Custom, Excise & Service Tax Tribunal
M/S.Schwing Stetter (India) Pvt. Ltd vs Commissioner Of Customs (Imports) on 17 February, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. C/40309/2015
(Arising out of Order-in-Appeal C.Cus.No.1703/2014 dated 18.9.2014 passed by the Commissioner of Customs (Appeals), Chennai)
M/s.Schwing Stetter (India) Pvt. Ltd. : Appellant
Vs.
Commissioner of Customs (Imports),
Chennai : Respondent
Appearance Shri S. Murugappan, Advocate Ms. Sridevi, Advocate, for the Appellant Ms. Indira Sisupal, AC (AR) for the Respondent CORAM Honble Shri R. Periasami, Technical Member Honble Shri P. K. Choudhary, Judicial Member Date of Hearing: 28.10.2015 Date of Pronouncement: 17.02.2016 FINAL ORDER No.40280/2016 Per R. Periasami The present appeal is filed against the OIA dated 18.09.2014 passed by the Commissioner of Customs (Appeals), Chennai.
2. The brief facts of the case are that the appellants imported machinery i.e. Schwing mobile concrete pump placers from their related supplier M/s. Schwing GmbH, Germany. Though both the supplier and the appellants are related, as per the OIO of the Dy. Commissioner of Customs (SVB) dated 22.12.2000, the transaction value was accepted. He also ordered that an amount of Rs.4.25 Crores towards design and drawing fees to be added to the assessable value as and when the same is paid. The appellant amended the collaboration agreement by deleting the clause relating to payment of design and drawings. The said SVB order was reviewed and followed upto 22.12.2013. However, the Dy. Commissioner of Customs (SVB) in his OIO dated 05.03.2013 while reviewing the order rejected the transaction value and ordered for loading. For proper appreciation of the case, the operative part of the order is reproduced as under:-
a) The Indian Company M/s. Schwing Stetter (India) Pvt. Ltd., Kancheepuram and the Foreign Suppliers M/s. Valeo Matteriaux De Friction, France and their Associate Companies are related to each other in terms of Rule 2(2)(i)&(iv)& (vi) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
b) I reject the invoice value of 49 Nos. of Schwing Mobile Concrete Pump Placers of 90/120 CUM/ HR capacity, of Model No. S36 referred in para 37 above under Rule 12(1) of CVR, 2007 read with Section 14(1) of the Customs Act, 1962.
c) I re-determine the value of 49 Nos. of Schwing Mobile Concrete Pump Placer of 90/120 CUM/HR capacity, of Model No. S36 referred in para 37 as EUR 79,50,950 (Ex-works) as against the declared value of EUR 74,04,350 (Ex-works) under Rule 4 of CVR, 2007 and appropriate duty leviable at the time of importations on the differential value of EUR 5,46,600 (Five Lakh Fourty Six Thousand and Six Hundred only) shall be demanded in terms of Sec 28 (4) of the Customs Act, 1962.
d) I reject the invoce value of 27 Nos. of Schwing Mobile Concrete Pump Placer of 90/120 CUM/ HR capacity, of Model No. S36 referred in para 38 above under Rule 12(1) of CVR, 2007 read with Section 14(1) of the Customs Act, 1962.
e) I re-determine the value of 27 Nos. of Schwing Mobile Concrete Pump Placer of 90/120 CUM/ HR capacity, of Model No. S36 referred in para 38 as EUR 43,83,450 (Ex-works) as against the declared value of EUR 40,23,000 (Ex-works) under Rule 4 of CVR, 2007 and appropriate duty leviable at the time of importations on the differential value of EUR 3,60,450 (Three Lakh Sixty Thousand Four hundred and Fifty only) shall be demanded in terms of Sec. 28(4) of the Customs Act, 1962.
f) I order to load the Technical knowhow Fee of EUR 7,20,000 to the Transaction Value of 76 Nos of Schwing Mobile Concrete Pump Placers of 90/120 CUM/ HR capacity, of Model No S36, in terms of Rule 10(1)(c) of CVR,2007.
g) The importer shall be given an option to pay duty on Technical Know How Fee as lump sum payment for the particular financial year at the rate of duty prevailing for the imported pumps or at the rates applicable to the pumps imported under every Bill of Entry for a particular Year.
