TaxTMI 
TaxTMI 
2011 (8) TMI 717
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....r-valued certain goods imported by it and, therefore, they visited the factory of M/s. Mahindra at Nasik on 31/08/2004. During the visit, it was found that M/s. Mahindra had not declared the assessable value of the imported goods correctly inasmuch as they had not included the assessable value of design and engineering charges in the value of the imported goods. Therefore, a detailed investigation was undertaken on the imports made by M/s. Mahindra. Investigation revealed that M/s. Mahindra intended to develop a new vehicle under its Scorpio vehicle programme. Pursuant to this, they entered into two separate agreements with M/s. Nichimen Corporation, Japan (Nichimen in short). These agreements were as follows: i) Agreement bearing No.IDAM/REV/RUP/02 dated 20/11/98 (referred to as design agreement) for technical consultancy, design and engineering of models, soft tools and soft jigs/fixtures and assembly fixtures for the Scorpio vehicle programme. Charges payable for this by M/s. Mahindra to M/s. Nichimen were Japanese % 17,78,20,000. ii) Agreement bearing No.AIAM/REV/RUP/03 dated 20/11/1998 (referred to as supply agreement) for supply of 34 prototype Body-in....
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....p; of BIW and panels was done by the engineers of M/s. Mahindra in India and subsequently the design house facility of HW was used by engineers of both M/s. Mahindra and HW. He also admitted that the design and engineering of said BIW was carried out by HW, England and fine tuned in India by the engineers of M/s. Mahindra and these engineering designs and specifications were given to M/s. Nichimen for the manufacture of the said BIWs by using soft tools, soft jigs/fixtures, at M/s. Chibha, Japan. 2.4 Investigation further revealed that HW was an international consultancy agency specializing in automotive design and engineering and product development and M/s. Mahindra had entered into an agreement with HW on 22/10/1996 for 'concept and feasibility - design and engineering of the IDAM vehicles'.As per this agreement, all designs, models, technical documentation, calculations, data and other information was developed or produced by HW for M/s. Mahindra in pursuance of the project. The scope and duration of the project as per the agreement was concept and feasibility design and engineering of the IDAM vehicle as represented by the already approved fu....
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....M/s. Mahindra was required to inform M/s. Nichimen of any further requirement over and above the said 34 BIWs and 2 sets of panels. Further, in terms of the agreement, soft jigs and pressing and hammering tools were required to be dismantled and disposed of six months after the completion of last shipment of BIW and panels. 2.8 Scrutiny of bills of entry relating to imports made by M/s. Mahindra revealed that M/s. Mahindra did not include in the assessable value of the goods imported, the amounts of UK $ 7,21,366.75 paid to HW for the design and engineering of BIW and panels and Japanese % 23,28,10,165 paid to M/s. Nichimen towards design and engineering of models, soft tools, soft jigs/fixtures and assembly fixtures. In terms of Rule 4 read with Rule 9 (1) (b) (ii) and rule 9 (1) (b) (iv) of the Customs (Valuation) Rules, 1988 read with Section 14 of the Customs Act, 1962, the aforesaid amounts were required to be added to the assessable value of 34 BIWs and 2 sets of panels inasmuch as the same were manufactured by using models, soft tools, soft jigs/fixtures and assembly fixtures by M/s. Nichimen/Chiba, Japan. 2.9 An importer of goods into India is ....
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....s to the show-cause notice and grant of personal hearing, the Commissioner of Customs, New Customs House, Mumbai, adjudicated the three show-cause notices vide the impugned order. The Ld. Commissioner confirmed the demand for differential Customs duty amounting to Rs. 7,78,67,696/- after holding that the balance amount of Rs. 1,71,72,092/- is time barred (beyond the extended time limit of 5 years). The Commissioner further held that no interest is payable under Section 28AB of the Customs Act, 1962 on the duty demanded since the importer had already paid the differential amount of customs duty even before the issue of show cause notice. The Commissioner also held that 34 BIW and one set of panels, which were imported, totally valued at Rs. 17,76,27,591/- were liable to confiscation under Section 111 (m) of the Custom Act, 1962 and since the goods were not available for confiscation, the Commissioner imposed a fine of Rs. 3 Crore in lieu of confiscation. The Commissioner imposed a penalty of Rs. 1.5 Crore on M/s. Mahindra under Section 112 (a) of the Customs Act, 1962 and a penalty of Rs. 5.00 lakhs on Shri. R.U. Prabhu, Dy. General Manager (Capital Pur....
