Document Fragment View

Matching Fragments

(i) --
(ii) --
(iii) --
(iv) engineering, development, artwork, design work and plans and sketches undertaken elsewhere than in India and necessary for production of imported goods.
The learned special counsel argued that the provisions of rule reproduced above would mean:
(a) The expression for use in connection with is of wide import. This does not imply only immediate nexus to vendors cost and prices.
(b) The expression Engineering appearing in clause (iv) is again of wide import. Once the goal of a project is set, engineering starts with task specification, concept formulation followed by development, analysis, solution specification, basic design, detailed design and manufacture of the desired product and finally installation and erection. At every stage, engineering comes into play. [Even as per Art. 4.1(c) of OETAC, KHILs engineering services included the preparation of drawings, specifications, schedules and estimates and coordination with the engineering efforts of sub-contractors and company contractors.]
6(a) (4) It was argued that the basic engineering/conceptual design is limited to system design only. The learned counsel also stated that the equipments purchased were standard equipments which had been supplied to various power plants all over the world and the prices charged by the suppliers were all inclusive. He also submitted that the scope of service under OETAC had nothing to do with the designing of the equipment supplied under Offshore Equipment Supply Contract (OESC). It was his submission that there is difference between designing of plant and designing of equipment and both contracts are mutually exclusive. He submitted that the equipments supplied under OESC are basically of standard design and there was no requirement of designing or engineering or preparation of the drawings of supplied items. He relied on Annexures E to J6 to submit the fact that design of the equipments was not provided to the suppliers and the price was all inclusive.
6(a) (6) However, the appellants submitted that this has nothing to do with the supply of imported goods and the designs etc. provided by the contractor under OETAC were not for use in connection with the supply. Some of the sample agreements were relied upon by the learned counsel to support his submission that in all the cases of major equipments supplied, equipments were standard supply and there was no question of providing any design or specification in connection with the supply. We examined some of them. M/s. GE Energy Products Europe in their letter dt. 26/02/2004 stated that in respect of gas turbines supplied by them based on a standard design identified by the model number available on order, they had supplied certain customized auxiliary equipment which was designed and manufactured for the purposes of the contract. Further they go on to observe that the contract includes a standard description of their equipment, materials and design with certain options and modifications as required by the contract specifications. What emerges from the letter appears to be that certain modifications were suggested and naturally if modifications were to be suggested, that requires certain changes in the design and specifications, which would have been carried out by the contractors in this case and given to the suppliers who studied the same and finally designed the item which is supplied. The letter of the supplier in this case has to be read with OETAC which would show that the responsibility for basic engineering and design lies with the contractor and therefore the contractor would have put in efforts to prepare engineering and designs to undertake to design and engineering work. In the case of vacuum pump, the supplier specifically stated that the item supplied was not a standard product of Nash Korea. The packages were designed and manufactured by Nash Korea permit the purchase specifications from M/s. Doosan. In Annexure G, Land Instruments International Combustion and Environmental Division stated All of the items supplied were standard land catalogue items with the exception of the mounting frames upon which the systems were installed and the calibration gases. Special project engineering services were included to package the standard components into standalone systems as required by the Hanjung procurement specification and Lands own design requirements. Another important point that has to be taken note is that if the standard equipments were available and understood by the contractor and the buyer as specified by the requirements of the buyer, there was no need to undertake item wise performance required by the contractor in respect of these standard equipments and interpreting basic design and engineering, conceptual as well as project management in the attachment to OETAC. Very fact that OETAC and OESC have similar provisions with regard to designing and engineering both on conceptual as well as project management aspects goes against the submissions by the counsel for the appellants.
6 (b) (7). Another decision which has been relied upon by the learned spl. Counsel for Revenue is the decision of this Tribunal in the case of MRPL in Customs Appeals No. 525/2007 and 496/2007 dated 8.8.2012. In that case, the facts are almost similar to the facts of this case. MRPL was expanding the capacity of their refinery and for this purpose, they entered in to three contracts. The contention of the Revenue was that the amount paid in terms of other contracts should be included in the assessable value. The three contracts covered three different stages namely basic design package, extended basic design package and detailed design package. This Tribunal took a view that all the three elements are liable to be included. In fact this decision which is very detailed and elaborate goes much beyond the allegations made in the present case and since Revenue is not in appeal against the decision of the Commissioner in allowing certain deductions as proposed by the show-cause notice, the decision of the Tribunal in the case of MRPL need not be considered by us in great detail. In the case of MRPL also, enhancement of assessable value, finalization of assessment along with imposition of penalty and confirmation of demand of differential duty was upheld. This is the latest decision of the Tribunal which in our opinion would apply to the facts of this case. The discussion above would show that the decision we have taken is covered by the precedent decisions of the Tribunal and legally also is correct. In view of the detailed discussion by us as above, the legal issue raised by the appellant in this case that as there was provisional assessment, without finalizing provisional assessment, notice for recovery of differential duty, imposition of penalty and confiscation of goods could not have been resorted to cannot be accepted.