Custom, Excise & Service Tax Tribunal
M/S. Hanil Lear India Pvt. Ltd vs Commissioner Of Customs (Imports) on 5 July, 2017
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
C/00009/2007
[Arising out of Order-in-Appeal C.Cus.No.710/06, dated 15.09.2006 passed by the Commissioner of Customs (Appeals), Chennai]
M/s. HANIL LEAR INDIA PVT. LTD.
APPELLANT
Versus
COMMISSIONER OF CUSTOMS (IMPORTS),
CHENNAI
RESPONDENT
Appearance:
For the Appellant Shri R. Raghavan, Adv.
For the Respondent Shri B. Balamurugan, AC (AR) CORAM:
Honble Smt. Sulekha Beevi, Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing :
Date of pronouncement:
18-05-2017 05-07-2017 FINAL ORDER NO. 41122 / 2017 Per Bench:
Facts of the case are that the appellant is a 50:50 joint venture company with equity participation of M/s Hanil Lear Corpn. USA.
2. Dispute in this appeal relates to determination of value for imports by the appellant from M/s Hanil E. HWA & Co. Ltd., Korea for the period March 2004 to February 2007.
3. The Special Valuation Branch of Customs conducted enquiry with reference to imports made by appellant from M/s. Hanil E. HWA & Co. Ltd., Korea. By an Order-in-Original No.187/2001-SVB, dated 26.02.2001, original authority held that there shall be 20% loading on the invoice price for arriving at the value (for the purpose of payment of duty) for the three years period from March 2001, it till March, 2004.
4. The aforesaid Order-in-Original was set aside vide Order-in-Appeal No.530/2001, dated 31.08.2001, with the Commissioner (Appeals) holding that the loading of 20% will not survive as no reason is available for the addition and further, M/s. Hanil E. HWA & Co., Ltd., Korea have been procuring and supplying goods to the appellant and the price charged by M/s. Hanil E. HWA & Co. Ltd., Korea was more than direct imports of the said goods from the manufacturer M/s. Hyundai Ltd., Korea. There was no appeal, filed by the Department against Order-in-Appeal No.530/2001, dated 31.08.2001. On the other hand, it had been accepted by competent authority on 08.12.2001.
5. Subsequently, three years after the import, the Special Valuation Branch took up the matter for review, which culminated in issue of review Order-in-Original dated 30-03-2006, wherein it was inter alia ordered as follows:-
i) The transaction value of the imports made from the related suppliers M/s. Hanil E. HWA Co. Ltd., Korea shall continue to be accepted under Rule 4(3)(a) of Customs Valuation Rules, 1988.
ii) The lump sum fee of Rs.84,80,744/- towards technical know-how shall be loaded to the assessable value of the goods imported prior to Order-in-Original in terms of Rule 9(1)(e) of Customs Valuation Rules, 1988 and the difference in duty shall be demanded by invoking relevant provisions of the Customs Act, 1962 for willful suppression of facts regarding the payment of technical know-how fee.
iii) The payment of Rs.4,59,67,972/- towards technical assistance/engineering fee made to the suppliers M/s. Hanil E HWA. Co. Ltd., in terms of Technical and Administrative Service Agreement entered into after issue of Order-in-Original shall be loaded to the assessable value of the goods imported from 01.01.2003 to 31.12.2004 in terms of Rule 9(1)(b)(iv) of Customs Valuation Rules, 1988 and the difference in duty shall be demanded by invoking relevant provisions of the Customs Act, 1962 for willful suppression of facts from the Special Valuation Branch (SVB) in contravention of the preamble to the Order-in-Original.
6. Aggrieved, appellants preferred an appeal before the Commissioner (Appeals), who vide impugned order dated 15.09.2006 upheld the review Order-in-Original.
