9911796707
TMI Blog2013 (8) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... is a residuary Rule - transaction value under Rule 4(1) is to be adjusted with the costs and services mentioned in any of the clauses (a) to (e) of Rule 9(1) depending upon the fact situation of each case. It is needless to mention that each of the clauses from (a) to (e) of Rule 9(1) is independent. Further, just because the transaction value under Rule 4(1) is required to be adjusted with the costs and services under Rule 9(1), it cannot be said that Rule 9 is a residuary Rule. Technical Documentation - the Supply Agreement and the Technology Transfer and Trademark Licence Agreement are complementary to each other - both the Agreements had to be taken as indivisible and composite contract. Lumpsum (Technological Fee) vis-à-vis royalty – royalties will be addable to the value of the imported goods - only the lumpsum amount of USD 45 million paid towards technical documentation (technology transfer fee) which was different from royalty was addable to the assessable value of the goods - State Bank of India V/s. CC, Bombay –(2000 (1) TMI 177 - SUPREME COURT OF INDIA ). Limitation - The show cause notice had demanded duty for the period from October, 2001 to July,2007 by inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SAIPL and SACR had not declared the value correctly and consequently evaded customs duty. After completion of investigation, issue of show-cause notice and adjudication proceedings, impugned order has been passed. In the impugned order, the Commissioner has held that the agreements, viz. Technology Transfer and Trade Mark License Agreement dated 01.10.2001, supply agreement dated 01.10.2001 and importer agreement dated 26.09.2001 between the two companies are fraudulent and fabricated and have no relation to the real state of affairs of SAIPL. On this basis, the Commissioner decided that 45 million USD charged as Technology Transfer is attributable to pre-importation activity and, therefore, this amount has to be added and included in the assessable value, applicable to each imported car kit. Accordingly, he has confirmed a duty demand of Rs.97,15,00,054/- against SAIPL with interest as applicable. He has also imposed a penalty equal to duty under Section 114A of the Customs Act, 1962. He has also imposed a fine of Rs.10 crores in lieu of confiscation of car kits imported during the period from October, 2001 to July, 2007 under Section 111 (m) of the Customs Act, 1962. A penalty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd by the Revenue does not support this contention. In fact, material sought to be relied upon by the revenue clearly supports the case of the Appellants that technical documents did come to India. Also, Commissioner has recorded specific findings that technical documents have indeed come. 4.1 In fact, it is the claim of the Revenue that no Bill of Entry was filed nor any baggage declaration was made in respect of the technical documentation. 4.2 It is not disputed or denied by the Revenue that technical drawings, designs etc are otherwise exempt. It appears that the Government of India recognized that it is common practice to bring technical documents in the baggage and considering the ground reality. Notification No. 11/97-Cus (S.No. 84) was consciously amended vide Notification No. 23/97 dated 4 March 1997 to the effect, the technical documents like drawings are exempt even when imported in the baggage and fall under Chapter 98. 4.3 In any event, all key documents being relied upon by the Revenue themselves either contemplate or evidence receipt of technical documentation, inter alia including the following - 4.3.1 FIPB Application dated 16 September 1999 4.3.2 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... automobile manufacturers or auto parts manufacturers, have paid/are paying either lump sum or running or both kinds of "royalties and license fee" for obtaining permission to use of technology and know-how. This Hon'ble Tribunal has set aside any loading to assessable value for customs purposes on account of such payments. The appeals filed by Revenue before the Apex Court stand dismissed in Sl. No. (vi) to (ix) below. The list of relevant decision is as under: i. CESTAT Order No. A/290/WZB/06.C-II (G.S.T.B.) dated 30.03.2006 in the matter of M/s General Motors (I) Pvt. Ltd. ii. General Motors India Pvt. Ltd. V. CC (Imports) 2009 (235) ELT 364 (Tri.Mumbai) iii. Hyundai Motor (India) Ltd. v. CC 2007 (214) ELT 436 (Tri. Del) iv. Escorts Ltd. v. Collector of Customs 1996 (83) ELT 388 (Tribunal) v. Daewoo Motors India Ltd. v. CC 2000 (115) ELT 489 (Tribunal) vi. Collector v. Hero Honda Motors Ltd. - 1995 (80) ELT 712 vii. Collector v. Maruti Udyog - 1987 (28) ELT 390 viii. Hindustan Motors v. CC - 2005 (191) ELT 488 ix. Toyota Kirloskar Motor (P) Ltd. v. CC - 2006 (200) ELT 289 5.5 In the application dated 16th September, 1999, made to FIP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard is placed on - i. Life Insurance Corp. of India v. Escorts Ltd. (1986) 1 SCC 264 ii. CIT v. Sriram Pistons Rings Ltd. [1990] 181 ITR 230 (Del.) iii. Kinetic Honda Motor Ltd. v. Jt. CIT [2001] 77 ITD 230 (Del.) iv. Circular No. 6-P issued by Central Board of Direct Taxes dated 06.07.1968. 