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.... 4.1.1 In support of the above convention, the Ld. Counsel relies on the judgment of apex Court in the case of CCE Vs. Cotspun Ltd., reported in 1999 (113) ELT 353 (SC) wherein the apex Court held that show-cause notice under Section 11A of the Central Excise Act, cannot be issued contrary to approved classification list. Similarly in the case of CC, Mumbai Vs. K.C. Shah & Others, reported in 2004 (64) RLT 314 (T), this Tribunal had held that where final assessments have not been reviewed under Section 129D, notice of demand under Section 28 cannot be issued. 4.1.2 The Ld. Counsel further relies on the judgement of the apex Court in the case of Priya Blue Industries Ltd., Vs. CC, reported in 2004 (172) ELT 145 (SC) wherein the apex Court held that in a case where the importer has not challenged the order passed while assessing the bill of entry, the refund claim is not maintainable. The Ld. Counsel also relies on the judgment of the apex Court in Additional CCE Vs. Mahindra & Mahindra Ltd., reported in 2000 (120) ELT 290 (SC) wherein it was held that even when demand is sought to be raised under Section 11A of the Central Excise Ac....
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.... 500 components and 250 assembly drawings, which clearly shows that engineering design of the vehicle was undertaken in India and it was these drawings and designs, which were given to Nichimen, Japan in the form of DAT tapes to enable them to make the prototypes according to M/s. Mahindra's specifications. 4.2.1 The extensive engineering done in India cannot be referred to as some preliminary work as held by the Commissioner. Therefore, the question of adding the amount paid to HW, UK, in the value of the prototype bodies received from M/s.Nichimen, Japan cannot arise. Rule 9 (1) (b) (iv) of the Customs (Valuation) Rules deals with '(iv) engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods'. Thus, the said clause deals with assists, which are necessary for the production of imported goods. Thus, this clause can be invoked only when the assists are necessary for the production of imported goods and it should be undertaken elsewhere than in India. It is their contention that the sketches obtained from HW, UK cannot be&n....
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....ed and agreed to the fact that this is a design, engineering and prototype building programme...... Prior to the imports under consideration, there was no body/vehicle named as Scorpio existing anywhere in the world. The body was created by Nichimen, Japan at the appellant's request and pursuant to the agreement with the appellants. The design of Scorpio body was for the first time registered under the Design Act, 2000 in India by the appellants as evidenced from the copy of the certificate issued in this regard. The certificate enumerates various novelty aspects in the design of the Scorpio body. For a design to be registered, it must be both new and original. Thus an IPR in the body was created for the first time ever which at all times vested in the appellants. This is clear from clause 13 relating to intellectual property right in the agreement (dated 20/11/98) wherein it is provided that: "The technical information generated/developed/ obtained by Nichimen and/or its sub-contractor pursuant to this agreement shall become the sole and exclusive property of M&M, and Nichimen nor its sub-contractor shall not be&nb....
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.... lakhs when sold in India. 4.5.1 As per interpretative note to Rule 9 (1) (c) of the Customs (Valuation) Rules 'the royalties and license fees may include among other things, payments in respect of patents, trademarks and copy rights. However, the charges for the right to reproduce the imported goods in the country of importation shall not be added to the price actually paid or payable for the imported goods in determining the customs value.'. This interpretative note makes it very clear that the payments made for the right to reproduce cannot be part of the customs value, whether it be under Rule 9 (1) (c) or 9 (1) (b). 4.6 The reliance placed by the department in the case of Associated Cement Companies Ltd., reported in 2001 (128) ELT 21 (SC) is of no help as the case pertained to valuation of drawings imported through a courier. In that case, the Supreme Court held that IPR when put on a media is to be regarded as an article and duty is payable on the total transaction value since there is no scope for splitting the engineering drawing or the encyclopedia into intellectual input on ....
