1993 (8) TMI 214 - AT - Customs

Summary

Issues Involved:
1. Applicability of Rule 9(1)(b)(iv) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988.
2. Nature of design and engineering charges paid to DML.
3. Inclusion of design and engineering charges in the transaction value for customs duty purposes.
4. Relationship between the agreements and the valuation of imported goods.
5. Treatment of payments made for design and engineering work in the valuation of imported goods.

Issue-wise Detailed Analysis:

1. Applicability of Rule 9(1)(b)(iv) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988:
The appellants contended that Rule 9(1)(b)(iv) was not applicable to their case. They argued that the design and engineering charges were related to post-importation activities and should not be added to the invoice value. However, the Additional Collector held that the design and engineering charges were necessary for the production of the imported goods and thus should be included in the transaction value under Rule 9(1)(b)(iv). The Tribunal upheld this view, emphasizing that the charges were for services undertaken outside India and necessary for the production of the imported goods.

2. Nature of Design and Engineering Charges Paid to DML:
The appellants argued that the design and engineering work was undertaken by the vendors themselves based on the specifications provided by DML and not by DML directly. They claimed that these specifications were not equivalent to design and engineering work. The Additional Collector found that DML had developed the design and engineering for the equipment, which was necessary for the production of the imported goods. The Tribunal agreed, noting that DML's design and engineering work was integral to the production process and thus should be included in the transaction value.

3. Inclusion of Design and Engineering Charges in the Transaction Value for Customs Duty Purposes:
The appellants contended that the design and engineering charges paid to DML should not be added to the transaction value as they related to the plant in India and not the imported equipment. The Additional Collector, however, observed that the design and engineering charges were necessary for the production of the imported goods and thus should be included in the transaction value. The Tribunal upheld this view, emphasizing that the charges were for services necessary for the production of the imported goods and thus should be included in the transaction value.

4. Relationship Between the Agreements and the Valuation of Imported Goods:
The appellants argued that the agreements for technical know-how and the supply of equipment were separate and should not be read together. The Additional Collector held that all three agreements should be read together to understand the full scope of the transaction. The Tribunal agreed, noting that the agreements were part of a unified and integrated package for sophisticated technology and thus should be read together to determine the transaction value.

5. Treatment of Payments Made for Design and Engineering Work in the Valuation of Imported Goods:
The appellants argued that the payments made for design and engineering work should not be added to the transaction value as they were for post-importation activities. The Additional Collector found that the payments were necessary for the production of the imported goods and thus should be included in the transaction value. The Tribunal upheld this view, emphasizing that the payments were for services necessary for the production of the imported goods and thus should be included in the transaction value.

Conclusion:
The Tribunal upheld the Additional Collector's decision to include the design and engineering charges in the transaction value for customs duty purposes. The appeal was rejected, and the sum of Pound 11.50 lakhs was correctly added to the contract price for the supply of equipment by DML to APL.