TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 181
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....ed tenders for supply of spare parts for P&H Shovel. 7. On 28.03.2000, M/s Harnischfeger Corporation, USA submitted its quotations through its distributor M/s Voltas Limited. In the terms and conditions, towards engineering and technical service fees an amount of 8 percent of the Free on Board (FOB) amount valued on pro-rata basis against each shipment, was to be paid to M/s Voltas Limited, Kolkata in Indian rupees. Payment to be made to M/s Voltas Limited was not to be deducted from the FOB amount. 8. On 03.04.2000, M/s Voltas Limited submitted detailed quotation on behalf of its principal M/s Harnischfeger Corporation, USA (foreign supplier). 9. Purchase order was placed on 20.12.2000 with the foreign supplier for supply of spares required for P&H Shovel. Clause 5 of the purchase order is relevant and reads thus: 5. Terms of payment: (A) 100% of the FOB value shall be paid in US$ by means of a confirmed, divisible and irrevocable letter of credit which will be established in your favour through the State Bank of India, Corporate Accounts Group Br. 34, J.L. Nehru Road, Calcutta- 700071 (India) or their branch at USA against presentation of the following documents, in three ....
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....or ensuring optimum availability of P&H Shovels are as under: Regular product support visits by Voltas Service Engineers to all the operational mine sites for inspection of the shovels., providing technical updates, guidance on reports and maintenance at 'No Cost' to the projects. Assist Project Engineers identity actual requirement of spares for planned procurement, scanning of part nos. in the enquiry/tender to ensure that correct parts are quoted, scrutiny of orders and L/C to ensure shipment of the right parts. Extend assistance by providing technical write-ups for speedy custom clearance. Assist customer doing insurance survey at docks. Coordinate with various agencies in regard to the discrepancies in supplies for prompt replacement etc. In view of the above, payment of engineering & service charges at the rate of 8% (eight percent) of the net FOB value of the order will be made on pro-rata basis to M/s Voltas, Calcutta in equivalent Indian Rupees at the exchange rate (BC selling) prevailing on the date of the bill of lading within 21 days from the date of submission of the following documents. 1) Pre-receipted & stamped bill: original + 2 copies 2) Full set of no....
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....rview of Rule 9(1)(a) and Rule 9(1)(e) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (briefly 'the Customs Valuation Rules' hereinafter). Hence, the engineering and technical service fees/charges were includable in the assessable value of the imported goods. Commissioner (Appeals) confirmed the order passed by the Assistant Commissioner and vide the order dated 21.06.2004 dismissed the appeal. 13. This order of the Commissioner (Appeals) dated 21.06.2004 came to be challenged by the appellant before the CESTAT which was registered as appeal No.CDM-164/2004. CESTAT vide the order dated 20.04.2010 ('impugned order' hereinafter) held that payment made by the appellant to M/s Voltas Limited was only in connection with the sale of goods because M/s Voltas Limited was an agent/distributor of the foreign supplier. CESTAT was of the view that payment made by the appellant to M/s Voltas Limited had no nexus to any services rendered by M/s Voltas Limited but was a condition of sale. Holding that payment made to M/s Voltas Limited had a direct nexus to the value of the goods imported, CESTAT rejected the appeal. 14. Hence, the present appeal. 15. Learned c....
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....er. 16.1. He also adverts to the documents titled as Voltas Limited Terms and Conditions and submits therefrom that it was clearly mentioned therein that prices quoted were exclusive of its engineering and technical service fees. Payment of 8 percent of the FOB price to the Indian agent was a condition of sale of the imported goods. Such payment was made purely as a condition of sale of the imported goods. It was based on an understanding between the foreign supplier and M/s Voltas Limited. Various services provided by M/s Voltas Limited were on behalf of the foreign supplier as its agent. The services rendered were to identify the requirement of the spares to be imported and therefore the payments so made had a direct nexus to the imported goods. As the local agent, services provided by M/s Voltas Limited were pre - importation activities and aimed at making the sale of spares by the foreign supplier effective. 16.2. He finally submits that there is no merit in the appeal and the same should be dismissed. 17. Submissions made by learned counsel for the parties have received the due consideration of the Court. 18. We have already extracted Clause 5 of the purchase order issued ....
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....was also to assist the appellant during insurance survey at the port after importation of the identified spares. Such services were related to procurement of spares by the appellant and for the smooth sale of spares by the foreign supplier. 21.1. Appellant and its subsidiaries had no contract with M/s Voltas Limited for providing such services. The charges amounting to 8 percent of net FOB value were paid to M/s Voltas Limited as engineering and technical service charges for smooth importation of the goods. 21.2. Engineering and technical service charges paid to the local agent M/s Voltas Limited were 8 to 10 percent of the transactions of the appellant with the principal i.e. the foreign supplier. Such charges were paid as a recompense for the services rendered towards making the sale effective. Hence, engineering and technical service charges were nothing but commission. 21.3. Observing that the sale had become conditional in view of the conditions posed in quotation by the foreign supplier, the consequential engineering and technical service charges were fully covered by Rule 9(1)(e) of the Customs Valuation Rules. Assistant Commissioner referred to the Note to Rule 4 of the ....
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....9(1)(e) of CVR'88 and accordingly, the aforesaid charges shall be added/includible in the transaction under Section 14 of the Act read with provisions of CVR'88. 24.1. Looking into the nature of imports, Commissioner (Appeals) held that services provided by the Indian agent was on behalf of the foreign seller and was directly related to the sale of imported goods. Provision for such service and payment of service charges constituted a condition of sale. In such circumstances, the first appellate authority upholding the view taken by the Assistant Commissioner held that engineering and technical service charges were includible in the assessable value of the imported goods. 25. When this order was appealed against, CESTAT vide the impugned order held: 6.1 We have carefully considered the submissions from both sides and closely examined the records produced. It is apparent that there is agency/distributor agreement entered into between Voltas Ltd. and the American based supplier viz. Harnischfeger Corporation, U.S.A. The documents such as purchase order of the appellant, the quotation by the American supplier and documents of M/s Voltas Ltd. relied upon clearly referred M/....
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....be, in the course of international trade, where- (a) the seller and the buyer have no interest in the business of each other; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale: Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50; (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf. (2) Notwithstanding anything contained in sub-section (1) or sub-section (1A) if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. (3) For the purposes of this section- ....
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....rials; * * * * * (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable. 29. Rule 12 of the Customs Valuation Rules says that the interpretative notes specified in the schedule shall apply for the interpretation of the rules. In the Note to Rule 4, it is stated: The value of imported goods shall not include the following charges or costs, provided that they are distinguished from the price actually paid or payable for the imported goods: (a) Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment; (b) The cost of transport after importation; (c) Duties and taxes in India. 30. In J.K. Corporation Limited (supra), this Court considered the question as to whether customs duty would be payable on the purchase price of the goods by adding the value of the license and technical knowhow to the value of the imported goods.....