6.8 To be fair to the Revenue, in the present case, the Revenue is not suggesting that the quantum of USD 45 Million is excessive and is on a higher side. The Revenue is also not suggesting that payment of USD 45 Million amounts to diversion of portion of price of imported goods towards the value of technology. This is clear from the position that the Revenue is seeking to add entire USD 45 Million to the assessable value and not a porition of USD 45 Million to the assessable value of the imported goods. 6.9 In view of the above submissions, the Revenue's case fails in this scenario also. 7. Scenario 4 - That USD 45 million paid by Appellants to Skoda Auto a.s. under TTA dated 1 October 2001 is addable to the price of imported goods under rule 9(1)(e) of Customs Valuation Rules. 7.1 The Appellants have demonstrated vide their written submissions filed on 17 Nov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Hence, the amount of USD 45 million is for the cars manufactured in India and not related to the imported car kits/parts. 7.8 The payment of this amount is also not a condition for sale of the imported cars kits. There is no cross reference between the Supply Agreement and the TTA. Even the draft agreements did not suggest the same in any manner. The liability to pay USD 45 M is irrespective of number of car kits imported. 7.9 In fact, the terms of FIPB approval dated 2.11.1999, itself proves that lump sum is not a condition of sale of imported goods. The approval permitted payment of lump sum in the following installments:- a. 1/3rd amount when agreement is filed with RBI b. 1/3rd after delivery of technical documents. c. 1/3rd upon commencement of commercial production or 4 years after filing of agreement with RBI, whichever is earlier. 7.10 Therefore, even if commercial production had not commenced within 4 years of the filing the agreement, the technical fees still had to be paid. Hence, this clearly proves the fact that the payment of royalty is not linked to the imported goods. Obviously, the first two installments are not linked to the imports of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssification, measurement and assignment of Direct Expenses, for determination of the cost of product or service, and the presentation and disclosure in cost statements. The CAS-10 deals with the treatment to be accorded to direct expenses incurred on a lumpsum basis, and in fact, also recognizes that one time technical know-how fee is royalty. The said paragraph is reproduced below for ease of reference - "5.2.3 Direct Expenses paid or incurred in lump-sum or which are in the nature of one - time' payment, shall be amortised on the basis of the estimated output or benefit to be derived from such direct expenses. Examples: Royalty or Technical know-how fees, or drawing designing fees, are paid for which the benefit is ensued in the future period. In such case, the production / service volumes shall be estimated for the effective period and based on volume achieved during the Cost Accounting period, the charge for amortization be determined. 8.8 It is claimed that in the cost sheet, below the amount of DEM 13912 relating to CIF value, Mumbai, DEM 1775 (Euro 907 = USD 1000) towards lump sum and DEM 1000 towards (Euro 511) "technical consultation to be repaid" are shown. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccorded to both Euro 907/ DEM 1775 and Euro 511 / DEM 1000 is exactly the same, viz. both are shown as part of net revenue to Skoda Auto a.s. and both are also shown as part of manufacturing costs for the Appellants. 8.16 Then, going by the Revenue's method of inferring the cost sheet, all sums shown as "deducted from the amount of DEM 16,686" should be considered as payment towards price of the goods. 8.17 Further, in the present proceedings, Revenue has clearly accepted the position that the running royalty is not part of the price of the imported goods. Department has not added DEM 1000 = 6% of 16,686 = Euro 511) in the value in the present case. 8.18 Thus, it is evident that the inference drawn by the Revenue from the cost sheet is completely erroneous and perverse. 