7. Hence, appellants are before this forum.
8. On 18.05.2017, on behalf of the appellants, Ld. Advocate, Shri R. Raghavan reiterated the grounds of appeal and made further submissions, which can be summarized as follows:-
i) The impugned Review Order-in-Original and Order-in-Appeal are without jurisdiction, since they seek to direct how value shall be determined for the period 2001 to 2004, when this had already been finalized in Order-in-Original dated 26.02.2001, which was set aside by related Order-in-Appeal dated 31.08.2001.
(ii) Since no appeal has been filed against the Order-in-Appeal dated 31.08.2001, the issue remains closed.
(iii) The Review Order-in-Original dated 30-03-2006 which is to finalise value for the period from 2004 onwards, cannot suo motu take up the issue regarding valuation for the earlier period upto March, 2004.
iv) Therefore, directions in the impugned Order-in-Original and Order-in-Appeal as regards demands of differential duty for the period between 2001 to 2004 are totally devoid of merit and cannot be sustained.
v) Till date (i.e., May, 2017) notice under sec.28 of the Customs Act, 1962 has not been issued.
vi) There is no possibility to propose addition of Rs.84,80,744/- paid to M/s. Lear Corporation, USA in as much as admittedly there had been no imports whatsoever by appellant from M/s. Lear Corporation, USA.
vii) In the matter of addition of Rs.4,59,67,972/-, while this amount has been paid to M/s. Hanil E. HWA & Co. Ltd., Korea the imports from the said supplier are not their manufactured products. In the circumstances, notwithstanding the fact that appellant and Hanil E. HWA & Co. Ltd., Korea are related, there could be no addition to the transaction price inasmuch as the transaction price is on the higher side when compared with imports of the same item into India from manufacturer, of the said item.
viii) Further, the review Order-in-Original dated 30.03.2006 has not finalized value for the review period for three years from April, 2004 and has only directed that there shall be provisional payment of 1% EDD till further orders.
9. On the other hand, on behalf of Revenue, Ld. AR supports the impugned order and opposed the appeal. The main contentions of the Ld. AR can be summarized as follows:-
(i) The fact of payment of Technical Know-how fees etc., was noticed only from the Annual Report of 2000 which had been obtained along with other documents for the purpose of review of the SVB order of 2001 for loading of invoice value under Rule 8 of Customs Valuation Rules, 1988;
(ii) Such vital information had not been provided to the department during the original SVB proceedings which had culminated in issue of Order-in-Original No.187/2001, dated 26.02.2001. Even during the personal hearing on 14.02.2001, the representative from importers-company had stated that there was no payment of Royalty/Technical Licence Fee etc., to the suppliers;
(iii) Even vide letter dated 14.02.2001, appellants had confirmed that there was no agreement for payment of royalty to M/s. Hanil E. HWA & Co. Ltd., Korea for payment of product design and engineering;
(iv) As such, above information was not made available to the adjudicating authority in 2001. This being so, the setting aside of that order dated 26.02.2001 by Commissioner (Appeals) and its acceptance by the department will not prevent the department from considering these aspects afresh for loading of assessable value;
(v) Importers have made a payment of Rs.84,80,744/- towards Technical Know-how Fee to third party M/s. Lear Corporation, USA, who is also one of the joint venture partners only to satisfy an obligation of the seller as envisaged in the joint venture agreement. However, such payment was not found included in the price actually paid or payable;
(vi) In the circumstances, lump sum payment of Rs.84,80,744/- towards Know-how Fee made to M/s. Lear Corporation, USA relates to imported goods and hence, will required to be added to transaction value;
(vii) So also, payment of Rs.4,59,67,972/- was made by appellant towards Technical Assistance/Engineering Fee to the suppliers M/s. Hanil E. HWA & Co. Ltd., Korea, which also will require to be added to the assessable value; and
(viii) Appellants have suppressed these facts at the stage of the original SVB adjudication in 2001.
ix) Hence, the impugned order invoking extended period was very much in order.
