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TMI Blog2014 (3) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... OETAC would show that the submissions made by the learned special counsel for the Revenue regarding addition to be made in terms of Rule 9(1)(b)(iv) of Customs Valuation Rules have to be upheld and accepted. - Decided against the assessee. Issuance of SCN when assessments were provisional - Held that:- A question of res judicata may not arise in view of the fact that provisional assessments are resorted for specific purposes and once the assessee is able to specify the purpose for which provisional assessment was resorted to, the assessment can be finalized. Therefore, even if short-levy is disputed, notice issued, adjudicated, the finalization of provisional assessment or assessment process as per the document can be a separate subject and in both cases issues involved will be different. In the present self-assessment regime, there may be many occasions where the assessee may assess and pay higher duty and assessment be provisional. In our opinion, the conclusions reached by us above are more valid today than ever before especially in view of the complications involved in application of law to the facts and difficulties involved in making self-assessment. - Decided against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sourced and supplied by M/s Doosan to the appellant for its Power Project for consideration of US $103 Millions. Since the equipment to be imported were for Power Project classifiable under Chapter Heading 98.01, the appellant applied on 11.2.1999 for Registration for imports under the Project Import Regulations, 1986. While making application, the appellant had declared that there is no foreign collaboration and Rule 9 of the Customs Valuation Rules, 1988 was inapplicable in respect of the equipments being imported. The application was accepted and imports were allowed under the Project Import Regulation Act, 1986. 3. Proceedings were initiated by Revenue by issuance of show-cause notice on 19.6.2003 requiring the appellant to show-cause as to why an amount of Rs. 48, 11, 68,010/- under Section 28 of the Customs Act, 1962 along with interest thereon should not be recovered from them; imported equipment/goods should not be confiscated and penalty under Section 114A of the Customs Act, 1962 should not be imposed. 4. The matter travelled up to the Tribunal on two occasions and this is the 3rd round of litigation. In the impugned order which is the 3rd order passed by the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en imposed without finalizing provisional assessments. 6 (a) whether the appellant resorted to misdeclaration of the value of plant machinery imported under the Project Import Regulations by deliberate non-addition of the value of certain costs and services forming part of Off-Shore Engineering/Technical Assistance Contract (OETAC) and whether such value of costs and services are required to be added to the declared value of plant machinery under Rule 9(1) (b) (iv) of Customs Valuation Rules, 1988. Provisions of Rule 9(1) (b) of Customs Valuation Rules, 1988 (Valuation Rules) envisage addition of the value of goods and services subject to the provisions therein. For ready reference, the rule is reproduced as under:- Rule 9. Cost and Services:-(1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, -- (a) --- --- (b) The value, apportioned as appropriate, of the following goods and services where supply directly and indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of imported goods, to the extent that such value has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. Under the category of equipment and system design, item such as gas turbine generator and auxiliaries, cooling water system, heat recovery steam generator, steam turbine generator and auxiliaries etc. are listed and in each case, it has been provided in column 3 and 4 that the contractor would be responsible for conceptual as well as detailed engineering and PMT. The contract itself provides that contractor shall design plant, equipment and systems. In clause 4(c) of Article 4, it also provides that contractor shall perform detailed design and engineering as per attachment 1 (discussed above) including appropriate specification of equipment, materials and systems to be incorporated in the project. It also provides that contractors engineering services include the preparation of drawings (not obtaining from the suppliers) specifications, schedules and estimates and coordination with the engineering efforts of sub-contractors and company contractors. Further the contractor is expected to provide all services required to procure all equipment materials, supplies and other items necessary for the construction. 