h) The declared invoice value of parts, components and spares of Construction machineries shall continue to be accepted as Transaction Value in terms of Rule 3(3)(a) of the CVR, 2007 with due additions under Rule 10(2) ibid, in line with the Original Order and subsequent renewal orders for a further period of three years . However, if contemporary imports at higher prices are noticed, Groups may evaluate the goods as per the provisions of the Customs Valuation Rules,2007.
i) I order to load the expenditure on Repairs and Maintenance of Rs 5,27,25,594 /- ( Rupee Five Crore Twenty Seven Lakh Twenty Five Thousand Five Hundred and Ninety Four only ) incurred during the Year 2011-12 to the Transaction Value of parts, spare parts and / or components of construction / concrete machineries imported during the Year 2011-2012 in terms of Rule 10(1)(e) of CVR, 2007.
j) The importer shall be given an option to pay appropriate duty on the above mentioned amount as lump sum payment for that particular financial year at the rates applicable to the said goods imported under every Bill of Entry for a particular Year.
k) I order to load Rs 5,48,67,280 /- (Rupee Five Crore Forty Eight Lakh Sixty Seven Thousand Two Hundred and Eighty) to the Transaction Value of parts, spare parts amd components of construction/ concrete machineries imported during the Year 2012-2013 in terms of Rule 10(1)(e) of CVR,2007.
l) The importer shall be given an option to pay appropriate duty on the above mentioned amount as lump sum payment for that particular financial year at the rate of duty prevailing for the imported parts, spare parts and/ or components of construction/ concrete machineries or at the rates applicable to the said goods imported under every Bill of Entry for a particular Year.
m) In case of future imports, The Importer shall make Quarterly declaration appropriate duty shall be collected by adding the said Amount so declared by the Importers to the transaction value of the imported goods in terms of Rule 10(1) (c)/ Rule 10(1)(e) of CVR,2007 as the case may be.
n) Provisions under Section 28(4) of the Customs Act shall be invoked in case of goods imported beyond one year period.
o) Provisions under section 28AA shall be invoked for collection of interest at appropriate rate.
p) Penal provisions under section 114A shall be invoked against the importers for suppression of fact/ willful misstatement.
q) The progress made thereof shall be intimated to the Special Valuation Branch in due course.
r) The above decision has been taken on the basis of statements and declaration made by the Importers. If there is any change in the method of invoicing, terms of relationship or any other material facts affecting the valuation of goods under Rule 3(3) of the Customs Valuation Rules, 2007 read with Section 14(1) of the Customs Act, the importer or the concerned Assessing Groups shall inform the same to SVB immediately so as to enable the review of the decision in force. The imported goods thereafter will be assessed provisionally with Extra Duty Deposit (EDD) equivalent to 1% of the Assessable Value. In case, there is any factual error or omission, the same shall be brought to the notice of this office suo motto by the importer without delay.
w) All pending provisional assessments if any shall be finalized accordingly.
x) This order is operative for three years up to 04.03.2017.
2. Aggrieved by this order, the appellant preferred appeal before the Commissioner (Appeals). The Lower appellate authority in his impugned order C.Cus. No. 1703/2014 dated 18.09.2014 upheld the order of the adjudicating authority and rejected the appeal. Further, the Commissioner (Appeals) has also ordered modification of OIO at S.No. (r), where he ordered that till finalization of the proceedings under Section 28 (4) and Section 28 AA and Section 114 A of the Customs Act, 1962, the assessment shall continue to remain provisional and 5% EDD shall be collected on all future imports. Further, he has also ordered the department to procure suitable security/bank guarantee for the past imports. Hence the present appeal.
