2011 (4) TMI 47 - AAR - Customs

Advance Ruling Determination of value Levy of CVD on basis of Transaction value or MRP value - products are marked as Not Meant for Retail Sales - maintainability of advance ruling application - Held that - As can be observed the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 are so inextricably linked that it is not proper to interpret Section 28H of the Customs Act, 1962 in a narrow sense as has been sought to be done by the Departmental Representative. Value of imported goods for levy of additional duty of custom is again dependent on the value of goods under Section 14 of the Customs Act, 1962. Moreover, it cannot be denied that had the same questions been posed by an applicant in relation to the same goods manufactured and cleared from a factory within the country, these would squarely be within the jurisdiction of the Authority in terms of sub-section (2) of Section 23C of the Central Excise Act, 1944. Declaration of retain sale price - the same goods in some cases may require to bear the declaration as stipulated under Rule 6 (1) (f) of the Packaged Commodities Rules, some other goods of the same class but not intended for retail sale may be exempted from the obligation for a declaration of retail sale price. Consequently the mode of assessment and the incidence of duty would be different in respect of goods identical in shape, size, functions, & packing but declared for a different use. It is likely that at different points of time and having regard to the market conditions, duty leviability may be more if goods are intended for retail sale or vice versa. This places an additional responsibility on the applicant for making a true and correct declaration at the time of import and to ensure that the goods are used for the purpose for which the declaration is made and that there is no diversion from one intended use to another. Calculation of CVD - (i) Products intended for providing certain specialized end to end service - (ii) Products for internal and captive use of the applicant. - (iii) Free samples - (iv) Free replacement under warranty arrangements - Value to be determined as per transaction value. - SAD u/s 3(5) of CTA is applicable on these goods - no exemption form SAD is available. (i) Products intended for sale to Government Departments, large customers etc. and (ii) Products intended for display and demonstration. are liable to be assessed under MRP - These product shall also be exempt from SAD.

Summary

Issues Involved:

1. Determination of additional customs duty based on transaction value or Maximum Retail Price (MRP).
2. Exemption from Special Additional Duty (SAD) under Section 3(5) of the Customs Tariff Act, 1975.

Issue-wise Detailed Analysis:

1. Determination of Additional Customs Duty Based on Transaction Value or MRP:

The applicant, a joint venture company in India, imports office automation and IT products. The applicant sought an advance ruling on whether additional customs duty should be based on transaction value or MRP for products not meant for retail sale. The applicant's business activities are categorized as follows:

A. Providing Specialized End-to-End Services: The products are installed at client premises for service agreements. These products are not intended for sale but for providing services. Therefore, there is no requirement under Rule 6(1)(f) of the Packaged Commodities Rules to declare the retail sale price. Consequently, the additional duty of customs would be based on the transaction value method.

B. Sale of Products to Large Customers: The goods are supplied to large customers such as government departments and institutional users. These are intended for consumption by individuals or other consumers. Since these buyers are not categorized as "institutional consumers" or "industrial consumers" under Rule 2A, the applicant is required to declare the retail sale price. Thus, the additional duty of customs would be based on MRP.

C. Internal and Captive Use: The products are used within the applicant's premises for business purposes. There is no intention to sell these goods, and hence, no requirement to declare the retail sale price. The additional duty of customs would be based on the transaction value method.

D. Display/Demonstration and Free Samples: Goods intended for display/demonstration at exhibitions are likely to be disposed of by sale eventually. Therefore, these goods should be treated as intended for retail sale and required to bear the retail sale price declaration. The additional duty of customs would be based on MRP. However, free samples are not intended for sale, so the additional duty would be based on the transaction value method.

E. Free Replacement: The imported equipment used as free replacement under warranty arrangements is not intended for sale. Hence, there is no requirement to declare the retail sale price, and the additional duty of customs would be based on the transaction value method.

2. Exemption from Special Additional Duty (SAD):

SAD is levied to counterbalance sales tax, VAT, etc., on imported articles. Notification No. 29/2010-Cus exempts pre-packaged goods intended for retail sale from SAD if they are required to declare the retail sale price under the SWM Act or any other law.

A. Products Not Meant for Retail Sale: The following categories are not required to declare the retail sale price and hence are not exempt from SAD:
- Specialized end-to-end services.
- Internal and captive use.
- Free samples.
- Free replacement under warranty arrangements.

B. Products Meant for Retail Sale: The following categories are required to declare the retail sale price and hence are exempt from SAD:
- Sale to government departments and large customers.
- Display and demonstration.

Conclusion:

The ruling concludes that multifunctional devices and printers used for specialized services, internal use, free samples, and free replacement will be assessed to additional duty based on transaction value and are liable to SAD. Products intended for sale to large customers and for display will be assessed based on MRP and are exempt from SAD. The ruling was pronounced on April 8, 2011.