6(a) (4) It was argued that the basic engineering/conceptual design ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supply. Some of the sample agreements were relied upon by the learned counsel to support his submission that in all the cases of major equipments supplied, equipments were standard supply and there was no question of providing any design or specification in connection with the supply. We examined some of them. M/s. GE Energy Products -Europe in their letter dt. 26/02/2004 stated that in respect of gas turbines supplied by them based on a standard design identified by the model number available on order, they had supplied certain customized auxiliary equipment which was designed and manufactured for the purposes of the contract. Further they go on to observe that the contract includes a standard description of their equipment, materials and design with certain options and modifications as required by the contract specifications. What emerges from the letter appears to be that certain modifications were suggested and naturally if modifications were to be suggested, that requires certain changes in the design and specifications, which would have been carried out by the contractors in this case and given to the suppliers who studied the same and finally designed the item which is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. Except for the advance payment of 31.4% under OESC, all other payments are to be made on the same dates in both the contracts. 31.4% advance has been adjusted in 2nd and 3rd payments by adding 15.7% to each payment. When there is no relation between the two contracts according to the appellants, there is no explanation forthcoming as to why such similarity exists. The learned counsel simply denied and stated that these observations are not relevant but did not explain how both could be same. 6(a) (8) The Commissioner examined the arguments advanced by Lanco in paragraphs 85 to 87 and came to the conclusion that service portion of KHIL in the manufacturing of imported equipments is important and the cost of these services are to be added to the declared assessable value. The learned counsel submitted that this was not a logical conclusion. The Commissioner has taken note of the fact that it was advised that KHIL would provide sub-vendors with the manufacturing and drawings for the integral parts of steam drums etc. In the case of purchase of GTG and STG, there is continuous interaction between the supplier and the KHIL and specifications and parameters have to be provided o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, we have already taken note of the fact that according to the contract, KHIL was required to provide 10 copies of designs and drawings to the buyer. The responsibility for providing the designs and drawings was of KHIL and not of the overseas suppliers as far as the buyer is concerned. 6(a) (10) The learned counsel vehemently argued that the appellants had taken expert opinion from M/s. TCE Consulting Engineers (TCE) and the expert had opined that design, manufacture and supply of imported equipment can be carried without the activities listed in OETAC and also stated that the activities under OETAC are not related or necessary for the manufacture of imported equipment. 6(a) (11) In paragraph 91, this expert opinion has been discussed by the Commissioner. The conclusion the Commissioner has reached is that according to the opinion given by the TCE, there is no categorical opinion that the goods under consideration have been manufactured without the activities under OETAC. Annexure K filed by the appellants with the appeal memorandum contains the opinion given by TCE. 6(a) (12) In paragraph 4.1., the TCE had broadly classified activities under OETAC as basic enginee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e say that supports the claim that sambar has been prepared without using toor dal. This does not seem to be a correct way of confirming that the activities under OETAC had nothing to do with the equipments and machinery purchased form the suppliers. An examination of OETAC and OESC as done by the Commissioner and discussed in detail, cannot be substituted by an expert opinion which does not contain such details and which does not evidence that such detailed consideration have gone into. It can be said that TCE have the expertise but even if a person is an expert, unless specifications are gone into and a comparison with OESC is made and details are examined, it cannot be said that the expert opinion has to be preferred to a detailed analysis of different agreements made by the adjudicating authority and also the letters from the suppliers produced before him. It was submitted that the emphasis in the impugned order as well as the submissions on behalf of the Revenue to the terminology contained in the OETAC is unwarranted and contrary to the settled law that substance has to be prevailed over form. There cannot be any dispute as regards this submission. The question is only wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. After citing this decision, it was submitted that terminology contained in OETAC cannot be the basis for taking a view that design of imported equipments is part of OETAC. It was submitted that appellant had produced overwhelming evidence to show that the design of the imported equipment was not supplied to the suppliers of the imported equipments. However, we find that there is contradictory information emerging from the contract itself. For example, the contract itself requires KHIL to provide all documents, design etc. to the buyer. The responsibility for providing the entire design is on KHIL and as already observed in some of the