TaxTMI 
TaxTMI 
2011 (8) TMI 717
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....ore, 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-White (BIW in short) and 2 sets of panels for the Sc....
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....hindra 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 full size clay model by M/s. Mahindra. The team to undertake ....
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.... 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 required to file a declaration in form Annexure-I along with th....
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....use 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 Purchase) of M/s. Mahindra under Section 112 (a) of the Customs Act, 1962. Hence, M/s. Mahindra and Shri R.U. Prabhu are in appeal before us again....
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....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 Act, 1944, the principle laid down in Cotspun case will apply and if there is an approved price list, notice under Section 11A is not maintainable. S....
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.... 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 held to be necessary for the production of the imported goods. These sketches had to be further developed by undertaking extensive work ....
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....amed 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 entitled to use the same for any purpose other than for the purpose of this agreement and shall not be entitled to apply for and register industrial property in its own name....
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.... 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 the one hand and the paper on which it is scribed on the other. In other words in the Associated Cement Company's case, the articles imported were copyrighted goods whereas in t....
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....nt 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 decisions, the present show-cause notice issued by ADG, DGCEI, Mumbai is without jurisdiction even in respect of imports made through Mumbai port, Mumbai Airport and Nhava Sheva port. 4.10 Notif....
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....untervailing 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 CC Vs. Rishi Ship Breakers iii) Bombay High Court Order in Customs Appeal No.66 of 2009 in CC Vs. Finesse Creations 4.15 Lastly, no penalty is imposable as there was no suppression or mis-statement of facts. I....
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....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 UOI Vs. Jain Shudh Vanaspati Ltd., reported in 1996 (86) ELT 460 (SC). In that case, the hon'ble apex Court held as follows: "It is patent that a show cause notice under the? provisions of Section 28 for payment of Customs du....
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....G, 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, Sahar, Mumbai, which fall within the jurisdiction of Mumbai zone. Therefore, the show-cause notices issued by ADG, DGCEI are perfectly in order and legally valid. When a similar contention was raised before this Tribunal in the case of....
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....le 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 The Ld. Special Consultant also relied on the judgment of Gujarat Mineral Development Corporation Ltd., Vs. CCE & C 2005 (190) ELT 5 (SC) wherein the hon'ble apex Court held that design and engineering charges are addable to the assessable va....
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..... 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. Whatever taxes, duties, etc. are payable in India will be paid by M/s. Mahindra and wherever similar taxes are payable in England, it will be paid by HW. Therefore, the contention that interpretative note to Rule 4 of Customs Valuation Rules, 1988 provides for&....
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....o 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 respect of similar four other cases, the appellant admitted the duty liability before the hon'ble Settlement Commission and discharged the duty liability along with interest. In the light of these, the Special Consultant submits that the appellant/importer suppress....
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....terest 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 issued only subsequent to the clearance under Section 47 of the concerned goods. Further, Section 28 provides time limits for the issuance of the show cause notice there under commencing from the "relevant date"; 'relevant date' is defined by sub-section (3) of Section 2....
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.... 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 the appellant on the Cotspun case and Mahindra and Mahindra case cited supra does not help their cause because these decisions pertains to interpretation of section 11A of the Central Excise Act. When there are decisions by the hon'ble apex court, the hon'ble high court of Madras and ....
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....ued 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 show-cause notices were issued by the Asst. Commissioner of Customs, IAD, Madras, who was assigned the audit functions of ICD, Bangalore. There was no notification conferring powers on Asst. Commissioner, Madras for the purpose of issue of notice under Section 28 in respect of imports through ICD,....
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....ROJECT' 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 BE PROVIDED BY HW 3.1 HW shall supply Mahindra with the data specified in Appendix A in order that Mahindra may use the Product to the best advantage without delay. 3.2 HW shall at the request of Mahindra, permit a reasonable number of personnel designated by Mahindra to have the opportunity to study the design and assist in the Projec....
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....d 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 PROJECT 2.1 The total Project concerns the complete CAD development of the 'IDAM' concept clay as previously produced by Hawtal Whiting. For detailed description see Appendix A. The Total Project time shall be targeted for Twelve (12) weeks as per Article 6 herein below. Time shall be of the essence of the contract. HW sha....
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...., 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 approved full size clay model and was undertaken by a team comprising of both HW and Mahindra staff and the project was conducted at the premises of HW in UK. The information developed by HW was conveyed to the appellant M/s.Mahindra by exchange of documents, forwarding of drawings, electronic data and reports to Mahindra, or through the visits of Mahindra's personnel to HW during the period of agreement. HW is an int....
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....bsp; 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 design and manufacture of BIWs and panels imported from Japan and these were used in the manufacture of those products. Therefore the contention of the appellant regarding lack of proximate nexus does not have any basis whatsoever and is rejected in toto. 9.4 Rule 9 (1) (b) of the Customs Valuation Rules, 1988 reads as follows:- "(1) In determining the transaction value, there shall be added to the price actually paid or pa....
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....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 relevant time. There is a fallacy in this argument. To a specific query from the Bench, how these designs, drawings and sketches were brought into India from UK, it was clarified that they were brought by the engineers, who had been sent to UK. The appellant did not file any bill(s) of entry for importation of these goods and it is obvious that these drawings and sketches were brought in the personal baggage of the officials, who....
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....nd 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 purpose of this agreement is to set out the following: a) The responsibilities and obligations of NICHIMEN for providing technical services of design, engineering and development of MODELS, SOFT TOOLS and SOFT JIGS/ FIXTURES for the Scorpio Program as per the data & information provided by M&M set forth in Clause 4 of this Agreement. b) The responsibilities and obligations of M&M for providing all necessary data and information on schedule (including DESIGN CHANGE no....
