2013 (8) TMI 134 - AT - Customs

Valuation - import of cars in SKD / CKD conditions - inclusion of costs towards transfer of technology and trademark licence - Investigation was taken up on the basis of intelligence assesses had not declared the value correctly and consequently evaded customs duty - the Commissioner ordered that 45 million USD charged as Technology Transfer is attributable to pre-importation activity and, therefore, this amount has to be added and included in the assessable value, applicable to each imported car kit - Agreements between the two companies fraudulent and fabricated - whether the payment of lump sum made to SKODA towards technological fees for manufacturing car kits calculated on the basis of USD per unit as per FIPB application and as per cost sheet recovered during the investigation was includable in the assessable value or not - clauses from (a) to (e) of Rule 9(1) are independent - just because the transaction value under Rule 4(1) is to be adjusted with the costs and services under Rule 9(1), cannot be said that Rule 9 is a residuary Rule - transaction value under Rule 4(1) is to be adjusted with the costs and services mentioned in any of the clauses (a) to (e) of Rule 9(1) depending upon the fact situation of each case. It is needless to mention that each of the clauses from (a) to (e) of Rule 9(1) is independent. Further, just because the transaction value under Rule 4(1) is required to be adjusted with the costs and services under Rule 9(1), it cannot be said that Rule 9 is a residuary Rule. Technical Documentation - the Supply Agreement and the Technology Transfer and Trademark Licence Agreement are complementary to each other - both the Agreements had to be taken as indivisible and composite contract. Lumpsum (Technological Fee) vis- -vis royalty royalties will be addable to the value of the imported goods - only the lumpsum amount of USD 45 million paid towards technical documentation (technology transfer fee) which was different from royalty was addable to the assessable value of the goods - State Bank of India V/s. CC, Bombay (2000 (1) TMI 177 - SUPREME COURT OF INDIA ). Limitation - The show cause notice had demanded duty for the period from October, 2001 to July,2007 by invoking the extended period of limitation u/s28 (1) There were clear suppression of fact attracting the extended period of limitation the notice needed to be issued either within the normal period or within the extended period from the relevant date - CCE, Surat-I v/s. Neminath Fabrics Pvt. Ltd. ( 2010 (4) TMI 631 - GUJARAT HIGH COURT) - date of knowledge cannot be imported into the relevant date as prescribed by the Act. Jurisdiction - the show cause notice had been issued - the officers of the Directorate general of Central Excised Intelligence at various levels were also officers of Customs with all India jurisdiction vide Notification No. 27/2009-Cus - Further, they are also proper officers for the purposes of Section 28 in terms of Notification No. 44/2011. Confiscation - this was a case of misdeclaration of value of the goods by suppressing the fact of payment of USD 45 million in the guise of technical documentation - the Commissioner had rightly held that the goods are liable to confiscation u/s 111(m) and imposed redemption fine in lieu of confiscation as the goods were not physically available at the time of adjudication. Penalties - the short levy had arisen as a result of suppression of facts of payment of USD 45 million in the guise of technical documentation - the Commissioner had rightly imposed penalty of SAIPL u/d114A penalties were reduced - the goods were not physically available at the time of adjudication - redemption fine imposed by the Commissioner was not imposable decided partly in favour of assessee.

Issues Involved:
1. Inclusion of USD 45 million in the assessable value under Rule 9(1)(e) of the Customs Valuation Rules, 1988.
2. Alleged fabrication of agreements.
3. Jurisdiction of DGCEI officers.
4. Applicability of extended period of limitation under Section 28 of the Customs Act, 1962.
5. Imposition of penalties and redemption fine.

Detailed Analysis:

1. Inclusion of USD 45 million in the Assessable Value:
The main issue was whether the payment of USD 45 million made to Skoda Auto A.S. (SACR) for technological fees should be included in the assessable value of imported car kits under Rule 9(1)(e) of the Customs Valuation Rules, 1988. The Commissioner concluded that the agreements between SAIPL and SACR were fabricated to undervalue the imported goods. The FIPB application and cost sheets indicated that the technological fee was calculated at USD 1000 per car kit. The cost sheets recovered showed that the technological fee was indeed included in the landed cost of the car kits. The Tribunal upheld the Commissioner's decision, stating that the USD 45 million was intrinsically linked to the imported goods and hence includable in the assessable value.

2. Alleged Fabrication of Agreements:
The Commissioner found that the agreements submitted by SAIPL were fraudulent and fabricated. The Tribunal noted discrepancies in the documentation and the lack of clarity among SAIPL's officials regarding the agreements. The Tribunal agreed with the Commissioner that the agreements were manipulated to show a lower value for customs purposes.

3. Jurisdiction of DGCEI Officers:
The appellants challenged the jurisdiction of DGCEI officers to issue the show-cause notice. The Tribunal referred to Notification No. 27/2009-Cus (NT) and the amendment to Section 28 of the Customs Act, 1962, which retrospectively validated the jurisdiction of DGCEI officers. The Tribunal held that the show-cause notice issued by DGCEI was valid.

4. Applicability of Extended Period of Limitation:
The extended period of limitation under Section 28 of the Customs Act, 1962, was invoked due to suppression of facts by the appellants. The Tribunal found that SAIPL did not declare the payment of USD 45 million in the bills of entry and continued to import technical documentation without proper declarations. The Tribunal upheld the invocation of the extended period, citing the appellants' deliberate defiance of the law.

5. Imposition of Penalties and Redemption Fine:
The Commissioner imposed penalties on SAIPL and its officials under Section 114A of the Customs Act, 1962, and a redemption fine under Section 111(m). The Tribunal upheld the penalties on SAIPL and its officials but reduced the penalties on individual officials. The penalty on Pricewaterhouse Coopers Pvt. Ltd. (PWC) was dropped, as there was no evidence of their involvement in the alleged undervaluation. The redemption fine was also set aside as the goods were not available for confiscation.

Conclusion:
The Tribunal concluded that the USD 45 million paid by SAIPL to SACR was includable in the assessable value of the imported car kits under Rule 9(1)(e) of the Customs Valuation Rules, 1988. The agreements were found to be fabricated, and the extended period of limitation was rightly invoked. Penalties on SAIPL and its officials were upheld with some reductions, while the penalty on PWC and the redemption fine were set aside.

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