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TMI Blog1990 (2) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... essment under Heading 84.66 of the Customs Tariff Act, 1975 under Project Import Regulations. Under this Heading in the Customs Tariff Act, 1975, all items of machinery, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment or raw materials required for the initial setting up of a unit or the substantial expansion of an existing unit of a specified industrial plant, irrigation project, power project, mining project, project for the exploration of oil or other minerals and such other projects as may be notified by the Govt. are to be assessed at 40% ad valorem. The Heading also contains a proviso to the effect that provided these are imported, whether in one or more than one consignment against one or more specific contracts, which have been registered with the appropriate Custom House in the manner prescribed by regulations under Section 157 of the Customs Act, 1962 and that such contract has been so registered before the goods are cleared out of the Customs charge. The Heading also includes for such assessment all spare parts, other raw materials or consumable stores as a part of a contract registered with the Custom House provided, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntaining the following charges:- (i) Dismantling charges etc. are pre-importation charges and therefore formed part of assessable value. Foreign exchange expenditure of US $ 1,65,73,234.00 + US$55,00,738.00 = US $2,20,74,072.00 incurred by M/s. BDMC towards landed cost of project are includible in the assessable value under Section 14 of Customs Act and therefore, chargeable to duty. Duty however has been paid on US $ 1,81,99.788.00. As such M/s. BDMC is required to pay duty on a value equivalent to US $ 38,74,085.00 equal to Rs. 3,57,05,852.00 at the exchange rate of import licence i.e. US $ 10.85 = Rs. 100/-. (ii) M/s. BDMC were informed by the department as early as 15-12-1982 that dismantling charges formed the part of assessable value. Yet during the course of importation, M/s. BDMC did not disclose the foreign exchange expenditure of US $ 55,00,738/- till by letter dated 8-7-1987. Enquiry was made regarding remittances towards cost of project and dismantling charges. Though higher value as worked out above were paid for the project, the same was not duly declared in the reconciliation statement. This appears to constitute an offence under Section III(m) of the Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled for and examined the import contract and all other relevant information and particulars including inter alia, the valuation of the plant and machinery. The appellants had furnished alongwith the application for registration, the Valuation Report in respect of the plant from a Chartered Engineer, which had been accepted by the Government. It was after considering the contract and valuation report that the Customs had registered the contract for assessment as project import under Heading 84.66-CTA. Therefore, the Customs authorities, it was argued, are bound by law to value the imported plant and machinery in accordance with their registered value, which, in this case, was US $ 10 million set out in the registered project import contract. It was argued that the value so registered under the Project Import Regulations is always the starting point for assessment and it may be modified or enhanced only due to circumstances after the registration of the contract and the date of import. The assessable value is to be derived from the base value as on the date of registration of contract. Shri Nariman further contended that provisional assessment of the goods to duty in this context ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the US laws, Insurance charges incurred in USA as well as charges and reimbursement of expenses to M/s. Tata Incorporated, would all be elements of indirect expenditure not connected with the value of the goods, and hence these items will not form part of assessable value. In other words, charges other than dismantling, packing and forwarding have all been incurred by the importers and are not connected with the value of the goods imported and as such, were not includible because the charges incurred have to have a nexus with the value of the goods. It was also pointed out that even in the initial less charge demand, only dismantling, forwarding and packing charges were included and not other elements of expenditure. 3. The learned Senior Counsel also contended that the Collector ought to have excluded the proportionate value of the goods left behind in America as under Section 14 of the Customs Act, it could only be value less this amount upon which Customs duty can be levied being the assessable value. As regards the question whether the appellants had imported spares of a total value of Rs. 2,03,80,587/- and whether this was in excess of 10% of the value of the main machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that all the elements of expenditure incurred in relation to the goods to make the goods ready for delivery for shipment should go into the assessable value. The dismantling and other charges had been taken upon themselves by the appellants herein who had by an agreement with the supplier, purchased the plant in as-is-where-is condition. If they had not done so, the plant could not have been imported into India without incurring expenses towards dismantling and other charges. The learned SDR, in this context, relied upon the decision of this Tribunal in the case of M/s. Bombay Gas Company Ltd. v. Collector of Customs, Bombay in Appeal No. CD(SB) (T) A. No. 336/77-A in its Order No. 636/84-A dated 15-9-1984 wherein the Tribunal held that cost of services incurred by the appellants abroad in the context of the valuation of the goods should get reflected in the assessable value of the goods when delivered in India. It was also pointed out that the Collector has followed the provisions of Section 14 specifying the exchange rate applicable as that in force of the filing of the Bill of Entry and the valuation of the spares adopted by the Collector also, according to the learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law in which the said clause is inserted - (1981) 2 SCC 109 - Tulsiram Ghasiram v. Lakshmi Chand Ghambhir Chand Others and also see AIR 1953 Nag. 234 - Superintendent and Remembrancer of Legal Affairs, West Bengal v. Satyen Bhowmick Others. In this view of the matter, we do not see any force in the argument that because the contract was registered by the Custom House in terms of Project Import (Registration of Contract) Regulations, 1965, the same would amount to pre-assessment as regards value. It is also significant to note that when it comes to the recovery provisions of