1992 (7) TMI 183 - AT - Customs

Summary

Issues Involved:
1. Inclusion of engineering fees in the assessable value of imported goods under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988.

Detailed Analysis:

1. Inclusion of Engineering Fees in Assessable Value:

Background:
The Department appealed against the Collector's order regarding the inclusion of engineering fees in the assessable value of imported goods. M/s. Visakhapatnam Steel Project entered into agreements with Skoda Export Foreign Trade Corporation for basic design and engineering, and with Bharat Heavy Electricals Ltd. (B.H.E.L.) for design, engineering, manufacturing, and commissioning of the plant. B.H.E.L., lacking technical know-how, engaged M/s. Siemens AG for these services.

Contractual Payment Structure:
The payment schedule in Schedule II of the agreement was divided into two parts:
- Payments to B.H.E.L. for indigenous electrical equipment and services.
- Payments to Siemens AG for imported electrical equipment and services, including engineering fees amounting to 15,185,240 DM.

Department's Position:
The Department argued that the engineering fees payable to Siemens AG should be included in the assessable value of the goods imported, as per Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. They contended that:
- Siemens AG is not connected with the services under "Scope of Work" in Schedule-I, which are the responsibility of B.H.E.L.
- The engineering fees paid to Siemens AG are related to the equipment supplied and hence should form part of the assessable value.

Respondent's Argument:
The respondents argued that the engineering fees paid to Siemens AG were for general layout and design services for the plant, not specifically for the imported equipment. Therefore, these fees should not be included in the assessable value under Rule 9(1)(b)(iv).

Collector's Findings:
The Collector found no indication in the contract documents that the engineering fees were related to the production of the equipment supplied by Siemens AG. The fees were compensation for designing the entire electrical network of the plant, not for the production of the imported goods. Hence, the Collector set aside the Assistant Collector's order.

Tribunal's Analysis:
The Tribunal examined the contract terms, billing schedule, and relevant clauses, including:
- Schedule-I, which defined engineering services and detailed the scope of work.
- Schedule-II, which specified payments for equipment and engineering services separately.
- Annexure XII, which outlined the scope of engineering work by Siemens AG.

The Tribunal concluded that the engineering services provided by Siemens AG were for the overall design and layout of the plant, not specifically for the imported equipment. Therefore, the engineering fees did not relate to the production of the imported goods.

Rule 9(1)(b)(iv) Interpretation:
Rule 9(1)(b)(iv) states that engineering fees necessary for the production of imported goods should be included in the transaction value. Since the Tribunal found that the engineering fees paid to Siemens AG were not for the production of the imported goods, Rule 9(1)(b)(iv) was not applicable.

Conclusion:
The appeal was dismissed, and the Collector's order was upheld, confirming that the engineering fees paid to Siemens AG should not be included in the assessable value of the imported goods.

Final Order:
The appeal is dismissed, and the Collector's order is confirmed.