2018 (1) TMI 1061 - AT - Customs

Valuation - Rule 2(2) of the Customs Valuation Rules - Article 19 of the Technical Collaboration Contract - includibility of certain expenses - Held that - the requirement of Rule 10(1) (e) are satisfied and hence, such payments made are required to be loaded on to the invoice value of Masters Samples/Utility Models. The Commissioner (Appeals) appears to have proceeded on the wrong understanding that such payments are by way of royalty which is paid in consideration for the technical assistance. Whether such loading can be extended to imports already made for the period prior to the renewal of SVB order? - Held that - Revenue has justified the demand for the past period by alleging that the respondent has mis-declared the answer to question No.20 of the SVB Questionnaire - Revenue has justified mis-declaration on the part of the respondent and invoking extended period of limitation. Appeal allowed.

Summary

Issues:
- Interpretation of Technical Collaboration Contract (TCC) regarding payment obligations.
- Application of Rule 10(1) (e) of the Customs Valuation Rules to loading transaction value.
- Justification for re-assessment of earlier bills of entry.
- Allegation of mis-declaration and invocation of extended period of limitation.

Interpretation of Technical Collaboration Contract (TCC) regarding payment obligations:
The appeal involved a dispute over the interpretation of Article 19 of the Technical Collaboration Contract (TCC) between the respondent and their principal in Japan. The Revenue contended that certain charges, such as Documentation Charges and Initial fee, not included in the invoiced value of Master Samples/Utility Models, should be considered as part of the assessable value of imported goods under Rule 10(1) (e) of the Customs Valuation Rules. The respondent argued that these charges were for development and technical assistance, not for the right and license to manufacture the products. The Tribunal analyzed Article 19 of the TCC, emphasizing that the charges were for covering development costs and technical assistance, essential for importing components. The Tribunal held that the charges should be loaded onto the invoice value of the models, rejecting the Commissioner (Appeals)’s view that the payments were akin to royalty for technical assistance.

Application of Rule 10(1) (e) of the Customs Valuation Rules to loading transaction value:
The Tribunal examined whether the loading of transaction value for Master Samples/Utility Models could be extended to imports made before the renewal of the Special Valuation Branch (SVB) order. Revenue alleged mis-declaration based on the respondent's response to Question No.20 of the SVB Questionnaire. However, the Tribunal found that the TCC submitted with the original SVB order remained unchanged during the renewal, and there was no basis for alleging suppression of facts solely based on the response to Question No.20. Consequently, the Tribunal ruled that there was no justification for loading the transaction value of models imported before the initial SVB circular, dated 16.07.2008.

Justification for re-assessment of earlier bills of entry:
The Revenue sought re-assessment of earlier bills of entry for the period before the renewal of the SVB order, alleging mis-declaration by the respondent. The Tribunal noted that since the TCC remained unchanged, and the Revenue had the complete contract information at the time of both SVB orders, the allegation of suppression could not be upheld. Therefore, the Tribunal concluded that there was no justification for loading the transaction value of models imported before the issuance of the initial SVB circular.

Allegation of mis-declaration and invocation of extended period of limitation:
Revenue justified the invocation of an extended period of limitation based on alleged mis-declaration by the respondent regarding payments to the supplier of imported goods. However, the Tribunal found that the complete TCC was available to Revenue at the time of both SVB orders, and there was no substantial change in the contract during the period. Therefore, the Tribunal dismissed the allegation of mis-declaration and upheld that there was no basis for loading the transaction value for imports made before the initial SVB circular.

In conclusion, the Tribunal set aside the impugned order, partially allowing the appeal of Revenue by upholding the loading of transaction value for Master Samples/Utility Models but ruling against loading for the period before the date of the original SVB circular.