3. The Ld. Advocate appearing on behalf of the appellant reiterated the grounds of appeal and submits that the appellants are manufacturers of concrete handling equipment Concrete Boom Pump Placer, which are imported from their related company. He drew attention to page 98, 99, 102 and 102A of the paper book containing technical literature/catalogue/diagram of Truck Mounted Concrete Pump S 36X model. She submits that the appellants are importing components and manufacturing Truck Mounted Concrete Pump S 36X model by using the imported components and same are cleared to domestic market. He further submits that they have also imported fully assembled Truck Mounted Concrete Pump S 36X model and cleared on high sea sales. They have imported the machine Boom Placer and Pumps are manufactured in their factory and assembled along with Bloom Placer and cleared on payment of excise duty. The adjudicating authority held that the price of Boom Placer is based on their own imported invoices relating to fully assembled which contains Pumps. The adjudicating authority held that the price of knowhow fee paid to the overseas supplier has been loaded to the transaction value and also loaded the fees paid towards reimbursement of repair and maintenance expenses for the services rendered by the foreign collaborator. He submits that both the adjudicating authority and the Commissioner (Appeals) have confirmed the loading of all the three issues. Further, he submits that the Commissioner (Appeals) while upholding the OIO also ordered for 5% EDD which is beyond the purview of SVB order.
4. Technical knowhow Regarding addition of technical knowhow fee paid to their related supplier, he refers to pages 46 & 47 of the OIA and drew attention to the agreement at page 46 and referred to the copy of the agreement annexed at page 162 of Volume-II and submits that out of total 60 units agreed upon, they have imported only 27 units and included the development cost of EUR 12,000 in their invoice price. He submitted the copy of the invoices, wherein it clearly shows out that of total invoice price of EUR 1,49,000, less 12,000 which was already received as per the agreement. He further submits that the customs have already taken into account, which was paid including the technical knowhow fee while calculating the transaction value. The same cannot be loaded again. In support of this, he drew attention to para 14 at page-72 of the OIO, where these facts have been clearly brought out these facts before the adjudicating authority. They have not imported the remaining 33 units and therefore no appropriation was indicated in the invoices. Further he drew attention to pages 180 & 181 of paper book Volume-II, where in their reply dated 19.02.2014, to the Dy. Commissioner at para 5 & 6, they have clearly brought out these facts before the adjudicating authority informing that the development costs of EUR 12,000 for all the 27 units imported as per the list already included in the invoices. The customs duty has been discharged on the total price of 1,49,000 EUR. He further submits that balance 33 units were not imported, the development cost will be added as and when the imports takes place. Regarding 15 Boom Placer shipped during the year 2011, they do not fall under the purview of the agreement entered in 2012. He further submits that the balance of 3,96,000 EUR paid to their principal as advance still remains in the books of accounts as advance. He further submits that as per the agreement dated 24.01.2012, the payment of development cost relates to only S 36 X model and not applicable to other Pumps of other models.
5. On Price Variation On the issue of price variations, he submitted that the adjudicating authority held that the prices based on their invoices of fully assembled equipment mobile concrete pumps of model S 36X and the declared price is EUR 1,63,250. He drew our attention to page 157 of the paper book volume-II the copy of invoice dated 19.08.2011, and submitted that the said invoice relates to import of fully assembled equipment, which was sold on high sea sales. The said equipment includes Pump kit. In this case, what was imported is without pump kits as they have started manufacturing the pump kits in their own factory itself. He drew attention to page 151 of the paper book volume-II enclosing invoice dated 08.06.2011 and submits that though the description in both the invoices refers to the same model, the total gross weight is 17260 kgs in this case and the fully assembled equipment sold to high sea sales referred under invoice dated 19.08.11, the gross weight is 18560 kgs. The difference in weight in the later case relates to the weight of the pump kit, which they have not imported. To substantiate this, he relied on the invoices at page 159, where they have imported only the pump kits and the declared weight of 8516 kgs for four pump kits fully assembled. He further submits that if both the invoices referred at page 155 and 159 are taken together, the total gross weight will match to the gross weight of fully assembled kit. He also submits that the invoice price of EUR 1,49,000 of equipment without pump declared under the invoice at page 159 and the price of pump kit of EUR 13350 of pump kits is added together, the total price comes to EUR 1,62,350. This proves that the goods sold on high sea sales declared price of EUR 1,62,350 is pump placer with pump kits and what they have imported is for the price of EUR 1,49,000 only, without pump kits. He drew attention to the sketch/diagram of pump placer and pump kits placed at page 102 and 102A of pump kits and without pump kits respectively. He further submits that these facts can be verified from the documents as well as by physical verification at their factory. The customs conducted post clearance audit, (on site audit) and verified the records and no irregularities were noticed.