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.... capability of the pattern and the quantity of castings that can be manufactured from it and thus working out the cost to be apportioned per unit. In the instant case, even though the appellant had imported only 34 bodies and 2 panels for testing and validation, Nichimen were capable of producing 150 bodies and therefore, the cost towards such tools, jigs, fixtures etc. should be apportioned over 150 bodies and not 34 bodies/2 panels as has been done in the instant case. Therefore, the proposal in the show-cause notice apportioning the entire cost on 34 BIWs/2 panels is against well settled principles of valuation. 4.9 The show-cause notice was issued by the DGCEI without jurisdiction. Though the show-cause notice has been issued in terms of Notification No.31/2000-Cus (NT) dated 09/05/2000, the said notification does not specify any area in respect of which the Additional Director General could have issued the notice. The counsel relies on the judgments of this Tribunal in the following cases: i) C.K. Geever Vs. CC (Seaports-Imports, 2009 (235) ELT 304 (T) ii) Copier Force India Ltd., Vs. CC (I) Chennai, 2009 (235) ELT 282 (T) In the light of these decision....
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....decision is applicable to the facts of the present case. Since in the present case, the goods imported are prototypes, they cannot be considered as goods liable to Customs duty. 4.12 The demand for countervailing duty (Addl. Customs duty) paid under section 3 of the Customs Tariff Act, 1975, cannot be made under the proviso to Section 28 as the appellants had taken Modvat/Cenvat credit of the entire countervailing duty and there cannot be any suppression for the same. 4.13 The whole dispute pertains to interpretation of law where certainly two views are possible. Under such circumstances, the appellant cannot be faulted when subsequently it was found that the belief held by the appellants was untenable in law. 4.14 The confiscation of goods and imposition of fine in lieu thereof is untenable in law. In this case, the goods are not available for confiscation and they were cleared on payment of proper duty and the clearance was not provisional. Therefore, imposition of fine is not warranted and relied on the following judgements: i) Shiv Kripa Ispat Vs. CCE 2009 (235) ELT 623 (T-LB) ii) Bombay High Court order in Customs Appeal No.70 of 2009 in ....
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....nbsp; need for any amendment to Section 28 of the Customs Act, 1962 and, therefore, the question of any retrospective validation similar to Section 110 of the Finance Act, 2000, in the Customs Act, did not arise at all. 5.2 The Special Consultant points out that on the Customs side, the assessment of duty is made first either under Section 17 or section 18 and then clearance is given under Section 47. The clearance under Section 47 cannot be said to be final as can be seen from the definition of assessment under sub section 2 (2) of Customs Act, 1962, which reads as follows: "Assessment includes provisional assessment, reassessment and any order of assessment in which the duty assessed is nil". 5.3 In a Customs case, short levy or non-levy can be detected only after clearance of the goods. Therefore, for raising any demand under Section 28 of the Customs Act, there is no requirement of reviewing the assessment order on the bill of entry. The demand can be straightaway raised within the prescribed time limit under Section 28 and this position of law has been upheld by the hon'ble apex Court in the case of....
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.... 5.5 As regards the contention of the appellant regarding the jurisdiction of ADG, DGCEI, Mumbai, for issue of show-cause notice in the present case, the Special Consultant submits that only three show-cause notices have been issued by the ADG, DGCEI, Mumbai. Vide notification No.31/2000-Cus (NT) dated 09/05/2000 (as amended), the Central Government has appointed officers of DGCEI as officers of Customs and invested in them all the powers exercisable by an officer of Customs. As per sub Section (2) of Section 1, the Customs Act extends to the whole of India. From this, it is automatically follows that the DGCEI officers, who have been made officers of Customs will have all India jurisdiction. Therefore, non-mention of jurisdiction in the notification does not mean that the DGCEI officers have no jurisdiction at all. Even if it is assumed that ADG DGCEI, Mumbai, does not have all India jurisdiction, it cannot be disputed that he has jurisdiction over Mumbai zone. In the present case imports have been made through three Custom Houses, namely, New Customs House, Mumbai, Jawahar Customs House, Nhava Sheva Port and Air Cargo Complex....
