Custom, Excise & Service Tax Tribunal
Bramhani Industries Ltd vs Commissioner Of Customs (Airport & Air ... on 2 November, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI Appeal No.C/554/2009 [Arising out of Order-in-Original No.803/2009 dt. 30.10.2009 passed by the Commissioner of Customs (Airport & Aircargo), Chennai] Bramhani Industries Ltd. Appellant Versus Commissioner of Customs (Airport & Air Cargo) Chennai Respondent
Appeal No.C/270/2010 [Arising out of Order-in-Original No.137/2010 dt. 27.02.2010 passed by the Commissioner of Customs (Airport & Aircargo), Chennai] Bramhani Industries Ltd. Appellant Versus Commissioner of Customs (Airport & Air Cargo) Chennai Respondent Appeal No.C/271/2010 [Arising out of Order-in-Original No.138/2010 dt. 04.03.2010 passed by the Commissioner of Customs (Airport & Aircargo), Chennai] Bramhani Industries Ltd. Appellant Versus Commissioner of Customs (Airport & Air Cargo) Chennai Respondent Appearance:
Shri B.G. Chidananda URS, Advocate For the Appellant Shri B. Balamurugan, AC (AR) For the Respondent CORAM :
Honble Ms. Sulekha Beevi C.S. Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing : 11.10.2017 Date of Pronouncement : 02.11.2017 FINAL ORDER No. 42561-42563 / 2017 Per Bench All these three appeals involving identical issue are filed by the same appellant, hence they are taken together for common disposal.
2. The dispute involved in all these appeals concerns enhancement of declared values and classification of Engineering Design and Technical Documentation.
3. In appeal C/554/2009, appellant had filed Bill of Entry No.732340 dt. 07.11.2008 for clearance of goods declared as Basic Engineering Design and Technical Documentation for Battery, BPP and CDQ. Value of the goods was declared as EUR 45,60,000 and the goods classified under CTH 49119920 claiming exemption from customs duty under Notification No.21/2002-Cus., Sl.No.164. On investigation, it appeared to department that declared values and classification were incorrect. Accordingly, proceedings were initiated by way of SCN dt. 18.08.2009, inter alia proposing enhancement of value to EURO 54,72,000 (CIF) classification of the goods under CTH 84178090 along with main equipment (MTPA Coke Oven with CDQ and Byproduct Plant), confiscation of the imported goods and imposition of penalty under Section 112 (a) of the Customs Act, 1962. On adjudication, vide an impugned order dt. 29.10.2009, the Commissioner confirmed the proposals in the notice, confiscated the goods, however allowed their release on payment of redemption fine of Rs.70,00,000/- under Section 125 of the Customs Act, 1962. Penalty of Rs.10,00,000/- was also imposed on the appellant under Section 112 (a) ibid. Hence Appeal No.C/554/2009.
4. In Appeal C/270/2009, the appellant had similarly imported goods declared as Design Engineering and Technical Documentation for 189M3 Sinter Plant vide Bill of Entry No.617838 dt. 23.05.08 goods were classified under CTH 49111090, claiming exemption under Notification No.21/2002-Cus. Sl.No.164. So also, vide Bill of Entry No.617835 dt. 23.05.08, they had imported the goods declared as "Design Engineering and Technical Documentation for 178M3 Blast Furnace". The value of the said consignments were declared as US$ 600 and US$ 1120 respectively and the goods were classified under 49119990, claiming exemption under CN 21/2002. SCN dt. 31.07.2009 was issued to appellant inter alia proposing enhancement of declared values for Basic Engineering and Technical Documentation for Sinter Plant and Blast Furnace to Rs.3,68,14,500/- (CIF) and Rs.6,87,20,400/- (CIF) respectively, and reassessment of the goods under CTH 84198190 and CTH 84178090 respectively on par with classification of main equipment viz. Sinter Plant and Blast furnace and demand of differential duty of Rs.3,13,52,416/-. SCN also proposed confiscation of the imported goods, as also imposition of penalty under Section 114A ibid. In adjudication, vide impugned order dt. 27.07.2010, the Commissioner confirmed the proposals in the SCN for enhancing the values and classifying the goods under 84198190 and CTH 84178090. Differential duty was also confirmed. Imported goods were confiscated however allowed to be redeemed on payment of fine under Section 125 ibid of Rs.1,50,00,000/-. Penalty equal to duty liability namely, Rs.3,13,52,416/- under Section 114A was also imposed. Hence Appeal C/270/2010.
