2003 (1) TMI 584 - AT - Customs

Summary

Issues Involved:
1. Alleged evasion of customs duty on imported drawings and designs.
2. Classification and valuation of the imported goods.
3. Imposition of customs duty on intangible assets.
4. Reliability of evidence and statements provided.
5. Applicability of interest and penalties under the Customs Act, 1962.

Detailed Analysis:

1. Alleged Evasion of Customs Duty:
The appellants were accused of evading customs duty on imported drawings and designs received under agreements with foreign collaborators, ACE, UK, and Pantex, USA. The agreements stipulated a one-time technology fee of Rs. 45 lakhs each for the transfer of technology, including drawings and designs. The customs authorities alleged that the appellants received these drawings and designs without declaring their correct value, thus evading appropriate customs duty.

2. Classification and Valuation:
The Commissioner classified the imported drawings and designs under Heading 9803 of the Customs Tariff Act, 1975, with an assessable value of Rs. 90 lakhs. The customs duty amounting to Rs. 90 lakhs was confirmed under Section 28 of the Customs Act, 1962. Additionally, a fine of Rs. 10 lakhs in lieu of confiscation and a penalty of Rs. 90 lakhs under Section 114A were imposed.

3. Imposition of Customs Duty on Intangible Assets:
The Tribunal found that the transfer of technical know-how, held as capital assets by the foreign collaborators, did not constitute the import of tangible goods. The letters from ACE and Pantex indicated a transfer of knowledge rather than tangible goods. The Tribunal referred to the decision in Commissioner of Income-tax, Bangalore v. B.C. Srinivasa Setty, which held that the transfer of intangible assets like goodwill does not give rise to capital gains. The Tribunal also cited the General Ministerial Declaration on Global Electronic Commerce, which resolved not to impose customs duties on electronic transmissions, supporting the view that intangible transfers are not dutiable.

4. Reliability of Evidence and Statements:
The Tribunal found that the retracted statement of Dr. B.Y. Murthy, corroborated by the agreements and letters from the foreign collaborators, did not conclusively prove the import of tangible goods. The letters did not admit to delivering tangible goods, and no tangible goods were found or seized during the investigation. The Tribunal emphasized that mere remittance of amounts for technical know-how does not imply the import of tangible goods.

5. Applicability of Interest and Penalties:
The Tribunal noted that the Commissioner erred in demanding interest on duty for the period before 28-9-90 under Section 28AB of the Customs Act, 1962, for alleged imports made in 1995. The mandatory penalty under Section 114A was also deemed inapplicable as no tangible goods were proven to be imported. The imposition of a redemption fine of Rs. 10 lakhs was set aside as no designs and drawings were available for confiscation.

Conclusion:
The Tribunal set aside the order of the Commissioner, concluding that no tangible goods were imported, and thus, no customs duty, interest, or penalties were applicable. The appeal was allowed, and all charges against the appellants were dismissed.