1990 (2) TMI 212 - AT - Customs

Tribunal Decision on Assessable Value & Spares Charges: Precedents, Registration, Exchange Rate

The Tribunal upheld the inclusion of dismantling charges in the assessable value, citing precedents that expenses to make goods ready for delivery should ... Project import registration and provisional assessment - Assessable value under Section 14 - includability of preimportation charges - Distinction between import licence (debits) and customs assessable value - Provisional assessment under Section 18 and finalisation on reconciliation - Computation of 10% spareparts concession with reference to assessable value - Applicable rate of exchange for assessable value - date of presentation of Bill of EntryProject import registration and provisional assessment - Provisional assessment under Section 18 and finalisation on reconciliation - Registration of a contract under the Project Imports (Registration of Contract) Regulations does not constitute a final preassessment of value; project registration fixes classification under Heading 84.66 but valuation is subject to provisional assessment and finalisation under Section 18. - HELD THAT: - The Tribunal accepted that registration under the Project Imports Regulations facilitates classification under a single tariff heading and was intended to avoid detailed itembyitem classification. However, the appellants had executed a continuity bond and the Customs proceedings proceeded by provisional assessment under Section 18. The nonobstante language of Section 18 permits provisional assessment notwithstanding other provisions, and the final assessable value is to be determined after clearance of the last consignment and on submission and verification of the reconciliation statement. The historical purpose of the Project Imports item and contemporaneous administrative material show the scheme contemplates provisional assessment to be finalised later, not a conclusive valuation at registration.Registration determines classification under Heading 84.66 but does not finally determine valuation; valuation is to be finally fixed when provisional assessments are finalised under Section 18.Assessable value under Section 14 - includability of preimportation charges - Distinction between import licence (debits) and customs assessable value - Preimportation charges including dismantling, packing and forwarding, and other services reasonably attributable to making the goods ready for shipment are includible in the assessable value under Section 14(1); debits to the import licence do not control the assessable value for customs purposes. - HELD THAT: - Relying on statutory scheme and earlier authorities, the Tribunal held that expenses which in an arm'slength transaction would be for the seller's account or which plainly add to the value of goods when delivered for shipment must be added to assessable value. Where the importer undertakes services (inspection, certification, dismantling, insurance, contractors' services) that, but for the importer's undertaking, would have affected the seller's price, those expenses are properly includible. The fact that the licensing authority or RBI treated dismantling charges differently for licence debiting does not bind Customs; licence debits serve foreign exchange conservation purposes and are distinct from valuation under Section 14. The Collector therefore was right to include dismantling, packing and related charges after applying Section 14 principles.Dismantling, packing and forwarding and other preimportation charges which are attributable to making the plant ready for shipment are includible in assessable value under Section 14; import licence debits are not conclusive of customs assessable value.Computation of 10% spareparts concession with reference to assessable value - Applicable rate of exchange for assessable value - date of presentation of Bill of Entry - The 10% spareparts concession under Heading 84.66 must be computed with reference to the assessable value determined under Section 14; the rate of exchange to be applied for calculating assessable value is the rate in force on the date the relevant Bill of Entry is presented under Section 46, not the exchange rate in the import licence. - HELD THAT: - The Schedule does not define 'value' for the Heading; statutory definition in Section 2(41) imports Section 14(1) valuation. Hence the 10% ceiling for spare parts is to be worked out against the Section 14 assessable value. Section 14's proviso requires calculation with reference to the rate of exchange as in force on the date of presentation of the Bill of Entry, so the Collector correctly applied the exchange rate under Section 14 rather than the licence exchange rate. The Tribunal therefore upheld the approach that the licence exchange rate is relevant only for debiting the licence and not for customs valuation.Compute the 10% spareparts concession with reference to Section 14 assessable value; apply the exchange rate as per Section 14 on the date of presentation of each Bill of Entry.Factfinding on nonimported parts and classification of items as spares - The factual contentions regarding (a) nonimport of certain parts in the USA and the proportionate value thereof, and (b) whether specific items are integral parts of the main plant or spares within the 10% concession, were not finally decided on the record and require fresh consideration. - HELD THAT: - The Tribunal found that the Collector had not made adequate findings after investigation on the appellants' claim that certain items were left behind in the USA and that the actual value of imports was lower than the contract sum; similarly, although the Collector compared figures in Exhibit 'L', there is