2005 (7) TMI 523 - AT - Customs

Summary

Issues Involved:
1. Inclusion of design and engineering charges in the assessable value for customs duty.
2. Fulfillment of export obligation under EPCG license.
3. Liability of the imported goods for confiscation.
4. Imposition of penalty on the appellants.

Detailed Analysis:

1. Inclusion of Design and Engineering Charges:
The appellants argued that the design and engineering charges pertained to the goods manufactured and procured in India and not to the imported goods. They supported their claim with a certificate from MDH, the foreign supplier, stating these charges were for layout, installation, and other arrangements necessary for commissioning and did not relate to the imported equipment. The EPCG Committee excluded these charges from the CIF value when issuing the license, indicating they did not pertain to the imported goods. The Tribunal found that the design and engineering charges did not relate to the imported goods and should not be included in the assessable value, especially since the Customs Department did not question the certificate at the time of import.

2. Fulfillment of Export Obligation:
The Commissioner demanded duty for non-fulfillment of export obligation due to a consignment exported after the stipulated period. However, the DGFT extended the period and accepted the export made after the original deadline, issuing an E.O. certificate. The Tribunal held that the Customs authorities could not reject the DGFT's condonation of delay and demand duty, as it would undermine the functioning of government departments. Therefore, the demand of Rs. 27,07,294/- was set aside.

3. Liability for Confiscation:
The Commissioner ordered the confiscation of goods under Section 111(m) of the Customs Act, 1962, alleging misdeclaration of value. The Tribunal found that the appellants had disclosed all relevant information to both the DGFT and the Customs authorities. Since the EPCG Committee, including a Customs representative, had excluded the design and engineering charges from the license, there was no misdeclaration. Consequently, the confiscation order was set aside.

4. Imposition of Penalty:
Given that the duty demands and the confiscation were set aside, the Tribunal found no justification for imposing a fine and penalty on the appellants. The appeal was allowed with consequential relief.

Conclusion:
The Tribunal ruled in favor of the appellants, setting aside the demands for additional duty, the order of confiscation, and the imposition of penalties. The Tribunal emphasized the importance of the EPCG Committee's decisions and the need for Customs authorities to consult with the DGFT before taking contrary actions.