2004 (7) TMI 643 - AT - Customs

Summary

Issues Involved:
1. Eligibility for concessional rate of Customs duty under Tariff Item 9801.00 for LNG facility imports.
2. Inclusion of a portion of the value of the Offshore Services Contract in the declared value of the equipment under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988.
3. Applicability of Section 111(m) and 112 of the Customs Act, 1962.

Summary:

Issue 1: Eligibility for Concessional Rate of Customs Duty
The Tribunal examined whether the various items of equipment, machinery, etc., imported for the LNG facility are entitled to concessional Customs duty under Tariff Item 9801.00 as project imports. The Commissioner had concluded that the LNG facility is an independent fuel venture and not an integral part of the power project, thus not qualifying for concessional duty. However, the Tribunal found that the LNG facility is part of the integrated power project, supported by various agreements and approvals, including those from the Government of India and the Foreign Investment Promotion Board (FIPB). Consequently, the Tribunal held that the LNG facility imports are entitled to concessional duty under Tariff Item 9801.00.

Issue 2: Inclusion of Offshore Services Contract Value
The Commissioner included a portion of the value of the Offshore Services Contract in the declared value of the equipment under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. The Tribunal reviewed the contracts and found that the services provided under the Offshore Services Contract went beyond mere specifications and included detailed engineering and design necessary for the production of the imported goods. The Tribunal modified the inclusion amounts for various service categories, ultimately determining that 28.73% of the total offshore service value should be added to the assessable value of the imported goods.

Issue 3: Applicability of Section 111(m) and 112
The Commissioner had held that the goods imported for the LNG facility were liable for confiscation under Section 111(m) of the Customs Act, 1962, due to misdeclaration, and imposed a penalty under Section 112(a). The Tribunal, however, accepted the appellant's contention that the scope of the Offshore Services Contract was known to the department and that the first Bill of Entry was assessed by including the value of offshore services. Given that the assessments were provisional, the Tribunal set aside the confiscation, redemption fine, and penalty.

Final Orders:
1. Appeal No. C/601/2001 filed by DPC is partly allowed.
2. Appeal No. C/519/2000 filed by DPC is allowed.
3. Appeal No. C/520/2000 filed by the Revenue is dismissed.