8.19 In view of judgment of this Hon'ble Tribunal, once running royalty is not added to the value, lump sum cannot be added to value of imported goods. (a) Totalfinaelf India Ltd. v. CC (Import) 2008 (227) E.L.T. 581 (Tri. - Mum) 8.20 In fact, title of the document is "Car price Calculation". This itself shows that document relates to total revenue receivable by Skoda Auto from its Indian operation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is not disputed by any of the agencies including the Respondent in his impugned order. There is not even a suggestion that others did not pay similar amount at that time. 10. Allegation mis-declaration to SVB The department has alleged that the Appellants have not declared the correct transaction value to the SVB. This allegation is based on (i) document showing import price for Skoda Octavia at SKD00 and SKD0 levels, (ii) document showing pricing of India SKD0, Slowenien CBU and Koratien CBU and (iii) Price List at Appendix B of Supply Agreement submitted to SVB. 10.1 It is submitted that these and similar averments made and conclusions drawn in the Show Cause Notice or on behalf of the Respondent are incorrect and irrelevant to the present controversy. 10.2 In the present case, addition is being made under Rule 9. If value arrived under Rule 4 by SVB is incorrect and unacceptable for the department for any reason, they are free to determine the value in terms of Rule 4 or any other Rules, like Rule 5 etc. 10.3 Once the conditions of Rule 9 are satisfied, the additions thereunder are to be made and can be made whether or not the import is from related person. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that USD 45 million paid by the Appellants to Skoda Auto a.s. under the TTA is a condition to the sale of imported goods, and hence, includible in the price of imported goods under Rule 9(1)(e). (a) Matsushita Television Audio (I) Ltd v. CC (b) T.D.T. Copper Ltd v. CC, New Delhi (c) Hitachi Koki India Ltd v. CC, Chennai (d) Continental Coffee Ltd v. CC, Chennai 10.11 Decision in case of Matsushita Television Audio (I) Ltd supra, has no application in the present case, on facts. In Matsushita's case, the payment of running royalty was held to be a condition to the sale of imported goods on the basis that the royalty was computed on net factory sale price' which included, inter alia, the value of imported goods. It was on this sole basis that Supreme Court decided against the assessee. This judgment has been distinguished in Ferodo's case by Supreme Court itself. The royalty being paid by the Appellants to Skoda Auto a.s. is computed only on the value-addition done at the factory i.e. excluding the value of imported goods. It is further submitted that the decision in case of Matsushita Television Audio (I) Ltd (supra), in fact, supports that Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for import of car kits and hence, addable under Rule 9(1)(e), it is submitted that the SVB examined the said TTA and recorded a specific finding that payment of USD 45 million is not relatable to the goods imported from Skoda Auto a.s. and is relatable to transfer of technology for assembly and manufacture of contractual products, and that there is no requirement to make any adjustments to the price of the goods being imported under provisions of Rule 9 of the Customs Valuation Rules. Hence, the demand would clearly be barred on grounds of limitation. Alternate submissions on applicability of proviso to Section 28 12. Let us assume for the sake of argument that full facts were not known to the SVB when the order was passed in June 2003. 12.1 However, admittedly, the assessments of imports from 2001 were provisional. The SVB passed a speaking order on 10.06.2003, inter alia, concluding that the lump sum payment is not addable to value. Two separate orders dated 23.03.2005 and 11.04.2005 were thereafter passed finally assessing the bills of entry and granting refunds. 12.1 It is also not disputed that on or around 21.09.2004, DGCEI had visited the Appellants factory and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken over by the department. Hence, the additional documents resumed on 17.08.2006 cannot enable the department to invoke proviso, since practically the entire material from which adverse inference is being drawn is available to the department on 21.09.2004. 12.11 Even otherwise, according to the department, it is the cost sheet which shows that the technology fee is USD 1000 per car. The show cause notice makes the same averment from the application dated 16.09.1999 filed with FIPB. This application dated 16.09.1999 is part of record resumed on 29.05.2004. Hence, inference sought to drawn from the cost sheet is already the inference drawn by the department from the FIPB application dated 16.09.1999. Hence, discovery of cost sheet on 17.08.2006 cannot be a ground to invoke proviso. 