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2024 (7) TMI 1045 - AT - CustomsValuation of Customs Duty - inclusion of the supervision charges and license charges for process Know-How in the assessable of goods imported by the appellant - re-determination of Customs duty - HELD THAT - From the decision in COMMISSIONER OF CUSTOMS, CHENNAI VERSUS M/S. DENSO KIRLOSKAR INDUSTRIES PVT LTD 2015 (10) TMI 549 - SUPREME COURT and COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. HINDALCO INDUSTRIES LTD. 2015 (5) TMI 696 - SUPREME COURT , it is apparent that before such consideration are included in assessable value it has to be established that such charges are a condition of sale Moreover, it has to be established that the charges are not in relation to post importation activities. It s only in such conditions that such charges can be added to the assessable value. There is nothing in the contract which shows that the procurement of licenses for process Know-How or the activity of the supervision of erection and commissioning plant are in any way, condition for the sale of goods to the appellants. The impugned order also does not identify any such conditions of sale. Moreover, the licence fee also relates to the manufacture process which is a post importation activity, just like supervision of Erection and Commissioning. In these circumstances, since the activities are clearly post importation activities and also not a condition for sale, the price paid for the same cannot for part of the assessable value of the goods. The impugned order cannot be sustained - appeal allowed.
Issues Involved:
1. Inclusion of supervision charges and license fees for process Know-How in the assessable value of imported goods. 2. Re-determination and quantification of Customs duty based on the inclusion of these charges. Issue-wise Detailed Analysis: 1. Inclusion of Supervision Charges and License Fees: The primary issue in the appeals was whether the supervision charges for erection and commissioning, and the license fees for process Know-How should be included in the assessable value of the imported goods. The appellant argued that these charges were incurred after the importation of the machinery into India and thus should not be included in the assessable value. The Lower Authority included these charges in the assessable value, revising the transaction value by invoking Rule 9 (1)(b)(ii) and Rule 9(1)(iv) read with Rule 4 of Customs Valuation Rules, 2007, and Section 14 of the Customs Act, 1962. The Commissioner (Appeals) upheld the inclusion of these charges but remanded the matter to apportion only the fraction of the charges attributable to the value of the machinery imported in these Bills of Entry. The appellant relied on several judicial decisions to assert that such charges are not includable in the value of goods imported as they are related to post-importation activities. 2. Re-determination and Quantification of Customs Duty: The second appeal was against the order quantifying the demand in terms of the aforementioned remand order. The original adjudicating authority assessed the Bill of Entry finally under Section 18 (2) of the Customs Act, 1962, and appropriated an amount of Rs. 1,71,30,570/- debited through EPCG license toward payment of Customs Duty. Consequently, a differential duty amounting to Rs. 17,903,038/- along with interest was demanded under Section 18 (3) of the Customs Act, 1962. Detailed Analysis: Supervision Charges and License Fees: The relevant legal provisions invoked were Rule 10(1)(c) and Rule 10(1)(e) of the Customs Valuation Rules, 2007. Rule 10(1)(c) pertains to royalties and license fees related to the imported goods that the buyer is required to pay as a condition of the sale of the goods being valued. Rule 10(1)(e) pertains to all other payments made as a condition of sale of the imported goods by the buyer to the seller or a third party to satisfy an obligation of the seller. The Tribunal examined the contract and found that the license fee for process Know-How and supervision of erection and commissioning charges were related to post-importation activities. The contract specified that the seller agreed to perform multiple activities, including the supply of engineering drawings, supervision of erection, and commissioning of the plant, and granting a license for process Know-How for production of Spandex yarn. The Tribunal referred to several judicial decisions, including: - Commissioner of Customs, Chennai vs. Denso Kirloskar Industries Pvt. Ltd. - Commissioner of Customs, (Import), Mumbai Vs. Hindalco Industries Ltd. - Inspiron Engineering P. Ltd. Vs. C.C.(A) JNCH, Nhava Sheva, Mumbai- II - Bright Brothers Ltd. Vs. Commissioner of Customs (i), Mumbai These decisions established that charges related to post-importation activities and not a condition of sale should not be included in the assessable value. The Tribunal concluded that there was nothing in the contract indicating that the procurement of licenses for process Know-How or the supervision of erection and commissioning were conditions for the sale of goods. The impugned order did not identify any such conditions of sale, and the license fee related to the manufacturing process, a post-importation activity. Conclusion: The Tribunal set aside the impugned order, stating that the charges for supervision of erection and commissioning and the license fees for process Know-How could not be included in the assessable value of the imported goods as they were related to post-importation activities and not conditions of sale. The appeals were allowed, and the impugned order was not sustained. Pronouncement: The judgment was pronounced in the open court on 16.07.2024.
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