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....8 The Ld. Consultant relies on the judgment of the hon'ble apex Court in the case of Andhra Petrochemicals Vs. CC, Madras, 1997 (90) ELT 275 (SC). In this judgement, the hon'ble apex Court held that designs and engineering charges are loadable when the goods imported are specially manufactured on the basis of design and engineering specifications provided by the foreign supplier to the third party who have actually manufactured the goods. In the present case, the design and engineering drawings were supplied by HW, England to M/s. Mahindra who after making improvements supplied the same to Nichimen, Japan, who got the BIWs and panels made by Chibha, Japan. The only difference, if at all, in the present case is that instead of sending the designs and engineering drawings directly to Nichimen, Japan by HW, England, the same were sent to Nichimen, Japan via India, i.e., through Mahindra. This, in no way alters the factual position that the design and engineering drawings were made outside India by HW and eventually supplied to M/s. Nichimen/Chiba, Japan, who manufactured the BIWs and panels using the said designs and engineering drawings. 5.9 T....
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....visions of Rule 9 (1) (b) (iv) are clearly attracted. 5.12 As regards the contention of the appellant that the income tax amount deducted by way of TDS should be excluded while arriving at the assessable value of the goods under importation, the Ld. Consultant submits that this contention has no merits. He submits that as per the agreement entered into with M/s. Nichimen, all taxes/levies by the Indian Income tax authorities on Nichimen shall be borne by M/s. Nichimen and any increase thereon shall also be borne by M/s. Nichimen and any decrease will be to the benefit of M/s. Nichimen. M/s. Mahindra shall deduct the withholding tax assessed on Nichimen's income and pay the same to the Indian Income tax authorities. It is thus clear that M/s. Mahindra paid income tax on behalf of the Nichimen on the latter's income in India. Therefore, the amount of income tax paid to the Central Government from the total payment made to Nichimen cannot be deducted while arriving at the assessable value of the imported goods. So is the case in respect of income tax payments in respect of HW. Such payment of taxes, duties, etc. are reciprocal. What....
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....d HW. In the annexure-I, there is a declaration which is required to be signed by the importer which says that information furnished above is true, complete and correct in every respect. There is a further declaration that the importer will undertake to bring to the notice of the proper officer, any particulars which subsequently comes to his knowledge which will have a bearing on valuation. This declaration was signed by the importer. However, at no stage the importer brought to the notice of the Customs the fact of payments made to Nichimen and HW. But for the intelligence received and developed by DGCEI, this fact would not have come to the notice of the department. The law requires the importer to give the details of payments made in connection with the imported goods. It is not for the importer but for the Customs to decide whether any charges are required to be included in the value of the imported goods. Further, the importer in this case is a well known corporate body. They cannot be presumed to be unaware of the requirements of law. Thus, it is a clear case of suppression of facts and mis-declaration of value with intent to evade Customs duty. In re....
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....ther, it was a case of mis-declaration of value of imported goods by suppressing material facts. Therefore, the provisions of Section 28AB could be rightly invoked for recovery of interest on the duty demanded and the Ld. Commissioner made an error in not charging interest on the amount of duty confirmed. Therefore, the impugned order of the Commissioner relating to non-levy of interest on the duty confirmed requires to be set aside and the appeal of the department in that regard allowed. 6. We have considered the rival submissions very carefully. 7. Regarding the contention of the appellant that the demand of duty under Section 28 of the Customs Act, 1962 is not sustainable because the department did not review the assessments made in the bills of entry at the time of importation under Section 129D does not have any legal basis. The same issue came up before the hon'ble apex Court in the case of UOI Vs. Jain Shudh Vanaspati Ltd case cited supra and the hon'ble apex Court observed as follows: "It is patent that a show cause notice under the? provisions of Section 28 for payment of Customs duties not levied or short-levied or erroneously refunded can be ....
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....ously refunded can be issued only subsequent to the clearance of the goods under Section 47 of the Act vide Union of India v. Jain Shudh Vanaspati Ltd. [1996 (86) E.L.T. 460 (S.C.)]. Therefore, as rightly held by the Tribunal, if the contention of the appellant's counsel that when the goods were already cleared, no demand notice can be issued under Section 28 of the Act is accepted, we will be rendering the words "where any duty has been short-levied" as found in Section 28(1) of the Act as unworkable and redundant, inasmuch as the jurisdiction of the authorities to issue notice under Section 28 of the Act with respect to the duty, which has been short-levied, would arise only in the case where the goods were already cleared. In view of the clear finding with regard to the misdeclaration and suppression of value, which led to the under-valuation and proposed short-levy of duty, we do not see any lack of jurisdiction on the part of the adjudicating authority to issue notice under Section 28(1) of the Act." 7.3 The SLP filed against the order of the Madras High Court was also dismissed by the hon'ble apex Court reported in 2007 (209) ELT A61 (SC). The reliance placed by th....
