Customs, Excise and Gold Tribunal - Delhi
Andhra Petro Chemicals Ltd. vs Collector Of Customs on 23 August, 1993
Equivalent citations: 1997(91)ELT349(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. This is an appeal filed by M/s. Andhra Petro Chemicals Ltd., Tanuku, Andhra Pradesh (hereinafter referred to as 'APL'), against the Order No. S/50/3/90-SVB, dated 16-4-1992, passed by the Additional Collector of Customs, Customs House, Madras.
2. APL had entered into agreements with M/s. Davy Mekee (London) Ltd., UK (hereinafter referred to as 'DML')/ for supply of equipment and materials, for technical know-how and for servicing of the plant proposed to be erected by them at Vizag in Andhra Pradesh, for the manufacture of Oxo-alcohols.
3. Under F. No. S/50/8/90/SVB, dated 10-1-1992, it was proposed to load/adjust the invoice value of imports of capital goods, by APL, from DML, by 35.28% on CIF value, under Rule 9(1)(b)(iv) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to as the 'Valuation Rules'). A working sheet showing the basis of arriving at the said loading factor was enclosed.
4. Under letter dated 7-2-1992, the facts, reasons and evidence on record, which established payment- of design and drawing charges/fees to the foreign collaborators, on whose basis it was proposed to load/adjust the invoice values of imports of capital equipment by 35.28% on the CIF value under Rule 4 read with Rule 9(1)(b)(iv) of the Valuation Rules, were given.
5. It was mentioned that under agreement dated 14-10-1988, APL had entered into an agreement with DML for the supply of equipment and materials needed for the erection and commissioning of the Oxo-alcohols plant for the production of 2-Ethyl hexanol and butanole. It was provided that certain critical/complex items of equipment of a proprietary nature which were required for the said plant were not readily/satisfactorily available in India and that such items had to be properly designed and fabricated to ensure safe and reliable operation of the said plant. DML were obligated to undertake supply of the equipment.
6. Equipment was explained as all of the listed items or equipment and materials to be supplied by DML. In addition to the design and engineering charges to be paid separately, DML undertook the obligation to supply the said equipment at a contract price.
7. APL imported capital equipment from DML under cover of the equipment and materials supply agreement dated 14-10-1988.
8. DML had developed design and engineering and got the capital equipment manufactured by other manufacturers. DML developed design and engineering and they were not the manufacturer. The manufacturers based in UK, Italy and West Germany manufactured the equipment as per the design/ engineering developed by DML, and they sent the finished products to DML, who in turn invoiced them to APL. In these invoices the manufacturing cost and the profit margin of the manufacturers and the procurement/handling charges of DML were included.
9. The invoice price did not, however, include the design and engineering charges paid separately apart from the contract price.
10. Towards design and engineering charges developed by DML, payment of Pound 11,50,000 was made.
11. Approval for this payment of Pound 11,50,000 towards designs and engineering charges, in addition to a lump sum know-how fee of US dollars 81.50 lakhs, was accorded by the Government of India under their communication dated 8-3-1988.
12. Under the licence know-how and engineering agreement dated 30-10-1986, DML had undertaken the obligation, among others, of technical documentation.
13. The case was adjudicated by the Additional Collector of Customs, Customs House, Madras.
14. The Additional Collector, Customs observed that "Under the supply of equipment and materials agreement dated-14-10-1988, M/s. DML has supplied the equipment under a contract price of Pound 33,80,498. The equipment supplied by DML is not manufactured by DML. DML has only developed the design and engineering for and on behalf of M/s. APL for an amount of Pound 11,50,000/- as design and engineering charge. These design, engineering, drawings and specifications were given to different manufacturers, located in UK, Italy and Germany and are not connected with M/s. DML. Basing on the above, the manufacturers have manufactured and supplied to DML who, in turn, invoiced them to M/s. APL."
15. He referred to the approval of the collaboration by the Ministry of Industry under which (1) lump sum know-how fees of US Dollars 81.50 lakhs, and (2) design and engineering charges of Pound 11.50 lakhs, were to be paid to DML.
16. It was observed that DML's patented Devy process involved confidential technical information, and without supply of the design and engineering of the equipment for such a patented process by DML, no unconnected manufacturer having no access to such confidential design and engineering of the equipment, could produce them.