12.12 Similarly, on the basis of statements given by Mr Lukas Folc and Mr Bhaskar Swaminathan and some letters written by Mr Lukas Folc in 2006 /2007, the department is inferring that the Appellants did not know what the technical documentation was for. The show cause notice makes the same averment from the Minutes of meeting dated 09.02.2002 of Sunil Rekhi and PWC, and the "Merry Christmas" email by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Hon'ble Tribunal in Vishwa Industrial Works, Bombay v. Collector of Central Excise, Bombay 1987 (31) ELT 976. 13. Redemption fine in lieu of confiscation 13.1 It is submitted that there is no cause for confiscation of the goods imported by the Appellants under Section 111(m) of the Customs Act. 13.2 It is submitted that in any event, since, by own admission of the Respondent, no goods are available for confiscation, the questions of confiscation and/ or imposition of redemption fine do not arise. Admittedly no goods are seized and no bond is executed by the Appellants for provisional release of the goods. 13.3 It is submitted that the Larger bench of this Hon'ble Appellate Tribunal at Mumbai in the case of Shiv Kripa Ispat Pvt Ltd v Commissioner of Central Excise Customs, Nasik reported in - 2009-TIOL-388-CESTAT-MUM-LB and Commissioner of Customs, Mumbai v Rishi Ship Breakers reported in - 2009-TIOL-388-CESTAT-MUM-LB, held that when the goods are not available for confiscation no redemption fine be imposed. 13.4 It is submitted that the purported finding recorded by the Respondent in paragraph 162 of the impugned order is clearly inconsistent with the aforesaid bindin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion to commence operations in India. On 02.11.1999, the Department of Industrial Policy and Promotion ("DIPP") granted approval to the Application of Skoda Auto A.S. to establish a wholly owned subsidiary for manufacture/assembly of cars in India. 17.2 Pursuant to the approval of Government of India, there was a meeting of the Board of Directors of Skoda Auto India Private Ltd. ("SAIPL") held on 04.07.2000 and it was agreed therein that a set of the following 5 draft agreements between SAIPL Skoda Auto A.S. were to be sent to the Appellants for review prior to execution: a. Technology Transfer Agreement ("TTA") b. Importer Contract c. Contract for assembly work d. Trademark Agreement e. Transfer of utilization rights to Intellectual Property 17.3 The 5 agreements referred to earlier were emailed to PwC Czechoslovakia (an independent member Firm of PwC Global Network of Firms, of which the Appellant is also a member) on 28.07.2000 which was subsequently forwarded to the Appellants (in India) for review. 17.4 The following changes were made to the agreement i. TTA and Trademark Agreement merged into one agreement titled "Technology Transfer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (235) ELT 304 (Tri. - Chennai) (ii) Swami Fashions (P) Ltd. v. CC 2009 (239) ELT 149 (Tri.-Chennai) A.3 Notifications 27/2009-Cus dated 17.03.2009 superseded Notification No. 31/2000-Customs (NT) dated 09.05.2000 "except as respect things done or omitted to be done before such suppression". This notification gave all India jurisdiction to officers of DGCEI. This notification is prospective. The show cause is issued in the present case prior to this date and hence notification dated 17.03.2009 is not relevant. A.4 Vide Section 92(1) of Finance (No.2) Act, 2009, Notification No.27/2009 shall be deemed to be, and to have always been, for all purposes, in force retrospectively on or from 09.05.2000. A.5 Unfortunately there is a major lacuna in Section 92(1). It makes the entire notification 27/2009 operate retrospectively. However, Notification No. 27/2009 dated 17.03.2009 superseded Notification 31/2000 dated 09.05.2000 "except as respect things done or omitted to be done before such supersession". A.6 Therefore, since entire Notification No. 27/2009 is made retrospective from 09.05.2000, the portion of the 2009 notification superseding the 2000 notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and prayed for deletion of penalty CESTAT accepted this submission. There is also, amendment related to a procedural matter. Hence, no penalty is imposable in the present case. C.4 In Standard Chartered Bank - 2006 (197) ELT 18, the Supreme Court has held that offences are not confined to criminal proceedings only. It is a transgression of the law and need not be restricted to criminal proceedings. Further, the Hon'ble Court held that punishment will also include imposition of a penalty. Hence, when the Explanation refers to punishable offence" it includes within its ambit, penalty under the Customs Act 1962. 