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TMI Blog2003 (1) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... drawings, flow charts, documents, product designs, toolings, etc., of the relevant technical information that was required and was available with them. The appellants were to pay ACE one time technology fee of Rs. 45 lakhs in terms of Para 3 of the Agreement. The Agreement was registered with the Reserve Bank of India. An amount of Rs. 45 lakhs in terms of the Collaboration Agreement was payable. From the Certificate of Deduction of Tax at Source (u/s 203 of the Income-tax Act, 1961) dated 31-3-95, issued by the appellants, it can be seen that an amount of Rs. 31,61,000/- was credited on 7-3-95. It was observed from the letter of Pantex, USA, that they were the owners of technical know-how by way of drawings, flow charts, documents, product designs and tooling, etc., for mass production of Pneumatic and Hydraulic Actuators and other equipment and this technical know-how which was held by them as capital assets were delivered to the appellants for a consideration of Rs. 45 lakhs. (ii) Similar agreements were also entered into with M/s. Pantex, USA of Buy back and to transfer to the appellants the technology pertaining to actuators and models 067, 084, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; B.Y. Murthy, CMD of the appellant-company appeared on 10-9-98 and categorically confirmed the fact, that as a Director of the appellant-company and himself had earlier got themselves cleared through Mumbai Customs, incidentally Derrick C. Pepperell had also visited India in connection with the requirement of the appellants and had also sought clearance from Mumbai Customs. Further, B.Y. Murthy did not honour the commitment of furnishing the designs and technical data brought by Dr. Raju Vanguri of Pantex and Derrick C. Pepperell of ACE, the foreign collaborators, as technical know-how, for scrutiny as undertaken by him in his statement dated 16-4-98. Subsequently, on 15-9-98, Dr. B.Y. Murthy vide his letter dated 10-9-98, retracted his statement dated 16-4-98. (vii) The Show Cause Notice alleged that the drawings and designs, appearing in Chapter 49 of the Customs Tariff Act, 1975, have been imported as part of the baggage and therefore, were classifiable under Chapter Heading 98.03 of the Schedule to the Customs Tariff Act, 1975. They are, therefore, assessable to customs duty at 100% during 1994-95 in terms of Notfn. No. 136/90-Cus., dated 20- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Customs duty amounting to Rs. 90 lakhs is confirmed under the proviso to Section 28 of the Customs Act, 1962. (iii) Demand and recovery of interest at 24% per annum as prescribed under Notfn. No. 32/2000 (N.T.), dated 12-5-2000 or at the rate of interest as prescribed under notification issued under Section 28AB of the Customs Act, on the said amount of Rs. 90 lakhs confirmed and adjudged payable under proviso to Section 28 of the Customs Act. (iv) The goods namely product designs, drawings, flow charts and documents are held to be liable for confiscation under Section 111 of the Customs Act. However, he imposed a fine of Rs. 10 lakhs in lieu of confiscation. (v) He imposed a penalty of Rs. 90 lakhs under Section 114A of the Customs Act on M/s. Pantex Geebee Fluid Power Ltd. Hence this appeal. 5. After hearing both sides and considering the submissions made and the material on record, it is found : - (a) The Commissioner in the impugned order in Para 8 has found as under : - "8. In view of the aforesaid discussion it is held that M/s. ACE Internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marily on the retracted statements of Dr. B.Y. Murthy, of the appellants, recorded on 16-4-98, corroborated by Buy Back Agreements on remittance of foreign exchange and the two letters, on record, from the two passengers through whom the impugned goods are found to be imported. (ii) The relevant extracts of the agreements have been recorded in Para 2(ii) (supra) and are not being repeated. The two letters read as under : - "Letter of M/s. ACE : We have been owners of technical know-how information by way of Drawings, Flow-Charts, Documents, Product Designs, Tooling etc. for mass production of pumps and other equipments and we have been holding such technical know-how as capital asset in our hands which was transferred, to you for consideration of Rs. 45,00,000/-. On payment of Rs. 45,00,000/- to us your company becomes the owner of the technical know-how relating to mass production of pumps and other equipments and may deal with it as your company like. We have no permanent establishment in India within the meaning of the term permanent establishment as per Double Taxation Avoidance Agreement between India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... know-how information. (c) Relying on the decisions of the Apex Court in the case of Commissioner of Income-tax, Bangalore v. B.C. Srinivasa Setty, wherein a Full Bench held that 'transfer of good-will does not give rise to capital gains' and on the standard work of law on sale of goods i.e. Benjamin's Sales of Goods', we also find that no duty under the Customs Act could be recovered on transfer of knowledge and information. We find that General Ministerial Declaration on Global Electronic Commerce, it was minuted and resolved as follows, in the Ministerial conference held on 18th and 20th May, 1998 : - "The General Council shall, by its next meeting in special session, establish a comprehensive work programme to examine all trade-related issues relating to global electronic commerce, including those issues identified by Members. The work programme will involve the relevant World Trade Organisation (WTO) bodies, take into account the economic, financial, and development needs of developing countries, and recognize that work is also being undertaken in other international fora. The General Council should produce a report on the progress of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods crossing any Indian Customs frontier and thereafter no tangible goods have been found and or seized in the form of drawings, designs, etc., from the appellants or elsewhere, even though enquiries were conducted by the Premier Investigating Agency viz., Directorate General of Revenue Intelligence. Therefore, relying on the decision of the Apex Court, in the case of Associated Cement Companies Ltd. [2001 (128) E.L.T. 21 (S.C.)] wherein it was held that 'drawings and designs all of tangible movable articles are goods liable for charge of customs duty under Section 12 read with Section 2(22)(e) of the Customs Act, 1962, irrespective of what that article may be or may contain' and would be liable for duty; in this case, the Apex Court held that 'it may be that what the importer wanted and paid for was technical advice or information technology, an intangible asset, but the moment the information or advice was put on a media, whether paper, cassettes or diskettes or any other thing, that was supplied becomes chattel'. Bound by this finding, when we find that no 'chattels' have been located in this case, then it has to be found that there was no cause for recovery of customs duty, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al evidence of delivery of imported tangible media-chattel would not invoke the levy of customs duty on such knowledge know-how transfers. (g) Relying on the decision in the case of Associated Cement Companies Ltd. [2001 (128) E.L.T. 21 (S.C.)], wherein the Apex Court in the case of Civil Appeal No. 3632 of 2000 have observed as follows, in Para 67 and 80 of the decision as follows : - "67. On 29th June, 1992 Mr. Kato, presumably a representative of M/s. Toshiba, brought with him to India drawings and designs as part of his personal baggage. This was cleared without payment of duty. 80 .......... It is sufficient in the present case to observe that the drawings & designs which were imported by the appellant were correctly classifiable under Heading No. 49.06 and the tariff itself providing that the import of the same is free, the said drawings and designs were not dutiable articles and, therefore, no customs duty was leviable thereon even as a part of the passenger baggage. On this short ground alone the appeal of Videocon has to be allowed." The imports, of these, if made by M ..... 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