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....on of the appellant seems to be that in Notification No.31/2000, the area of jurisdiction of the DGCEI officers has not been specified. If no area is specified, it has to be presumed that the jurisdiction is all India. In any case, in the instant case the show-case notices have been issued by the ADG, DGCEI, Mumbai, whose area of jurisdiction covers the entire Mumbai zone. In the instant case the imports have been taken place through various ports /airport situated in the Mumbai zone. Therefore, even though notification 31/2000 does not specify any jurisdiction, the ADG, DGCEI, Mumbai can issue show-cause notices with respect to offences/violations, which have been taken place within his jurisdiction. Hence, we do not find any infirmity or lack of jurisdiction in the show-cause notices issued by the ADG, DGCEI, Mumbai in the instant case. Appellant has placed reliance on Devilog Systems India Vs. CCE, Bangalore, reported in 1995 (76) ELT 520 (Kar) decided by the hon'ble High Court of Karnataka. The facts of that case are quite different. In that case, the goods were imported through Madras Port but cleared for home consumption through ICD, Bangalore. The....
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....HW is willing to provide Mahindra with the necessary study and assistance therefor; AND WHEREAS the Parties have thought it expedient to put forth the terms and conditions in writing as hereinafter appearing. ARTICLE 1 DEFINITIONS As used in this Agreement, the following terms have the following meanings: 1.1 'PROJECT' shall mean the concept and feasibility phase of the programme. The details of the Project are as provided in Article 2 and in Appendix A hereto. 1.2 'STAFF' means......... 1.3 'INFORMATION' means all designs, models, technical documentation, calculations, data and all other information developed or produced by HW for Mahindra in pursuance of the Project. ARTICLE 2 SCOPE AND DURATION OF PROJECT 2.1The total Project shall consist of the concept and feasibility design and engineering of the IDAM vehicle as represented by the already Mahindra approved full size clay model. The team to undertake this programme phase shall be comprised of both HW and M & M staff and shall be located at HW premises for an estimated twenty-one (21) weeks. For details of work scope see Appendix A. ARTICLE 3 SERVICES AND INFORMATION TO B....
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....W dated 4th November, 1996. "CONTRACT AGREEMENT CAD SURFACE DEVELOPMENT Entered into on 4th November, 1996 WITNESSETH WHEREAS, Mahindra is a manufacture and exporter inter alia of 4 wheel drive vehicles; AND WHEREAS HW is an international consultancy specialising in automotive design, engineering and product development; AND WHEREAS Mahindra has approached HW for CAD surface development on a 2/4 wheel drive vehicle; AND WHEREAS HW is willing to provide Mahindra with the necessary study and assistance therefor; AND WHEREAS the Parties have thought it expedient to put forth the terms and conditions in writing as hereinafter appearing. ARTICLE 1 DEFINITIONS As used in this Agreement, the following terms have the following meanings: 1.1 'PROJECT' shall mean CAD surface development. The details of the Project are as provided in Article 2 and in Appendix A hereto. 1.2. 'STAFF'- means...... 1.3 'INFORMATION'- means all designs, models, technical documentation, calculations, data and all other information developed or produced by HW for Mahindra in pursuance of the Project. ARTICLE 2 SCOPE AND DURATION OF PROJ....
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....plied by Mahindra and these sketches were brought into India by the engineers of Mahindra and those had to be worked upon for more 1= years to convert them into usable engineering drawings based on which the BIWs and the panels could be manufactured. The engineers of Mahindra in India worked upon these sketches and produced 750 engineering drawings, which were then sent to Nichimen, Japan for further use. In other words, the appellant contends that there is no proximate nexus between the engineering sketches supplied by HW and import of goods from Nichimen, Japan and, therefore, the cost of the engineering sketches provided by HW cannot be included in the assessable value of BIWs and panels manufactured and supplied by Nichimen, Japan. 9.3. The agreement dated 22/10/96 related to concept and feasibility design and engineering of the IDAM vehicle and these included designs, models, technical documentation, calculations, data and all other information developed or produced by HW for Mahindra. The project consisted of concept and feasibility design and engineering of the IDAM vehicle as represented by the already Mahindra approv....
