By TIOL News Service

MUMBAI, AUG 24, 2016: THIS is a Revenue appeal.

Revenue is aggrieved by the impugned order of Commissioner of Customs (Appeals), Mumbai who has set aside the addition of USD 175000 to the assessable value made while finalizing the provisional assessment relating to ‘project imports' effected by respondent for M/s Gujarat Godrej Innovative Chemicals .

The lower appellate authority held that the enhancement of assessable value by inclusion of value of price attributable to ‘engineering information, drawing and design' is contrary to rule 4(1) of Customs Valuation Rules, 1988 read with Rule 9(1)(e) and relied upon the Supreme Court decision in Tata Iron & Steel - 2002-TIOL-07-SC-CUS-LB where it is held that post-importation expenses were not to be included in assessable value.

The AR while reiterating the grounds of appeal emphasized that the first appellate erred in concluding that there was no evidence of sale of goods being contingent upon payment for ‘engineering drawings' and that ‘engineering drawings' were intended for use in post-importation activity; that the parts imported are integral to the plant which would require ‘engineering drawings' to make it functional and that rule 9(1) of Rules requires drawings and designs to be included in assessable value. It is further submitted that the deliberate act of splitting up of the total consideration for the agreement is sufficient evidence that the supply of goods was contingent upon providing the drawings; likewise, this was allegedly reinforced by the performance warranties that mandated the operation of the plant at the stipulated efficiency. As for the apex court decision relied by the lower appellate authority, it was submitted that it dealt with a different includible element and is hence not applicable.

The Bench, after noting the contents of the agreements liberally extracted passages from the apex Court decisions in Hindalco Industries Ltd - 2015-TIOL-132-SC-CUS, Essar Steel Ltd - 2015-TIOL-63-SC-CUS observed thus -

"13. It is, therefore, unambiguously clear that rule 9 of the Rules supra does not confer a blanket mandate to add the value of elements of a contract merely because the supply of imported goods are covered in the same contract. The nature of each element of the contract that has a separate and distinct value, whether so segregated at the specific request of the importer or not, must be scrutinized for ascertainment as pre-importation component for addition to the assessable value. Prima facie, the value of ‘engineering drawings' is a post-importation cost. No evidence has been adduced to show that the provision of these ‘drawings' is conditional to placing order for equipment or that it is a pre-importation cost. Sans such a submission, we are unable to agree with Revenue that we must interfere with the impugned order."

Holding that the facts do not warrant invocation of rule 9 of the Valuation Rules, 1998 and that mere supply of drawings at a value in the same agreement does not, ipso facto , have the support of law to resort to rule 9, the Appeal of Revenue was dismissed.

(See 2016-TIOL-2169-CESTAT-MUM)