short levy under Section 28 of the Customs Act, 1962, it has been laid down that the relevant date for the issue of notice for such short levy, in a case where duty is provisionally assessed under Section 18, will be the date of adjustment of duty after the final assessment thereof. Therefore, it is not acceptable that once the contract is registered, the assessment as regards value is also final and complete. On the other hand, the history of this item in the Customs Tariff for Project Import would show that it was a facility for easy classification of machinery and equipment imported for setting up the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the Customs authorities is indicated by the fact that they themselves had re-credited back to the import licence the amount debited towards dismantling charges. We are, however, unable to agree with the contention in this regard because it has been well settled by the Bombay High Court decision in the case of Union of India v. Glaxo Laboratories (India) Ltd. - 1984 (17) E.L.T. 284 (Bom.) that the value by which import licence is to be debited by the Customs authorities is the actual CIF value and not the international price of imported goods which is relevant and material only for calculating import duty thereon under Section 14(1) of the Customs Act, 1962. The Bombay High Court had held so after observing that the Customs Officer have to perform two duties. They have to guard the revenue and assess any imported article on the basis of Section 14(1) of the Customs Act, 1962 and that it is also part of their duty to debit the Customs copy of the licence with the value of the imported goods. The High Court pointed out the philosophy behind the grant of import licence having regard the need to conserve foreign exchange which is the guiding principle of the licensing authority for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of theirs cannot be taken as an admission by the Customs authorities that the dismantling charges were also not includible in the assessable value under Section 14(1) of the Customs Act. The argument that the Bombay High court judgment is not applicable to the present case of import under Project Import Regulations, is not acceptable as we have seen that these Regulations are for classification purposes and registration thereunder would not be conclusive of valuation aspect. 6. This brings us to the next question of the includability in the assessable value of the various elements including dismantling, packing and forwarding charges amounting to US $ 5.5 million. These consists of dismantling charges US $ 21,35,767.50 and packing and forwarding charges US $ 3,80,632.50. Apart from this, the balance amount out of US $ 5.5 million is on account of expenditure incurred on inspection, insulation, removal charges, insurance charges incurred in the USA and Tata Incorporated charges and reimbursement of Misc. expenses. The appellants have submitted that none of these charges are includible in the assessable value. They have, however, made an alternative plea that the Custom House sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld furnish isometric drawings; 4. the markings etc. was to be done by their own engineer posted on the spot; 5. the Company waived the condition regarding detailed photographs and dismantling facilities; and 6. the Company was not to insist on the dismantled sections being packed in wooden boxes.] We observe that in the absence of such a stipulation, the supplier would have charged for the said services and the cost of dismantling charges would have necessarily gone up. ......But for the appellants undertaking to depute their own engineers and other workers for carrying out the above mentioned operations abroad, the element of dismantling charges could have been the same as orginally stipulated. In any event, cost of services incurred by the appellants abroad in the context of the valuation of the present goods should in our view, get reflected in the assessable value of the goods when delivered in India". In the present case, the appellants have purchased the plant and machinery on as-is-where-is condition and the appellants have agreed to take upon themselves the cost of dismantling and removal of the equipment. The goods will not become ready for shipment without such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Besides, he has pointed out that it was a belated claim on the part of the appellants that some part of the plant has not been paid for when the appellants have not been able to show that any part of US $ 10 millions has been received back from the supplier. On a consideration of the conditions, we find that the matter in the first instance requires investigation as to the factum of the non-import of the parts as claimed by the appellants. Since such an investigation does not appear to have been done and it cannot be undertaken at this stage of appeal before the Tribunal. It will be appropriate for the Collector to deal with this aspect of the case afresh based upon the detailed investigation into the matter and on a scrutiny of the records of imports and the background contracts for the imports. It is ordered accordingly. In respect of the duty demanded on the spares imported in excess of 10% of the value of the main machinery, the appellants contentions are that in their reply to the Show Cause Notice dated 2-12-1987, they have explained the position with reference to exhibits K and L . The appellants contend that items to the extent of Rs. 29,23,355/- had been incorrect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 lays down that the assessable value will be the price at which such or like goods are ordinarily sold or offered for sale for the delivery at the time of importation in the course of international trade in arms length transaction between the buyers and sellers and the proviso thereto says provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a Bill of Entry is presented under Section 46". This being a legal position, we find ourselves in agreement with the Collector s conclusion that the exchange rate given in the licence is relevant for debiting the licence and for the purpose of calculation ot assessable value including the value of spares, relevant exchange rate will be as per Section 14 of the Customs Act depending upon the date of presentation of different Bills of Entry. We have already found that the debits made to the import licence cannot be equated to the assessable value under Section 14 of the Customs Act. Further, we find that according to Heading 84.66(2), relating to spare parts, it is stated that the total value of such spare parts should not exceed 10% of the value of the goods covered by Item 84. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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