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....lly contrary to the terms and conditions of the agreement entered into with HW and also the statements given by the Project General Manager and Head (Program Management), who have very clearly admitted that the feasibility design and engineering and the CAD surface development provided by HW had a close nexus with design and production of BIW. As per the statement of Sri. Vasudevan, while the initial styling of BIWs and panels was done by the engineers of Mahindra in India, subsequently, the design house facility of HW was used by the engineers of both Mahindra and HW. He has further admitted that the design and engineering of said BIWs was carried out by HW England and fine-tuned in India by the engineers of Mahindra and these engineering designs and specifications were given to M/s Nichimen for the manufacture of BIWs by using the soft tools and soft jigs/fixtures at M/s. Chibha, Japan. From these statements all the top officials of the appellant company, who were concerned with the project and also from the terms and conditions of the agreement entered into with HW, it is clear that the designs and sketches provided by HW had proximate nexus with the desi....
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....id Customs Rules. In the instant case, in respect of engineering designs and surface development designs provided by HW these have been undertaken in UK in terms of the agreement. As confirmed by the statements of top officials of the appellant firm, these designs, whether they be sketches or plans, have been used in the production of BIWs, which were imported. It is not necessary that they have to be used as such or they need to be fine-tuned before further use. So long as the sketches, plans and drawings have been used in the manufacture of BIWs, whether directly or indirectly, it does not make any difference. From the evidences available on record, it is amply clear that the drawings, designs, sketches, plans, etc. supplied by HW, England in the instant case have actually been used in the manufacture of BIWs and panels by M/s Nichimen, Japan and, therefore, their cost is includable in the value of BIWs and panels imported from Japan and we hold accordingly. 9.6 The appellant, during the course of argument, made a point that the drawings and designs (supplied by M/s HW, UK) were exempt from payment of customs duty when imported from abroad at the releva....
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....d agreement was a supplemental agreement dated 4/1/2000 for engineering and design changes involving a payment of JY 5,23,95,100. It will be useful to see relevant terms and conditions in respect of these agreements. The relevant extracts from the 2nd and 3rd agreements are reproduced below:- "Agreement No.IDAM/REV/RUP/02 dated 20/11/98 - Technical Consultancy & Engineering Agreement. AND WHEREAS M&M has approached, NICHIMEN for the design and engineering of models, soft tools and soft jigs/fixtures for development for the Scorpio programme. AND WHEREAS NICHIMEN has expressed its willingness for the design and engineering of models, soft tools and soft jigs/fixtures for development for the Scorpio programme. 1. DEFINITIONS a) 'SCORPIO PROGRAM' shall mean two or four wheel drive utility vehicles to be manufactured by M&M under the IDAM Project.; ............................................ i) 'WORK' shall mean the design and engineering of MODELS, SOFT TOOLS and SOFT JIGS/ FIXTURES as set forth in Clause 3 - SCOPE OF WORK. 2. PURPOSE OF THIS AGREEMENT It is acknowledged by the Parties that the p....
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....k) Check weldability and fitability of all panels, which forms the body shell and provide feedback of changes required in the panel drawings to ensure weldability and fitability, and give feedback to M&M. 4. ..................................................................... 5. ..................................................................... 6. ENGINEERING CHANGES i. Both the Parties have acknowledged and agreed the fact that this is a design, Engineering, prototype building program and there are bound to be design changes from time to time during development stage. ii. As per the time schedule, two (2) ENGINEERING CHANGE are expected during design stage. However M&M shall be allowed to request one additional ENGINEERING CHANGE i.e. total three ENGINEERING CHANGE'S are allowed if required. iii. ENGINEERING CHANGES will be incorporated in such manner as that all the DESIGN CHANGE which are informed and delivered to NICHIMEN on or before the respective deadline date, as mentioned in the time schedule of Annexure-A, will be incorporated to the nest batch of the WORK. 9. CONSIDERATION In consideration of TECHNICAL CONSULTANCY & ENGINEERING along with ....
