Assessable value and tariff classification: commission added to import value, and synchroniser cones treated as motor vehicle parts.

Imported goods were held to include a separately agreed commission in assessable value where contemporaneous correspondence and admissions showed that the invoice price was only the net price; the commission of US $ 0.20 per unit was therefore added under the Customs Valuation Rules, 1963. Synchroniser cones were treated as components of a motor vehicle transmission system and, on that basis, classified as motor vehicle parts under Heading 87.04/06(1) rather than under Heading 84.63, which covers transmission shafts, gears and allied parts. The departmental assessment and confiscatory order were sustained on both valuation and classification.

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Issues: (i) Whether the assessable value of the imported goods was to include the commission of US $ 0.20 per unit; (ii) whether the imported synchroniser cones were classifiable under Heading 84.63 or under Heading 87.04/06(1) of the Customs Tariff Act, 1975.

Issue (i): Whether the assessable value of the imported goods was to include the commission of US $ 0.20 per unit.

Analysis: The record showed that the importers and Krishna & Co. were associate firms and that the telex correspondence expressly referred to invoice preparation after deducting the commission and showing only the net price. The declared invoice price of US $ 3.49 was thus found to exclude the commission element, while the contemporaneous correspondence and admissions established that the supplier had agreed to a CIF price of US $ 3.69 with commission of US $ 0.20 per unit. Under Rule 5(a) of the Customs Valuation Rules, 1963, commission was required to be added for assessment.

Conclusion: The inclusion of the commission in the assessable value was upheld against the assessee.

Issue (ii): Whether the imported synchroniser cones were classifiable under Heading 84.63 or under Heading 87.04/06(1) of the Customs Tariff Act, 1975.

Analysis: Heading 84.63 covered transmission shafts, gears, gear boxes and allied parts, whereas Heading 87.04/06(1) covered parts and accessories of motor vehicles not elsewhere specified. On the facts, the imported synchroniser cones were treated as components of the transmission system of motor vehicles, and the prior tribunal ruling on similar transmission synchroniser parts was applied. The goods were therefore held not to fall under Heading 84.63 but to be appropriately classified as motor vehicle parts under Heading 87.04/06(1).

Conclusion: The classification under Heading 87.04/06(1) was upheld against the assessee.

Final Conclusion: The appeal failed on both valuation and classification, and the departmental assessment and consequent confiscatory order were sustained.

Ratio Decidendi: Where contemporaneous correspondence and admissions show that the invoice price excludes a separately agreed commission, the commission forms part of assessable value under the valuation rules; and where a component is found to be part of the transmission system of a motor vehicle, it is classifiable as a motor vehicle part rather than under the general heading for gears and transmission equipment.

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