6. Various payments made to their principal company On the issue of various payments made to their principal company towards common expenses incurred by them. He submits that as per their agreement dated 07.03.2011, principle company has entered with service agreement with all their subsidiary units located all over the world. As per the scope of the service, the principle company will provide management service, sales service, joint administration service etc. to all their sister units and in consideration service fee is payable by the appellant to the principle holding company. He submits that the service fee calculated as per the agreement based on the actuals and the service fee is calculated on quarterly basis. He drew attention to page 181 of volume II and explains that their principle company has raised invoices towards purchase of machineries, sales promotion etc. they have already registered with service tax and service tax has been discharged and TDS have also been deducted and the same cannot be taken for customs valuation. Whereas, the adjudicating authority has loaded these expenses on import of equipments under Rule 10(1) (c) of CVR. Under this Rule only the amount which is related to the cost of the imported goods can only be included. Since these amounts are service charges/reimbursable expenses towards repair and maintenance, the same cannot be added to the cost of imported goods.
7. On the last issue of order of 5% EDD by the Commissioner (Appeals), he drew our attention to page 63 of the OIA para 4 and 5. The LA modified the DC SVB's order and ordered that until the proceedings under various sections are being finalized, the assessment shall continue to remain provisional and 5% EDD shall be collected on all imports. He relied on the Boards Circular dated 23.02.2001 enclosed at page 119 of volume-I and drew attention to the paras 9 & 10 of the Boards Circular and submits that the Commissioner (Appeals) direction of loading of 5% EDD is totally contradictory to the Boards Circular. He also drew attention to the Commissioners interim order dated 17.06.2014, at the time of granting waiver, the Commissioner has clearly recorded that the appellant is a regular importer with a long standing track record of import and export and insisting of security may be avoided whereas the same authority in the final order took a different stand which is totally contradictory. He relied on the decision of the Honble Supreme Court decision in the case of UOI Vs. Mahindra & Mahindra Ltd. 1995 (76) ELT 481 (S.C.).
8. The Ld. AR appearing on behalf of the Revenue reiterates the findings of the order of the DC, SVB as well as the impugned order. She submits that the appellants are into the imports since 2000. She drew attention to the SVB order dated 22.12.2010 annexed at page 149. As per the SVB order, any change in the method of transaction or any agreement, the appellants are required to bring it to the notice of SVB. Whereas, in the present case, the appellants subsequently entered into the service agreement on 2.03.2011 and also renewed the agreement dated 25.1.2015 and in their agreement dated 24.1.2012 of technical knowhow fee, which they did not bring it to the notice of SVB.
9. On the merits, the Ld. AR countered the arguments of the appellants. On the loading of value on payments based on the price variation, the adjudicating authority has rightly loaded the price as the description in both the invoices are identical. She drew our attention to page 80 of the paper books of the OIO and to page 40 & 41 of the paper book, where the Commissioner (Appeals) has clearly spelt out his findings regarding principles of natural justice. In the case of SVB there is no requirement to issue any SCN as both the appellant and the department are in correspondence with each other in the form of questionnaire and reply and thereafter heard the appellants, the adjudicating authority passes the SVB order.
10. Regarding loading of technical knowhow fee, she reiterated the findings of appellate authority at page 46 to 51, where the Commissioner (Appeals) has reproduced the OIO. She submits that the adjudicating authority has rightly loaded the technical knowhow fee with the cost of imported equipment. As regards the invocation of Section 28, 28(4) 28 AA, the appellate authority has correctly held that at page 58 of the paper book and ordered for 5% EDD is fully justified. She relied on the decision of the Honble Supreme Court in the case of Commissioner Vs. Aquamall Water Solutions Ltd. 2006 (193) ELT A197 (S.C.), wherein the Honble Supreme Court has held that the sale made to third parties is admissible.
11. The Ld. Advocate in his rejoinder countered the arguments of the Revenue and once again summarized all the four issues. On the principles of natural justice, he submits that though they where under correspondence, the adjudicating authority never gave an indication that the department propose to load the value had it been informed they could have explained the details before the adjudicating authority on the price variations as well as on the loading of technical knowhow. He submits that these facts can be verified at any time from the records available with them. He further submits that the comparable invoice relied by the Department, where they have imported fully assembled equipment with pump kit and same was sold on high sea sales basis to third party. He submits that the Commissioner (Appeals) ordered 5% EDD and invoking Section 28(4) and 28 AA is not justified as they have not suppressed any facts. He relied on the decision of the Honble High Court of Bombay in the case of Forbo Siegling Movement Systems India Pvt. Ltd. Vs. UOI 2013 (296) ELT 443 (Bom.) and pleaded to allow their appeal.
