2015 (5) TMI 696 - SC - Customs

Supreme Court clarifies Customs Valuation Rules on post-import services for capital goods

The Supreme Court upheld the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) decision in the first case, emphasizing that fees from ... Valuation under Rule 9 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - Addition of licence fee and fees paid for basic engineering services to the invoice price of the imported goods for the copper smelting plant - Fees paid under the Licence Agreement and under the Basic Engineering, Training and Technical Services Agreement related to the import of the capital goods was not a condition of sale - Held that:- On going through the order of the CESTAT, it becomes clear that the CESTAT has gone into the various provisions of the three agreements and has come to the conclusion that neither the fees paid under the Licence Agreement nor under the Basic Engineering, Training and Technical Services Agreement related to the import of the capital goods nor was it a condition of sale and on that basis it has recorded the finding that the provisions of Rule 9(1)(b)(iv) or Rule 9(1)(c) or Rule 9(1)(e) of the aforesaid Rules would apply to the facts of the case. That apart, it further finds that both the Agreements, viz., Licence Agreement as well as Basic Engineering, Training and Technical Services Agreement, pertained to the services that were to be provided post import of the aforesaid goods. On this ground also, the value of these services could not have been loaded into the value of the goods at which those were imported. It is also to be borne in mind that the respondent had purchased various capital components from many other parties and the goods for which the agreement was signed with OEC constituted only 16% of the total value.On these facts, we are of the opinion that the matter is squarely covered by the recent judgment of this Court in Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Ltd. [2015 (4) TMI 486 - SUPREME COURT ] decided on 13th April, 2015. - Decided against the revenue. Issues:1. Customs valuation of imported capital goods under various agreements.Analysis:In the first case, the respondent, engaged in copper manufacturing, imported capital goods for setting up a smelter plant. The Customs Authorities disputed the valuation, wanting to include payments from multiple agreements in the invoice price. The Assistant Commissioner of Customs held that only the equipment for the sulphuric acid plant should be loaded per the Customs Valuation Rules. The Commissioner (Appeals) disagreed, adding fees from other agreements to the invoice price. However, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) allowed the appeal, stating that fees from the agreements were not related to the import of capital goods. The Supreme Court upheld the CESTAT decision, citing a previous judgment and emphasizing that the services under the agreements were post-import and not part of the goods' value.In the second case, similar issues arose with agreements between the assessee and another company for the supply of equipment and services. The Tribunal ruled in favor of the Revenue, contrary to the CESTAT decision in the first case. The Supreme Court, referencing the same judgment, reversed the Tribunal's decision, aligning with the CESTAT's rationale that the agreements pertained to post-import services and should not be included in the valuation of the imported goods. The Court allowed the appeal, setting aside the Tribunal's orders.These judgments clarify the application of Customs Valuation Rules in cases involving imported capital goods and multiple agreements, emphasizing that post-import services should not be loaded into the value of the goods.