17. The DML had admitted that they had given specifications to the sub-vendors. The Additional Collector observed that "what is said as specifications in the letter dated 27-1-1992 of DML can be inferred to be more in the nature of design and engineering specifications, as unconnected manufacturer cannot produce equipment for DML's patented process without such details."
18. He held that "the design and engineering fees of Pound 1.15 million as indicated at (i)(B) of the Government of India's approval letter is towards the design and engineering which can only form part of specifications undertaken by DML and supplied to the manufacturers/sub-vendors as confirmed by DML in DML's letter dated 27-1-992."
19. He came to a finding that the transaction value under Rule 4 declared in that case and accepted provisionally by the department subject to detailed investigation, required as an outcome of the investigation, a revision by way of an adjustment in terms of Rule 9(1 )(b)(iv) of the Valuation Rules.
20. He held that the value of the goods imported against the various bills of entry be adjusted/loaded to the extent of 35.28% on CIF value in terms of Rule 4 read with Rule 9(1)(b)(iv) of the Valuation Rules.
21. In appeal the appellants contended that:
(1) The provisions of Rule 9(1)(b)(iv) of the Valuation Rules were not applicable in their case;
(2) The design and engineering of the equipment was undertaken by the vendors themselves on the specifications of DML, and no design and engineerig work was undertaken by the DML with regard to the equipment supplied. These specifications were not design and engineering;
(3) The design and engineering charges paid to DML referred to the design and engineering of the plant in India, and thus related to post importation activities;
(4) The prices charged by the manufacturers of the equipment included the charges for engineering and designing done by them, wherever engineering and designing was necessary; and (5) The prices charged to the appellant's company by DML were inclusive of the procurement and other service charges for the equipment supplied by DML.
22. The case was heard on 6th and 7th of April, 1993, when Shri L.P. Asthana, Advocate with Shri Tarun Johri, Advocate appeared for the appellants. Respondents were represented by Shri Prabhat Kumar, SDR.
23. Shri L.P. Asthana, the learned Advocate referred to the provisions of the three separate agreements entered into by APL with DML. He mentioned that the first and the second agreements, for licence know-how and services were entered on 30-10-1986, while the third agreement for supply of equipment and material was entered into after 2 years, on 14-10-1988. The matter related to the first and the third agreement. The first agreement related to technical know-how and the front-end engineering package for the production of the goods in India. Under the first agreement, two payments were to be made a lump sum fee of 81,50,000 in US Dollars, and another payment of 11,50,000 in Pound Sterling.
24. He referred that the Additional Collector had accepted the transaction value but had sought to add payment in Pound Sterling to the transaction value under Rule 9(1)(b)(iv) of the Valuation Rules. He submitted that Rule 9 could be invoked only when value as referred to in Rule 9 has not been included in the price actually paid.
25. He referred to the various clauses of the agreements and stated that the appellants had not supplied any engineering and design work. The design and engineering work undertaken by DML was with reference to the plant, and not to the equipment and the production of the goods.
26. The learned Advocate relied upon the following citations in support of his arguments :-
(1) 1991 (56) E.L.T. 221 (Tribunal).
(2) 1992 (62) E.L.T. 572 (Tribunal).
27. Shri Prabhat Kumar, the learned SDR referred to the provisions of Rule 4 and Rule 9 of the Valuation Rules, and the provisions of Rule 9(1)(b)(iv), and submitted that the various clauses in the agreements have to be read along with the clauses of the rules. He also submitted that all the three agreements have to be read together. For this purpose, he referred to the various clauses in the three agreements. He stated that what is 'know-how' will differ from process to process, and added that in the instant case the design and engineering were for the precise goods to be supplied. In this connection, he referred to the blueprints prepared by DML and made available to the manufacturers of the goods. He emphasised that the loading has to be seen in the light of the sophisticated technology. Relying on the entire Order-in-Original he concluded that the loading of the invoices was covered by the provisions of the law and was based on the facts and circumstances of the case. He also stated that the taxes were to-be included for the purposes of arriving at the customs value for the purposes of assessment.
28. In support of his arguments, Shri Prabhat Kumar, the learned SDR relied upon the following citations:
(1) 1988 (33) E.L.T. 787.
(2) 1990 (48) E.L.T. 388.
(3) 1991 (52) E.L.T. 602.
(4) 1992 (62) E.L.T. 572.
(5) 1992 (62) E.L.T. 833.
(6) 1991 (56) E.L.T. 221.
