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TMI Blog2022 (3) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... om re-determination of value of 1 nos. 500mm x 1000mm 'LED display' imported against bill of entry no. 579691/28.06.2018 by addition of 'cost of service' under the authority of rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 to Rs. 7,36,236/-. The import of multiple consignments has also been held to have breached the mandate of Bureau of Indian Standards (BIS) certification. The appeal of the importer against confiscation of goods, under section 111 of Customs Act, 1962, with attendant fine as condition of redemption and imposition of penalties under section 114A and section 114AA of Customs Act, 1962 along with the enhancement of assessable value, the two appeals of the partners, S/shri Brijesh Patel and Udit Patel, against the penalties imposed on them under section 112 of Customs Act, 1962 and the appeal of Revenue against the dropping of Rs. 7,49,80,179 owing to non-adoption of the payment schedule in 'Collaborative Framework Agreement (CFA)' as fixed income stream to the supplier in China proposed in the show cause notice as 'assessable value' are taken up together for disposal in this common order. 2. In his narration of the background, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics & Information Technology (MEITY) on the applicability of Electronics and Information Technology (Requirements for Compulsory Registration) Order, 2012 and were intimated that only screen size over 32 inches was intended to be covered. It was also informed that, in order to facilitate release of seized goods, necessary certification, as prescribed, had been obtained on 1st November 2017. 4. Mr Shivdass submitted that the other consignment proceeded against for misdeclaration of value had been imported against bill of entry no. 579691/28.06.2018 for clearance of 1 nos. 'P8.33 LED display 500 mm x 1000 mm' on declared value of US$1223 which the show cause notice proposed to enhance to the extent of value of services in the separate invoice even though they had demonstrated that the billed activity had no nexus with the import and the sample had been sent back after testing. These, he contended, were the three disputes raised in the post-clearance investigations which commenced on 24th May 2017 with seizure of the panels that had been assembled for use during the event and stored thereafter for further use in future. 5. According to him, the adjudicating authority had, even while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods were not compliant at the time of importation and the post-clearance certification demonstrates that their original contention of non-applicability is not tenable. He further informed that the investigating authority had taken the assistance of a certifying entity, M/s TUV SUD South Asia Pvt Ltd, which, being reported in the adjudication order thus '26.1 There are many test reports and opinions on record which are placed by the Investigation and the Noticee. The main rival contentions are in relation to seize. It is alleged by the investigation that the goods are of size beyond 32" as the units are of 500 mm x 1000 mm. The examination of the cargo under Mahazar proceedings by shri Lokesh Employee No.E-5482, who is a Project Manager of M/s. TUV SUD South Asia Pvt. Ltd. And the report furnished them, was placed on record in support of the contention. Shri Lokesh stated that "though there are two panels put together as one visual display unit, the same cannot be considered as two separate units as they are driven by a single power supply unit which is connected serially to one another, the size on one Panel is diagonally 43 inches and 19 inches horizontal and 39 inches vertic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of applicability of MEITY CRO resulted in the BIS issuing registration to the supplier for the supply of goods of the description P8.33 (Outdoor Fixed LED Screen) making it clear that the goods are liable for Registration. It is to be noted that on application by the Noticee on behalf of the supplier, BIS has not returned the application stating that the goods do not require BIS Registration and are not covered in MEITY CRO though the goods are made of 500 mm x 500 mm panels and each of them function individually. 26.4. The above fact of BIS granting the registration to the same item which was imported, holds in favour of the allegation made in the Show-Cause Notice that the goods are liable for BIS compliance and registration. The noticee contested that the goods do not require the BIS Registration and compliance of BIS Standards ISI 3252: 2010 on many grounds. I shall examine these contentions.' places the issue in proper prospective and that, insofar as the value of goods imported against the 16 bills of entry is concerned, it is common ground that the impugned order is flawed. He highlighted the obvious infirmity in the finding of the adjudicating authority that '27.2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter dated 15.3.2017 issued by Unilumin submitted by him during proceedings of recording of the statement. Firstly, there are inconsistencies in his statement and the letter. The said Letter was addressed to Shri Brijesh Patel. The agreement was entered into by the parties on 11.3.2017. The Noticee raised Purchased Order for the goods at a price of US$ 750 on 13.3.2017. Be that it may, there is no communication by email with regard to price reduction to 750 till there was seizure by DRI. The said letter dated 15.3.2017 was also not found in any documents seized from the premises. The said communication was suo moto submitted by Shri Udit Patel during the proceedings of recording of his statement. The authenticity of the said communication also appears questionable. Firstly, it was not signed by any signatory of the Agreement but issued in pursuance of the agreement. Further, if the rate was revised by the supplier on 15.3.2017, the Noticee could not have raised the Purchase Order with a Price of US $ 750 per Sq. Mtr on the supplier before such date, i.e., before 15.3.2017. The Purchase Order is dated 13.3.2017. Indeed, as the Purchase Order was raised on the Supplier by the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and the product imported are different. It is to be also observed that shri Brijesh Patel also not mentioned such a thing in his statements. It is only after the SCN is issued, for the first time in their submissions, the noticee is talking about the agreement being in respect of another product. Very importantly, the agreement does not talk about the description and Model Number of the Product at all.' in support of his contention that the appeal of Revenue for confirmation of differential duty on the value proposed in the show cause notice for the goods imported against 16 bills of entry should be allowed. 