2014 (8) TMI 396 - AT - Customs

Valuation - import of drawings, designs and documents separately from import of plant and machinery - drawings, designs and technical documents classifiable under Customs Tariff Heading 98.03 were imported through courier without payment of duty - Suppression of value at the time of import - Held that - Normally, books mean, text books or reference books meant for reading by general public, professionals and students. The imported goods were meant for sole purpose of the appellant, which cannot be regarded as book not being meant for reading by general public. Those were technical literature relating to the plant and machinery imported by appellant to bring such plant and machinery into existence and carry out manufacture using the technology agreed to be imparted. Perusal of the copy of the collaboration agreement throws light that the drawings, designs and documents came through courier are all attributable to the plant and machinery imported according to technical collaboration agreement. That formed part of the entire supply contract and does not leave any doubt to treat technical collaboration agreement to be independent of divisible contract of supply and service. The drawings, designs and technical documents are no doubt goods being integrally connected with the plant and machinery and not classifiable under CTH 49.01. In the present case, those were inevitable necessity of the capital goods to come into existence. Inseparability of each other was their virtue. Therefore it does not appeal to common sense to treat the import consignment independent of plant and machinery to be called book . When it transpires that the entire contract of supply of plant and machinery (capital goods) and supply of drawing and design were integrally connected with each other that shows allocation of part of value of contract towards drawings and designs to escape duty on capital goods. Such division brings the case to the purview of section 28 of Customs Act 1962. Once the goods (drawing and designs) were not books, the notification benefit claimed by appellant is also deniable and adjudication was not time barred. Even the alternate claim of the appellant that the import of drawing and design shall fall under the Tariff Heading 99.10 is inconceivable because those were not specimens, models, wall pictures nor diagrams for instructional purpose as is specified by that entry. Appellant fails to succeed on merit as to the claim that the imported drawings, designs and technical documents were books. Exemption benefit of the notification claimed by it is not admissible to it since the drawings and designs are not books classifiable under the CTH claimed by the appellant. Thus appeal on this count is dismissed - However, penalty is reduced - Decided partly in favour of assessee.

Issues Involved:
1. Classification of imported drawings, designs, and technical documents.
2. Applicability of Customs duty and exemption under relevant notifications.
3. Whether the imported items qualify as "goods" under Section 2(22) of the Customs Act, 1962.
4. Whether the imported items can be classified as "baggage" under Heading 98.03.
5. Applicability of extended period for demand under Section 28(1) of the Customs Act, 1962.
6. Imposition of penalties on the appellant and its Managing Director.

Detailed Analysis:

1. Classification of Imported Items:
The primary issue was whether the imported drawings, designs, and technical documents should be classified under Chapter Heading 49.01 (printed books) or 49.06 of Schedule I of the Customs Tariff Act, 1975, or under sub-heading 4911.99 as contended by the department. The Tribunal referred to the Supreme Court's decision in CCE (General), New Delhi and Ors. Vs. Gujarat Perstorp Electronics, which emphasized that the natural and ordinary meaning of "book" must be considered when it is not defined in the Act. The Tribunal observed that the imported items were technical literature related to machinery and not books meant for general reading.

2. Applicability of Customs Duty and Exemption:
The appellant argued that the imported items should be exempt from duty under Notification Nos. 107/93-Cus. and 38/94-Cus. as they were instructional materials classifiable under Heading 99.10. The Tribunal, however, found that the items were not instructional materials but integral parts of the machinery, thus not qualifying for the claimed exemption. The Tribunal upheld the adjudicating authority's decision that the items were goods liable to Customs duty.

3. Definition of "Goods" under Section 2(22) of the Customs Act:
The appellant contended that the drawings, designs, and documents were intellectual properties and not "goods." The Tribunal rejected this argument, stating that the definition of "goods" in Section 2(22) of the Customs Act is inclusive and broad enough to cover such items. The Tribunal noted that the items had a value and were subject to transfer of property, making them liable to Customs duty.

4. Classification as "Baggage" under Heading 98.03:
The appellant argued that the items could not be classified as "baggage" under Heading 98.03 since they were imported through a courier service and not by a passenger. The Tribunal found that prior to the notification of the courier import regulations, courier imports were treated as baggage, as confirmed by Circular No. 56/95-Cus. The Tribunal upheld the classification under Heading 98.03 and the corresponding duty imposition.

5. Applicability of Extended Period for Demand:
The Tribunal addressed the issue of whether the extended period under Section 28(1) of the Customs Act was applicable. The Tribunal found that there was no suppression or mis-declaration by the appellant, and the imports were proper. However, the Tribunal noted that the issue involved was a question of law relating to classification, and thus the extended period was applicable.

6. Imposition of Penalties:
The Tribunal reviewed the penalties imposed on the appellant company and its Managing Director. The original penalties were Rs. 2,00,00,000/- on the appellant company and Rs. 1,00,00,000/- on the Managing Director. Considering the facts and circumstances, the Tribunal reduced the penalties to Rs. 20,00,000/- for the appellant company and Rs. 10,00,000/- for the Managing Director.

Conclusion:
The Tribunal concluded that the imported drawings, designs, and technical documents were not books and were liable to Customs duty. The items were correctly classified under Heading 98.03 as baggage, and the extended period for demand was applicable. The penalties on the appellant company and its Managing Director were reduced. Both appeals were partly allowed to the extent of penalty reduction. The order was pronounced in the open court on 08/05/2014.

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