suppliers letter, it has been indicated that modifications were made as per the specifications provided by the buyer. If only procurement specifications were to be finalized and identification of the supplier was the only responsibility, there was no need for the attachment and giving details in respect of each and every equipment and striking similarity between OETAC and OESC. None of these has been explained. Other than the opinion of the consulting engineer, there is not much else provided by the appellants. While we agree that subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions to be fair and reasonable and in accordance with rules and we may have to reproduce what the Commissioner has written in the order just to show we agree with him, we consider it is sufficient if we say so. 6 (b) The next issue is whether show-cause notice for short-levy could have been issued under Section 28 of the Customs Act 1962 when the assessments were provisional. 6 (b) (1) The learned counsel for the appellants relied upon the following decisions: UOI Vs Godrej Boyce Mfg Co. Pvt Ltd. [1989 (44) ELT 3 (Bom)] Serai kella Glass Works Vs CCE [1997 (91) ELT 497] CCE Vs ITC Ltd. [2006 (203) ELT 532] Dunkans Industries Ltd. Vs CCE [2006 (201) ELT 517] CCE Vs Godfrey Philips India Ltd. [2007 (211) ELT 52] CCE Vs Siddhartha Tubes Ltd. Vs CCE [2006 (194) ELT 28] 6 (b) (2). All these cases relied upon by the learned counsel relate to central excise matters. In all these cases as submitted by the learned counsel, Hon ble Supreme Court and other authorities took a view that show-cause notice for short levy could not be issued when the assessment is provisional. 6 (b) (3). After considering the relevant provisions under the Customs Act, Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the first step in making of the assessment. The proper officer is empowered to assess the duty on the goods so removed by the assessee and complete the assessment on the return filed by the assessee. A copy of the return so computed by the proper officer has to be sent to the assessee. The duty assessed and paid by the assessee on self assessment will be set-off against the duty assessed by the proper officer. If the duty paid by the proper officer on final assessment is more than the duty determined and paid by the assessee, the assessee has to pay the deficiency by making a debit in the account-current within ten days of the receipt of the copy of the return from the proper officer. If the duty on final assessment payable by the assessee is less than what he has actually paid, the assessee is entitled to take credit in the account-current for the excess payment. No question of any show cause notice under Section 11A arises at this stage. The duty has to be paid by making adjustment in the account-current which has to be maintained by the assessee within ten days time. 17. Section 11A deals with recovery of duty not levied or not paid or short-levied or short-paid or errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short levy occurred or not itself can be reconsidered and finalizing the assessment which does not result in payment, procedure for recovery under Section 11A and Section 28 of Customs Act 1962 are being invoked. Therefore as argued by the learned special counsel for the Revenue, if the finalization of assessment as well as proposal for penalty and confiscation of goods are combined, no prejudice would be caused to the appellant or the assessee. It will only reduce parallel adjudication proceedings and multiple litigation on the same subject. The question as to whether finalization of provisional assessment and proposal for confiscating and penalty can be undertaken simultaneously has not come up for consideration in any of the precedent decisions relied upon by the learned counsel for the appellant in this case. In all the decisions relied upon by him which relate to central excise matters the consideration was whether show-cause notice could have been issued for recovery of short levy/short-paid duty and whether confiscation and penalty could have been imposed in the same proceedings. In all the cases, Section 11A has been invoked straightaway without proposing finalization of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abhol Power Company ordered the finalization of provisional assessment as done by the Commissioner in the light of the findings of their order. We find that in the case of Dabhol Power Co., the Tribunal had approved the course adopted in finalizing the provisional assessment simultaneously invoking provisions of Section 28 of the Customs Act 1962. Even though a rejoinder was submitted to the submissions made by learned special counsel for the appellants, applicability of the decisions of Tribunal in the case of Dabhol Power Company has not been discussed. This was a rejoinder filed in response to the written submissions made by the Spl. counsel for the Revenue. 