12. We have carefully considered the submissions of both sides and perused the records and agreements. The short issue in this appeal relates to determination of value and loading on the goods imported from their related supplier by the Special Valuation Branch. From the facts already set out above, there is no dispute on the relationship between the appellant and the overseas company as the appellant company is a wholly owned subsidiary of M/s.Schwing Project Indien GmbH, Germany (Schwing Group of Companies). The appellants started importing components and parts of mobile concrete pump from M/s.Schwing GmbH, Germany and mobile concrete mixer and batching plant from M/s.Stetter GmbH since 1999 and both the overseas companies are part of group company i.e. schwing group of companies. We also find that the transaction value was initially accepted by the Customs vide SVB order dt. 22.12.2000 and renewed after 3 years and their transaction value was accepted by Customs upto 22.12.2013. We find that the appellant regularly imported and cleared the said goods as per the declared value for 13 years and there was no dispute.
13. It is pertinent to see that all the DC SVB orders dt. 22.12.2000, 9.11.2004, 10.12.2007 and dt. 22.12.2010 all were accepted by the department and the assessment had attained finality for the said period. We also find from the records that the revenue preferred appeal against DC's first order dt. 22.12.2000 and the Commissioner (Appeals) in his OIA No.126/2002 dt. 16.4.2002 rejected the revenue appeal and upheld the order and the same was accepted by the Department and no appeal filed against the said OIA.
14. With the above back drop of events, we find that the DC (SVB) while renewing the period from 23.12.2013 onwards rejected the transaction value which was hitherto accepted by the department and ordered for loading of value on various heads as set out in his order reproduced at para (2) above. On appeal by the appellant, the LAA not only upheld the order but also ordered for provisional assessment and 5% EDD on the future imports till finalization of demands on past imports.
15. The appellants put forth the very same grounds before LAA as contended before this Tribunal against all the issues and it is seen that the LAA in the impugned order has not discussed or countered the arguments of the appellant, instead merely generalized and affirmed the OIO and extracted and reproduced the OIO paragraph on each issue and affirmed with his statements like "L.A analyzed the issue in detail" or "LA order is based on legal backing" etc. and no clear findings given on the appellant's arguments.
16. Be that case, we proceed to discuss the each issue on merits.
(i) On enhancement of value of Model S 36X pumps The adjudicating authority rejected the declared value of pumps and enhanced the value based on the price of pumps imported and sold by the appellants to third parties on high sea sale basis. The appellant's main contention that the goods imported and sold to third parties are fully assembled pumps with pump kits ready to use by the user industry whereas what they imported were pumps without pump kits as the pump kits were manufactured indigenously at their plant and the same were supplied along with pumps after discharging excise duty. We have perused import invoices No.61535189/11R 1453 dt. 19.8.2011 relating to high sea sale annexed at page 157 of paper book and Invoice No.61546090/12 R1031 dt. 09.02.2012 relating to their own imports of pumps without pump kits annexed at Sl.No.5 of typed set. The description and quantity and price, gross weight and net weight of both invoices are tabulated as under :-
I II 1. Invoice No. 61535189/11R 1453 61546090/12R1031 2. Date 19.8.2011 (High seas sale to third party) 09.02.2012 (Self) 3. Description
SCHWING mobile concrete pump placer of 90/120 cuM/Hr capacity, model S36X P2023-110/75 RB, 380L complete with accessories SCHWING mobile concrete pump placer of 90/120 CuM /HR capacity, Model S 36X complete with accessories.
4. Order No. 1015607.00/1 1016105.00/1
5. Sl.No. 1015607 1016105
6. HS Code 84134000 84134000
7. Quantity 1.000 pc 1.000 pc
8. Net Unit Price EUR 162,350.00 EUR 149,000.00
9. Packing 1 unpacked. 1 case 1unpacked. 2 cases
10. Gross Wt.
18560.00 kgs.
17260.00 kgs
11. Net wt.
18510.00 kgs.