5. In Appeal C/271/2010, the facts of the case are that the appellant filed Bill of Entry dt. 18.12.2008 for clearance of goods declared as "Catalogues Design Engineering and Technical Documentation", classifying the goods under CTH 49111090 and claiming exemption from payment of duty under Notification No.21/2002-Cus. Sl.No.164, and declaring the value as US$ 10. It also appeared that appellant imported "Detailed Engineering Drawings for Blast Furnace" under DHL Airway Bill No.992 3540 270 declaring the value as US$50. A SCN dt. 30.07.2009 was issued to appellant proposing enhancement in value to US$ 6,00,000 (CIF) classifying under CTH 84198190 in line with the main equipment (Sinter Plant). The SCN also proposed enhancement of Detailed Engineering Drawings for Blast Furnace imported under DHL Airway Bill No.9923540270, the value therein was proposed to be determined at US$ 224000(CIF) and classification under CTH 84198190 and CTH 84178090 under which the main equipments had been imported. SCN also proposed confiscation of the imported goods and imposition of penalty under Section 112 (a) ibid on the appellant. In adjudication, Commissioner vide impugned order dt. 04.03.2010 confirmed proposals in the SCN and ordered confiscation of the goods as above, however allowed the redemption on payment of fine of Rs.1,00,00,000/- under Section 125 ibid. Penalty of Rs.50 lakhs was also imposed on the appellant. Hence C/271/2010.
6. Today, when the matter came up for hearing, on behalf of the appellant, Ld. Advocate Shri B.G. Chidananda URS submitted oral and written submissions which can be broadly summarized as under :
(i) The department has proceeded on a premise that import of Technical and Engineering Documents is a precondition for the same equipment Sinter Plant and Blast Furnace etc. imported separately from the foreign supplier.
(ii) Department has taken a view that supply of Design Engineering Drawings and Technical Documentations are conditional to same equipment. This premise is totally incorrect.
(iii) On the other hand, Design Engineering Drawings and Technical Documents are required for installation of plant and machinery which is a post-import activity.
(iv) In support of his argument, Ld. Advocate draws attention to para 3.8 of the contract entered into between the appellant and the Chinese supplier. As per para 3.8, "All the detailed engineering and working drawings prepared / furnished by the Seller". Ld. Advocates contention is that Engineering and Technical documents are meant only for installation of plant and machinery as is evident from para 3.8 of the contract. He draws our attention to the agreement in para 3.8 wherein the seller has agreed to deliver the detailed certified construction drawings for civil foundation works.
(v) Ld. Advocate further draws our attention to page 5 of the contract wherein it has been clearly indicated that purchaser has appointed MECON Limited as their Consultant for the project who shall approve the drawings, Billing Schedule and shall carry out functions of Engineering, Contract, Construction & Project management on behalf of the purchaser.
(vi) Technical specifications mentioned in Annexure-3 of the contract was not attached to the contract though mentioned therein since soil specifications had to be furnished by the purchaser for finalizing technical specifications. He referred to Article 18.0 of the contract and contended that periodical Design Liaison Meeting has to be held for finalizing the technical specifications and therefore at the time of contract the technical specifications were not made part of the contract though mentioned.
(vii) In respect of Appeal C/554/2009, the impugned order dt. 29.10.2009 only redetermined the declared value of the imported goods. However, there is no differential duty that has been demanded. In the circumstances, the confiscation of the goods as well as imposition of the redemption fine and imposition of penalty cannot be sustained.