19. Order is vitiated as it relies upon an inadmissible material D.1 In Para 166, the Commissioner has relied upon email dated 06.07.2004 written by Shri Sunil Rekhi to the appellants to come to the conclusion that the appellants were actively involved in drafting of various agreements. D.2 The email is not relied upon in the SCN and for the first time, it is referred to in the impugned order, without affording any opportunity to the appellants to have their say on the email. D.3 In Dhirajlal Giridharilal v. CIT, Bombay, (1954) 26 ITR 736, the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted SAIPL to comply with the statutory requirements (Paras 5- 10 of the minutes). By no stretch of imagination can the above advice on legal compliance be construed as "abetment" of evasion of customs duty. E.7 At no point of time, were the Appellants called upon by the Respondents to explain the alleged acts by the department. Merely relying upon surmises and conjectures, the Respondent in the impugned order has assumed a completely erroneous inference. E.8 Based on the internal mail dated 19.12.2003 or Mr. Sunit Rekhi, the Respondent has alleged complicity in the alleged evasion of customs duty by SAIPL. It is submitted that this email merely shows that the methodology of payments was in line with the FIPB approval. This fact was to be vetted by the Appellants. Hence, on the part of the Respondent to assume that this email shows complicity on the part of the Appellants creating fabricated documents are incorrect. E.9 Further, the Appellants have furnished the draft agreements from PwC Czechoslovakia, along with the written reply, before the Commissioner. Upon a comparison of the same, the only changes that have been undertaken in the agreements are the ones at Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not paid customs duty on the technical know-how fees, there was no necessity for any one to fabricate the agreements, as alleged in the impugned order. 20. On behalf of the Revenue, Shri. K.M.Mondal, learned Consultant appeared and strongly opposed the arguments of the learned Sr. Advocate on behalf of the appellants. That the following undisputed facts may be seen: i). SAIPL is a related person of SKODA under Rule 2(2) of the Customs Valuation Rules, 1988. ii). The goods imported are SKD/CKD deliveries i.e. sets of disassembled vehicles or parts thereof. iii). SAIPL is not free to procure the impugned goods from any other source unless approved by SKODA. (as per statement dtd. 29/08/2006 of Mr. Lukas Folc, Managing Director. iv) Neither any Bill of Entry nor any Baggage Declaration was filed for import of technical documentation. 21. At the further outset, it may be mentioned that based on various evidences gathered during the investigation, the Show Cause Notice alleges that the payment of lump sum of USD 45 million made to SKODA is intrinsically linked to the value of the impugned goods as a condition of sale thereof. Hence it is required to be added to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00013 DEM Individual cost of SKODA / car kit is Coming to: 16988 DEM 22.4 The net revenue of SKODA for its transaction with SAIPL on the sale of this car kit is arrived at by deducting 301 DEM (being the contribution on profit) from the costs, which comes to 16698 DEM. At least this should have been the Transaction Value. But then, the Transaction Value/CIF Mumbai has been calculated as 13912 DEM which is as under: Net Revenue : 16686 DEM (-) Lump Sum : 01775 DEM (-) Technical Consultation (to be paid) : 01000 DEM (-) Terms of Payment (150 days) : 00343 DEM = CIF Mumbai : 13912 DEM, which was 7113 Euros @ 1.96 DEM per Euro as was prevailing in the year 2001. 1775 DEM is Euro 907 and 1000 DEM is 511 Euro as per the exchange rate of 1.96 DEM per Euro as shown in the cost-sheet. On this CIF value, Customs duty has been calculated loaded and then transport up to Aurangabad and thereafter again the lumpsum of 907 Euros and Technical Consultation of 511 Euros have been loaded to work out the landed cost of the car kit in India as under: (Figures in Euros) CIF Mumbai 7113 Bank Costs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i.e. USD 1000 per car kit) has been added to the value of the goods imported to arrive at the landed cost after clearance of the same. There is no plausible answer to this. It is, therefore, quite evident that the import of car kits and the lumpsum amount of USD 45 million is intrinsically linked, thereby establishing a clear nexus between the two. 25. Transaction Value: Rule4(1) provides 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. Rule 9 provides for cost and services. Rule 9(1) provides that in determining the transaction value, there shall be added to the price actually paid or payable for the imported goods. - (a) .. (b) .. (c) .. (d) .. (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable. 26. From the above, it is quite apparent that transaction va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no nexus between royalty/licence fees payable for the know-how and the goods imported for the manufacture of licensed products. The Department itself has invoked rule 9(1)(c). 