29. In reply, the learned Advocate referred to article 4 of the technical collaboration agreement and explained as what was meant by procurement. He stated that the case was not covered by Rule 9(1)(b)(iv) of the Valuation Rules.
30. Written submissions after the hearing were filed by the learned Advocate on 22-4-1993, and by the learned SDR on 17-5-1993.
31. We have carefully gone through the facts and circumstances of the case, and have considered the arguments advanced by both the sides.
32. APL entered into an agreement with DML on 30-10-1986 with regard to the installation of an Oxo-Alcohols plant at Vizag (Andhra Pradesh), for the production of 2-ethyl hexanol (2-EH) and Butanols, used in the manufacture of PVC plasticisers. A rhodium based catalyst for the Oxo process called 'low pressure (LP-oxo) process', had been developed and commercialised by DML. DML agreed to undertake various obligations licence, non exclusive rights disclosure, technical documentation etc., for the following considerations :-
(1) Lump sum know-how fee US Dollars 81.50 lakhs.
(2) Design and engineering charges Pound 11.50 lakhs.
(3) Service charges at amount per calendar day for different category of officers, with other allowances, expenses and facilities.
(4) Contract price for supply of the equipment.
33. The Additional Collector, Customs, Madras has added under Rule 9(1)(b)(iv) of the Valuation Rules, the design and engineering charges of Pound 11.50 lakhs to the invoiced contract price for supply of equipments, to arrive at the transaction value under Rule 4(1) of the Valuation Rules, for the purposes of the levy of the Customs duty under Section 14(1) of the Customs Act, 1962 (hereinafter referred to as the 'Act').
34. Some facts considered relevant are given below :-
(1) In the Project Report at page 320 of the paper book No. 1 it has been stated under equipment summary that "the entire equipment description may not be given till such time that a secrecy agreement is signed."
(2) In the licence know-how and engineering agreement dated 30-10-1986, under Article IV relating to licences and scope of responsibility of DML, at page 13 of the paper book No. 1, it was provided that DML was obligated to undertake the scope of work for basic engineering ascribed to it in Appendix XL (3) As per Appendix XI, for each type of equipment, general specification, inspections specifications and Standard detail drawings were to be provided by DML. Each equipment has been identified by item member and name. Design and working conditions and other parameters of each item has been detailed in precise terms in accordance with DML's standards.
(4) In respect of the items critical to the process performance, DML in addition to the basic engineering was also required to carry out technical bid evaluation, production of purchase specifications and checking and approval of vendors drawings.
(5) Total lump sum payment to DML was to the extent of Pound 11,50,000 and dollars 8,50,000 in respect of all their obligations.
(6) APL was to provide DML with authenticated tax deduction certificates in respect of the Indian tax paid by it and in the event that DML subsequently sets off such tax so paid against its UK tax liability then DML was to refund/credit APL to the extent of the set off amount. It was added that DML shall use its best efforts to obtain set off of Indian taxes in the UK.
(7) The Government of India foreign collaboration letter No. FC. II 372 (86) 738 (85), dated 21-10-1986, formed-part of the agreement.
(8) The Government of India letter dated 21-10-1986, as amended by letter dated 8-3-1988 provided for payment of Pound 11.50 lakhs towards design and engineering charges, and lump sum know-how fee of US Dollars 81.50 lakhs, to DML.
(9) On 14-10-1988 another agreement for supply of equipment and materials was made. This agreement referred to the items of equipment which were to be a properly designed and fabricated as "of a proprietary nature". APL was to recognise the proprietary nature of the equipment supplied.
(10) DML took responsibility for supply of the equipment from the countries of manufacture outside India, according to the specifications on a fixed lump sum contract price of Pound 3380498, and took guarantee of the equipment supplied against defects in materials, workmanship and mechanical design.
(11) The Government of India foreign collaboration letter No. FC II 372 (86) 738 (85); dated 21-10-1986, formed part of this agreement also. The Government of India letter dated 21-10-1986, as amended by letter dated 8-3-1988 provided for payment of Pounds 11.50 lakhs towards design and engineering charges, and lump sum know-how fees of US Dollars 81.50 lakhs, to DML.
(12) DML while placing the purchase orders on the manufacturers, supplied detailed specifications for each item, standards and data sheets, as listed on the engineering document list, general design requirements, schematic lay out and other relevant technical information.
