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Indusind Media And … vs Commissioner Of Customs New Delhi on 27 September, 2019

Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

1

Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2498 OF 2018

INDUSIND MEDIA COMMUNICATIONS LTD. …Appellant

VERSUS
COMMISSIONER OF CUSTOMS, NEW DELHI …Respondent

J U D G M E N T

Uday Umesh Lalit, J.

1. This Appeal under Section 130E of the Customs Act, 1962

(hereinafter referred to as ‘the Act’) arises out of Order

No.C/A/57743/2017 dated 09.11.2017 passed by the Customs Excise and

Service Tax Appellate Tribunal (for short, ‘the Tribunal’) dismissing

Appeal No.C/51770 of 2016 preferred by the appellant herein.

2. The basic facts leading to the issuance of Show Cause Notice dated

27.06.2014 initiating proceedings against the appellant, as set out in the
Signature Not Verified

Digitally signed by
MUKESH KUMAR
Date: 2019.09.27
17:00:38 IST

Order under appeal are as under:-

Reason:

Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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“The appellant imported certain goods at air
cargo complex, New Delhi and filed Bill of
Entry 2660085 dated 26.6.2003. They declared
the goods as Multiplexor Satellite Receivers, test
and measurement equipment etc. and attached
six invoices covering 19 items imported. They
indicated individual classification for the various
items under Chapter 84/85 of the Customs
Tariff. The Bill of Entry was assessed as per
declaration and applicable customs duty was
paid. Subsequently, information was received
from SIIB Air Cargo Complex Mumbai, that
investigations had been commenced against the
appellant for import of similar goods at Mumbai.
Accordingly, Provisional Assessment was been
ordered under Section 18 of the Customs Act.

2. The investigation undertaken at Mumbai
revealed as follows:-

The importer had placed the order at UK
for purchase of equipments – one set for
Mumbai and another set for Delhi. Each
set of equipment, taken together
constituted ‘Head End’ for cable TV
operations. The ‘Head End’ was an
equipment at a local TV office that
originates the cable TV services and cable
TV modem services to subscriber though
Conditional Access System (CAS). All
imported equipments taken together
contributes towards a clearly refined
function i.e. ‘Head End’ for cable TV
operations. The complete set of equipment
together merits classification under
Customs Tariff Heading (CTH) 8543 8999,
in the light of Note 4 to Section XVI.

Thus, it appeared that individual
classification indicated for 19 imported
items amounts to mis-declaration. The
search operation carried by SIIB, ACC,
Mumbai at the premises of importer further
revealed that the importer had also mis-
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

3

declared the value of the imported
consignments at Delhi and Mumbai. They
had suppressed the value of embedded
software as well as value of services
payable to the foreign supplier for carrying
out integration of the system prior to
shipment and provide complete
commission and installation services at the
customers premises. Further, it was
noticed that the purchase order placed by
the importer was revised to show as CIF
instead of FOB.”

3. In the aforesaid circumstances, Show Cause Notice dated

27.06.2014 was issued by the Department stating inter alia :-

“18. In view of the above, it appears that the
Importer had fabricated documents by way of
splitting of value of the goods and declared
lesser value to the Customs Department with the
sole intention to evade payment of Customs
Duties. Therefore, it appeared that the Importer
had intentionally not declared the true and
correct value of the goods imported to the
customs for the purpose of payment of Customs
Duty. Further the cost of services was to be paid
separately by the Importer to their supplier.
Hence, the Importer failed to make true
declarations. Therefore, the goods imported
vide Bill of Entry No.260085 dated 26.06.2003
filed at Air Cargo Complex, New Delhi also
appear to be liable for confiscation under
Section 111(m) of the Customs Act, 1962 due to
their aforesaid act of omission and commission.