21. In the alternative, it has invoked rule 9(1)(e). This Rule 9(1)(e) cannot stand alone. It is a corollary to Rule 4. There is no finding in the present case that what was termed as royalty/licence fee was in fact not such royalty/licence fee but some other payment made or to be made as a condition pre-requisite to the sale of the imported goods. It is important to bear in mind that Rule 9 refers to cost and services. Under Rule 9(1), the price for the imported goods had to be enhanced/loaded by adding certain costs, royalties and licence fees and values mentioned in sub-rules 9(1)(a) to 9(1)(e). It refers to "all other payments actually made or to be made as a condition of sale of the imported goods." In the present case, the Department invoked rule 9(1)(c) on the ground that royalty was related to the imported goods, having failed it cannot fall back upon rule 9(1)(e) because essentially we are concerned with the addition of royalty etc. to the price of the imported goods. Further, in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection, it is important to note that each case depends on its own facts. Even one additional or different fact may make a world of difference between conclusions in two cases as held by the Hon'ble Apex Court in the case of CCE, Calcutta V/s. Alnoori Tobacco Products - 2004 (170) ELT 135 (SC). Even otherwise, the cited decision of the Tribunal has no presidential value inasmuch as the Department's appeal against the Tribunal's decision has been admitted by the Hon'ble Apex Court as reported in 2005 (186) ELT A114 (SC). In this connection, reliance is placed on the judgment of the Apex Court in the case of Union of India V/s West Coast Paper Mills Ltd. - 2004 (164) ELT 375 (SC) holding that once an appeal is filed before this Court and the same is entertained, the judgment of the High Court or the Tribunal is in jeopardy. The subject matter of the lis unless determined by the last Court, cannot be said to have attained finality. 31.2 CC, Chennai V/s. Ibex Gallegher Ltd. : From the facts of this case, it is seen that the Tribunal examined the provisions of Rule 9(1)(c) in the context of payment of royalty/licence fee. It found that the payment of royalty was not a condition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of its judgment in the case of CC V/s. M/s. Ferodo India Pvt. Ltd. It is submitted that the Apex Court's decision in Ferodo India Pvt. Ltd. has no application to the facts of the case in hand as already mentioned herein above. 32.4 Technology Transfer and Trade Mark Licence Agreement and Supply Agreement both dtd. 01/10/2001: According to the Department, the Technology Transfer and Trademark Licence Agreement and the Supply Agreement both dtd. 1/10/2001 are bogus and fabricated. However, according to the appellant, these are valid agreements entered into between the appellant and its collaborator. Assuming without admitting that the agreements are valid, the appellant will be bound by the terms and conditions of the agreements. Article 1 in both the agreements gives definitions of various words and expressions. Definition of "Technical Documentation" in both the agreements is identically worded. It read as follows: "Technical Documentation": Any documents such as drawings, photographs, diagrams, tapes, magnetic tapes, video tapes, information system, etc., pertaining to deliveries, assembly/manufacture, testing, and quality assurance developed by SKODA and concerning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to (i) Order and accept SKD deliveries from SKODA; (ii) accept technical responsibility for the Contractual Products manufactured/assembled by SAIPL upon SOP; (iii) pay SKODA the price of SKD Deliveries as set out in Article 8. 33.4 Article 8: Pricing and Price Adjustment Only relevant portion of Article 8 is reproduced below: "Skoda shall sell complete SKD deliveries for the price agreed mutually between Parties valid at the date of shipment. Current price list is et out in Appendix B, which forms an integral part of this Agreement. These prices do not include import duties and/or import fees such costs shall be borne by SAIPL ." The current Price List in Appendix B will be referred to and discussed in suitable place hereinafter. 