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....oduced below:- "Now it is agreed by and between the parties as follows: I. Nichimen shall carry out design change as requested by M&M in accordance with the specifications set out in Data Cartridge tapes numbers from 1 through 10, which shall be provided by M & M to Nichimen. II. As consideration for providing the design change, M&M shall pay to Nichimen an additional amount of JY 52,395,100. Pursuant to the foregoing, clause 9 of the Main agreement shall be modified to read as under:". 10.2 The appellant's contention for the exclusion of payments made to Nichimen, Japan, under the two agreements cited above is that if this value is included in the assessable value of the goods under importation, then the assessable value per body will work to Rs. 49 to Rs. 51 lakh whereas the complete vehicle is being sold in the market at a price ranging from of Rs. 6 to 8 lakhs. Therefore, there is something fundamentally wrong in the value computed in the show-cause notice. An additional argument has also been made that the payments made to Nichimen also created IPR in favour of the appellant, which can be exploited in India apart from tangible bodies and, hence, tot....
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....to be necessarily added to the value of the imported goods for the purpose of levy customs duty in terms of the provisions of Rule 9 (1) (b) (ii) and (iv) of the Customs Valuation Rules and we hold accordingly. 10.3 The next contention of the appellant is that the payment made to Nichimen is not only for the product but also for the IPR involved in the goods and the appellant has registered the design of the body subsequently in India under the Designs Act, 2000. This contention of the appellant is not tenable for the following reasons. 10.4 According to clause 9 of the agreement dated 20/11/98, the payment has been made for the technical consultancy and engineering along with technical services and not for any IPR. Therefore, in terms of the agreement entered into between two parties it is clear that consideration, which has been paid by the appellant to Nichimen under the agreement dated 20/11/98 and supplemental agreement dated 04/01/2000 is only for technical consultancy and engineering along with technical service and not for anything else. No doubt, there is a clause which states that the technical information generated/developed/obtained by Nichimen and or ....
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....ign or article covered by the design. Thus, merely because the Nichimen has produced the design in the instant case, it does not mean that they can claim the ownership of the IPR in the design. Therefore, clause 13 relating to IPR/title has to seen as a clarificatory/explanatory clause so as to remove any doubt/confusion in the matter. Therefore, merely because there is an IPR clause in the agreement, it does not mean that the payment made is for the IPR. If the appellant so desired that part of the consideration was for IPR, there was nothing which prevented them from specifying the consideration for the IPR separately. In the absence of any such specification, it has to be presumed that the consideration has been paid for the goods/services under import. Clause 9 of the agreement with M/s Nichimen very clearly states that the consideration is for the technical consultancy and engineering along with technical services provided by Nichimen. This is further amplified in sub-clause (i) of clause 9 which reads as - charges payable for design, engineering and development charges of MODEL, SOFT TOOL, DIES, SOFT JIGS/FIXTURES in the sum of Japanese Yen ".......... Furth....
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....m, etc.), then the payment for the same has to be part of the transaction value of the goods imported. Viewed from this angle also, there is no way the payments made to M/s Nichimen under the technical consultancy and engineering including technical services can be excluded from the value of goods imported. 10.6 In Tata Consultancy vs. State of Andhra Pradesh [2004(178)ELT 22], the Supreme Court while holding canned software recorded on floppy/CD/hard drive to be goods on which sales tax was leviable made the following observations:- "A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes and marketed would become 'goods'. .........In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just the media which by itself has very l....
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....that the Tribunal was right in holding that the agreement relating to purchase of equipment cannot be disassociated from other agreements and the authorities were right in loading the design and engineering charges by $ 11.50 lakhs owe to the value of the imported equipment under Rule 9 read with Rule 4 of the Customs Valuation (Determination of the Price of Imported Goods) Rules, 1988". 10.8 Similarly in the case of Gujarat Mineral Development Corporation Ltd., Vs. CCE & C, Ahmedabad 2005 (190) ELT 5 (SC) a question arose before the apex Court whether the design and engineering charges going as input into manufacture are includible in the transaction value of the imported goods. In that case the apex Court held that the value of designs and engineering charges going as input into manufacture are includable in the taxable value of goods imported and remanded the matter back to the appellate Tribunal for reconsideration of their order wherein they had held that they were not so includible. A similar question arose in the case of Dabhol Power Company Vs. CC, Pune - 2004 (171) ELT 354 wherein this Tribunal held that the value of servi....