17130.00 kgs.
From the above table, it is seen that the description of the goods declared in the invoices are not same as held by the lower authorities. In (I) invoice of highsea sale to third party, after the description the model number is described as "S36 X P 2023 110/75 RB, 380L" whereas the (II) invoice relating to their own imports after description the model is indicated only as "S36X". The imported goods are packed in 1-unpacked, 1 case in the first invoice and 1-unpacked, 2 cases in the second invoice. Similarly, the gross weight and net weight is 18560 kgs. and 18510 kgs as compared to 17260 kgs. and 17130 kgs in the appellant case. The difference in description and model numbers and gross weight and net weight and the difference in price all these features clearly confirms that the pumps imported by the appellants and sold to third parties as described in the above invoice dt. 19.8.2011 are complete pump with pump kit. The difference in description and Model No.S36XP 2023-110/75 RBI 380L is distinct when compared to the appellant's own imports where the description & model is indicated only as S36X and it cannot be construed as missing or omission as held by the LA. This is further supported with difference in gross weight and net weight of both the imports.
Further, on perusal of invoice No.61556451 dt. 13.8.2012 at page 159 of the paper book, we find that the appellant imported and cleared only the "pump kits" alone. The description, model, quantity and price reads as under :-
Description Model Quantity Net weight Unit price Assembly Pump kit P2023/110-75RB 4.0 pcs 8516 kgs.
EUR 13350.01 Total Price 53400.04.
17. It is evident from the above that the Model No. of pumpkit is P2023/110-75 RB and this model number exactly figuring in the invoice of high sea sale dt.19.8.11 as S36 X P2033/110-75 RB. It is evident that S36X refers to pump and P2023/110-75 RB refers to the pump kit. The unit price of pumpkit declared in the said invoice dt. 13.8.2012 in Euro 13,350 per piece. In their own imports covered under Invoice dt.9.2.12, the declared price of pump is Euro 1,49,000 and if the per unit price of pump kit i.e. Euro 13,350/- is added to the appellant declared price of pump, the total price comes to Euro 1,62,350 (1,49,000 + 13,350) which is quoted in the highsea sale invoice dt. 19.8.2011. Therefore this fact proves beyond doubt that the comparable price of third party sale of pumps adopted by the LAs referred at invoice dt.19.8.11 confirms that what was imported and sold to third party on high sea sale basis is a complete pump with pump kit valued at Euro 1,62,350.00.
18. It is pertinent to see that the appellant had set up plant for manufacture of pump kits indigenously by using various components. Once the pump kits are manufactured and the same are fitted with mobile concrete pump which are imported and cleared by the appellants. The whole unit is cleared to the customer as complete pump with pump kit as one unit after value addition and payment of appropriate excise duty. This is evident from the Central Excise Invoice No.000 000 1666 dt.22.12.2011 (annexed at page 201 of Paper Book) where the appellant had cleared mobile concrete pump S36X and paid excise duty on the complete unit.
19. From the above facts, it is evident that the invoice price of Euro 1,62,350/- of pumps imported, sold to third parties on High Sea Sale Basis are not comparable goods with the goods imported by the appellants @ Euro 1,49,000. The rejection of declared price and loading EURO 1,62,350 ordered by the authority is not sustainable. We hold that the declared value of the pumps imported is the correct transaction value. Accordingly, we set aside the loading ordered by adjudicating authority at b,c,d,e of the operative part of OIO relating to re-determination of value of import of Schwing mobile concrete pump placer and allow the appeal.
20. Now we proceed to discuss the second issue on the loading of Technical Know how fees to the Transaction value of imported goods. The adjudicating authority loaded the Technical Know how fee of EURO 7,20,000/- paid to overseas company towards transfer of technical know how relating to manufacturing of SCHIWING Concrete Boom Pump Model S36 by the appellant. The appellant entered into agreement with their principal supplier. The relevant extract of Agreement dt.29.1.2012 is reproduced as under :-
This agreement is being signed on 24th day of January, 2012 between M/s.Schwing GmbH (hereinafter referred to as Schwing), a body corporate having its Office at Postfach 20 03 62, D-44647 Herne, Germany represented by Mr.Gerhard Schwing on the one part and M/s. Schwing Stetter (India) Pvt Ltd. (hereinafter referred to as SSI), a Company registered under the Indian Companies Act, 1956 and having its Registered Office at F-71, SIPCOT Industrial Park, Irungattukottai, Sriperumbudur 602 105, Kancheepuram Distrct, Tamil Nadu, India, represented by Mr.A.Sundaresan, Managing Director, on the other part, for the transfer of technical Knowhow relating to manufacturing of SCHWING Concrete Boom Pump Model S36(hereinafter referred to as Concrete Boom Pump or Boom Pump) by Schwing to SSI, for a consideration of EURO 720,000/-.
