2006 (11) TMI 64 - AT - Customs

Tribunal rules demand for duty based on income tax paid is time-barred & royalty charges unrelated.

The Tribunal set aside the impugned order, ruling that the demand for duty based on the inclusion of income tax paid was barred by limitation. ... Demand - Alleged that appellant has to include charges paid for the technical know-how, design & engineering for calculation of assessable value – After considering all the fact authority allow the appeal with the consequential relief Issues Involved:1. Inclusion of income tax paid in the duty calculation.2. Provisional vs. final assessment of duty.3. Inclusion of Royalty charges in the assessable value of imported goods.4. Limitation period for issuing a corrigendum to the show cause notice.Detailed Analysis:1. Inclusion of Income Tax Paid in the Duty Calculation:The appellants argued that the show cause notice dated 12-8-1991 did not initially claim any duty on income tax. It was only by a corrigendum dated 12-8-1999, eight years later, that the claim was made for duty inclusion of income tax. The appellants contended that this was a new case and barred by limitation. The Tribunal agreed, citing precedents such as *ESPI Industries Chemical v. Commissioner of Central Excise, Hyderabad* and *S.T.L. Exports Ltd. v. Commissioner of Customs, Indore*, which held that belatedly issued corrigenda to enlarge the scope of the original notice are illegal. Thus, the demand for duty based on the inclusion of income tax paid was deemed unsustainable and barred by limitation.2. Provisional vs. Final Assessment of Duty:The appellants argued that the assessment could not be deemed provisional as the goods had been cleared after compliance with Sections 17, 46, and 47 of the Customs Act. The Tribunal noted that there was no evidence of provisional assessment at the time of release of the goods and that the goods were cleared under Section 47, implying final assessment. The Tribunal concluded that the demand for short levy could only be made under Section 28, which pertains to final assessments, and not under Section 18, which deals with provisional assessments.3. Inclusion of Royalty Charges in the Assessable Value of Imported Goods:The appellants contended that the Royalty fee was related to post-importation activities and not the imported goods. The Tribunal examined the contracts and found that the Royalty contract dated 31-3-1988 covered activities such as design, engineering, and consultancy for the PBCC Plant, which were post-importation services. The Tribunal referenced the Supreme Court decision in *Commissioner of Customs, New Delhi v. Prodelin India (P) Ltd.*, which held that technical know-how fees for post-importation activities are not includible in the assessable value of imported goods. Therefore, the Tribunal concluded that the Royalty charges were not a condition of sale of the imported goods and were not includible in the assessable value under Rule 9(1)(c) of the Customs Valuation Rules.4. Limitation Period for Issuing a Corrigendum to the Show Cause Notice:The Tribunal found that the corrigendum issued eight years after the original show cause notice was barred by limitation. Citing cases such as *Bhagsons Paint Industries (India) v. CCE, New Delhi*, the Tribunal emphasized that the absence of a statutory time limit does not imply an indefinite period for completion of adjudication. The Tribunal held that the belated corrigendum was invalid, and the demand based on it was unsustainable.Conclusion:The Tribunal set aside the impugned order, holding that:- The demand based on the inclusion of income tax paid was barred by limitation.- The Royalty charges were related to post-importation activities and not includible in the assessable value.- The assessment of duty was final, not provisional.- The corrigendum issued after eight years was invalid.The appeal was allowed with consequential relief, if any.