2021 (12) TMI 1158 - AT - Customs

Valuation of imported goods - payment for the services, sought to be included by customs authorities in the assessable value of reactor set - enhancement of declared value - suppression of facts or not - invocation of extended period of limitation - penalty u/s 114A of Customs Act, 1962 - HELD THAT - It is on record that the licence agreement for know-how and technical assistance and the purchase order for supply of the impugned goods, were both contracted separately with M/s Atofina France. Thereafter, M/s Arcil Catalyst Pvt Ltd, a producer of aluminum chloride anhydrous and intending to expand manufacturing capacity, placed order for reactor set from M/s Atofina France on 13th December 2000 which was assessed to duty on the contract value of the goods in bill of entry filed on 26th February 2001. Well before this, on 15th September 1999, the licence agreement for collaboration in debottlenecking of existing process and upgradation of facility was entered into; it is the payment due on invoice dated 10th December 2002 for technical knowhow and invoice dated 19th December 2002 for technical assistance raised by M/s Atofina France in pursuance of the agreement which was sought to be added to assessable value of the goods. It would appear to have been assumed that the qualifying expression, as a condition of sale , in rule 9(1)(c) and 9(1)(e), can be stretched limitlessly to encumber the transaction value of imported goods with any, and all, other outflows of the importer to the seller merely by being so. The mismatched concatenation of facts, contrived for confirming the demand in the impugned order, is mirrored in the confused categorization of the impugned payments under two different, and mutually exclusive, contingencies that permitted inclusion of services in assessable value. We cannot accord judicial sanction to a proposition that subsumes all commercial transactions between two entities merely for sharing commercial objective in common with a cross-border transaction in goods. The facts of the case must lead to that conclusion for approval of the proposed addition. The payment for the services, sought to be included by customs authorities in the assessable value of reactor set , became due well after the import and the obligation for providing the technical knowhow and technical assistance the services in question was contingent upon certificate of conformity with the basic engineering package or, in other words, the readiness of the facility for debottlenecking and upgradation in accordance with the agreement. It is seen that this certificate was issued on 13th September 2001 following which the payment contracted in the agreement was made due by M/s Atofina France - The certificate of conformity which, according to the adjudicating authority, is the pivot also clearly pertains to provision of service in India after import. None of these facts find fitment within the scheme of taxing of services rendered by an overseas provider at the rate of duty for assessment of imported goods as intended by rule 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 set out. The demand fails along with appeal of Revenue - Appeal allowed - decided in the favor of assessee.

Summary

Issues Involved:
1. Inclusion of payments for 'technical know-how' and 'technical assistance' in the assessable value of imported goods.
2. Legality of invoking the extended period of limitation under section 28 of the Customs Act, 1962.
3. Imposition of penalty under section 112 vs. section 114A of the Customs Act, 1962.

Detailed Analysis:

1. Inclusion of Payments for 'Technical Know-How' and 'Technical Assistance' in Assessable Value:
The core issue revolves around whether payments made for 'technical know-how' and 'technical assistance' should be included in the assessable value of imported goods under rule 9 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The appellant-assessee imported a 'reactor set' and paid duties based on its declared value. However, subsequent payments for 'technical know-how' and 'technical assistance' were revealed, leading to proceedings to include these payments in the assessable value. The adjudicating authority concluded that the 'technical know-how' and 'technical assistance' were integral to the imported goods and should be included in the assessable value. However, the Tribunal found that the payments were made well after the import and were contingent on the readiness of the facility, indicating they were not a 'condition of sale' of the goods. Judicial precedents, including Commissioner of Customs (Port), Chennai v. Toyota Kirloskar Motor P Ltd, emphasized that post-importation services or activities should not be included in the assessable value. The Tribunal concluded that the addition of these payments to the assessable value was not justified.

2. Legality of Invoking the Extended Period of Limitation:
The adjudicating authority invoked the extended period of limitation under section 28 of the Customs Act, 1962, citing suppression of facts by the importer. The appellant-assessee argued that the demand was computed from details available in public documents, making the finding of suppression untenable. The Tribunal noted that the extended period could only be invoked if there was willful suppression of facts, which was not evident in this case. The reliance on judicial decisions such as UT Limited v. Commissioner of Central Excise, Calcutta-I further supported the appellant's argument against the extended period of limitation.

3. Imposition of Penalty Under Section 112 vs. Section 114A:
The Revenue appealed against the imposition of penalty under section 112, arguing that the circumstances warranted a penalty under section 114A of the Customs Act, 1962. The Tribunal found that the impugned order had covered all relevant aspects for enhancement of the declared value and that the appeal of Revenue was limited to the legality of imposing penalty under section 112. Given the absence of circumstances that empowered the imposition of a penalty under section 114A, the Tribunal upheld the penalty under section 112.

Conclusion:
The Tribunal concluded that the payments for 'technical know-how' and 'technical assistance' were not a 'condition of sale' of the imported goods and should not be included in the assessable value. The invocation of the extended period of limitation was not justified due to the lack of willful suppression of facts. The penalty under section 112 of the Customs Act, 1962, was appropriate given the circumstances. Consequently, the demand failed, the appeal of Revenue was dismissed, and the appeal of the assessee was allowed.

(Order pronounced in the open court on 22/12/2021)