[.... .... ..... ....] NOW IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS :
1. Schwing agrees to irrevocably transfer the required technical know how to SSI for a one time consideration of EURO 720,000/- (EURO seven hundred and twenty thousand only)
2. In lieu of this, Schwing agrees to reduce the per unit price of the boom pump, at the level of Indigenization as described in schedule A forming part of this agreement, for the fist 60 units to be supplied during the January to December 2012, by Euro 12,000 per unit i.e. From Euro 149,000 per unit to Euro 137,000 per unit. The invoices for these first 60 units should separately mention that the development cost of EURO 12,000/- per unit has already been remitted, giving the break-up of such deduction and referring to the invoice for EURO 720,000/- including reference to this agreement.
3. Schwing also agrees to re-price all supplies beyond these 60 units, based on the then level of indigenization and may return to its previous price per unit, depending on the then current calculation.
4. Schwing agrees that there will be no further charges for technological know how or R&D for the initial development of this product (S36). However, any future expenses on upgrading or maintaining the design may be charged by Schwing, for whatever product.
5. SSI agrees to use the technical know-how only for their in-house manufacturing of the boom pump and its components.
[... ... ..... .....] As seen from the Clause (2) of the above agreement, the supplier had agreed to reduce the price of the Boom Pump from Euro 1,49,000/- to Euro 1,37,000/- by taking into account Euro 12,000/- per unit towards development cost already received from the appellant of Euro 7,20,000. The reduction in price is limited to first 60 units to be supplied during January to December 2012. It is also stipulated the invoice of 60 units should separately mention the Development Cost of Euro 12,000/- per unit.
21. Appellant contended that out of 60 units, they have imported only 27 units and the balance 33 units are yet to be imported and also contended that they have paid Custom duty on the total invoice value of Euro 149,000 after adding the development cost of Euro 12,000/- to the invoice price EURO of 1,37,000 and the same cannot be loaded again. They submitted copies of all the invoices and Bills of Entry. On perusal of one Invoice No.61546050/ 12 R10 dt.9.2.2012 it is seen that the supplier clearly indicated Development Cost Euro 12,000 and priced the goods less development cost. As seen from the copies of Bills of Entry, the Transaction value has been computed by taking Euro 149,000 and not Euro 137,000 and customs duty has been discharged on the above value. This confirms the development cost of Euro 720,000 paid is apportioned to 60 units and taken Euro 12,000/ per unit and the Department has added this amount to 27 units already imported. Customs duty has been discharged the development cost of technical know how fee already apportioned and includible in the Transaction value of 27 units, the same cannot be loaded again for computing Transaction value. Since the appellants are yet to import the balance 33 units the development cost shall be included in the value as and when import takes place. In view of the above facts, we hold the development cost already included in the Transaction value of imports of 27 units is not liable to be added to the Transaction value of imported goods. Since the agreement is effective from January 2012 the Technical know how fee cannot be added to the imports made in 2011 and not applicable to other models as well other than the pumps model S36X.
22. In view of the above facts, we are of the considered view that the original authority ordering of loading of Technical know how fee of Euro 720,000 to the Transaction value of 76 Nos Pumps under Rule 10 (1) (c) is not sustainable and not backed with any evidence. Accordingly we set aside the impugned order in so far as the addition of Technical know how fee to the Transaction value of pumps.
23. As regards the third issue of loading of service fees paid to overseas supplier towards rendering various services the Lower Authority ordered for loading of the amount to the Transaction value on the grounds that both the parties are related and the service charges paid by the appellant is related to the import of goods.