(13) The drawings submitted by the manufacturers were required to be re-viewed and approved by DML. Equipment was required to be inspected by DML. Invoices by the manufacturers were raised on DML. In turn DML raised invoices on APL.
35. Valuation for the purposes of levying customs duty is to be determined under Section 14(1) of the Act, which is reproduced below :-
"Section 14. Valuation of goods for purposes of assessment. - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each 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;
(1 A) Subject to the provisions of Sub-section (1), the price referred to in that Sub-section in respect of impored goods shall be determined in accordance with the rules made in this behalf."
36. It is seen that where customs duty is chargeable on an ad valorem basis, the assessable value of the goods is, under clause (a), the price at which the goods or similar goods are ordinarily sold at the relevant time and place in the course of international trade, but provided that the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale. Sub-clause (b) comes into operation where the price is not ascertainable under the terms of clause (a) in which event it is the nearest ascertainable equivalent of such price and is determined in accordance with rules made for the purpose.
37. Under Rule 4 of the Customs Valuation (Determination of price of imported goods) Rules, 1988 (hereinafter referred to as the 'Rules'), the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of those Rules. Invoice value may not be in all cases co-terminous with the transaction value.
38. The price is paid by the importer in India. It is paid for the goods when such goods are sold for export to India. How the price is paid and to whom it is paid, will depend on the terms, conditions and the circumstances of each case. The modalities of the payments may vary from case to case and even transaction to transaction. In particular, when specialised custom made series of goods are imported, the goods which are specifically made or are ordered to be made by different manufacturers in different countries, there may be advance payments, payments for different processes of manufacture, payments in different forms and to different persons etc. All these payments in such cases are part of the transaction for import of the goods in India. Such payments may be made prior to the import, at the time of import or after the import. Such payments may be made by the buyer, or a third party on behalf of the buyer, to the seller, or to a third party, to satisfy an obligation of the seller. Taking all payments towards the goods imported, it is the actual, full value, total payments made by the buyer. Invoice price, if it does not represent the actual value/total payments, had to be adjusted under the Customs Valuation Rules, to bring it to the level of the transaction value.
39. As per Interpretative Notes, it is the total payment made or to be made by the buyer to or for the benefit of the seller for tike imported goods. The payment may be made directly or indirectly.
40. Any additional payment made to a contractor in a foreign country for engineering and development work will have to be added under Rule 4 as part of the total price actually paid or payable to the seller.
41. Rule 9 of the Rules relates to the cost of services, which in determining the transaction value, shall be added to the price actually paid or payable for the imported goods.
42. Rule 9 makes it clear that the cost of services shall be added to the price paid or payable, to determine the transaction value. It establishes that the transaction value may be and in certain circumstances shall be more than the invoice price.
43. Among others, this rule provides that the value of the engineering, development, art work, design work and plans and sketches, undertaken elsewhere than in India and necessary for the production of the imported goods, shall be added to the price actually paid or payable for the imported goods. Such services could be supplied directly or indirectly by the buyer. They could be supplied free of charge or at reduced cost.
44. If such services are used in connection with the production and sale for export of imported goods, then to the extent, the value of such services has not been included in the price actually paid or payable, shall be added to the price actually paid or payable, in determining the transaction value.
45. Any payment made to foreign suppliers for plans, sketches and drawings for construction of the parts and accessories will have to be added as per Rule 9(1)(b)(iv). It covers design work, plans and sketches undertaken outside the country of importation necessary for the production of the plant and supplied free of charge by the buyer to the contractor.
46. As per a case study by the C.C.C. Technical Committee on the application of Article 8.1 (b) [Rule 9(i)(b)], [quoted in the Centax Publication on Customs Valuation Code at pages No. 94 to 96], even the payment to the design work, plans and sketches done by the importer's foreign subsidiary and undertaken outside the country of importation, and the value of the service of preparing drawings provided by his foreign based design centre, had to be added to arrive at the transaction value.
47. The appellants have contended that the DML had not taken up on themselves any responsibility for providing designs etc., necessary for the production of the imported goods, and that the responsibility of DML was confined to providing know-how and front end engineering package for the plant at Vizag.
