Plain wording of exemption notifications and limited inclusion of design and engineering charges in customs valuation.

Exemption notifications must be applied according to their plain wording, and an exclusion cannot be expanded by intendment. On that construction, the imported power project was treated as eligible for the concessional duty under Sl. No. 206(iv) of Notification No. 36/96-Cus., because the record did not show that the project was one engaged in activities other than power generation. Separately, design and engineering charges undertaken outside India were includible in assessable value only to the extent they were genuine design and engineering costs under the valuation rules; erection, testing and commissioning costs were excluded, and the exact quantum was left for redetermination at final assessment.

---

---

Issues: (i) whether the imported project was entitled to the concessional rate under Sl. No. 206(iv) of Notification No. 36/96-Cus. or fell under Sl. No. 206(iii) as a captive power plant; (ii) whether the design and engineering charges were includible in the assessable value and, if so, to what extent.

Issue (i): whether the imported project was entitled to the concessional rate under Sl. No. 206(iv) of Notification No. 36/96-Cus. or fell under Sl. No. 206(iii) as a captive power plant.

Analysis: The relevant notification covered power generation projects including gas turbine power projects, while the exclusion applied only where the project was set up by a project engaged in activities other than power generation. The record did not show that the imported project itself was a project for activities other than power generation. The interpretation adopted below was based on intendment rather than the wording of the notification. The notification had to be construed on its plain language.

Conclusion: The project was eligible for the benefit of Sl. No. 206(iv), and the denial of that concession was not sustainable.

Issue (ii): whether the design and engineering charges were includible in the assessable value and, if so, to what extent.

Analysis: Under Rule 9(1)(b)(iv) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1983, design and engineering charges undertaken outside India and necessary for production are includible in assessable value. However, the exact quantum had to be ascertained and only genuine design and engineering charges, and not erection, testing or commissioning costs, could be added. Since the import was being assessed provisionally under Heading 9801, the amount was to be redetermined at finalisation on the basis of material produced by the importer.

Conclusion: The charges were includible only to the extent they represented design and engineering costs, and the exact quantum was left for redetermination at final assessment.

Final Conclusion: The appeal succeeded on classification and the denial of concessional duty was set aside, while the valuation question was kept open for proper redetermination at the stage of finalisation.

Ratio Decidendi: An exemption notification must be applied according to its plain wording, and an exclusion cannot be extended by intendment; separately, design and engineering charges are includible in assessable value only to the extent they are genuinely such charges under the valuation rules.

---