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....y of castings that can be manufactured from it and thus working the cost to be apportioned per unit'. This clarification has been given to deal with a situation where the exact number of units that can be produced with the pattern is not known. In that context it was stated that expected life and capability of the pattern should be taken into account. That is not the situation obtaining in the present case. The number of BIWs/panels that were manufactured with the aid of models, soft tools, soft jigs/fixtures in the case was clearly known. Further, there was a condition that the moulds, tools, jigs/fixtures, etc. should be destroyed after the programme is over. The total quantity of goods manufactured with the aid of these goods were 34BIWs and one panel. Thereafter, the moulds, tools, etc. were destroyed. Therefore, the cost of the moulds, tools, jigs/fixtures has to be distributed over the 34 BIWs and one panel and not on the basis of any assumed/estimated capability. The judicial decisions cited by the assessee dealt with situations mentioned in the Board's circular. When the said circular itself is not applicable to the facts of the present case, the orders cited by the....
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....hat the income tax is paid for or on the imported goods. The liability to pay income tax is on the person earning income, which is the foreign supplier. Merely, because the appellant is obliged to deduct the tax at source and pay to the exchequer on behalf of the foreign supplier, it does not mean that the tax is payable by the appellant buyer/importer or the tax is on the goods. Different aspects of a transaction can be levied to different types of taxes. As has been held by the hon'ble apex Court in the case of Federation of Hotels and Restaurants Association Vs. UOI - 1989 (3) SCC 634-'different aspects of a transaction can be subjected to different taxes, if the law so provides. As has been succinctly stated in the said case 'subject which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinct....
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....s which accrue to the seller (g) Freight (h) Insurance (i) Loading, unloading, handling charges (j) Landing charges (k) Other payments, if any. If the appellant had paid certain amounts to the foreign supplier on account of these charges, which has not been included in the invoice value, the particulars of the payments had to be declared before the Customs authorities, so that the Customs authorities can decide whether the exclusion made in the value is correct or not. Further in the said annexure-I, there is a declaration to be made by the importer stating that that the information furnished is true, complete and correct in every respect. The declaration further provides that the importer undertakes to bring to the notice of the proper officer any particulars, which subsequently comes to his knowledge which will have a bearing on valuation. In the instant case, the appellant/importer did not declare the various charges paid to HW, UK and Nichimen, Japan towards various services rendered. Thus, there is a willful mis-declaration made by the appellant with an intent to evade payment of appropriate customs duty. Theref....
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....g fraud, suppression of facts, collusion, willful misdeclaration or violation of any provisions of Act with an intent to evade duty, etc. In the instant case the imports have taken place during the period from June 1999 to July 2000. Therefore, interest on duty demanded under section 28 of the Customs Act (invoking the extended period of time) is leviable under Section 28AB, in cases involving suppression, fraud, collusion, etc. In other words, wherever short payment or non-payment of duty is on account of suppression, collusion, willful mis-statement, etc. interest was leviable under section 28. Thus, the order passed by the Commissioner holding that the appellant importer is not liable to pay interest under Section 28AB of the Customs Act is legally incorrect and therefore, this finding relating to interest needs to be set aside and the departmental appeal in this regard ought to be allowed. 17. The next issue for consideration relates to imposition of penalty on the appellant under Section 112 (a) of the Custom Act. The Commissioner has imposed a penalty of Rs. 1.5 crore on the appellant under Section 112 (a). The appellant has contes....
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.... the statute from 1988 onwards, and the said rule provided for inclusion of costs and services incurred, if any, in the transaction value of the goods imported, if such costs and services were relatable to the manufacture of the imported goods and such costs and services were incurred in a place other than India. The said Rule 9 was very much in existence at the time of importation of the goods in the instant case and it has not been amended in any manner, with retrospective effect. If any importer did not include the costs and services as provided for under Rule 9, then non-inclusion would have attracted penal action under Section 111 and 112 of the Customs Act, irrespective of who issued the show-cause notice. It is not the issue of show-cause notice which determines the liability to penalty. Liability to penalty arises if the goods are liable to confiscation under Section 111. None of these sections has been amended in any way with retrospective effect so as to bring in its purview mis-declaration of value as a punishable offence under the aforesaid sections. In the instant case what has been validated by the Fina....