supplied by S.N., technical documents for the latter have been supplied. These technical documents will serve the purpose for the whole items as such, technical documents being common to an item. In this manner, the first appellant has got technical documents for manufacture of substantial number of import items. It is therefore obvious that the technical documents supplied to the appellants pertain both to (i) the imported equipment and (ii) the equipment which was yet to be procured or manufactured by the appellants. It may also contain (iii) technical documents which are related to post-importation activities undertaken by the appellants for assembly, construction, erection, operation and maintenance of the imported equipment. Value of two categori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not filed an appeal and therefore duty liability of the appellant shall have to remain confined to the value of the equipment at 21.2747826086 million DM as found by the adjudicating officer. The quantum of penalty imposed on the appellant was reduced by the Tribunal from Rs. 5 crores to Rs. 4 crores. The penalties on other noticees were set aside. The appellant has come up to this Court by filing this appeal under Section 130E of the Customs Act, 1962. 10. We have heard Shri Ashok Desai, the learned senior counsel for the appellant and Shri Kirit Raval, the learned Additional Solicitor General for the respondents. We are satisfied that the impugned order of the Tribunal cannot be sustained and therefore has to be set aside followed by a remand so as to assess the value of the goods liable to payment of customs duty and thereupon determine the quantum of duty and penalty, if any, for the reasons stated hereinafter. 11. A perusal of the order of the Tribunal shows that it has mainly proceeded on two sets of reasoning for holding against the appellant. Firstly, the Tribunal has examined the applicability of Rule 9(1) (b) (iv) and formed an opinion that benefit thereof was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to by the Tribunal is extracted and reproduced hereunder :- 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, - xxxxxx xxx (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, namely :- (i) materials, components, parts and similar used in the production of 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; xxxxxx xxx (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 third party to satisfy an obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices supplied by the buyer free of charge or at a reduced cost for use in connection with the production and sale of imported goods to the seller and to the extent that such value has not been included in the price actually paid or payable. To illustrate, the seller may have manufactured equipments of a design, drawings whereof were made available by the buyer say by engaging an independent expert agency in the country of the seller. Although the seller has not incurred any expenditure on the technical/engineering design of the equipment manufactured by it yet the price paid for securing the engineering designs and drawings will be a component of the value of the equipment manufactured. In spite of the price for the services rendered by the expert agency having been paid by the buyer, the value thereof is liable to be added to the value of the imported goods for determining the transaction value. In the case at hand it is nobody's case that the buyer had supplied any goods or services free of charge or at reduced cost for use in connection with the production and sale for export of imported goods. All the exercise done by the Tribunal in scrutinizing the documents forming subject m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 imported goods. To illustrate, if the seller has undertaken to erect or assemble the machinery after its importation into India and levied certain charges for rendering such service the price paid therefore shall not be liable to be included in the value of the goods if it has been paid separately and is clearly distinguishable from the price actually paid or payable for the imported goods. Obviously, this Interpretative Note cannot be pressed into service for calculating the price of any drawings or technical documents though separately paid by including them in the price of imported equipments. Clause (a) in third para of Note to Rule 4 is suggestive of charges for services rendered by the seller in connection with construction, erection etc. of imported goods. The value of documents and drawings etc. cannot be "charges for construction, erection, assembly etc." of imported goods. Alternatively, even on the view as taken by the Tribunal on this Note, the drawings and documents having been supplied to the buyer-impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he blast furnace equipment having been under valued by artificially excluding therefrom the value of technical documents. According to the Revenue such documents are even otherwise and in ordinary course supplied by the seller to the buyer. Because of the absence of such documents the goods sold being equipments would be of no use at all but the appellant had so manipulated the single transaction by bifurcating the single content into two documents so as to under value the blast furnace equipments by transferring a part of the value of such equipments to the value of engineering documents and drawings. The gist of the allegation is under valuation of blast furnace equipment. Shri Kirit Raval, the learned Additional Solicitor General has submitted that from the stage of the show cause notice till before the Tribunal the Revenue has kept its plea alive. Vide para 7 of its order the Tribunal noted this plea of the Revenue but did not go into it as the Tribunal considered it not necessary in view of other findings arrived at. The learned Additional Solicitor General submitted that if this Court may not sustain the order of the Tribunal then in all fairness the Revenue should be allowed ..... 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