3.4 Article 14.6- Upon the expiry date of this Agreement, all the rights assigned by SKODA to SAIPL shall expire and SAIPL shall terminate the assembly/production and sale of the Contractual products. SAIPL shall return to SKODA all data obtained from SKODA under the terms of this Agreement, including any copies thereof ever made. 33.5 In this connection, it may be mentioned that under Article 3.1 of the Technology Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two different expressions. (iii) The technical documentation for which the lumpsum payment of USD 45 millions has been paid to SKODA is and shall remain the intellectual property of SKODA as per Article 3.7 of the Technology Transfer and Trademark Licence Agreement. Precisely for this reason, the FIPB application dtd. 16/9/99 has used the expression Technological Fees as lumpsum payment. (iv) In this connection, the judgment of the Hon'ble Apex Court in the case of State Bank of India V/s. CC, Bombay - 2000 (115) ELT 597 (S.C.) may be usefully referred to and relied upon. In para 18 of this judgment, while considering the agreement between the State Bank of India and Kindle (the foreign supplier), the Hon'ble Apex Court found that the licence fee was charged towards countrywide use of software and that the software was not sold to the State Bank of India as such but it was to remain the property of Kindle. The Hon'ble Apex Court found that there was no other value of the software indicated in the agreement except the licence fee. In the case in hand, the lumpsum amount of USD 45 million is payable on account of use of technical documentation for assembly of cars and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted not only on the domestic element of the net sale price of the colour T.V. but also on the cost of imported components. A bare reading of the agreement shows that payment under the said agreement related not only to the production of the goods in India but also to imports. In some of the decisions cited on behalf of the assessee, we find that the net ex- factory sale price of the finished products expressly excluded the cost of imported components. On the other hand, in the present case, the cost of imported components was expressly included in the net ex-factory sale price of the colour T.V. Further, when payment to MEI was at the rate of 3% of the sales turn over of the final product, including cost of imported component, it became a condition of sale of the finished goods. Hence, in this case both the conditions of Rule 9(1)(c) of the Valuation Rules, 1988, are satisfied." 34.4 In the present case, as per the TTA, SAIPL is required to pay royalties @ 5% on domestic sales 8% on exports on all contractual vehicles assembled/manufactured by SAIPL. It may be noted that the contractual vehicles have been assembled and manufactured out of the imported car kits/parts/components. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Hon'ble Gujarat High Court in the case of CCE, Surat-I v/s. Neminath Fabrics Pvt. Ltd. -2010 (256) ELT 369 (Guj.), holding that the concept of date of knowledge cannot be imported into the relevant date as prescribed by the Act. (Paras 16 to 24) 34.7 Jurisdiction: In this case the show cause notice dtd. 31/01/2008 has been issued by the ADG, DGCEI, Mumbai. Suffice it to say that the officers of the Directorate general of Central Excised Intelligence at various levels are also officers of Customs with all India jurisdiction vide Notification No. 27/2009-Cus (NT) dtd. 17/03/2009. Further, they are also proper officers' for the purposes of Section 28 in terms of Notification No. 44/2011-Cus (NT) dtd.06/07/2011. Vide the Customs (Amendment and Validation) Act, 2011, Section 28 of the Customs Act, 1962 has been amended by the inserting sub-section (11) which reads as follows: "(11) Notwithstanding anything to the contrary contained in any judgment, decree or order of any court of law, tribunal or other authority, all persons appointed as Officers of Customs under sub-section (1) of section 4 before the 6 th day of July, 2011 shall be deemed to have and always had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was brought in through courier/hand baggage. It is the contention of the learned Counsel that as per Notification 23/97 dated 04.03.1997 technical documents like drawings etc. when imported in the baggage are exempts from customs duty under Chapter 98 of the Customs Tariff Act. It is further find that the learned Counsel is contesting that the Revenue has not made out any case that technical know-how received was worthless. It is also submitted on behalf that the total consideration of know-how was paid in USD45 million. We find that the Revenue has issued a show-cause notice to the appellant to cover the said payment of USD 45 million in the assessable value under Rule 9(1)(e) of the Customs Valuation Rules, 2007. Therefore, the arguments advanced by the learned Counsel that technical know-how documents have been received in baggage or the know-how documents are worthless or shown less value are not material to discuss herein and the case law relied on are not relevant to the facts of this case. 39. We have to examine whether the provisions of Rule 9(1)(e) of the Customs Valuation Rules, 1998 are applicable to the facts of this case. 40. For better appreciation the Rule 9(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with royalty at the rate of 6 per cent of costs of manufacture for indigenous sale and 8 percent for export. In that application it was stated that 45,000 Octavia model vehicles are planned to be cumulatively produced within five years. It was further stated that US D 45 million calculated on the basis of US D 1000 per car. We find that the application made by the appellant before FIPB is very much relevant to know that whether the payment of USD 1000 per car is a condition for the sale of the imported goods. It is the contention of the learned Counsel that on the basis of FIPB approval the technology transfer agreement was provided in October 2001 but which was only a draft and not a signed agreement. The appellants were directed to vetting of the drafts by PWC and the draft agreement was got approved. 