Case Law Details
Brief of the Case
In the Case of M/s GMR Energy Ltd vs. Commissioner of Customs, Bangalore, Hon’ble Supreme Court while dealing with the appeal of the assessee and of the revenue held that Rules 4 and 9 of the Custom Valuation Rules, 1988 would only apply in case imported goods are “sold” for export to India. It is clear under the terms of LTAPSA that parts are to be replaced without any further charge after a certain number of hours of the running of the power plant. There is no sale in the present case as the assessee has not made any payment for the imported goods separately. Further once the appropriate authorities are satisfied that the impugned goods are required for renovation, the customs department does not need to go deep into the matter and by hairsplitting and semantic niceties deny the benefit of the exemption notification.
Facts of the Case
The assessee’s appeal was related with the issue of valuation of import of parts of the Gas Turbine Hot Section of a naphtha based power plant while the revenue concerns was whether the assessee is entitled to avail itself of the benefit of the exemption notification No.21 of 2002 dated 1.3.2002 in respect of the goods imported under two bills of entry dated 25.6.2003. The appellant had imported a naphtha based power plant with five gas turbines for purposes of generating power which is to be uploaded into the grid of the Karnataka Power Transmission Corporation Limited. The power plant had to be kept in good running condition as the contract with KPTCL is to supply power to them continuously. For this purpose, the appellant entered into an agreement for service and supply of parts with GE, USA being a Long Term Assured Parts Supply Agreement dated 12.12.2000, (referred to as “LTAPSA”) under which the appellant was required to make payments based on either fired hour charges or maintenance charges. Various parts of the Gas Turbine Hot Section of the said plant, which had to be imported under the ‘LTAPSA’, were imported under two bills of entry dated 25.6.2003 after 12,500 fired hours had come to an end. The parts that were identified as having to be replaced were re-exported back to GE, USA under cover of shipping bills of the month of May, 2003 before the two bills of entry dated 25.6.2003 were presented for import of the replaced parts to the customs authorities. The appellant paid customs duty based on the value declared in the said bills of entry but did not make any payment to GE based on these invoices since their payments had already been made based on fired hour charges. The assessment of the said import was completed by the customs department after due verification of the documents produced at the time of import. Subsequently, the custom department considered the invoice value as discounted price and by a show cause notice dated 12.08.2004 sought to add 1/3rd of the value of the imported items to represent the amount of the parts that were replaced and re-exported back to GE, USA to the invoice value by invoking Rule 4(2)(g) and Rule 9(1)(d) and 9(1)(e). The Department also denied the benefit of exemption under NN 21/2002-Cus dated 01.03.2002. In reply thereof the assessee disputed all the allegations made in the notice. The commissioner of custom, however, confirmed the demand made in the show cause notice. The Appeal of the assessee was also dismissed by the Tribunal as it found that there is no transaction value at all and applied Rule 8 of the Custom Valuation Rules. However the Tribunal granted relief for availability of benefit of exemption notification. Therefore the two appeals came up before Hon’ble Supreme Court to decide.
Contention of the assessee
Please become a Premium member. If you are already a Premium member, login here to access the full content.
This case is 5 months back now and is a very significant judgment of SC. Humble request to please post this landmark judgments on early basis. You are doing a brilliant work