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TMI Blog1993 (8) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... he Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to as the `Valuation Rules ). A working sheet showing the basis of arriving at the said loading factor was enclosed. 4. Under letter dated 7-2-1992, the facts, reasons and evidence on record, which established payment- of design and drawing charges/fees to the foreign collaborators, on whose basis it was proposed to load/adjust the invoice values of imports of capital equipment by 35.28% on the CIF value under Rule 4 read with Rule 9(1)(b)(iv) of the Valuation Rules, were given. 5. It was mentioned that under agreement dated 14-10-1988, APL had entered into an agreement with DML for the supply of equipment and materials needed for the erection and commissioning of the Oxo-alcohols plant for the production of 2-Ethyl hexanol and butanole. It was provided that certain critical/complex items of equipment of a proprietary nature which were required for the said plant were not readily/satisfactorily available in India and that such items had to be properly designed and fabricated to ensure safe and reliable operation of the said plant. DML were obligated to undertake supply of the equip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Industry under which (1) lump sum know-how fees of US Dollars 81.50 lakhs, and (2) design and engineering charges of Pound 11.50 lakhs, were to be paid to DML. 16. It was observed that DML s patented Devy process involved confidential technical information, and without supply of the design and engineering of the equipment for such a patented process by DML, no unconnected manufacturer having no access to such confidential design and engineering of the equipment, could produce them. 17. The DML had admitted that they had given specifications to the sub-vendors. The Additional Collector observed that what is said as specifications in the letter dated 27-1-1992 of DML can be inferred to be more in the nature of design and engineering specifications, as unconnected manufacturer cannot produce equipment for DML s patented process without such details. 18. He held that the design and engineering fees of Pound 1.15 million as indicated at (i)(B) of the Government of India s approval letter is towards the design and engineering which can only form part of specifications undertaken by DML and supplied to the manufacturers/sub-vendors as confirmed by DML in DML s letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector had accepted the transaction value but had sought to add payment in Pound Sterling to the transaction value under Rule 9(1)(b)(iv) of the Valuation Rules. He submitted that Rule 9 could be invoked only when value as referred to in Rule 9 has not been included in the price actually paid. 25. He referred to the various clauses of the agreements and stated that the appellants had not supplied any engineering and design work. The design and engineering work undertaken by DML was with reference to the plant, and not to the equipment and the production of the goods. 26. The learned Advocate relied upon the following citations in support of his arguments :- (1) 1991 (56) E.L.T. 221 (Tribunal). (2) 1992 (62) E.L.T. 572 (Tribunal). 27. Shri Prabhat Kumar, the learned SDR referred to the provisions of Rule 4 and Rule 9 of the Valuation Rules, and the provisions of Rule 9(1)(b)(iv), and submitted that the various clauses in the agreements have to be read along with the clauses of the rules. He also submitted that all the three agreements have to be read together. For this purpose, he referred to the various clauses in the three agreements. He stated that what is `know-how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g charges of Pound 11.50 lakhs to the invoiced contract price for supply of equipments, to arrive at the transaction value under Rule 4(1) of the Valuation Rules, for the purposes of the levy of the Customs duty under Section 14(1) of the Customs Act, 1962 (hereinafter referred to as the `Act ). 34. Some facts considered relevant are given below :- (1) In the Project Report at page 320 of the paper book No. 1 it has been stated under equipment summary that the entire equipment description may not be given till such time that a secrecy agreement is signed. (2) In the licence know-how and engineering agreement dated 30-10-1986, under Article IV relating to licences and scope of responsibility of DML, at page 13 of the paper book No. 1, it was provided that DML was obligated to undertake the scope of work for basic engineering ascribed to it in Appendix XI. (3) As per Appendix XI, for each type of equipment, general specification, inspections specifications and Standard detail drawings were to be provided by DML. Each equipment has been identified by item member and name. Design and working conditions and other parameters of each item has been detailed in precise terms in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13) The drawings submitted by the manufacturers were required to be re-viewed and approved by DML. Equipment was required to be inspected by DML. Invoices by the manufacturers were raised on DML. In turn DML raised invoices on APL. 35. Valuation for the purposes of levying customs duty is to be determined under Section 14(1) of the Act, which is reproduced below :- Section 14. Valuation of goods for purposes of assessment. - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale : 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, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the goods imported, it is the actual, full value, total payments made by the buyer. Invoice price, if it does not represent the actual value/total payments, had to be adjusted under the Customs Valuation Rules, to bring it to the level of the transaction value. 