7. Having heard both sides and perused the records, it would appear that the present proceedings must determine breach, if any, of certification standards which, admittedly, had ceased to be of import by the time of issue of show cause notice, the appropriate approach to the dispute over valuation of goods imported against 16 bills of entry and the correctness in inclusion of the value of the invoice for services in the assessable value of the goods. 8. It is not in doubt that the goods imported against 16 bills of entry were presented for clearance without any certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods specified therein were to be ignored, the scheme of valuation under section 14 of Customs Act,1962 cannot be for it is the transaction value, and the transaction value alone, as declared in the bill of entry that is assured of acceptance for assessment except for varying from the qualifying circumstances therein as well as in rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. There is no finding, either of additional payments having been made as consideration or of the value not being in conformity with the parameters therein, for rejection of rule 12 of the Rules to warrant resort to the sequential application of the several methods in the Rules. Most significantly, the 'Collaborative Framework Agreement (CFA)' intended temporary transfer of possession almost akin to 'lease' and, thereby, not a 'sale' which is a necessary qualification for conformity with rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 to which all alternative methods of valuation are subject. 10. The Tribunal, having in Futura Travels Ltd v. CC (Import), Mumbai [final order no. A/87363-87364/2021 dated 21st December 2021 disposing off c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have to be determined in accordance with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 10. The Rules provide for substitution by 'transaction value' declared in comparable situations, computation of costs and, as a last resort, to best judgement. This is no carte blanche; the guiderails of 'transaction value', the 'gold standard' for valuation in the 1988 version of the Rules and the concept in the version extant since 2007, are not to be crossed over. The value adopted by the adjudicating authority and the value pressed for in the appeal of Revenue must be aligned within; as the residuary rule cited for validating appropriateness is not in question, it is the one most in conformity that should prevail.' and, in the light of that exposition, we cannot but find that the proposal in the show cause notice for adoption of the fixed income stream does not conform to section 14 of Customs Act, 1962 and the Rules framed thereunder. The re-determination in the impugned order can be set aside and the appeal of Revenue dismissed for that reason alone. 11. In the circumstances, we need not dilate on the Solomonic wisdom of the adjudicating authority in mathem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices imported with goods and held that '13. Beyond the enumeration of definitions, the Rules comprise three parts: the standard in rule 3 and 4 reflecting the primacy of the 'transaction value' of imports, the 'substitute values' of rule 5 to 8 - ranged as 'transaction value' of 'identical' and 'similar' goods, the deductive or computed value, and the ascertained value - and the invisibles, or cost of services, in rule 9 with the first two being mutually exclusive as is evident from rule 3 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The interpretative notes, appended as Schedule to the Rules, are integral to appraisal of value for assessment. 14. There is no whiff of suggestion in the proceedings thus far that there is any dispute on the contracted value of the goods requiring resort to one of the 'substitute value' by sequential elimination. Hence, it is the cost of services that are liable to be subjected to duties of customs in accordance with '4. Transaction value. - (1) 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so restricted though the terms of contract linking the payment to value of 'imported goods', which are undoubtedly valued, would require to be added while those paid after clearance would need to be linked to the goods supplied as a specific condition of sale. 17. Customs Act, 1962 is legislatively erected on the constitutional empowerment at serial no. 83 of List I of the Seventh Schedule to the Constitution. The Rules framed under section 14 of Customs Act, 1962 provide transcending the goods to include value of services, though in the restricted context elaborated supra. This contrived subjecting of specified, and unspecified, services to duties of customs predates the assumption of legislative jurisdiction to tax services - both domestic and overseas - and survives even after Finance Act, 1994 did impose levy on services. Therefore, neither can there be a claim that the unfilled gap was taxable without bounds before 1994 nor that tax levied on services provided from outside the country from 2006 blurs the bounds to such extent as to erase any restriction in the inclusion envisaged in rule 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. Clearly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia after import, even if directly related to imported goods, cannot justifiably enhance the assessable value and 'condition of sale' has to be construed as that which is inseparable from the contract of import.' Though the decision was handed down in the context of the substituted Rules, the provisions relating to addition of 'cost of services' remain unaltered in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, hence, no less applicable to the present dispute. 14. The impugned order has relied upon a pro forma invoice as rationale for the enhancement. That may have sufficed for re-determination of transaction value after rejecting declared value. However, the provisions for inclusion of 'cost of services' are a special law within the Rules which require ascertainment per the circumstances in rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. There is no such determination in the impugned order and the enhancement of assessable value is, thereby, tainted. 15. The impugned goods are not in breach of certification standards and the onus for disturbing the transaction value in 16 bills of entry as well as the value of ..... 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