6 (b) (6). The learned counsel also relied upon some decisions which are dealing with customs matters only. The first such decision is in the case of A.S. Syndicate (warehousing Pvt Ltd.) Vs CC (Port) reported in 2011 (267)ELT 469 (Cal)]. This decision cannot be considered since the show-cause notice itself had been challenged and show-cause notice itself was quashed by allowing the writ petition filed by the party. The Hon ble High Court accepted the submission that there is no provision for issuance of show-cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case before us. In the case of CC (imports) Mumbai Vs Orkay Steel Mills [2001(133)ELT 698 (Tri-Mum)], the Tribunal relied upon the decision of the Hon ble Supreme Court to hold that where assessments are provisional, show-cause notice invoking extended period could not be issued. Since we have already differentiated and considered the decision of the Hon ble Supreme court in Serai Kella Glass Works, this decision of the Tribunal also cannot be applied to the facts of this case. 6 (b) (7). Another decision which has been relied upon by the learned spl. Counsel for Revenue is the decision of this Tribunal in the case of MRPL in Customs Appeals No. 525/2007 and 496/2007 dated 8.8.2012. In that case, the facts are almost similar to the facts of this case. MRPL was expanding the capacity of their refinery and for this purpose, they entered in to three contracts. The contention of the Revenue was that the amount paid in terms of other contracts should be included in the assessable value. The three contracts covered three different stages namely basic design package, extended basic design package and detailed design package. This Tribunal took a view that all the three elemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supplier, the total quantity of goods imported vis-a-vis the plan made at the time of taking permission under Project Import Regulations. The question that arises is when there was a contract in existence, even before the supply contract came into picture and legitimately and legally such values were to be included in assessable value but the omission of inclusion of such items could probably have been found out only because of intelligence received or because of detailed investigation conducted, question arises whether Revenue should wait for the assessee to submit all the details and seek finalization of assessment. The question also arises, if the assessee does not give the details in a case like this, Revenue may not even know whether the imports have been completed or not. In such a situation, if the assessee delays submission of details, no finalization can take place and even if the department has all the details collected because of investigation, if the stand taken by the assessee for appellant in this case is legally correct, the department will have to keep on waiting for finalization of assessment or propose finalization of assessment at the higher rate of duty for al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to both sides. Therefore, we have chosen to make mention of these aspects also in the order even though the conclusion as regards the duty demand has no relevance or the conclusions reached are not required to be considered. The fact remains that these conclusions also support the case of the Revenue. 6 (b) (11). In the present self-assessment regime, there may be many occasions where the assessee may assess and pay higher duty and assessment be provisional. In our opinion, the conclusions reached by us above are more valid today than ever before especially in view of the complications involved in application of law to the facts and difficulties involved in making self-assessment. 6 (c). The next issues to be considered are whether confiscation of goods and penalty imposed by the Commissioner can be sustained. 6(c) (1). We have already taken a view that there was gross undervaluation by the appellant and non-declaration of OETAC to the original assessing authority amounted to suppression of facts and miss-declaration of value. We have also upheld the quantum of additions made by the Commissioner in the impugned order. Therefore, there is no doubt that the appellant has ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision cannot be applied to the facts of this case. It was submitted that in that case, the proprietor attempted to defraud revenue. Instead of producing satisfactory evidence in support of the declared value, he disowned the transaction and stated that he was holding himself as the importer at the behest of another person. It was submitted that there is finding of the fact in the case of Sri Ganesh Overseas (supra) that there was complete fraud committed. In this case what the appellant s submission is whether action of the importer does not amount to defrauding revenue or not has to be based on the gravity of offence. It is submitted that in this case, the appellant had a bona fide belief. However, the submission of Revenue is contrary and we happen to agree with the submission of Revenue. Therefore, while we may not call action of the appellant as equivalent to action of the importer in case of Sri Ganesh Overseas (supra), We definitely do not agree with the claim of bona fide belief on the part of the appellant. Therefore, distinction made by learned counsel, in our opinion, is not acceptable. In this view of the matter, the submission made by learned special counsel as regards ..... X X X X Extracts X X X X X X X X Extracts X X X X
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