1997 (8) TMI 295 - AT - Customs

Tribunal Decision: Inclusion of Technical Document Costs in Imported Goods Value

TATA IRON & STEEL CO. LTD. Versus COMMR. OF CUS. & C. EX., BHUBANESWAR

The Tribunal upheld the inclusion of the cost of technical documents in the value of imported goods, emphasizing their necessity for equipment assembly ... Jurisdiction - Valuation - Demand - Confiscation - Penalty Issues Involved:1. Undervaluation of Blast Furnace Equipment.2. Suppression of facts.3. Inclusion of cost of technical documents in the value of imported goods.4. Jurisdiction of the Commissioner of Customs, Bhubaneswar.5. Penalties imposed on TISCO and its employees.Detailed Analysis:1. Undervaluation of Blast Furnace Equipment:The appellants were accused of undervaluing the blast furnace equipment by transferring part of the value to engineering costs. The adjudicating officer included the price of technical documents within the scope of MD-301 into the price of the equipment, as these documents were necessary for assembling and operating the equipment. The Tribunal noted that the technical documentation was essential for the assembly, operation, and maintenance of the imported equipment, and thus, their cost should be included in the value of the equipment.2. Suppression of Facts:The appellants were also accused of suppressing facts relating to other costs. The Tribunal found that the Commissioner's findings were based on conjectures and not on any evidence that these charges had been incurred by the first appellant. The Commissioner accepted that there was no evidence of payment for these charges by the appellants, yet he added these charges to the value of goods. Consequently, the Tribunal set aside the differential demands of duty on account of these charges, as they were based on conjectures.3. Inclusion of Cost of Technical Documents:The Tribunal considered whether the cost of technical documentation should be included in the value of the imported goods. The adjudicating officer had included the cost of technical documents necessary for assembling and operating the equipment in the assessable value. The Tribunal upheld this inclusion, stating that the technical documentation was essential for setting up and operating the equipment and normally supplied with the equipment without any extra charge. The Tribunal also noted that the technical documentation pertained both to the imported equipment and the equipment yet to be procured or manufactured by the appellants. Since separate values were not shown in the contract MD-301 or invoices, the entire value of 12.5 million DM of technical documentation was included in the value of the equipment.4. Jurisdiction of the Commissioner of Customs, Bhubaneswar:The Tribunal upheld the jurisdiction of the Commissioner of Customs, Bhubaneswar, stating that the assessment on registration of a contract for project import is provisional. The Commissioner had the jurisdiction to take all relevant factors into account while finalizing the assessment. The Tribunal referred to the Apex Court's judgment in the Bombay Dyeing case, which stated that the assessment under the Project Import Regulations on registration of a contract is only provisional and final assessment is done after completion of all imports against the registered contract.5. Penalties Imposed on TISCO and Its Employees:The Tribunal examined the penalties imposed on TISCO, Dr. J.J. Irani, Shri S.L. Srivastava, and M.N. Dastur & Co. The penalties on Dr. J.J. Irani and Shri S.L. Srivastava were based on their roles in splitting the total contract value and obtaining a certificate from ITP without stipulating any precondition for the plant's performance. The Tribunal found that the split into two contracts was a legal necessity and that there was no evidence of fraudulent means to obtain approval for the importation of the blast furnace. Consequently, the penalties on Dr. J.J. Irani, Shri S.L. Srivastava, and M.N. Dastur & Co. were set aside.For TISCO, the Tribunal found that there was suppression of the Sales Contract from the Customs Authorities at the time of applying for Registration of the Contract for project import. However, no particular individual's name amongst TISCO's employees was identified. The Tribunal reduced the penalty on TISCO from Rs. 5 crores to Rs. 4 crores, considering the amount of Revenue involved and other facts and circumstances.Conclusion:The Tribunal disposed of TISCO's appeal by reducing the penalty and setting aside the inclusion of other related charges. The appeals of Dr. J.J. Irani, Shri S.L. Srivastava, and M.N. Dastur & Co. against the imposition of penalties were allowed, and the penalties were set aside.