2015 (5) TMI 966 - AT - Customs

Customs duty upheld for sharing capital goods with related company, highlighting ownership vs. control distinction. Duty calculated from sharing start date.

Microsoft India (R & D) Private Limited Versus Commissioner of Customs & C. Ex., Hyderabad IV

The judgment upheld the customs duty demand on the appellant for sharing capital goods with a related company, emphasizing the distinction between ... Duty demand - Capital goods - rate and valuation of the assets - Section 28AB - Held that:- The impugned order concludes that Microsoft Corporation , USA is not the owner of the appellant or of MGSCI even though these entities may be subsidiaries of Microsoft Corporation USA, as they are distinct legal entities and therefore appellant and MGSCI are separate legal entities. The impugned order proceeds on the basis that while a holding company may have effective control over a subsidiary, such control does not amount to ownership of the holding company over the subsidiaries, which is the condition for sharing of assets. - Confirmation of the duty demand on the appellant is thus unassailable and warrants no appellate interference. The impugned order also holds that appellant’s liability to customs duty must be calculated from the date of commencement of sharing of the assets between the appellant and MGSCI. Since this sharing of the assets constitutes the contravention of the condition in Notification No.52/2003-Cus, which has triggered the liability to duty, it is appropriate that duty on the valuation should as on the date of commencement of sharing of the assets by the appellant with MGSCI. - impugned order suffers from no infirmity - Decided against assessee. Issues:1. Confirmation of customs duty demand on the appellant for sharing capital goods with another company.2. Interpretation of ownership and control in the context of sharing assets between related entities.3. Calculation of liability to customs duty from the date of commencement of sharing of assets.Analysis:1. The appellant, an assessee, challenged the order of the Commissioner of Customs & Central Excise confirming a customs duty demand on capital goods shared with another company. The impugned order applied Section 28AB of the Customs Act, 1962, to calculate the liability based on the commencement of sharing, leading to the duty demand.2. The appellant sought permission for sharing assets with a group company, which was initially granted in 2006. Subsequently, in 2008, a lease agreement was entered into, leading to proceedings alleging a violation of Notification No.52/2003-Cus. The impugned order emphasized the distinction between ownership and control, holding that the appellant and the group company were separate legal entities, not owned by Microsoft Corporation, USA.3. The impugned order concluded that the appellant's liability to customs duty should be calculated from the date of sharing assets with the group company, triggering duty liability due to the contravention of Notification No.52/2003-Cus. The order justified the duty calculation based on the valuation as of the sharing commencement date, dismissing the appeal for lacking merit and without costs.In summary, the judgment upheld the customs duty demand on the appellant for sharing capital goods with a related company, emphasizing the distinction between ownership and control in determining liability. The calculation of duty from the sharing commencement date was deemed appropriate, leading to the dismissal of the appeal for lacking merit.