no detailed finding addressing the appellants' itemwise contentions and Exhibit 'K' which they say shows correct main equipment versus spares values. These issues involve factual enquiry, scrutiny of import records and contract background and cannot be resolved at the appellate stage without fresh factual determination.Remit the matters of nonimported parts/proportionate value and the question whether particular items are spares or integral parts to the Collector for fresh investigation and findings after giving the appellants an opportunity to be heard.Final Conclusion: The appeal is partly allowed in law: the Tribunal upholds that project registration determines classification but not valuation, confirms inclusion of dismantling, packing and other preimportation charges in assessable value where attributable under Section 14, and affirms that the licence debit is not conclusive for customs valuation; exchange rate rules under Section 14 apply and the 10% spare concession must be computed on Section 14 value. Factual issues as to nonimported parts and the status/value of specific items as spares are remitted to the Collector for fresh enquiry and determination. Issues Involved:1. Inclusion of dismantling charges in the assessable value.2. Provisional assessment under Project Imports (Registration of Contract) Regulations, 1965.3. Value of spares exceeding 10% of the main equipment value.4. Exchange rate applicability for the spares.5. Non-import of certain equipment from the USA.Detailed Analysis:1. Inclusion of Dismantling Charges in the Assessable Value:The appellants argued that dismantling charges amounting to US $5.5 million should not be included in the assessable value as these charges were not part of the import licence issued by the licensing authority. They contended that the Customs authorities had initially agreed to re-credit the amount debited towards dismantling charges back to the import licence. However, the Tribunal held that the inclusion of dismantling, packing, and forwarding charges in the assessable value was justified. The Tribunal referenced the Bombay High Court decision in Union of India v. Glaxo Laboratories (India) Ltd., which established that the assessable value under Section 14 of the Customs Act, 1962 must include all expenses incurred to make the goods ready for delivery at the port of shipment. The Tribunal also cited the case of Bombay Gas Company Ltd. v. Collector of Customs, Bombay, emphasizing that costs incurred by the appellants abroad, such as dismantling and other charges, should be reflected in the assessable value of the goods when delivered in India.2. Provisional Assessment under Project Imports (Registration of Contract) Regulations, 1965:The appellants contended that the registration of the contract under the Project Imports Regulations amounted to a pre-assessment of the value. The Tribunal rejected this argument, stating that the registration of the contract facilitated the classification of goods under one tariff heading and did not determine the final assessable value. The Tribunal emphasized that provisional assessments under Section 18 of the Customs Act, 1962, are not controlled by other provisions of the Act due to the non-obstante clause in Section 18. The Tribunal concluded that the scheme of Project Imports assessment primarily relates to the classification of items under one head, with the final valuation to be determined after all imports comprising the project are cleared and a reconciliation statement is submitted.3. Value of Spares Exceeding 10% of the Main Equipment Value:The appellants argued that the value of spares imported did not exceed 10% of the value of the main machinery, as some items included as spares were integral parts of the main DMT plant. The Tribunal noted that the Collector had not provided a detailed finding on the appellants' contentions regarding the nature of the items listed in Exhibit 'L'. The Tribunal directed the Collector to re-examine the issue, considering the detailed explanations provided by the appellants and giving a fresh finding on whether the items in Exhibit 'L' were spares or integral parts of the main plant.4. Exchange Rate Applicability for the Spares:The appellants contended that the exchange rate applicable to the spares should be the one fixed by the Import Licensing Authority while granting the import licence. The Tribunal disagreed, stating that Section 14 of the Customs Act, 1962, requires the assessable value to be calculated with reference to the exchange rate in force on the date of presentation of the Bill of Entry. The Tribunal upheld the Collector's conclusion that the relevant exchange rate for determining the assessable value, including the value of spares, should be as per Section 14 of the Customs Act.5. Non-import of Certain Equipment from the USA:The appellants claimed that some parts of the plant were not imported, and the proportionate value of these items should be excluded from the assessable value. The Tribunal found that this issue required further investigation to determine the factum of non-import. The Tribunal directed the Collector to conduct a detailed investigation into the matter and provide a factual finding on the non-import of certain equipment from the USA.Conclusion:The Tribunal upheld the Collector's findings regarding the provisional assessment under the Project Imports Regulations and the inclusion of dismantling charges in the assessable value. The Tribunal directed the Collector to re-examine the issues of non-import of certain equipment and the value of spares exceeding 10% of the main equipment value, providing detailed findings after considering the appellants' contentions. The appeal was disposed of in these terms.