It also appears that they have rendered
themselves liable for penal action under Section
112(a) and/or Section 114AA of the Customs
Act, 1962.”
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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The appellant was thus asked to show cause why:

(a) the declared values should not be rejected
under Rule 10A of the erstwhile Customs
Valuation (Determination of Price of
Imported Goods) Rules, 1988 and the same
should not be redetermined under Rule 9(1)

(e) (adding cost of services) of the erstwhile
Custom Valuation (Determination of Price of
Imported Goods) Rules, 1988;

(b) the invoice value of imported goods declared
in the (Bill of Entry as Rs.1,02,91,463/-
should not be enhanced to Rs.1,72,03,243/-
(Rupees One Crore Seventy Two Lakhs
Three Thousand Two Hundred and Forty
Three Only) for the purpose of assessment
under Section 14 of the Customs Act, 1962
read with Rule 9(1)(e) of the erstwhile
Customs Valuation (Determination of Price
of Imported Goods) Rules, 1988 and the
provisional assessment made under Section
18 of Customs Act, 1962 should not be
finalised accordingly.

4. According to the record, the appellant was given several

opportunities but no written submissions, in response to the Show Cause

Notice, were filed. The facts on record also disclose that the opportunity

of personal hearing was also extended and the matter was adjourned from

time to time but the appellant did not avail the opportunity of personal

hearing1. After considering the facts on record, the Principal

1 Paras 16 and 17 of the Order dated 29.12.2015
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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Commissioner of Customs (Import) by his order dated 29.12.2015

rejected the declaration by the appellant vide Bill of Entry No. 260085

dated 26.06.2003. It was observed that the appellant had intentionally not

declared the true and correct value and correct classification of imported

goods. The conclusion was drawn as under:-

“26. … …I find that in the instant case, the
Noticee(s) made a declaration at the time of
filing of Bill of Entry that goods imported by
them vide Bill of Entry No. 260085 dated
26.06.2003 were different parts classifiable
under different CTHs whereas the goods under
import were the complete equipment of head-

end classifiable under CTH 85438999 and the
goods were also declared undervalued, as
discussed above. Brigadier R Deshpande
(Retd.), Vice President, Technical of the
importer had admitted his awareness in his
statement dated 10.07.2003 that software was
embedded in the machine. He in connivance
with the supplier of goods fabricated document
by splitting the values between the goods
imported and the other services rendered by the
supplier in connection with the imported goods
and as such, I find that the declaration of the
Noticee(s) was false in material particular. In
view of above, I hold both the Noticee(s) are
liable to penalty under Section 114AA of the
Customs Act, 1962.”

The Principal Commissioner of Customs (Import) then redetermined

the value of all the goods imported under said Bill of Entry as under:-

“(a)… …The value of all the goods imported
under the said B/E taken together is
redetermined under Rule 9(1)(e) of the said
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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Rules as US $ 361633 CIF and consequently
after loading 1% towards landing charges and
applying the relevant exchange rate, the
assessable value is determined as
Rs.1,72,03,243/-(Rupees One Crore Seventy
Two Lakhs Three Thousand Two Hundred and
Forty Three Only) for the purpose of Section 14
of the Customs Act, 1962 read with Rule 9(1)(e)
of the Customs Valuation (Determination of
Price of Imported Goods), Rules, 1988.

(b) The classification of all the components
imported under the B/E No.260085 dated
26.06.2003 taken together is determined under
CTH 85438999 of the SectionCustoms Tariff Act, 1975.

(c) The provisional assessment made in
respect of B/E No.260085 dated 26.06.2003 is
finalized under Section 18 of the Customs Act,
on the basis of revised assessable value and
classification as ordered above. Consequently,
demand for differential duty amounting to
Rs.54,19,475/- is confirmed. I order that the
amount of Rs.54,19,475/- deposited at the time
provisional release of the goods be appropriated
towards the differential duty.

(d) The goods imported under B/E No.260085
dated 26.06.2003, which were provisionally
released on execution of P.O. bond for
Rs.1,72,03,242/-, are confiscated under Section
111(m) of the Customs Act, 1962. Since the
goods are already released to the party, they are
ordered to pay redemption fine of
Rs.10,00,000/- (Rupees Ten Lakhs only) under
Section 125 of the Customs Act, 1962 in lieu of
confiscation thereof.”

