Customs, Excise and Gold Tribunal - Tamil Nadu
M/S. United Systems Engineers Pvt. Ltd. vs C.C.E. Coimbatore on 14 March, 2001
ORDER
Shri VK Agrawal
1. The issue involved in this appeal filed by M/s United Systems Engineers Pvt Ltd is whether the cost of Reserch & Development charges and Technological know how fees are includible in the assessable value of prototype Radio manufactured and supplied by them to Rural Communication Division, Telexcom Research Centre Bangalore.
2. Shri BV Kumar, learned Counsel for the appellants has submitted, in his letter dated 23.2.01, a synopsis and has requested to decide the matter on merits on the basis of he grounds of appeal.
3. We have therefore heard Shri G. Greekumar Menon, learned, SDR, and perused the records. He submitted that the issue stands settled by the Supreme Court judgement in the case of Associated Cement Companies Limited vs Commissioner of Customs reported in 2001 (128) 211 (SC) wherein it was held that cost of drawing and design and manuals and technical materials has to be included in the transaction value under the Customs Act, 1962.
4. The appellants on the other hand have contended that they had entered into two development projects i.e.Development of TDMA UHF Digital Radio Terminal for Rural Communication Division, Telecom Research Centre, Bangalore and (ii) A Technology Transfer Agreement with C.DOT for transferring the technology for the 4000 MHz radio unit and necessary CPFSK modern required for transmission of 384K bits/sec data; that under the agreement they were not only to transfer the technology but also to sell the prototypes developed to prove the technology to show a functioning model of the technology developed; that the cost of Research and Development is not includible in the cost of prototype which are developed only to prove the functioning of the technology; that it would form part of the assessable value of the goods in the hands of the subsequent buyers who may manufacture the goods on mass scale by using the technology acquired; that the cost of Research and Development and the intellectual property right has no nexus with manufacture of the product and as such cost of R & D should be distinguished form the engineering drawing, designing/documentation charges.
5. In the memorandum of appeal the appellants have mentioned that penalty is not warranted in the circumstances of the case as there was no concealment of facts or malafide on their part.
6. The learned SDR refers to the finding of the Commissioner wherein it has been mentioned that there was no evidence to show that any of the documents on the basis of which show casus notice has been issued was brought to the notice of the department; that only during the investigation these documents came to light; that the visit of the officers to the factory cannot be a ground for contending that extended period of time would not apply. Reliance has been placed on the ration of the decision in the case of Jaishri Engineering Co. Pvt Ltd. reported in 1989 (40) ELT 214 and in the case of CCE vs. Thermax reported in 1994 (70) ELT 247.
7. We have considered the submissions of both the sides. It is not in dispute the prototype developed by the appellants was supplied by them. Whatever cost has been incurred by them in developing the prototype will form part of the assessable value . If any expenses have been incurred on R & D they to form part of the intrinsic value of the prototype developed and supplied by t hem. The Hon'ble Supreme Court in the case, relied upon by the learned SDR, has observed that intellectual inputs greatly enhance the value and giving example, the Hon'ble Supreme Court mentioned that the value of paper is negligible as compared to the value or price of the encyclopedia or a Dictionary . The Hon'ble Supreme Court held that "this means that the charges of a duty is on the final product whether it be Encyclopedia or the engineering or architectural drawings oracy manual" Following the ratio of the judgement of the Supreme Court, we find no reason to interfere with the impugned order. We also agree with the findings of the Commissioner on the in vokability of the provisions of Section 11A(1) as the material facts were not disclosed to the department and duty was not paid on the entire value. Penalty is imposable on the appellants. We find that only penalty of Rs.10,000/- has been imposed in a case involving duty of Rs.1.21 lakhs which in our view isnot high at all. We, therefore uphold the order and reject the appeal.
(Dictated and pronounced in open Court)