10.1 Heard both sides and gone through the facts.
10.2 After the first import of seats and other interiors passenger cars from M/s. Hanil E. HWA & Co. Ltd., Korea, the investigation of relationship between Indian importer and foreign supplier was commenced by the department. It is seen that the SVB of Customs House had registered the matter on 21.11.2000 and asked importer to submit follow-up questionnaire along with relevant documents. The importer submitted the details on 17.02.2001. In the letter of the same date, they had also averred that they have not entered into any Technical Collaboration Agreement and Technical Assistance Agreement for Trademark as per joint venture. In the personal hearing, conducted on 14.02.2001, the appellants had averred that there are no payment of Royalty/Technical Licence Fee to the supplier and that although, joint venture agreement says Technical Collaboration Agreement, they have not entered into any such agreement with their joint venture partners. Based on this information made available to him, the original authority passed an Order dated 26.02.2007, wherein, he inter alia, held that the appellant, and their suppliers M/s. Hanil E. HWA & Co. Ltd., are related, and that invoice price shall be loaded by 20% for the purpose of assessment. In page 4 of the order, the adjudicating authority takes note of the fact that the appellant had not submitted a number of documents, including SIA Technical Assistance Agreement/Licence Agreement (Trademark) etc. In Sl.No.4 of the order portion on page 6 of the order, the adjudicating authority categorically indicates that the decision taken by him has been done only on the basis of importers statement, information and declaration made in various written submissions made to the department and that it does not take into account any suppression or misdeclaration affecting the invoice value, which shall be dealt properly under the law and procedure as and when noticed. Para 6.6 of the order also enjoins the appellant to inform the department regarding any change affecting the invoice value.
10.3 No doubt, the said Order dated 26.02.2001 was set aside in appeal by Commissioner (Appeals). It is also a fact that the decision was not appealed by the department. But a careful analysis of the Commissioner (Appeals) Order dated 31.08.2001 will indicate that what was set aside was the order of the lower authority loading the invoice price by 20%. However, the Commissioner (Appeals) did not, order setting aside of any other portion of the impugned order of the original authoritys order, in fact, the last line of the Commissioner (Appeals) clearly indicates that the original order has been modified only to this extent.
10.4 This being so, in our view, the other conditionalities and directions in the original authoritys Order of 26.02.2001, including the portions, therein discussed in para 10.2 above will remain unmodified, untouched and unhindered.
10.5 In the circumstances, then, there is no legal impropriety in the SVB matter having been taken-up for review after three years and a Review Order-in-Original dated 07.04.2006 being its resultant.
10.6 Interestingly, the agreement between M/s. Hanil Lear India Pvt. Ltd., and M/s. Lear Corporation, USA concerning payment to be made for monetary assistance [to check] has been executed on 05.09.1999, well before the first import of the goods and, certainly much in advance of the SVB registration and original authoritys proceedings in 2001. It is only based on this agreement, that over a period, a total amount of Rs.4,59,67,972/- was paid by the appellant to M/s. Lear Corporation, USA towards Technical and Administrative Assistance Fee.
10.7 We also find that the lower authorities have found similar payment of Rs.84,80,744/- towards Technical knowhow, in foreign currency, by the appellants, right from 2001 onwards, to M/s. Hanil E. HWA Co. Ltd., Korea as per the joint venture agreement. From the portions of the agreement extracted in the review order dated 30-03-2006, seen at page 39 of the appeal book, clause (C) of the agreement specifically highlights rendering of Technical and Administrative Assistance, by Hanil E. HWA to Hanil Lear India Ltd., from October, 2001 onwards.
10.8 Distinguishably, the facts of such agreements, or, for the matter, the facts of these payments made to M/s. Lear Corporation, USA and to M/s. Hanil E. HWA Co. Ltd., Korea by the appellant, had not been disclosed and consequently not analysed, during the initial SVB investigation in 2001. There can then be no doubt that such a vital information of this nature has been suppressed from the investigating SVB. Such suppression cannot be attributed to inadvertence or negligence and has certainly been done for the purpose of avoiding proper enhancement of assessable value and thereby evading discharge of the correct Customs duty to the exchequer.