The Order dated 29.12.2015 proceeded to impose penalty as
under:-

Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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“(e) I impose a penalty of Rs.15,00,000/-
(Rupees Fifteen Lakhs only) on M/s. Indusind
Media Communication Ltd., Mumbai under
Section 112(a) of the Customs Act, 1962.

(f) I impose penalty of Rs.15,00,000/-
(Rupees Fifteen Lakhs only) on M/s. Indusind
Media Communication Ltd., Mumbai under
Section 114AA of the Customs Act, 1962.

(g) I impose a penalty of Rs.3,00,000/-
(Rupees Three Lakhs only) on Brigadier R.
Deshpande (Retd.), Vice President, Technical of
M/s. Indusind Media Communication Ltd.,
Mumbai under Section 112(a) of the Customs
Act, 1962.

(h) I impose a penalty of Rs.2,00,000/-
(Rupees Two Lakhs only) on Brigadier R.
Deshpande (Retd.), Vice President, Technical of
M/s. Indusind Media Communication Ltd.,
Mumbai under Section 114AA of the Customs
Act, 1962.

(i) The redemption fine and penalties may be
recovered by enforcing the Bank Guarantee
executed at the time of provisional release of
goods.”

5. The appellant, being aggrieved, filed Customs Appeal Nos.51769-

51770 of 2016 before the Tribunal. It was submitted that there was no

undervaluation of the goods; that the department had incorrectly included

the amount towards software and post import services; and that Note 4 to

Section XVI of the First Schedule to SectionCustoms Tariff Act, 1975 (“the Act’,

for short) had no application in the matter. It was alternatively submitted
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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that the goods in question merited classification under Central Excise

Tariff Heading (CETH) 8525 2019 as “transmission apparatus” and not

under 8543 as contended by the Department. In response, it was

submitted on behalf of the Department that out of 19 items indicated in

the Bill of Entry, only 8 items were physically presented, as several cards

were already assembled in the main unit; that the appellant had not given

proper description in the Bill of Entry and the goods imported were

complete ‘Head End’ and not parts; that the charges covered by the

relevant invoice amounting to US $ 1,00,019 were rightly included since

they pertained to charges where the software covered by the invoice was

already embedded in the equipment and that the goods were rightly

classified under 8543.

6. After hearing rival submissions, following issues were framed by

the Tribunal for consideration:-

“1. First is the classification of the imported
goods – whether 8543 as ordered by the
adjudicated authority or 8525 as claimed by the
appellant.

2. Second issue is of valuation – whether the
value of software already embedded in the
equipment as well as service charges are
required to be included in the assessable value.”
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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7. The Tribunal relied upon Note 4 to Section XVI and found that

though different equipments were ordered, they were meant to be

interconnected in such a way as to perform a common clearly defined

function which was to be ‘Head End’. However, according to the

Tribunal, the goods would actually be covered by heading 8525 and not

by heading 8543. For arriving at such conclusion, reliance was placed on

the decisions in SectionSET India Pvt. Ltd. vs. Commissioner of Customs,

Cochin2 and Commissioner of Customs vs. Multi Screen Media Private

Limited3.

While considering the issue regarding valuation, the purchase

order was relied upon, according to which, apart from supply of

equipment, necessary software had to be embedded in the equipment

before the supply was effected. Relying on Sub-Rule (iii) of Rule 10 of

the Customs Valuation (Determination of Value of Imported Goods)

Rules, 2007 (for short, ‘the 2007 Rules’) it was observed that since the

software was already incorporated in the imported goods, the value of the

same was required to be added to the transaction value.

It was concluded:-

“19. In view of the mis-declaration established in
respect of valuation, the imported goods will be
liable for confiscation under Sectionsection 111 of the

2 2003 (152) ELT 190 (Tribunal – Mumbai)
3 2015 (322) ELT 421 (SC) (2015) 16 SCC 263
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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SectionCustoms Act and the appellant will also be liable
for penalty.”

In the premises, by Order under appeal, the matter was remanded

to the adjudicating authority only for the purpose of recomputing the

differential duty in the light of its conclusion that the classification of

imported goods was to be under heading 8525 and not under heading

8543.

