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2025 (1) TMI 1327 - AT - CustomsClassification of imported goods - drawings and designs - to be classified under CTH 49.06 or not? - submission of the Revenue is that the imported item pertains to a Pre Import Activity as reflected in the agreement of supply of ETP and DDGS - HELD THAT - CTH 49.06 would cover plans and drawings for architectural engineering industrial commercial topographical or similar purposes being originals drawn by hand; hand-written texts photographic reproductions on sensitized paper and carton copies. This heading covers industrial plans and drawings the purpose of which generally is to indicate the position and relation of parts or features of buildings machinery or other constructions either as they exist or for the guidance of builders or manufacturers in their construction (eg. architects or engineers plans and drawings). The plans and drawings may include specifications directions etc. printed or not. In the instant case the supplier M/s Ventilex B. V. confirmed that these drawings are original taken print out from computer and solely prepared in accordance to the contract no. IFBFAG/PO/PROJ-CMG/2013-14/017 dated 09.07.2013; in other words the impugned drawings are original print outs supplied separately and not as a part of the ETP. The impugned drawings are original print outs supplied separately and not as a part of the ETP. Therefore the import of impugned drawings and designs are related to post import activity and not related to pre-import activity as contended by the Revenue. The Department had also erroneously proceeded on the incorrect premise that since the value of the impugned drawings was to be included in the assessable value of the equipment imported and/or to be imported subsequently in terms of provisions laid down under Rule 10(1)(b)(iv) of the Valuation Rules therefore the impugned goods were classifiable under CTH 84.19 instead of CTH49.06 since ETP was classifiable under CTH 84.19. The above said contention of the Department is clearly misplaced inasmuch as the sub clause (iv) of clause (b) of Rule 10(1) of the Valuation Rules seems to have been read in isolation. Conclusion - i) The imported drawings and designs are rightly classifiable under CTH 49.06 not CTH 84.19. ii) The value of the drawings should not be included in the assessable value of the ETP under Rule 10(1)(b)(iv) of the Customs Valuation Rules as they were supplied by the foreign supplier. iii) The drawings pertain to post-import activity not pre-import activity. iv) The exemption under Notification No. 12/2012-Cus. is applicable allowing a nil rate of duty. There are no reason to disagree with the reasoned findings given by the ld. Commissioner (Appeals) in the impugned order - appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS Classification of Imported Drawings and Designs The relevant legal framework involves the interpretation of CTH 49.06 and CTH 84.19. CTH 49.06 covers "Plans and drawings for architectural, engineering, industrial commercial, topographical or similar purposes, being originals drawn by hand; hand-written texts: photographic reproductions on sensitized paper and carton copies." CTH 84.19 pertains to "Machinery, plant or laboratory equipment for the treatment of materials by a process involving change of temperature." The Court observed that CTH 49.06 explicitly includes industrial plans and drawings for the guidance of builders or manufacturers, which aligns with the nature of the imported goods. The HSN Explanatory Notes further support this classification, emphasizing that such drawings are intended for construction guidance. Key evidence includes confirmation from the supplier, M/s Ventilex B. V., that the drawings are original printouts prepared according to a specific contract and supplied separately from the ETP. The Court found that the drawings were for segments of the plant to be constructed in India, not for equipment manufactured abroad. The Court applied the law to the facts by determining that the drawings were not machinery or equipment, thus not classifiable under CTH 84.19. The intellectual property value of the drawings was specified in the contract, reinforcing their classification under CTH 49.06. Inclusion of Value in Assessable Value of ETP The Revenue argued that the value of the drawings should be included in the assessable value of the ETP under Rule 10(1)(b)(iv), which pertains to costs supplied by the buyer to the supplier of imported goods. However, the Court found that the drawings were supplied by the foreign supplier, not the buyer, making the application of this rule inappropriate. The Court noted that the Department's interpretation was flawed, as it read the rule in isolation without considering the context of supply. The Court concluded that the drawings were not related to the equipment imported and thus should not be included in the assessable value of the ETP. Relation to Pre-Import or Post-Import Activity The Revenue contended that the drawings were linked to pre-import activity. However, the Court found that the drawings were intended for post-import activity, as they were for construction and assembly within India. The supplier's confirmation and the nature of the contract supported this finding. Exemption under Notification No. 12/2012-Cus. The Court upheld the Ld. Commissioner (Appeals)'s decision to classify the drawings under CTH 49.06, which qualifies for a 'nil' rate of duty under the relevant notification. The Court found no procedural or legal error in granting this exemption. SIGNIFICANT HOLDINGS The Court held that:
The Court concluded by upholding the decision of the Ld. Commissioner (Appeals) and rejecting the Revenue's appeal, affirming the classification and exemption of the imported drawings and designs.
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