2013 (8) TMI 777 - AT - Customs

Valuation inclusion of inspection charges - inclusion of cost of erection, commissioning and installation of the three cranes - Held that - he words that ICAN shall provide, shows that inspection was a condition of the sale and not optional to ICAN. Even though payment has been made separately, the fact remains that it was an obligation of the seller to provide the certificate. - inspection charges have to be included in the assessable value since it was ICAN s responsibility and expense was incurred on behalf of the ICAN by GPPL since it was obligatory for ICAN to provide the certificate. Any expense incurred on behalf of the seller by the buyer and obligatory as per the contract and incurred prior to import is includable in the assessable value. Decided in favor of revenue. Inclusion of cost of erection, commissioning and installation of the three cranes Cost incurred after import - Held that - It cannot be said that the purchase contract had a condition for erection to be undertaken and this was a condition of sale - Commissioner had wrongly interpreted the provisions of Rule 4 to reject the transaction value on the ground that importation of cranes in the dis-assembled form means restriction in terms of clause (e) of said Rule 4 (2) of the Customs Valuation Rules assesse shall be entitled to refund of all payments made including an annual interest payable on the same. The purchase contract also included a warranty and provides that warranty shall survive the expiration and / or sooner determination of the contract - It also provides that the warranty shall be the sole remedy for the goods - the case was decided on the basis of Valuation Rules and the terms of the contract, which invariably were not comparable according to clause -1 assesse was required to do necessary drawing, design engineering and modification work and thereafter only send the cranes in disassembled form - By the time the disassembled cranes were received in India, full drawing, design and engineering details and documentation required was available Decided in favor of assesse.

Issues Involved:
1. Inclusion of inspection charges in the assessable value.
2. Inclusion of costs related to discharging, installation, commissioning, painting, and other post-importation activities in the assessable value.

Detailed Analysis:

1. Inclusion of Inspection Charges in the Assessable Value:
The primary issue revolves around whether the inspection charges paid by the importer, GPPL, should be included in the assessable value of the imported cranes. The Revenue contended that these charges were essential for ascertaining the condition of the imported goods and should be added to the value under Clause CVR 9(1)(e). The GPPL argued that the inspection was optional and not a condition of the sale.

Judgment Analysis:
The Tribunal examined the contract between ICAN and GPPL, particularly Article 1.5.2.1, which required ICAN to provide an inspection certificate. The Tribunal noted that although the payment was made separately, the obligation to provide the certificate was on ICAN, making the inspection a condition of the sale. Therefore, the inspection charges were deemed obligatory and incurred on behalf of the seller, necessitating their inclusion in the assessable value. The Tribunal upheld the Revenue's contention that the inspection charges should be included in the assessable value.

2. Inclusion of Costs Related to Post-Importation Activities:
The second issue concerns whether the costs for discharging, installation, commissioning, painting, and other post-importation activities (listed as Serial Nos. 2 to 8) should be included in the assessable value. GPPL argued that these were post-importation activities, separable under a distinct service contract, and not conditions of the sale.

Judgment Analysis:
The Tribunal analyzed the purchase and service contracts between ICAN and GPPL. The purchase contract (dated 27.11.2003) and the service contract (dated 30.11.2003) were scrutinized to determine if the post-importation activities were conditions of the sale. The Tribunal noted that the purchase contract included clauses for the transfer of title and risk at the Japanese port, indicating that the sale was complete upon loading the disassembled cranes onto the vessel. The service contract, which covered erection, installation, and commissioning, was separate and entered into after the purchase contract.

The Tribunal concluded that the purchase contract did not impose any conditions for erection, installation, and commissioning by ICAN. These activities were not conditions of the sale but optional services availed by GPPL. Consequently, the costs related to these post-importation activities could not be included in the assessable value. The Tribunal allowed GPPL's appeal against the inclusion of these costs.

Conclusion:
The Tribunal ruled that:
1. The inspection charges were to be included in the assessable value as they were a condition of the sale.
2. The costs related to discharging, installation, commissioning, painting, and other post-importation activities were not to be included in the assessable value as they were not conditions of the sale.

Both appeals, filed by the Revenue and GPPL, were allowed, leading to a partial modification of the original adjudicating authority's order.

← Previous Next →