2022 (11) TMI 169 - AT - Customs

Valuation of imported goods - import of baggage - goods to be assessed separately or not - inclusion of charges for importation of design engineering and site run in the assessable value - case of assessee is that the design engineering and site run had already been assessed separately under Chapter 49 was not decided by the Tribunal - HELD THAT - This matter was remanded by the Supreme Court to this Tribunal with a direction to re-decide the issue regarding includability of the charges paid for importation of design engineering and site run in the assessable value of the fermenters afresh because in the Final Order passed this Tribunal had not discussed Rule 9(1)(b) and 9(1) (e) read with Rule 4 and had also not examined the effect of the exigibility of the design engineering and site run which were assessed separately under Chapter 49 - So, it is to be decided if the assessment of the design engineering and site run was completed under Chapter 49 and if so, what is the effect of such assessment. It has been represented by the appellant before the Supreme Court that design engineering and site run had already been assessed separately under Chapter 49 . In the synopsis presented by the learned counsel before us, it has been submitted that the technical documents had already been allowed assessment under Chapter 49 at Nil rate of duty. Therefore, once their assessment has been finalized independently, the value of the same cannot be included in the value of the fermenters . Once an order permitting clearance of goods for home consumption is issued by the proper officer, they cease to be imported goods and the person who imported them ceases to be an importer. Since the duty, if applicable, has to be paid before the order for clearance of goods for home consumption can be issued, such goods also cease to be dutiable goods. No duty can be assessed under section 17 of the Act on such goods because duty can be charged on the goods imported into India as per Section 12 (the charging section) and once the goods are no longer imported goods, no duty can be charged. The process of assessment, whether the assessment is done by the officer (as in this case) or it is a process of self-assessment is completed with the order permitting clearance of goods for home consumption except in cases of provisional assessment where the assessment is completed with the order finalizing the assessment. When goods are imported as baggage by a passenger, they are classified under Customs Tariff heading 98.03 regardless of what the individual items of baggage are. Similarly, imports for personal use and import of stores in ships and aircrafts are classified under a single heading. The present import is not covered under any of these exceptions and therefore, it is immaterial whether the goods are imported under the same contract or not. Similarly, it is immaterial if the goods are imported into the country under the same Airway Bill or not. Goods must be assessed individually on merits. Whether in this case, the sale of the design engineering and site run was a condition for the sale of the fermenters? - HELD THAT - There are nothing in the records to show that there was any condition in the agreements or invoices that unless the importer buys the design engineering and site run, it will not be sold the fermenters. Merely because more than one goods are bought by the buyer from the seller under the same agreement and under the same invoice, the sale of one good does not become the condition of sale for another. This is also true even if the goods so bought are related in terms of their use. For instance, one may buy a car and also buy some accessories of the car. Unless there is a condition in the sale contract that if the accessories are not bought, the car will not be sold at all or will not be sold at that price, the purchase of the accessories does not become a condition for sale of the car. It does not matter if the accessories will be used with the car to improve its appearance or have some additional conveniences in the car - there exists nothing to say that the purchase of the design engineering and site run was a condition for sale of the fermenters and therefore, the value of the design engineering and site run cannot be added to the value of the fermenter even though both were purchased as per the same contract and invoice and were imported under the same Airway bill. Therefore, Rule 9(1)(e) of the Valuation Rules does not apply to this case and the value of the design engineering and site run cannot be included in the assessable value of the fermenters. The impugned order is set aside insofar as the valuation is concerned with consequential benefits, if any, to the appellant - the impugned order cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Includability of charges for design engineering and site run in the assessable value of fermenters.
2. Effect of separate assessment of design engineering and site run under Chapter 49.
3. Applicability of Rule 9(1)(b) and Rule 9(1)(e) read with Rule 4 of the Customs Valuation Rules, 1988.

Issue-wise Detailed Analysis:

1. Includability of Charges for Design Engineering and Site Run in the Assessable Value of Fermenters:
The core issue revolved around whether the charges paid for design engineering and site run should be included in the assessable value of the fermenters. The appellant argued that these charges were assessed separately under Chapter 49 at a nil rate of duty and should not be included in the fermenters' value. The tribunal noted that Rule 9(1)(b) and Rule 9(1)(e) of the Customs Valuation Rules were invoked in the show cause notice (SCN) and the impugned order, but the tribunal had not initially referred to these rules. Rule 9(1)(b) pertains to cases where goods or services are supplied free of charge or at a reduced cost, which was not applicable here as the design engineering and site run were supplied for a consideration. Rule 9(1)(e) involves payments made as a condition of sale of the imported goods. The tribunal found no evidence that the sale of the design engineering and site run was a condition for the sale of the fermenters. The fermenters could be sold independently and used to produce vaccines, albeit not meeting WHO GMP standards without the design engineering and site run. Thus, Rule 9(1)(e) did not apply, and the value of the design engineering and site run could not be included in the fermenters' value.

2. Effect of Separate Assessment of Design Engineering and Site Run under Chapter 49:
The appellant contended that since the design engineering and site run were assessed separately under Chapter 49 at nil duty, their value should not be included in the fermenters' assessable value. The tribunal examined the assessment process under the Customs Act, noting that assessment includes both document-based appraisal and physical examination of goods. The tribunal found that the assessment of the design engineering and site run under Chapter 49 was not completed as no order permitting their clearance for home consumption was issued. The examination revealed that these goods were related to the fermenters, prompting a re-assessment proposal in the SCN. Therefore, the initial assessment under Chapter 49 did not preclude including their value in the fermenters' assessable value.

3. Applicability of Rule 9(1)(b) and Rule 9(1)(e) Read with Rule 4 of the Customs Valuation Rules, 1988:
The tribunal analyzed whether Rule 9(1)(b) and Rule 9(1)(e) required adjustments to the transaction value under Rule 4. Rule 9(1)(b) was deemed inapplicable as it pertains to free or reduced-cost supplies by the buyer to the seller, which was not the case here. Rule 9(1)(e) involves payments made as a condition of sale. The tribunal found no evidence that the purchase of design engineering and site run was a condition for the sale of the fermenters. The supplier confirmed that fermenters could be sold without the design engineering and site run. Thus, Rule 9(1)(e) did not apply, and the value of the design engineering and site run could not be included in the fermenters' assessable value.

Conclusion:
The tribunal concluded that the impugned order could not be sustained as the value of the design engineering and site run could not be included in the fermenters' assessable value under Rule 9(1)(b) or Rule 9(1)(e). The appeal was allowed, and the impugned order was set aside with consequential benefits to the appellant.