(viii) In respect of Appeal C/270/2010, imported goods was already cleared out of charge and hence their confiscation under Section 111 (m) and imposition of redemption fine under Section 125 of the Customs Act, 1962 is not justified. So also, there is imposition of penalty equal to the differential duty liability is also not justified as they have not suppressed or misstated any facts.
(ix) In respect of C/271/2010, while the declared import value has been redetermined and enhanced, however, there is no demand of differential duty. Hence confiscation of the goods under Section 111 (m) of the Act and imposition of redemption fine under Section 125 cannot be justified. There is also no justification for imposition of high quantum of penalty of Rs.50 lakhs under Section 112 (a) of the Act.
(x) Ld. Advocate also further submits that various higher courts have held that when the engineering, design and drawing documentations are related to post-import activity their value cannot be added to the assessable value of the imported plant and machinery. By implication, engineering design and drawings which have no reliance with the import but only are required for post-import activity cannot be classified along with main plant and machinery imported but will merit classification on their own premise. He relies upon the following case laws :
1. Gujarat Mineral Development Corpn. Ltd. Vs CCE Ahmedabad - 2000 (117) ELT 432 (Tribunal)
2. Gujarat Mineral Development Corpn. Ltd. v CCE Ahmedabad - 2005 (190) ELT 5 (SC)
3. CC New Delhi Vs Parasrampuria Synthetics Ltd.
2001 (133) ELT 9 (SC)
4. CC (Port), Kolkata Vs J.K. Corporation Ltd.
2007 (208) ELT 485 (SC)
5. CC Vs Ferodo India Pvt. Ltd.
2008 (224) ELT 23 (SC)
6. CC (General) New Delhi Vs Gujarat Perstorp Electronics Ltd. - 2005 (186) ELT 532 (SC)
7. CC Mumbai Vs Kinetic Technology India Ltd.
2016 (314) ELT 155 (Tri.-Mumbai)
7. On the other hand, ld. AR Shri B. Balamurugan supports the impugned orders. He submits that the Design Engineering and Technical Documentation imported by the appellant were very much concocted and pre-requisite for the import of the main plant and machinery. Ld. A.R further made the following submissions :
7.1 The contract dt. 17.04.2008 between the appellant and their foreign supplier in page 4 thereof clearly lays down that appellant is purchasing complete Design, Equipments, Systems, Technical Services and Training for its 1 Million Ton Per Annum recovery type coke oven plant with CDQ and with by-products plants for its project. Ld. A.R draws our attention to the fact that there is no mention of any installation in the said agreement.
7.2 So also in para 3.3 of the agreement, it is clearly indicated that the seller's scope shall include inter alia supply of technology and basic engineering; complete design and detailed engineering; supply of plant and machinery etc. 7.3 In para 3.8 of the agreement, it is laid down that total design and engineering for said plant including Basic Design, Basic Engineering and Detailed Engineering will be the responsibility of the seller.
7.4 In para 10.1.5 of the agreement, it is laid down that seller shall submit the drawings/documents etc. of the equipment for the approval/information of the purchaser as per the technical specifications. So also in Article 21.0 (Order Exhibition Plant), the seller is required to submit detailed Project Planning, Execution Report and Progress Report every one month with details of drawings, designs and data for review.
7.5 The imported design and technical documents therefore are not post-importation activity but they are very much related to the plant equipments earlier imported.
7.6 On the matter of value enhancement, Ld. A.R submits that in all the three appeals, it has been meticulously established that the prices declared by the appellant in the Bills of Entry were concocted and that in addition to the declared prices, had made 10% / 40% etc. advance payment as also 10% / 40% etc. payments subsequent to their import. Only based on such evidence has the declared value been enhanced.
7.7 Once it has been established that the design and technical documentations imported are only related with the concerned plant and equipment / machinery earlier imported like Sinter plant, Blast Furnace, the said goods will be classified under the same classification of the main equipments, and rates of duty will be applicable accordingly.
