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TMI Blog2016 (10) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... (Judicial) and Mr. Madhu Mohan Damodhar, Member (TechnicaI) Shri Rajesh Rawal, Advocate for the Appellant Shri P.S. Reddy, AR for the Respondent [Order per: Sulekha Beevi) C.S.,] 1. The facts, in brief, of this case are that the appellants, through their agent viz. M/s Lee and Mulhead Ltd., vide letter No. LMNTZ/customs/150/98-99 dated 21.10.98, applied for registration under project contract for import of Plant and Machinery for setting up of Palm Oil Mill at Peddapuram, East Godavari Dist., AP under Project Import Regulations, 1986. The supplier was M/s Salcon Engineering Sendrian Berhead, Malaysia. Along with their application, the Appellants had submitted project report, plan layout and process chart, list items etc., vide Government of India, Ministry of Agriculture, purchase order No. 101 dated 25.4.98. The Government of India, Ministry of Agriculture, vide their letter dated 06.10.98 recommended to the Custom House to consider import of plant and equipment along with spares. As per Public Notice No.21/96, the Appellants submitted security deposit of 2% of CIF value which worked out to ₹ 12.47 Lakhs vide R.D.No.370, C.M.235 dated 22.10.1998. 1.1 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mill. 3.3 The Appellant imported the equipment and spares through the Visakhapatnam port under cover of 3 consignments declared the value of the machinery imported and did not include in the value of imported plant and machinery, the amount of RM 1,400,000 which had been paid towards design and engineering services for the reason that design and engineering charges were not in connection with the imported equipment but only for setting up the palm oil mill as a whole. 3.4 It is the Appellant's case, since the design and engineering charges were paid for the design of the entire plant as a whole as agreed in the Appellant's agreement with M/s. SALCON dated 20.5.1998 and not for design of the imported goods imported under Purchase Order No. 101 dated 25.4.1998 and therefore the same is not includible in the value of the goods imported. 3.5 Goods imported by the Appellant were customised goods available in the international market, manufactured by companies such as alfa-laval etc. and no specific design, technical specifications or drawings were required to supplied by M/s. SALCON for the manufacture Consequently there was no requirement for M/s. SALCON to design the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nggit Malayasia RM 1,400,000. In particular it is mandated that predominant amount of RM will have to be paid upon receipt of the documents pertaining to the complete technical Specifications and Drawings. 8. It is seen that department has not proposed or demanded addition of lump sum amount of RM 1,700,000 mandated in the first agreement for supervision and management. What has been sought to be added to assessable value is RM 1,400,000 towards Design Engineering charges mandated in second agreement. From the facts and circumstances of the case, it is evident that as per purchase order SESB only would fabricate and supply all crucial machinery and equipment, for which appellant would have to pay lump sum of RM 5,566,840. However without the Design, Technical Specifications and Drawings, the erection/construction of the Palm oil Mill cannot actualise. Even in the supervision and the management agreement, the focus is on construction in compliance with designs, drawings, specifications etc. 9. We therefore are of the opinion that the lower authority has appreciated the facts and evidence in the correct perspective as seen from para 8 of impugned order which is as below; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty is payable or the value should be split into two - one for the intellectual input and other for the media. The Hon'ble Apex Court held as follows: it is misconception to contend that what is being taxed is intellectual input. What is being taxed under the Customs Act read with Customs Tariff Act and the Customs Valuation Rules is not the input alone but goods whose value has been enhanced by the said inputs. The final product at the time of import is either the magazine or the encyclopedia or the engineering drawings as the case may be. There is no scope for splitting the engineering drawing or the encyclopedia into intellectual input on the one hand and the paper on which it is scribed on the other. For example, paintings are also to be taxed. Valuable paintings are worth millions. A painting or a portrait may be specially commissioned or an article may be tailor made. This aspect is irrelevant since what is taxed is the final product as defined and it will be an absurdity to contend that the value for the purposes of duty ought to be the cost of the canvas and the oil paint even though the composite product, i.e., the painting is worth millions. In the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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