8. In this appeal, it has principally been submitted:-

“A. The Imported Goods have been correctly
classified by the Appellant.

a. The following major components were imported
by the Appellant from Tandberg:

1. Multiplexers

2. Satellite receivers

3. Test and measurement

b. The following are the major components imported
from other supplier by the Appellant:

i. CAM Modules – Aston and
Nagravision
ii. Encoders

iii Power Vu receivers – Scientific Atlanta
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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iv. Integrated receiver De-coder’s (IRD’s)
– Purchased from the channels
directly
v. Encryption System -Nagravision

c. The Head End is the physical location in your area
where the television signal is received by the
provider, stored, processed and transmitted to their
local customers (subscribters).

d. Undisputedly the Appellant being a Multi System
Operator (“MSO”) i.e. a cable network operator,
receives encoded and scrambled signals from
Network Broadcasters. The major function of a
Head End is to decode and unscramble, the encoded
and scrambled signals received from the
Broadcasters. Such function admittedly could not
be achieved without Encoders, IRD’s, Power Vu
Receivers and Encryption System which were
imported by the Appellant from other suppliers.

e. Without these equipments working in conjunction
network, the encoded and scrambled signals from
Broadcasters could not be received at the Head End
(“Power Vu Receivers”) and neither can they be
decoded (Encoders and IRD’s) or unscrambled
(“Encryption System”) and thereafter could not be
broadcasted to the recipient/subscribers. Therefore,
the intended function of a Head End could not be
achieved without Encoders, IRD’s, Power Vu
Receivers and Encryption System. These
equipments admittedly were not part of the
imported consignment under dispute. Admittedly
these equipment’s were imported separately from
other suppliers.

f. Therefore, it can be concluded that the imported
consignment does not constitute a complete Head
End and that each component is to be classified
under the relevant Chapter Heading.”
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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and following principal question has been raised:-

“A. Whether the CESTAT has erred in failing to
consider the primary submission of the Appellant, that
the 19 different items imported by the Appellant under
the Bill of Entry No.2660085 dated 26.06.2003
(‘BOE’) even if taken together do not form one co
posite ‘Head-end’ and that each item has an individual
function, and each item is to be classified under the
Chapter Heading it falls mainly CTH 85175010, CTH
85281299, CTH 85438910, CTH 84717010 and CTH
85249112.”

9. Appearing in support of the appeal, Mr. Tarun Gulati, learned

Senior Advocate, also submitted:-

a) The imports and Bill of Entry in the instant case were of the

year 2003 and 2007 Rules would not apply.

b) Certain activities like engaging the services for appropriate

software etc. as a result of which cards were embedded in

items of import, were essentially post import activities and

could not be taken into account for the purposes of

valuation.

10. Mr. Aman Lekhi, learned Additional Solicitor General appearing

for the respondent refuted all the contentions of the appellant and

submitted that:-

a) Though the invoices in the case did mention individual

items, the dominant intent had to be seen whether the
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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intended user was of individual items or they were

supposed to be used collectively as part of one apparatus, in

which event Note 4 to Section XVI would provide

guidance.

b) Rule 9 of the Customs Valuation (Determination of Price of

Imported Goods) Rule, 1988 (“the 1988 Rules”, for short)

being almost identical to Rule 10 of 2007 Rules, the

reliance was not misplaced.

c) In any case, Rule 10 of 2007 Rules which seeks to explain

certain matters is clarificatory in nature and the meaning

would be consistent with Rule 9 of 1988 Rules.

d) The submission that there were post import charges which

were getting included in the valuation was incorrect and

what was found as a fact was that all those software cards

were embedded in various parts when the import had taken

place.