8. Heard both sides and have gone through the facts. In all these three appeals, the core issues that come up for appellate decision are as under :
(i) Whether the import of impugned goods is a pre-condition / intrinsic part of the total importation of the main plant and machinery or whether the goods can be considered as having been imported for subsequent post-import activity.
(ii) Whether "Engineering Design and Technical Documentation" imported can be classified under Chapter 49 of CTH as claimed by the appellant or whether they are required to be classified along with the main plant and machinery and equipments imported for the project.
9.1 On the issue of enhancement of declared values, from the copy of the agreement available before us, it emerges that the agreement involves purchase of complete design, equipments, systems, technical services and training for Coke Oven plant and by-product plant project. The main outline of the agreement in Clause A & B of the agreement at page 4 of the agreement attests to this :
"A. The Purchase has decided to purchase complete Design, Equipments, Systems, Technical Services & Training for its 1 Million Ton Per Annum recovery type coke oven plant with CDQ and with by-poroducts plants for its Project which will be located at Bramhani Hills, Jammalamadug, Kadapa District, Andhra Pradesh, India in accordance with the terms & conditions of this Contract.
B. The Seller has agreed to sell complete Design, Equipments, Systems Technical Services & Training for 1 Million Ton Per Annum recovery type coke oven plant with CDQ and by-products plant along with its right to use for the Purchaser's Project in accordance with the terms and conditions of this Contract."
From the above, it also emerges that the purchase of design is also part of the bucket list of purchase.
9.2 We further find from Article 4.0 that the contract price for Design, Engineering and Technical documentation is EURO 3,800,000 for Battery & BPP and EURO 7,600,000 for CDQ. It is also laid down that such design engineering and technical documentation has a reference to the "technical specification". It is seen that Annexure-3 contains Technical Proposals for Battery and CDQ. In Article 1.0 the "Battery Limits" has been defined as "areas and boundaries of Design, Engineering, Supply and Technical services to be supplied by the seller". Here again, we find that Design and Engineering is an innate part of the contract.
9.3 Article 5.2 of the agreement lays down the parameters for "Terms Of Payment". Interestingly, para 5.2.3 mandates that any despatch of drawings and equipments are to be preceded by approval of Billing Schedule which provides for individual / set / lot prices of drawings / items / equipments being despatched based on which pro-rata payments shall be released by Bank against Letter of Credit. This part of the agreement proves to implicate a connection between import of plant and equipment and the import of "Design Engineering and Technical Documentation". Thus there could be no import of the equipment and the machinery without the documents also being imported and payment terms of which have been separately brought in para 5.1 of the agreement.
9.4 We have then no doubt in our mind that the import of the Engineering Design and Technical Documentation are not for any post-import activity but are indispensible condition to the import of the main plant and equipment/machinery. This being so, the case laws cited by the ld. Advocate will not help his case.
9.5 In fact, case law of Gujarat Mineral Development Corpn.Ltd. 2000 (190) ELT 5 (SC) will go against the appellant since the Hon'ble Apex Court held therein that charges going as input into manufacture, which is the fact in these appeals, will be includible in the assessable value.
9.6 The ratio laid down by the Hon'ble Apex Court in Ferodo India Pvt. Ltd. 2008 (224) ELT 23 (SC), also cited by ld. Advocate, will not help their case since the Hon'ble Apex Court has categorically held therein that technical know how cost and payment of royalty is includible in price of imported goods if such payment constitutes a condition pre-requisite for supply of imported gods by foreign supplier, which ostensibly is the case herein.
9.7 The reliance of the Ld. Advocate on the ratio of the Hon'ble Supreme Court's judgment in Tata Iron & Steel Co. Ltd. Vs CCE Bhubaneshwar - 2000 (116) ELT 422 (SC) is also misconceived since therein the disputed charges (technical know-how) were covered by a separate contract and it was held by the Hon'ble Apex Court that it could not been included in the value of materials mixed up with the values of those documents which was referable to an equipment. However, in the case before us there is only one common and composite contract for which supply of design, engineering and equipment.
