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TMI Blog2008 (1) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for consultancy and engineering services rendered by M/s. Holder Bank Management and Consultancy Ltd., Switzerland (referred to as HMC for the purpose of brevity) is required to be added to the invoice value of the capital goods, raw materials, etc. imported by the appellants under Rule 9(1)(c) of the Customs (Valuation) Rules, 1988. 2. The facts giving rise to this Appeal filed by the Revenue, being aggrieved by the Order-in-Appeal, are that the appellants entered into an agreement with HMC for Consultancy and Engineering Services in the realization of the project, for which lump sum payment of Swiss francs 9,89,000 was paid by the respondents. In terms of clause 1.2 of the agreement, HMC provided consultancy services in the areas of plant design, production and manufacture techniques. The nature of the services provided were in the areas of preparation of technical concept to meet state-of-the-art technologies, ease of operation and maintenance, recommendation for selection and ordering of equipment, supervision of design for preparation of final general arrangements, drawings, supervision of suppliers design drawings, quality assurance of imported equipment, quality insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn/manufacture/fabrication of the goods and was essential for the manufacture of the goods. (iii) Although seller has not incurred any expenditure on the technical/engineering design of the equipment manufactured by it, yet the price paid for securing the engineering designs and drawings from a third party will be a component of the value of the equipment manufactured. (iv) In spite of the price for the services rendered by the expert agency having been paid by the buyer and not the seller, the value thereof would be liable to e added to the value of the imported goods for determining the transaction value and the requirement seems to be that the engineering, development, design work etc. were under-taken abroad at the cost of the importer. (v) In a case the importer pays for these services, it has to be taken to be a case of indirect supply of the services to the manufacturer of the imported goods, who manufactures the goods on the basis of those services like engineering, design and drawings. (vi) The invoice values of the goods imported are loaded pro rata with S.Fr. 10,51,000/- being the remuneration for transfer of technical know-how and engineering services, supervisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided by Supreme Court, it is clear that the payments of licence fees to M/s. Midrex was a condition of the sale of the plant which is not the case here and as such by considering Rule 9(1)(c) and the ratio of the said judgment, the technical know-how fees paid to M/s. Holder Bank are not includible in the value of the imported machinery. Thus, Rule 9(1)(c) cannot have application to the facts of the present case in the appeal. 5. The contentions raised by JBC in its Cross Appeal and in reply to the Revenue's Appeal are that: (i) HMC were engaged by the Respondents as Consultants. (ii) The Respondents have imported plants machinery etc. from six different suppliers to whom they are not related and to whom no payment by way of technical know-how, license fees, royalty etc. is payable and dealing with them is at arm's length. Therefore, the technical know-how, which was paid to HMC cannot be loaded to the plant machinery etc. imported from the said six suppliers as it was not a condition of the sale of machinery for payment of technical know-how fee to HMC. (iii) The importer, HMC or Holtec or the suppliers of machinery being not in any way related, any attempt to load the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery supplied by overseas ex porters unrelated to the respondents and are adequately compensated for the same services by a remuneration of S Franc 10,51,000/- paid by the respondents. (iv) In terms of Rule 4 read with Rule 9 of Customs Valuation Rules. 1988, the invoice value may not be conterminous with transaction value in all cases. The Respondents/importers in the subject case have paid for the goods imported from unrelated suppliers and have also paid for the services in the form of technical/engineering consultancy (in the form of assisting and approving the designs and drawings leading to the manufacture and supply of plant machinery equipments), rendered by HMC and Holtec which are directly related to the manufacture and supply of the plant, machinery and equipments imported by the respondent. (v) As per Rule of Customs Valuation Rules, 1988, if the invoice price does not represent the actual price or total payment, it has to be adjusted with additions stipulated under Rule 9(1)(b)(iv) and 9(1)(c). In the subject case, since the cost of the services incurred by the respondents are directly related to the imported goods, same have to be added to the invoice price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be loaded to the plant, machinery, etc. imported from the said six suppliers as it was not a condition of the sale of machinery for payment of technical know-how fee to HMC. (vii) In so far as the decision of Hon'ble Supreme Court in the matter of M/s. Essar Gujarat Ltd. - 1996 (88) E.L.T.' 609 (S.C.) is concerned, the same is also distinguishable from the present case as in the case of Essar Gujarat Ltd., condition of obtaining a licence from M/s. Midrex was a pre-condition of sale of the plant. Hence the process licence fees and cost of technical services for transfer of technology paid to third party were held to be includible in the price of the plant, because the plant could not be made operational without the same. In so far as the charges for the technical services were concerned, only expenditure incurred for dismantling the plant at Germany and making it ready for delivery was ordered to be added to the value of the plant. We agree with the findings of the Commissioner (Appeals) that in the present case no such circumstances exist. We also agree that it is not the case of the Revenue that the technical/supervision of design services etc. was extended to the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for that matter has to be read as a whole an not in bits and pieces. Ignoring the preamble to the contract and directly coming to the clauses in the contract would only be an aberration and would result in incorrect presentation of facts, which has to be avoided. Similarly, the rest of the submissions have to be read referring to the preamble and the resultant would be in line with clause 1.3 above. 10. The reliance placed by the SDR in the case of Andhra Petro Chemicals Ltd. - 1997 (91) E.L.T. 349 (Tri.) is incorrect as factually in the present case, the case is consultancy services rendered by HMC, who are a consultant and it is not on the basis of the services rendered by this company that the imported equipments are specially manufactured on the basis of their consultancy and that the technical specification, drawings and design are provided by the foreign supplier directly to the importer and there is no third party in this case. They neither designed the imported equipments nor supplied the engineering drawings for the manufacture of the imported equipments. The Indian company, Holtec were also not equipment designers. Such equipment designs were entirely left to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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