2006 (9) TMI 375 - AT - Customs

Summary

Issues Involved:
1. Assessment of manuals imported through Courier.
2. Addition of amounts attributable to agreements to the value of the equipment imported under Project Import Regulations for the PTA plant.
3. Limitation and invocation of extended period under Section 28 of the Customs Act, 1962.
4. Classification of imported manuals under Tariff Heading 98.03.
5. Inclusion of know-how/license fee, engineering services fee, and buying commission in the assessable value of imported equipment.
6. Confiscation and penalty under Sections 111(m) and 112(a) of the Customs Act, 1962.

Detailed Analysis:

1. Assessment of Manuals Imported Through Courier:
- Facts and Allegations:
RIL imported seven cartons declared as Company Manuals of No Commercial value. The department alleged these contained FEEP (Front End Engineering Package) related to agreements for setting up a PTA plant.

- Arguments and Findings:
- Department: Claimed the manuals were misdeclared and should be classified under Tariff Heading 98.03, attracting 200% duty. Asserted extended period under Section 28 due to misdeclaration.
- RIL: Argued manuals were "Printed Books" exempt under Notification 38/94-Cus. Cited precedents supporting classification under Chapter 49.
- Tribunal: Found the issue of classification highly debatable with plausible views supporting RIL's bona fide belief. Held that both "Company Manuals" and "Technical Documents" could qualify for exemption under Chapter 49. Determined that the extended period could not be invoked as there was no willful misstatement or suppression of facts.

2. Addition of Amounts to Equipment Value Under Project Import Regulations:
- Know-How and License Fee Agreement (US$ 39 Million):
- Department: Argued the fee was related to the imported equipment and should be added to the value.
- RIL: Contended the fee was for technology use in India, not a condition of equipment sale.
- Tribunal: Concluded the fee was for a manufacturing process in India, not related to the imported goods. Cited precedents and training materials supporting this view. Ruled the fee not addable under Rule 9(1)(b)(iv), (c), or (e).

- Engineering Services Agreement (US$ 5 Million):
- Department: Claimed the services were related to the imported equipment.
- RIL: Argued the services pertained to plant setup in India, not equipment production.
- Tribunal: Found only US$ 1,30,000 related to equipment specifications. Held the remaining services were for plant setup, not addable under Rule 9(1)(b)(iv).

- Buying Services Agreement (US$ 8 Million):
- Department: Asserted the commission was a camouflage to exclude profit from assessable value.
- RIL: Maintained it was a legitimate buying commission, not related to equipment sale.
- Tribunal: Agreed with RIL, noting John Brown was not the seller but an organizer of equipment procurement. Confirmed the commission was not addable under Rule 9(1)(a)(iv).

3. Limitation and Invocation of Extended Period:
- Department: Invoked extended period under Section 28 due to alleged misdeclaration.
- Tribunal: Rejected the invocation, citing RIL's bona fide belief and lack of willful misstatement. Ruled the demand time-barred as the Show Cause Notice was issued beyond the six-month period.

4. Classification Under Tariff Heading 98.03:
- Department: Argued manuals should be classified under Heading 98.03 as dutiable articles.
- Tribunal: Determined the manuals were not dutiable under Chapter 49 and thus not classifiable under Heading 98.03. Cited Supreme Court precedents supporting this view.

5. Inclusion of Fees and Commissions in Assessable Value:
- Know-How/License Fee: Ruled not addable as it related to the manufacturing process in India.
- Engineering Services Fee: Only US$ 1,30,000 addable, rest related to plant setup.
- Buying Commission: Not addable as it was a legitimate buying service.

6. Confiscation and Penalty:
- Department: Sought confiscation under Section 111(m) and penalty under Section 112(a).
- Tribunal: Set aside confiscation and penalty, noting no willful misstatement or suppression of facts.

Conclusion:
The Tribunal allowed RIL's appeal, setting aside the demands and penalties, and dismissed the Department's appeal. The decision emphasized the importance of bona fide belief, proper classification, and the non-applicability of extended periods without clear evidence of willful misstatement.