TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 1045
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....00 2 Blower part of plant and machinery to manufacture spandex yarn 4 84482000 3 Solvent Condensate facility part of plant and machinery to manufacture spandex yarn 2 84482000 The Bill of Entry was assessed provisionally on 23.09.2011, the appellant was asked for submission of installation certification from the relevant Excise office/Chartered Engineer and also to inform about charges for license fee/ Technical know-How, the supervision charges for erection and commissioning of said imports. The Lower Authority has included in the assessable value the charges for erection and commissioning amounting to Rs. 4,19,00,000/- and the amount of license fee of Rs. 3,49,12,500/-paid by the appellant to the seller in terms of the contract for purchase dated 30.07.2010. The transaction value was revised invoking provisions of Rule 9 (1)(b)(ii) and Rule 9(1)(iv) read with Rule 4 of Customs valuation Rules, 2007 and Section 14 of the Customs Act, 1962. The import were under EPCG Scheme and therefore an additional amount was debited in the EPCG license. The original adjudicating authority assessed the Bill of Entry finally under Section 18 (2) of the Customs Act, 1962 and appropriated ....
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....bai- II-2017 (357) E.L.T 801 (Tri.- Mumbai) Bright Brothers Ltd. Vs. Commissioner of Customs (i), Mumbai 2017 (346) E.L.T. 292 (Tri.-Mumbai) 6. The relevant legal provision invoked in Order-In-Original is those of Rule 10 of the Customs Valuation Rules, 2007 which is reads as under: "10. Cost and Services.- (1)In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods.- (a) the following to the extent they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods, namely:- (i) commissions and brokerage, except buying commissions; (ii) the cost of containers which are treated as being one for customs purposes with the goods in question; (iii) the cost of packing whether for labour or materials; (b) The value, apportioned as appropriate, of the following goods and services where supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export of imported goods, to the extent that such value has not been included in the price actually paid or payable, namely:- (i) materials, c....
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....uction of Spandex yarn for textile application. A perusal of the Para 2.2 of the contract shows as follows:- 2.2 SCOPE OF WORK Under this Contract, the Seller has agreed, for consideration separately Identified and concurred, to perform the following activities: (a) Supply of basic and detailed engineering drawings and designs in relation to the setting up of the Plant (Refer, Article 3 of this Contract); (b) Supply of the Equipment by the Seller and all engineering and technical drawings and designs in relation thereto (Refer, Article 4 of this Contract); (c) Supervision of erection of the Plant (Refer, Article 5 of this Contract); (d) Supervision of commissioning of the Plant: (e) Grant of licence of process know-how for production of Spandex yarn by using the Plant. (Refer, Article 6 of this Contract); and, (f) Executing the performance Test-Run." From the above clause, it is apparent that the multiple activities are being done by the seller for the buyer. 8.1 The relevant para of the contract between parties reads as follows:- "6. LICENCE OF PROCESS KNOW-HOW 6.1 The Seller hereby grants to the Buyer, a licence to use the technical information/ pr....
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....ant shall be erected, commissioned and started-up under the Instructions of the Seller, directly or indirectly by the Buyer. 5.4 The Seller undertakes and warrants that the supervisory services for supervision of erection of the Plant shall be completed (Mechanical Completion) within a period of one hundred and fifty (150) days from the date of commencement of erection of the Plant. Commissioning and Test- Run of the Plant shall be within 90 days from StartUp date, as per 1.2.12. 5.5 The Parties agree that the aforesaid time period of one hundred and fifty (150) days is of the essence of the obligation stipulated under this article and the Buyer shall, in addition to any right to damages or indemnity that the Buyer may have under this Contract, be free to terminate this Contract so far as and to the extent that the same relates to supervision of erection of the Plant in case the Start Up of the Plant is not successfully completed within the aforesaid period of one hundred and fifty (150) days due to the Seller's reason. For the removal of doubts, and subject to the provisions of clause (3) of article 26 hereof, it is clarified that the termination by the Buyer, under this....
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....R's facilities." 3. Though the Commissioner included the aforesaid value the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as 'CESTAT') has vide the impugned judgment dated 22-7-2005 [2005 (192) E.L.T. 1104 (Tri. - Bang.)] held that the consideration paid for the aforesaid technical information provided by the Japanese company cannot be included as the same is for post importation. 4. On the plain reading of the aforesaid agreement, it becomes clear that the technical information which was to be provided by the Japanese company to the respondent was for the manufacture of the contract products by the respondent herein, naturally, after the setting up of the plant. This cost is, thus, incurred after the importation of the goods. 5. The matter is squarely covered by the judgment of this Court in Civil Appeal No. 3042 of 2004 dated 13-4-2015 in the case of 'Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Limited' [2015 (319) E.L.T. 202 (S.C.)]. We, thus, do not find any merit in this appeal which is accordingly, dismissed. 8.4. Similarly, in the case of Hindalco Industries Ltd -2015 (320) E.L.T 42 (SC). The Hon'ble Apex Court has observe....
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....of services which are post import. Therefore, this case is also squarely covered by the judgment of this Court in Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Ltd. [Civil Appeal No. 3042 of 2004] decided on 13th April, 2015 [2015 (319) E.L.T. 202 (S.C.)]. 11. The Tribunal, however, in the instant case, took a different view, i.e., in favour of the Revenue and against the assessee. For the reasons recorded in the judgment in M/s. Essar Steel Ltd. (supra) as well as the salient features noted while deciding the above appeal, being Civil Appeal No. 2420 of 2005, this appeal warrants to be allowed, setting aside the orders of the CESTAT. It is directed accordingly. 8.5 In the case of Inspiron Engineering P. Ltd.-2017 (357) ELT 801 (Tri.- Bom.) Following has been observed:- 5. We find that ld. Adjudicating authority after careful considerations of the reply to the questionnaire and know-how agreement came to very reasonable conclusion that value declared by the appellant is acceptable. The relevant findings of the Order-in-Original reproduced below : - As regards royalty, it is calculated on net selling price of the product by deducting the cost of standard bought ou....
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....and also discussed about calculation of the royalty on net sale price, the same was not dealt with by the Commissioner (Appeals) in the impugned order. The reasoning given by the ld. Commissioner (Appeals) that without technical knowhow the imported goods would have no value since no manufacturing activity can take place, is absurd. If this view of the Commissioner (Appeals) is accepted then invariably in every case where technical know-how agreement exist the royalty/technical know-how fees will be added in the declared value without going into the fact whether it is condition of sale or otherwise. Therefore this contention of the ld. Commissioner (Appeals) is absolutely unacceptable to us. Ld. Commissioner (Appeals) has also not dealt with vital aspect that royalty is only on net selling price of the product. It is settled legal position by Hon'ble Supreme Court in case of Matsushita Television & Audio (I) Ltd. v. Commissioner of Customs [2007 (211) E.L.T. 200 (S.C.)] that when the royalty is related to the final product on the net selling price that is without inclusion of cost of imported components it was considered that royalty is not the condition of sale of the imported goo....