Case Law Details
Commissioner of Customs (Port) Kolkata Vs Steel Authority of India Ltd. (Supreme Court)
Conclusion: Authorities was not justified in holding that it was a turnkey project, importation of equipment and post-importation project implementation exercise were mutually dependent as reading such implied conditions into the contracts would be impermissible in the absence of any other material to demonstrate subsistence of such conditions. Thus, section 14, rule 4, rule 9 (1)(e) of Customs Valuation (Determination of Price) of Imported Goods Valuation Rules, 1988 could not be automatically applied to every import which had surface features of a turnkey contract.
Held: Assessee imported certain items under two contracts which were to supply plant, equipment and spares as also certain basic designs and supervisory services at site. Assessee wanted import duty to be charged on the plant and equipments alone as the price for the plants and equipments included all design and engineering for their manufacture. But designs and drawings specified in the schedule of contracts were all post-importation project related and project implementation activities. The customs authorities observed that the contractor was entrusted with the work on a turnkey basis, where the entire supplies and services were dependant on each other. The transaction value of the imported goods was directed to include the price paid for the basic design and engineering, drawings, supervision of erection, commissioning, performance guarantee and technical services under Rule 4 read with Rule 9(1)(e) of the 1988 Rules. It was also contended that the design and the other items, which were the subject of dispute, were integrally linked with the equipments and supply of the services were conditions for importation of the equipments. Assessee however contended that on a composite reading of Section 14 of the Act, Rules 4 and 9(1)(e) of the 1988 Rules, the price of drawings, design etc., should be added to the invoice value of the imported equipments, as those intangible items formed an integral part of the arrangement agreed upon between the two consortia and assessee. Tribunal accepted assessee’s plea for segregating the value of equipment and the other fees on services covered by the same contracts, the latter charges meant for the post-importation phase of the arrangement between the contracting parties. It found that the designs and drawings and engineering/technical services were for plant direction and overall project implementation for manufacturing iron and steel to be commissioned in India and charges were collected by the consortium when the design and drawings and engineering services in relation to the components were to be imported. It was held that on involving two import consignments, the authorities of First Instance and the Appellate Authority proceeded on the basis that since all the scheduled items formed part of the same contract and were linked with activities at post-import stage with the imported equipments, the provisions of Section 9 (1) (e) could be invoked. Such reasoning inferred subsistence of conditions for awarding post-importation work to the overseas consortia or makes import of both sets of items otherwise interdependent. However, the stand of SAIL was consistent that the subject drawings and specifications did not relate to the equipments imported and was meant for post importation activities and there was no condition laid down that the import of the equipments were to be supplemented by post-importation work. Reading such implied conditions into the contracts would be impermissible in the absence of any other material to demonstrate subsistence of such conditions. No part of the contract had been shown to us from which such condition could be inferred. There was no reason to interfere with the order of the Tribunal.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
The dispute in this appeal relates to valuation under the Customs Act, 1962 of import of certain items made by the respondent Steel Authority of India Ltd. (SAIL) under two contracts, bearing nos. PUR/PC/MOD/08.01/Pt.II dated 31.10.1989 and PUR/PC/MOD/08.01/Pt-I dated 29th March 1990. These imports were made in connection with modernisation, expansion and modification for their plant at Durgapur in West Bengal. For this purpose, SAIL had floated seven Global Tender Contract Packages. The two contracts were part of these Tender Contract Packages. They were registered with the customs authorities for the purpose of project import benefits in terms of the 1962 Act. The first contract involved in this appeal was with a consortium consisting of a German Company, Hoestemberghe & Kluisch, GMBH and H & K Rolling Mills Engineering Private Limited, an Indian Corporate entity. The second contract was also with a German Company, Siempelkamp Pressen Systeme and the Indian entity was Escon Consultants Private Ltd, with whom the consortium was formed. Both these contracts were in connection with modernisation of SAIL’s rolling mills at the aforesaid plant.
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