10.9 Viewed in this light, we are unable to find any infirmity with the findings and conclusions of the lower appellate authority in the impugned order, in particular, the following portions:-
" 14. It was therefore readily apparent that the appellants had willfully suppressed the payment of technical know how fee to M/s. Lear Corporation in March 2000 and the payment made to M/s. Hanil E Hwa in the years 2001 and 2004. Therefore the adding of the lump-sum fee of Rs.84,80,744/- paid to M/s.Lear, USA, and payment of Rs.4,59,67,972/- to Ms.Hanil E Hwa are justified. As the details have not been produced in respect of invoice nos. HI031081-01, HI0423-01 and HI0127-03, the appellants have been requested to provide break up details for apportionment for those invoices. In view of the suppression of facts penal action has rightly been proposed to be initiated against the appellants and future imports assessed provisionally.
15. In the appeal the appellants have claimed that as no imports were made from Lear Corporation, USA, the payment of 84.82 lakhs made to them was of no consequence in determining the value of the imported goods. As shown above, this point has amply been taken care of by the lower authority. In the absence of clear cut information from the appellants, a prudent mans estimation would have to be done on the information available at hand by the lower authority. Hence when M/s.Hanil E Hwa and M/s.Lear Corporation, USA, have entered into a joint venture agreement and have set up a joint venture Hanil Lear in India for the purpose of manufacture of car interiors such as seating and dash board systems and interior decorations for cars in which fields M/s.Lear Corporation and M/s.Hanil E Hwa are world leaders it would be only in natural to expect that the payment made to M/s.Lear Corporation was towards their technical know how for the mnanufacture of components and other expertise required for the import of these goods into India and therefore this payment has correctly been held to be addable to the value. The appellants have agreed that the payments are towards product design, assistance for tool drawings, Jigs, Fixtures etc for monitoring of project in all respects, testing quality standard / certification / bench marking, new process arrangements and maintenance of molds, machines, equipments and utilities. It would therefore be absurd and incongruous to state that these payments do not relate to the supply of components under import. It would be only natural to assume that the technical know how that has been accrued by way of such payments would go in to each and every product that is imported in to India and thereby all the services that have been paid for above are liable to be added to the value of the products. It is definitely obligatory (especially when payments have been made to the joint venture partners engaged in the same fields of expertise) on the part of the appellants to reveal such payments made abroad as there is every likelihood of such payments influencing the actual value of the goods. When an order had been issued to the effect that the appellants should make known any payments abroad or inform the department of any change in the invoicing patterns, the appellants should have definitely informed the department when the appellants made the payments to M/s.Hanil E Hwa so that the said value could be apportioned and loaded on to the value of their previous / future imports. The payments of Rs.84.80 lakhs to M/s.Lear Corporation, USA was definitely suppressed because they were not revealed to the original authority in March 2001 although the said payment was made in the year 2000 itself. Thus this payment made abroad would be addable suitably apportioned to the value of the goods imported during the year 2000.
16. Similarly, in respect of the Rs.4,59,67,972/- sought to be loaded by the department, it is seen that although a sum of Rs.7,77,20,729/- had been paid abroad, the order has only taken into account sums that have been incurred towards Technical Assistance and Engineering. An invoice wise break up has already been tabulated in the order of the adjudicating authority. Therefore, the payments made abroad may also be apportioned year wise to the value of the goods imported and duty charted appropriately. The appellants are directed to produce the break up invoices for the periods not covered so as to finalise the assessment."
11. In the event, we hold that there is no merit in this appeal, for which reason it is dismissed.
(Pronounced in open court on 05-07-2017)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Ksr/GS
04-07-2017
11
C/00009/2007