48. 'Plant' is the buildings, machinery, pipes, containers, tools etc. used in manufacturing some article, or carrying on some industrial process. 'Plant' is not just buildings or the tools. Without machinery no plant could be constructed. In fact the cost of buildings and civil works is not includible in the cost of plant and machinery installed, for arriving at the investment in plant and machinery, under excise notifications, and in the main it is the machinery that makes the plant. [refer Nav Bharat Link Chain Manufacturing Private Limited v. Collector, Central Excise -1985 (19) E.L.T. 493 (Tribunal) and Indian Barytes and Chemicals Ltd. v. Collector, Central Excise -1990 (50) E.L.T. 196 (Tribunal)].
49. The responsibility of providing know-how and front end engineering package for the plant has to be seen in the light of the machinery installed, operating such machinery and production of goods with various peripheral jobs at the stage of installation, running and manufacturing process.
50. As held by the Gujarat High Court in the Central Excise case of Anil Ice Factory v. Union of India -1984 (15) E.L.T. 333 (Gujarat), construction of plant is manufacture. The Gujarat High Court observed that "even if a company constructs a manufacturing unit for its own use by purchasing different duty paid parts or other material, it would amount to manufacture. Construction of a plant can, therefore, be said to be something which has been manufactured. If, therefore, a refrigerating or air-conditioning plant is manufactured by a company for its own purpose it can be said that it has manufactured the plant."
51. Technical information and know-how relevant to the plant will include the technical information and know-how relevant to the equipment of the plant, as plant is a system consisting of machinery parts, pipes, tools, accessories, component etc.
52. "Know-how" has been explained in Article 12, para 2 of the OECD Model Double Taxation Convention on Income and on Capital (1977), as under :-
"Payments of any kind received as a consideration for the use of, or the right to use, any copy right of literary, artistic or scientific work, including cinemagraphic films, any patent, trade mark, design or model, plan, secret formula or process, or for the use of or the right to use industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience."
53. In Appendix HI of Volume I to the Technical Collaboration Agreement, process description and drawings have been introduced. Various process units have been described with reference to process flow diagram. Different equipment have been identified technically and functionally by DML code numbers.
54. Other Appendix refers to DML patents (Appendix I), design basis (Appendix VII), Total equipment list (Appendix VIII). Appendix I of Volume 2 contains offshore equipment list.
55. Thus, the supply of equipment had direct nexus with the payment towards design and engineering charges as agreed at the time of entering into collaboration agreement. It is immaterial that the supply of the equipment commenced only after the payments towards design and engineering charges have been made.
56. It has been admitted by the appellants that "since DML had to prepare the basic engineering package for the plant as a whole which included foreign equipment, they had to prepare purchase specifications etc."
57. It is also pertinent to note that the whole transaction between APL and DML was a package, a deal, a unified and integrated agreement for sophisticated and highly developed technology. Thus, the agreements in such a case could not be read just between the lines.
58. This is confirmed by the 1988 agreement clause (c) to the preamble, which referred to the licence know-how and engineering agreement of 30-10-1986.
59. In this case, there was no settlement of price by negotiations. No discretion was left to APL to accept or not to accept the design and engineering charges added to the invoice contracted price, at which DML supplied the equipment after getting them fabricated by the third parties. Although the prices were called contracted prices, in the circumstances of the case, the prices were paid as invoiced by DML. APL were not free to purchase from anyone else than through DML. Purchases through DML or their agents were inherent in the guarantee and undertaking of liabilities with regard to the working of the equipment, by the DML.
60. Thus, the facts in the case of Union of India v. Mahindra and Mahindra Ltd. 1991 (55) E.L.T. 15 (Bom.) are different from the facts in the case before us.
61. It also could not be said that DML's know-how was different from and unrelated to the equipment through which alone the know-how could be used for the production of goods.
62. The provisions in the agreement with regard to plant thus covered drawings, designs, etc. necessary for the manufacture of imported equipment.
63. In the Central Excise case of Til Ltd. v. Collector, Central Excise, 1991 (52) E.L.T. 602 (Tribunal), the point for consideration was whether the charges in respect of the drawings, designing, fabrication drawings and technical specification work for the manufacture of the goods, raised by separate bills was to be included in the assessable value. The Tribunal held that non disclosure of recovery of designing and consistency charges amounted to suppression.
64. The Tribunal in that case had relied upon their earlier decision in the case of Collector, Central Excise v. Inter Con Engineers Pvt Ltd. - 1987 (28) E.L.T. 458 (Tribunal), wherein it was observed as under :
"Costs towards drawing, designing and technical specification of machinery were clearly elements of machinery costs.... It is not possible to manufacture a machinery without doing drawing, designing and technical specification work for it in advance. Drawing and designing is actually the first stage of manufacture itself. It is at this stage that the manufacturer plans as to what exactly he is going to manufacture. No interpretation of law is needed to bring home this point. Every manufacturer of machinery knows it well enough."