43. In the impugned order the learned Commissioner held that the Technology Transfer agreement was fabricated/concocted so that the imported cars can be under-valued. He has also held that the payments made by SAIPL to SACR have been made in connection with and as part of SKD/CKD car kits. We however find FIPB approved the proposal subject to the condition that no royalty is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel is that as they have to amortize the cost of the technological transfer to the Car kits imported is not convincing as the same has been worked in cost sheet of Skoda. During the course of search, the work sheets were recovered from the appellants which gives details regarding CIF value of import of Skoda car kits in India and landed cost and ex-work price of assembled car in India. As the documents were in German, common factory is 1000 USD towards technological licence fees. The amount shown in 1418 Euros, out of which 907 Euros is to go to SACR which is equal to 1000 USD. In addition, another cost sheet dt. 29.08.2001 also shows the amount of USD 1000 (907 Euros) as payment under the category lump sum. Although these cost sheets were not signed by anybody nor it was known who prepared but the same has been admitted by the learned Counsel for the appellant during the course of argument. We further find that PWC vetted the agreement relating to TTA and Trade mark and modified the assembly contract to supply contract and advised removal of certain clauses relating to termination of TTA. This also supports the case of the department that there was a belief on the part of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further it could not have been capitalized. In any case SAIPL is a 100% subsidiary of Scoda. 48. We further find that Scoda has shown this amount received for technology transfer agreement as Revenue receipts in their books of account as per para 8.10.14 of the written submissions. As it is admitted by the appellants themselves that it is a Revenue receipt in nature and the same is to be amortized / car kit supplied by them. This fact also supports the case of Revenue. The amount of 45 million USD was neither capital receipt at the hand of Skoda, nor the amount so paid was the intent to keep as capital expenditure in the hands of appellant but to amortise the said amount in the cost of imported cars/part and supplier themselves are admitting that the receipt is no Revenue nature. Therefore the said amount is to be in the nature of other than payment paid by the appellant to the foreign supplier as a condition of sale. 49. On account of limitation we find that in this case the extended period of limitation is rightly invoked as the appellant cannot declared the impugned goods and the appellant did not file any Bill of Entry or any baggage declaration for import of any technologi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SD 45 million towards transfer of technology and trademark licence over a period five years by importing car kits along with royalty shall be paid on 100% equity shares. The payment of royalty in the Transfer of Technology Agreement (TTA) has been on the basis of licensing of trademark and the payment of USD 45 million is towards transfer of technology by way for manufacturing of Skoda brand cars in India over a period of five years. The facts has been incorporated relating to the imports in USD 1000 as lump sum payment. The Managing Director and the Sr. Manager did not have any explanation with regard to TTA that the Company was importing car kits and assembling the same in terms of agreement. The technical documentation continues to be received till 2007 whereas the letter of Skoda dated 2.2.2004 to the appellant, the entire technical documentation under TTA had been provided before the date. The work sheets containing the details of CIF value of imported car kits to India and landed cost and ex-work price of assembled car in India. The amount shown in 1418 Euros, out of which 907 Euros is to goes to SACR which is equal to 1000 USD. Although the cost sheets were not signed by any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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