39. As per Interpretative Notes, it is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods. The payment may be made directly or indirectly. 40. Any additional payment made to a contractor in a foreign country for engineering and development work will have to be added under Rule 4 as part of the total price actually paid or payable to the seller. 41. Rule 9 of the Rules relates to the cost of services, which in determining the transaction value, shall be added to the price actually paid or payable for the imported goods. 42. Rule 9 makes it clear that the cost of services shall be added to the price paid or payable, to determine the transaction value. It establishes that the transaction value may be and in certain circumstances shall be more than the invoice price. 43. Among others, this rule provides that the value of the engineering, development, art work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 493 (Tribunal) and Indian Barytes and Chemicals Ltd. v. Collector, Central Excise - 1990 (50) E.L.T. 196 (Tribunal)]. 49. The responsibility of providing know-how and front end engineering package for the plant has to be seen in the light of the machinery installed, operating such machinery and production of goods with various peripheral jobs at the stage of installation, running and manufacturing process. 50. As held by the Gujarat High Court in the Central Excise case of Anil Ice Factory v. Union of India - 1984 (15) E.L.T. 333 (Gujarat), construction of plant is manufacture. The Gujarat High Court observed that even if a company constructs a manufacturing unit for its own use by purchasing different duty paid parts or other material, it would amount to manufacture. Construction of a plant can, therefore, be said to be something which has been manufactured. If, therefore, a refrigerating or air-conditioning plant is manufactured by a company for its own purpose it can be said that it has manufactured the plant. 51. Technical information and know-how relevant to the plant will include the technical information and know-how relevant to the equipment of the plant, as plant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled contracted prices, in the circumstances of the case, the prices were paid as invoiced by DML. APL were not free to purchase from anyone else than through DML. Purchases through DML or their agents were inherent in the guarantee and undertaking of liabilities with regard to the working of the equipment, by the DML. 60. Thus, the facts in the case of Union of India v. Mahindra and Mahindra Ltd. 1991 (55) E.L.T. 15 (Bom.) are different from the facts in the case before us. 61. It also could not be said that DML s know-how was different from and unrelated to the equipment through which alone the know-how could be used for the production of goods. 62. The provisions in the agreement with regard to plant thus covered drawings, designs, etc. necessary for the manufacture of imported equipment. 63. In the Central Excise case of Til Ltd. v. Collector, Central Excise, 1991 (52) E.L.T. 602 (Tribunal), the point for consideration was whether the charges in respect of the drawings, designing, fabrication drawings and technical speci- fication work for the manufacture of the goods, raised by separate bills was to be included in the assessable value. The Tribunal held that non disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms Valuation Rules. 68. Invoice is a list of goods sent to a purchaser showing such information as prices, amounts and other charges. The transaction is the carrying on of any kind of business; a piece of business, a deal. In its very nature, `transaction is wider than the `invoice . 69. The invoice is an important piece of evidence to determine what the real value is. That piece of evidence may be discarded if customs takes the view that over and above the price which is being paid some other consideration has passed under the document (AIR 1959 Bombay 372). 70. Under Rule 4 of the Customs Valuation Rules, it has been provided that the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India adjusted in accordance with the provisions of Rule 9 of these rules . The basis is the price actually paid or payable . Such price actually paid or payable is required to be adjusted in accordance with the provisions of Rule 9" to arrive at the transaction value. There is no reference to `invoice in the rule. The reference is only to the price actually paid or payable. Invoice may or may not represent the price act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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