24. On perusal of the Service Agreement dt.3.3.2011 we find that the principal agreed to provide Management Services, Sales Services, General Administrative Services which includes, marketing legal and IT Support Services etc. and the consideration is payable on actual on quarterly basis. The copy of Invoice No.920028 dt.29.2.2012 raised by the Schwing GmbH, Germany clearly shows that the amount raised for the services rendered for the month of Feb.2012.
25. It is evident from the above facts that these charges are related post-manufacturing activities and not connected to the import of goods and the payments made towards these services has no nexus to the import of pumps.
26. The Hon'ble Supreme Court in the case of CC Chennai Vs Toyota Kirloskar Motor Pvt. Ltd. (supra) [reported in 2007 (213) ELT (SC) ] clearly held that the Technical assistance fee has direct nexus with post import activities and not with importation of goods and dismissed Revenue's appeal. The ratio of the apex Court judgement is squarely applicable to the present case. By following the above apex Court decision and the High Court decisions, this Division Bench in the case of Saint Gobain Glass India Ltd. Vs. Commissioner of Customs, Chennai 2014-TIOL-1406-CESTAT-MAD = 2014 (310) ELT 757 (Tri. Chennai), and in Final Order No. 41538 & 41539/2015 dt. 17.7.2015 in the case of Godrej Agro Ltd. VS CC Chennai on identical issue of know how fees and other charges allowed the appeals. Therefore, we maintain the same in the present case.
27. Further, we find that the appellants are registered with Service Tax Department and discharged service tax on the said service charges paid to the overseas service supplier under reverse charge basis which is not in dispute. In view of the above facts, we hold that service charges and other charges paid to their overseas supplier towards various services has no nexus with import of pumps and accessories and the said amount not addable to the transaction value of imported goods covered in their appeals under Rule 10 (1) (c) of CVR. Accordingly, we set aside the impugned order loading of the amount of service charges.
28. Having discussed the main issues the last issue remains to be decided is the provisional assessment and 5% EDD ordered by the LAA for the future imports. We find from the impugned order the LAA on one hand upheld the original order of adjudicating authority who finalised the loading of value but proceeded beyond the scope of appeal and directed the Appraising Group that all future imports should be provisionally assessed till finalization of demands and realisation of differential duty and also ordered to collect 5% EDD on all future imports and also directed the department to secure with additional security. We find that this direction is beyond the scope of the OIO dt. 5.3.2013 which was appealed by the appellant before LAA. It is relevant to state that it is the case where the DC (SVB) has decided valuation issues and ordered loading under Customs Valuation Rules and directed the appraising group to finalize the assessment accordingly as per his order. Therefore, the LAA order to continue provisional assessment for all future imports does not arise.
29. It is interesting to note that the Commissioner (Appeals) in his interim order dt. 17.6.2014 (annexed at page 219) while granting the stay and waiver of predeposit stated that the appellants have long standing track record of imports and exports and directed that insisting of security deposit to be avoided. The relevant paragraph is reproduced as under :-
I find no reason for the goods under import to be denied clearance. If the Assessment Groups at Air Cargo Complex, Chennai finds this order in any way an impediment to clear the goods, they may keep the assessment provisional and clear the goods immediately. In any case, a final hearing of this matter is being taken up by 3rd week of July. The matter has been posted for final hearing on 16th July 2014 Therefore, the imports arriving in the next one month may be cleared on provisional assessment basis. Since the importer is a regular one with a long standing track record of imports and exports, insistence of security may be avoided.
Having given the above findings in his interim order as above, the same appellate authority in the final order changed his view without any valid reasons. Therefore, the LAA order directing to continue provisional assessment and recover 5% EDD or any other security is not warranted and beyond the scope of grounds of appeal before the LAA. Accordingly, we set aside the impugned order directing the department to continue provisional assessment for all future imports and to collect 5% EDD as security.
30. In view of our foregoing discussion and findings on each issues held in favour of the appellant as set out in the preceding paragraphs, we direct the authorities concerned to finalize all the assessments covered in the disputed period i.e. from 23.12.2013 by accepting the transaction value declared by the appellant. In the result, we set aside the impugned order and allow the appeal of appellant with consequential relief.
(Pronounced in open court on 17.02.2016)
(P.K. CHOUDHARY) (R. PERIASAMI)
Judicial Member Tehnical Member
BB/gs
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