65. In the case - Collector, Central Excise v. Sunray Computers Ltd. -1988 (33) E.L.T. 787 (Tribunal) also the Tribunal had held that "Pre-manufacturing research, planning and designing are a part of the manufacturing activity itself and their cost would form a cost of the machine produced."
66. In the case - IAEC Bokers Pvt. Ltd. v. Collector, Central Excise -1990 (48) E.L.T. 388 (Tribunal), it was observed that if "any cost relating to drawings, designing and technical specification of the boilers is included in the contract price, the same would form part of the assessable value of the boilers."
67. The invoices raised by DML were different from the invoices raised by manufacturers. The equipment was not manufactured by DML but the orders were placed by them on different manufacturers. The details, terms, payments etc. were fixed by DML with the foreign suppliers. DML not only found the manufacturers /suppliers, but also informed the seller as what was required to be manufactured/supplied, inspected the goods, bought the goods, made payment and arranged insurance, transport, storage and delivery of the goods. Original sellers' contract of sale was with DML. Original sellers' invoices were also for DML. The terms of payment with the manufacturer were fixed by DML. Payments by APL was made not to the manufacturers but to the DML. These were not agreed prices. APL had no option but to purchase equipment through DML. In such circumstances, the DML's invoice price could not be equated with the transaction value, contemplated in the Customs Valuation Rules.
68. Invoice is a list of goods sent to a purchaser showing such information as prices, amounts and other charges. The transaction is the carrying on of any kind of business; a piece of business, a deal. In its very nature, 'transaction' is wider than the 'invoice'.
69. The invoice is an important piece of evidence to determine what the real value is. That piece of evidence may be discarded if customs takes the view that over and above the price which is being paid some other consideration has passed under the document (AIR 1959 Bombay 372).
70. Under Rule 4 of the Customs Valuation Rules, it has been provided that "the transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India adjusted in accordance with the provisions of Rule 9 of these rules". The basis is "the price actually paid or payable". Such price actually paid or payable "is required to be adjusted in accordance with the provisions of Rule 9" to arrive at the transaction value. There is no reference to 'invoice' in the rule. The reference is only to the price actually paid or payable. Invoice may or may not represent the price actually paid.
71. In the case before us admittedly there was a difference between the prices charged by the manufacturers to DML, and the amount for which their invoices were raised by DML to APL. This difference was said to be around 30%. This itself establishes that the invoice did not represent the price of the manufacturers. In fact, APL had no dealings with the manufacturers. They had no option or choice to go to any other manufacturer or to go to any manufacturer bypassing DML. That they had to purchase equipment only through DML is inherent in the DML identification code number of various equipment, and the guarantee clause and other clauses of the agreements.
72. As regards appellants' reliance on the insurance policy, as observed by the Tribunal in the case of Orient Enterprises v. Collector of Customs -1986 (23) E.L.T. 507 (Tribunal), there is no such established mercantile practice as for what value the goods should be insured.
73. As regards party's reliance on the communication subsequent to the proceedings, it repeats more or less the language of the party, and in view of the facts and circumstances of the case had no evidentiary value.
74. As regards the tax deduction of the Indian tax aid by APL, it was provided in the agreement that the DML was to refund/credit APL to the extent of the set off availed of by DML against its UK tax liability. The appellants had not furnished any details about the refund /credit given to them by the DML. In the circumstances the provisions of Interpretative Notes to Rule 4 are not applicable to the facts of the case before us.
75. We find that a sum of Pound 11.50 lakhs was paid by APL to DML towards engineering, design work, plans, sketches etc., undertaken by DML elsewhere than in India, and that these engineering, design work, plans, sketches etc., were necessary for the production of the imported goods, got manufactured by DML and supplied to APL. Thus, this payment was covered by the provisions of Rule 9(1)(b)(iv) of the Customs Valuation Rules.
76. In the circumstances, we find that the invoice value was correctly loaded by the Additional Collector, Customs, and we hold that the sum of Pound 11.50 lakhs was correctly added to the contract price for the supply of equipment by DML to APL.
77. Accordingly, we reject the appeal and order accordingly.