Technical drawings from foreign vendor classified under CTH 49.06, not included in ETP equipment assessable value

CESTAT Kolkata dismissed Revenue's appeal regarding classification of imported drawings and designs. The tribunal held that technical drawings supplied separately by foreign vendor should be classified under CTH 49.06 (plans and drawings) rather than CTH 84.19 (ETP equipment). The drawings were original computer printouts related to post-import activity, not pre-import activity as Revenue contended. The tribunal ruled that drawing values should not be included in ETP's assessable value under Customs Valuation Rules and confirmed nil duty rate under applicable exemption notification.

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ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the classification of imported drawings and designs should fall under Customs Tariff Heading (CTH) 49.06 or CTH 84.19.
• Whether the value of the imported drawings should be included in the assessable value of the Effluent Treatment Plant (ETP) under Rule 10(1)(b)(iv) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
• Whether the imported drawings are related to pre-import activity or post-import activity.
• Whether the exemption under Notification No. 12/2012-Cus. dated 17.03.2012 applies to the imported drawings and designs.

ISSUE-WISE DETAILED ANALYSIS

Classification of Imported Drawings and Designs

The relevant legal framework involves the interpretation of CTH 49.06 and CTH 84.19. CTH 49.06 covers "Plans and drawings for architectural, engineering, industrial commercial, topographical or similar purposes, being originals drawn by hand; hand-written texts: photographic reproductions on sensitized paper and carton copies." CTH 84.19 pertains to "Machinery, plant or laboratory equipment for the treatment of materials by a process involving change of temperature."

The Court observed that CTH 49.06 explicitly includes industrial plans and drawings for the guidance of builders or manufacturers, which aligns with the nature of the imported goods. The HSN Explanatory Notes further support this classification, emphasizing that such drawings are intended for construction guidance.

Key evidence includes confirmation from the supplier, M/s Ventilex B. V., that the drawings are original printouts prepared according to a specific contract and supplied separately from the ETP. The Court found that the drawings were for segments of the plant to be constructed in India, not for equipment manufactured abroad.

The Court applied the law to the facts by determining that the drawings were not machinery or equipment, thus not classifiable under CTH 84.19. The intellectual property value of the drawings was specified in the contract, reinforcing their classification under CTH 49.06.

Inclusion of Value in Assessable Value of ETP

The Revenue argued that the value of the drawings should be included in the assessable value of the ETP under Rule 10(1)(b)(iv), which pertains to costs supplied by the buyer to the supplier of imported goods. However, the Court found that the drawings were supplied by the foreign supplier, not the buyer, making the application of this rule inappropriate.

The Court noted that the Department's interpretation was flawed, as it read the rule in isolation without considering the context of supply. The Court concluded that the drawings were not related to the equipment imported and thus should not be included in the assessable value of the ETP.

Relation to Pre-Import or Post-Import Activity

The Revenue contended that the drawings were linked to pre-import activity. However, the Court found that the drawings were intended for post-import activity, as they were for construction and assembly within India. The supplier's confirmation and the nature of the contract supported this finding.

Exemption under Notification No. 12/2012-Cus.

The Court upheld the Ld. Commissioner (Appeals)'s decision to classify the drawings under CTH 49.06, which qualifies for a 'nil' rate of duty under the relevant notification. The Court found no procedural or legal error in granting this exemption.

SIGNIFICANT HOLDINGS

The Court held that:

• The imported drawings and designs are rightly classifiable under CTH 49.06, not CTH 84.19.
• The value of the drawings should not be included in the assessable value of the ETP under Rule 10(1)(b)(iv) of the Customs Valuation Rules, as they were supplied by the foreign supplier.
• The drawings pertain to post-import activity, not pre-import activity.
• The exemption under Notification No. 12/2012-Cus. is applicable, allowing a 'nil' rate of duty.

The Court concluded by upholding the decision of the Ld. Commissioner (Appeals) and rejecting the Revenue's appeal, affirming the classification and exemption of the imported drawings and designs.

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