Integrated turnkey contract charges for design and engineering were includible in customs assessable value, despite separate invoicing.

Design and engineering charges paid to a foreign supplier were held includible in customs assessable value where the contract was a single integrated turnkey arrangement for designing, manufacturing, supply, erection, testing and commissioning of the imported machinery. The work had a direct nexus with the manufacture and supply of the goods and was not an independent post-importation service or separable drawings and manuals component. Separate invoicing or separate contract entries did not alter the character of the charges. Under Section 14 of the Customs Act, 1962 and Rule 8 of the Customs Valuation Rules, 1963, such costs formed part of the imported machinery's value for customs duty.

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Issues: Whether design and engineering charges paid to the foreign supplier were includible in the assessable value for customs duty, and whether such charges were separately excludible as post-importation services or drawings and manuals.

Analysis: The contract was read as a single integrated turnkey arrangement covering designing, engineering, manufacturing, supply, erection, testing and commissioning of the complete system. The design and engineering work was found to have a direct nexus with the manufacture and supply of the imported machinery and equipment, and not to be an independent post-importation activity. Mere separate invoicing or separate mention of design and engineering charges did not change their character. Under Section 14 of the Customs Act, 1962 and Rule 8 of the Customs Valuation Rules, 1963, all relevant elements of cost could be taken into account, and design and engineering costs formed part of the machinery cost in this factual setting.

Conclusion: The design and engineering charges were chargeable to customs duty and were includible in the assessable value; the appeal failed.

Final Conclusion: Charges incurred for designing and engineering of imported machinery under an integrated project-import contract were part of the imported goods' cost for customs valuation purposes.

Ratio Decidendi: Where design and engineering services are inseparably linked to the manufacture and supply of imported machinery under a unified turnkey contract, those charges are part of the assessable value and cannot be excluded merely because they are separately shown in invoices or contracts.

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