2001 (1) TMI 195 - AT - Customs

Summary

Issues Involved:
1. Inclusion of the value of knowhow documentation and basic engineering documentation in the assessable value of imported machinery and equipment.
2. Classification of the knowhow documentation and basic engineering documentation under the Customs Tariff.

Summary:

Issue 1: Inclusion of Documentation Value in Assessable Value of Machinery
The appellants entered into a contract with Pirelli for the import of machinery and spare parts, including technical documentation, at a specified price. Additionally, a separate contract was made for knowhow documentation and basic design documentation at a lump sum price. The Assistant Commissioner of Customs ruled that the price for the knowhow documentation should be included in the value of the imported machinery, a decision upheld by the Commissioner (Appeals).

The appellants argued that the transactions for machinery and documentation were independent, with the documentation related to activities in India and not a pre-condition for the sale of machinery. They contended that the documentation charges should not be included in the assessable value of the machinery, citing the Supreme Court's decision in TISCO Ltd. v. CCE & C, which ruled against including the value of technical documentation in the assessable value of imported equipment.

The Tribunal, after considering the terms of the contract and the Supreme Court's ruling, concluded that the price paid for the knowhow documentation and basic design documentation should not be included in the assessable value of the imported machinery and equipment.

Issue 2: Classification of Documentation under Customs Tariff
The appellants classified the documentation under Chapter 49 of the Customs Tariff, attracting a nil rate of duty. The authorities, however, classified it under Chapter 84, treating it as part of the machinery.

The Tribunal referred to its previous order in the case of TISCO Ltd. v. CC, Calcutta, which held that designs and drawings are classifiable under Chapter 49 and not Chapter 84. The Tribunal found no provision in the Customs Tariff that required the classification of designs and drawings with reference to the machinery's tariff heading. Consequently, the Tribunal upheld the classification of the documentation under Chapter 49.

Conclusion:
The Tribunal set aside the impugned order, ruling that the value of the knowhow documentation and basic design documentation should not be included in the assessable value of the imported machinery and equipment. Furthermore, the documentation should be classified under Chapter 49 of the Customs Tariff, granting the appellants consequential relief in accordance with the law.