Assessable value excludes separate engineering charges when they relate to installation and pre-import activities, not the imported goods themselves.

Design and engineering, documentation, project handling, workshop tests and inspections connected with an imported system were held not includible in assessable value where the contract materials and supplier certificate showed they related to layout, installation arrangements and other pre-import or post-import activities, and the licensing committee had already excluded them from CIF value. The export obligation under the EPCG licence was treated as fulfilled because the export obligation certificate accepted the exports and condoned delay in one shipment, so Customs could not allege non-fulfilment. With the duty demands unsustainable and no suppression or deliberate misdeclaration shown, confiscation, redemption fine and penalty were also set aside.

---

---

Issues: (i) whether the design and engineering, including documentation, project handling, workshop tests and inspections, were includible in the assessable value of the imported Sublance System under the Customs Valuation Rules; (ii) whether the export obligation under the EPCG licence stood fulfilled; (iii) whether the goods were liable to confiscation and penalty.

Issue (i): whether the design and engineering, including documentation, project handling, workshop tests and inspections, were includible in the assessable value of the imported Sublance System under the Customs Valuation Rules.

Analysis: The contract, the division lists, and the supplier's certificate showed that the disputed charges related to layout, installation arrangements, engineering for site-made items, and other pre-import or post-import activities, and not to the imported equipment itself. The EPCG Committee had also consciously excluded these charges while fixing the CIF value for the licence. In these circumstances, the department could not unilaterally add the amount to the assessable value. The invocation of the extended period also failed, as the full facts had been disclosed at the time of import and licence processing.

Conclusion: The design and engineering charges were not includible in the assessable value, and the demand on that score was unsustainable.

Issue (ii): whether the export obligation under the EPCG licence stood fulfilled.

Analysis: The export obligation certificate issued by the DGFT accepted the exports and condoned the delay in making one shipment after the original due date. As the authority entrusted with monitoring export obligation had treated the obligation as discharged, Customs could not disregard that discharge and raise a demand on the footing of non-fulfilment.

Conclusion: The export obligation stood fulfilled for purposes of the EPCG licence.

Issue (iii): whether the goods were liable to confiscation and penalty.

Analysis: Once the duty demands were held unsustainable and there was no material showing suppression or deliberate misdeclaration, the foundation for confiscation and penalty disappeared. The consequential fine and penalty could not survive independently.

Conclusion: The confiscation, redemption fine, and penalty were set aside.

Final Conclusion: The appeal succeeded in full, with the duty demands and all consequential proceedings annulled and relief granted to the importer.

---