9.8 We further note that sufficient evidence has been unearthed by the department to establish that declared / invoice values were much lower than the actual price adopted by the appellant to the foreign supplier. In all these cases, it has also been established that the appellant was required to, even before import of the impugned goods, effect payment of certain percentage of the actual value of the goods. Similarly, a percentage of the actual value was required to be paid after the import was effected. In any case, in all these appeals appellants have not adduced any counter evidence or proof to counter the allegations made in the SCNs and confirmed by the adjudicating authority. We also note that in all these impugned orders, the adjudicating authority had delved deep into the actual pricing of the impugned goods, the manner of payments and other evidences and only thereafter has confirmed the enhancement of the declared values. We are not able to find any infirmity in such enhancement of the declared values and the appellant's prayer on this count will also fail.
9.10 Coming to classification of impugned goods, once it has been established that the value of the Engineering, Design and Technical documents are required to be added to the assessable value of the related plant and machinery/equipment earlier imported, then each of such import will merit classification under Customs Tariff as that of the main import and we therefore are not able to find any infirmity in the change of classification ordered by the adjudicating authority in each of these cases.
10.1 On the issue of redemption fine, Ld. Advocate has contended that since there has been only enhancement of value in two of the three cases, there cannot be any confiscation or imposition of redemption fine. We do not find any merit in this contention. The goods have been confiscated under Section 111 (m) of the Act which ordains that any goods which do not correspond to in respect of value or in any other particular with the entry made under the Act shall be liable for confiscation. When imported goods have been evidently found as not corresponding in respect of value, hence their confiscation under Section 111 (m) is ordinarily very permissible. There is also no bar for imposition of redemption fine under Section 125 if there is no duty liability has been determined. Section 125 ibid provides for giving the owner of the goods an option to pay in lieu of confiscation such fine as the adjudicating officer thinks fit. The only proviso is that such fine shall not exceed the market price of the goods confiscated less in the case of imported good the duty chargeable thereon.
10.2 Accordingly, in respect of Appeal No.C/554/2009 (impugned order 803/2009 dt. 29.10.2009) the goods have been confiscated under Section 111 (m) of the Act. However, the importers have been given option to redeem the same for re-export on payment of fine of Rs.70,00,000/- under Section 125 of the Act. Taking into all the facts of the matter into consideration, we order reduction of redemption fine to Rs.10,00,000/- (Rupees ten lakhs only). So ordered.
10.3 In Appeal C/270/2010 (impugned order No.137/2010 dt. 27.2.2010), the impugned goods have been confiscated under Section 111 (m) and redemption fine under Section 125 ibid of Rs.1,50,00,000/- has been imposed. We are of the opinion that reduced redemption fine of Rs.25,00,000/- (Rupees Twenty five lakhs only) will sufficiently meet the interest of justice). So ordered.
10.4 In respect of Appeal C/271/2010, we note however that the offending goods had already been cleared out of customs charge and were not available for confiscation and their confiscation is not justified. As per the law laid down by higher appellate courts, when the goods are not available, there can be no confiscation, unless and of course, they have been cleared under bond etc. which is admittedly not the case herein. This being so, that part of the impugned order No.138/2010 dt. 04.03.2010 ordering confiscation of impugned goods as also ordering redemption fine of Rs.1,00,00,000/- under Section 125 of the Customs Act is not justified by law and is therefore set aside. So ordered.
11. Coming to the penalties impugned in these cases, we find that they are commensurate with the acts and omissions alleged against the appellant in each of those cases and also keeping with the penal provisions they have been invoked in the SCN and found as correct by the adjudicating authority. This being so, we do not interfere with the imposition of penalties on the appellants or the quantum thereof.
12. In the event, except for setting aside/modification of the redemption fines as ordered in paras 10.1 to 10.4 above, no interference is made in the remaining portions of any of the impugned orders in all these appeals.
The appeals are disposed of on the above terms.
(Order pronounced in court on 02.11.2017)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S)
Member (Technical) Member (Judicial)
gs
19
Appeals No.C/554/2009
C/270,271/2010