TaxTMI 
TaxTMI 
2026 (5) TMI 987
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....e appellant had entered into a contract with the foreign supplier having a total contract value of EUR 4,20,000, comprising EUR 1,26,000 towards key equipment and EUR 2,94,000 towards licence, engineering package and technical assistance, as reflected in Invoice No.2022000067 dated 08.03.2022. The B/E was thereafter sent for re-appraisal and a Pre-Notice Consultation letter dated 11.05.2022 was issued to the appellant. In reply, the appellant contended that only part machinery had been imported and that licence fee and technical assistance charges were not a condition of sale of the imported goods. Not being satisfied with the explanation, the Department seized the goods on 23.05.2022 under Section 110(1) of the Customs Act, 1962 alleging mis-declaration of value and proposing inclusion of licence and technical assistance charges in the assessable value. 3. Show Cause Notice dated 30.06.2022 was issued to the Appellant proposing re-determination of assessable value at EUR 4,20,000, confiscation of the goods under Section 111(m) of the Customs Act, 1962 [The Act] and imposition of penalty under Section 112(a) of the Act. The Adjudicating Authority vide Order-in-Original dated 06.....
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.... be supplied together. The total contract value agreed between the parties was EUR 4,20,000, which is clearly reflected in the contract and in the consolidated invoice issued by the supplier, the importer later split this amount into two invoices and declared only EUR 1,26,000 to Customs. Merely splitting invoices does not change the transaction value. Under customs law, duties are required to be paid on the actual amount paid or payable for the goods and therefore, the correct assessable value is EUR 4,20,000. Referring to the contract, it was submitted that the supplier agreed to supply the machinery only if the importer also paid the license fee and the engineering charges. The imported equipment by itself was incomplete and commercially unusable without the proprietary design, engineering drawings, operational know-how and technical assistance supplied by the foreign supplier. The lime kiln could not be erected, commissioned or operated without the proprietary design, engineering drawings, operational, know-how and technical assistance supplied by the foreign suppliers to technology. Since the functioning of the imported machinery was entirely dependent on the supplied know-how....
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.... 4,20,000.00, two separate part invoices bearing no.2022000067EN for EUR 2,94,000.00 and 2022000067EQ for EUR 1,26,000.00 were issued towards separate contractual obligation of Engineering Package, Technical Assistance, License Fee etc. and supply of key components, respectively. Such a bifurcation in terms of the contracts is evident of the intention of the parties to separately provide for the supply of the technical know-how and the equipment, and therefore, had provided for separate considerations. Law has been settled that once separate prices are provided for the supply of technical assistance, royalty etc. on one part and supply of equipment or capital goods on other part, then the consideration for the supply of technical assistance cannot be added to the assessable value in respect of import of equipment. 9. We may consider a later decision in the case of Steel Authority of India Ltd. [2020 (4) TMI 774 (SC)=2020(372) ELT 478 (SC)] where the Apex Court upheld the decision of the Tribunal and rejected the Department's appeal seeking addition of basic design and engineering drawings and supervision charges to be included in the transaction value of the imported equipments ....
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....nd observed by this Court in the case of Tata Iron and Steel Company Ltd. (supra) :- "16. It is nobody's case that the seller had an obligation towards a "16. third party which was required to be satisfied by it and the buyer (i.e. the appellant) had made any payment to the seller or to a third party in order to satisfy such an obligation. The price paid by the appellant for drawings and technical documents forming the subject-matter of contract MD 301 can by no stretch of imagination fall within the meaning of "an obligation of the seller" to a third party. There was also no payment made as a condition of sale of imported goods as such. Rule 9(1)(e) also, therefore, has no applicability. 17. So far as the Interpretative Note to Rule 4 is concerned it is no doubt true that the Interpretative Notes are part of the Rules and hence statutory. However, the question is one of their applicability. The part of the Interpretative Note to Rule 4 relied on by the Tribunal has been couched in a negative form and is accompanied by a proviso. It means that the charges or costs described in clauses (a), (b) and (c) are not to be included in the value of imported goods subje....
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....l for the appellant has pointed out that under Chapter Heading 49.06 of the Customs Tariff Act, 1975 plans and drawings for engineering and industrial purposes being originals drawn by hand as also their photographic reproductions on sensitised papers and carbon copies thereof are declared free from payment of customs duty. Sub-rules (3) and (4) of Rule 9 clearly provide that additions to the price actually paid or payable are permissible under the Rules if based on objective and quantifiable data and no addition except as provided for by Rule 9 is permissible." 10. The observations of the Apex Court in SAIL as are relevant in the present context is that if a single agreement involves importation of dutiable equipments and also services for post-importation activities and these two sets of items are segregable, it would be open to the importer to claim duty exclusion in respect of items directly relatable to post importation activities in cases where Rule 9 of the Valuation Rules are applicable. The concluding paragraph reads as follows:- "28. In the present appeal, involving two import consignments, the authorities of First Instance and the Appellate Authority proceede....
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....l Fire System, Compressor, Foundations, etc are to be prepared indigenously by the buyer. Note to Rule 3 of CVR does not support inclusion of the separately contracted value of technical documents in the customs value of the imported equipment. 12. Coming to the issue, whether the supply of technical know-how was the condition precedent for the supply of the plant and equipments, the Revenue has not been able to show anything from the contract that there was any binding obligation to buy services as a prerequisite for the purchase of equipment or machinery. No nexus has been pointed out between the know-how, technical and engineering services meant for setting-up and operation of lime kiln and the imported equipment. Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 provides for addition in the price actually paid or payable for the imported goods, while determining the transaction value of such imported goods in different situations. Rule 10(1)(c) provides for addition of Royalties and Licence fees related to imported goods that the buyer is required to pay, directly or indirectly, as a condition of sale of the goods being valued, to the ex....