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....ere 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 technical services provided by NICHIMEN, M&M shall pay to NICHIMEN a consideration of a sum of One hundred seventy seven million eight hundred twenty thousand Japanese Yen (J% 177,820,000) by telegraphic transfer with the following terms of payment. The charges for the total scope of work is as follows, i) Charges payable for Design, Engineering & Development charges of MODEL, SOFT TOOL DIES SOFT JIGS / FIXTURES in the sum of Japanese Yen One hundred seventy seven million eight hundred twenty thousand (J% 177,820....
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.... 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, total payments made/aggregate considerations paid to Nichimen cannot be considered in the assessable value of the goods imported. The agreement dated 20/11/98 is for technical consultancy and engineering and the purpose as per clause 2 of the agreement is for providing technical services of design, engineering and development of models, soft tools and soft jigs/fixtures for the Scorpio program. Without these models, soft tools, soft jigs/fixtures, the prototypes could not have been developed and without prototype, the commercial production ....
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....asons. 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 its sub-contractor pursuant to the agreement shall become the sole and exclusive property of Mahindra and Nichimen or its sub-contractor shall not be entitled to use the same for any purpose other than for the purpose of the agreement. When M/s Mahindra engaged Nichimen and its sub-contractors for the design, technical consultancy and engineering for the manufacture of BIWs, even without the specific clause relating to the IPR, the IPR in the goods would have accrued to M/s Mahindra. The IPR claimed by Mahindra is the copy right in des....
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....re 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 ".......... Further Rule 9(1)(b)(iv) covers costs and services paid for engineering, development, art work, design work, and plans and sketches. All these services enumerated in the rule have IPR in them. But the rule does not make any distinction between the IPR content of the work vis-`-vis the non-IPR content. The total cost involved for these services have to be added to the price paid or payable in determining the transaction value irrespective of whether the payment made is for IPR and non-IPR. The appellant has quoted several extracts from books relating to....
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....rogramme 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 little value. The software and the media can not be split up"'.As in the case of paintings or books or music or films, the buyer is purchasing the intellectual property and not the media.". The conclusion emerging is that a product can not be segregated in terms of the intellectual input and the medium in which it is stored. Similarly in the case of Accel Frontline Limited [2008 (227) ELT 313(AAR)], the Advance Ruling Authority held that data recorded on a medium has to be regarded as a composite goods and it can not be given dual identi....
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....e 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 services relating to drawings, data sheets, specifications, etc. were includible in the cost of equipment imported in terms of provisions of Rule 9 (1) (b) (iv) of the Customs Valuation Rules, 1988, since in the absence of these designs and engineering services the product could not have been manufactured. 10.9 In the light of the foregoing discussion and the case laws analysed above, we hold that the considerations paid to M/s Nichimen in terms of the agreements dated 20-11-98 and 4-1-2000 shall be added to the price actually paid for the imported goods in....
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....ion 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 assessee has no relevance and the argument has to be rejected outright. 12. The next issue for consideration is the appellant's claim for exclusion of income tax paid by the appellant on behalf of the foreign vendor from the taxable value of the goods imported. The appellant claims that in terms of the agreement entered into with M/s Nichimen, they have discharged the income tax liability of Nichimen by deducting the tax at source (TDS). In the case of agreement with M/s HW, UK, the appellant has paid the income tax on behalf of the foreign vendor. It has bee....
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....tels 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 distinctiveness of the aspects.". Thus there is no merit in the claim for exclusion of income tax paid on behalf of the foreign supplier from the value of the imported goods as such tax is not relatable to the goods under supply. Accordingly we find no merit in this contention and reject the same . 13. In the light of the foregoing discussion and analysis, it has to be held that charges amounting to UK 7,21,366.75 paid to M/s. HW, UK, in terms of the concept and feasibility design and engineering of the IDAM vehicle agreement dated 22-10-1....
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....at 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. Therefore, the argument of the appellant that in the instant case, the extended period of time could not be invoked to demand differential customs duty has no basis whatsoever and we totally reject the claim of the appellant in this regard. 15. The next issue for consideration is confiscability of the goods and imposition of redemption fine in lieu of confiscation. In this case, the Ld. Commissioner has held that the goods are liable for confiscation and has imposed a fine of Rs. 3.00 Crore in lieu of confiscation. Under Section 111 (m) of the Customs Act, whenever there is a misdeclaration of value or&nb....
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....ection 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 contested that imposition on two grounds. Inasmuch as the appellant has paid the duty demanded prior to the passing of the order, the penalty cannot be exceed 25% of the duty demanded. Another ground which they have adduced is that Notification No.31/2000-Cus (NT) was given retrospective effect and the action taken validated vide Section 92 of the Finance Act, 2009 and an explanation was also provided therein stating that "Explanation. - for the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if the sa....
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....ould 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 Finance Act, 2009 is the action taken by DGCEI officers in respect of issue of show-cause notices for Customs violations. This has nothing to do with the confiscability of the goods, if they had been imported in violation of the provisions of Customs Act. Therefore, in the instant case, the penalty has been rightly imposed under Section 112 (a) by the adjudicating authority for mis-declaration of value and consequent evasion of customs duty by deliberately suppressing material facts. The appellant has also made a point that penalty cannot be exceed 25% of the duty liability. In the instant case, the penalty impose....