11. It must be stated that the finding of the Tribunal that the imported

goods would be classifiable under Tariff Item 8525 and not under 8543,

has not been challenged by the respondent. Thus, insofar as issue of

classification is concerned, the question is whether the items imported
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

14

ought to be considered individually or whether the treatment given by the

Department, with the aid of Note 4 to Section XVI was correct. Note 4

appears in Section XVI of the First Schedule to the Act. Said Section XVI

has the heading:-

“Section XVI- Machinery and mechanical
appliances; electrical equipment; parts thereof;

sound records and reproducers, television image
and sound recorders and reproducers; and parts
and accessories of such articles”

Note 4 of Said Section XVI is to the following
effect:-

“4. Where a machine (including a
combination of machines) consists of individual
components (whether separate or interconnected
by piping, by transmission devices, by electric
cables or by other devices) intended to
contribute together to a clearly defined function
covered by one of the headings in Chapter 84 or
Chapter 85, then the whole falls to be classified
in the heading appropriate to that function.”

Tariff Item 8525 appearing in Chapter 85 is as
under:-

“Transmission apparatus for radio telephony,
radio-telegraphy, radio-broadcasting or
television, whether or not incorporating
reception apparatus or sound recording or
reproducing apparatus; television, cameras; still
image video cameras and other video camera
recorders; digital cameras.”
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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12. The Appellant is right in its submission that since the Bill of Entry

in the present case was of the year 2003, 2007 Rules would not apply and

that the appropriate Rules would be 1988 Rules. Rule 9 of 1988 Rules was

set out by this Court in Commissioner of Customs (Port), Chennai v.

Toyota Kirloskar Motors P. Ltd.4, while considering the issue whether

technical assistance fees in terms of SectionArticle 4 of the Agreement between

the parties had any direct nexus with importation of goods. It was

observed:-

“25. The Central Government in exercise of its power
conferred upon it under Section 156 of the Act, made
rules known as “the Customs Valuation
(Determination of Price of Imported Goods) Rules,
1988”. Rule 3 provides for determination of the
method of valuation, stating:

“3. Determination of the method of valuation.—
For the purpose of these Rules,—

(i) the value of imported goods shall be the
transaction value;

(ii) if the value cannot be determined under the
provisions of clause (i) above, the value shall be
determined by proceeding sequentially through
Rules 5 to 8 of these Rules.”

26. How the transaction value would be determined
has been laid down in Rule 4 of the Rules, stating that
the same shall be the price actually paid or payable
for the goods when sold for export to India adjusted in
accordance with the provisions of Rule 9 of the said
Rules. Rule 9 of the Rules provides for determination
of transaction value, stating:

4 2007 (213) ELT 4 (SC) (2007) 5 SCC 371
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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“9. Cost and services.—(1) In determining the
transaction value, there shall be added to the price
actually paid or payable for the imported goods,

(a) the following cost and services, to the extent
they are incurred by the buyer but are not
included in the price actually paid or payable for
the imported goods, namely—

(i) commissions and brokerage, except
buying commissions;

(ii) the cost of containers which are treated as
being one for customs purposes with the
goods in question;

(iii) the cost of packing whether for labour or
materials;

(b) the value, apportioned as appropriate, of the
following goods and services where supplied
directly or indirectly by the buyer free of charge
or at reduced cost for use in connection with the
production and sale for export of imported goods,
to the extent that such value has not been
included in the price actually paid or payable,
namely—

(i) materials, components, parts and similar
items incorporated in the imported goods;

(ii) tools, dies, moulds and similar items used
in the production of the imported goods;

(iii) materials consumed in the production of
the imported goods;

(iv) engineering, development, art work,
design work, and plans and sketches
undertaken elsewhere than in India and
necessary for the production of the imported
goods;

(c) royalties and licence fees related to the
imported goods that the buyer is required to pay,
directly or indirectly, as a condition of the sale of
the goods being valued, to the extent that such
royalties and fees are not included in the price
actually paid or payable;

Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
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(d) the value of any part of the proceeds of any
subsequent resale, disposal or use of the imported
goods that accrues, directly or indirectly, to the
seller;

(e) all other payments actually made or to be
made as a condition of sale of the imported
goods, by the buyer to the seller, or by the buyer
to a third party to satisfy an obligation of the
seller to the extent that such payments are not
included in the price actually paid or payable.”

27. The issue before us is no longer res integra in
view of the decision of this Court in SectionCommr. of
Customs (Port) v. J.K. Corpn. Ltd. wherein it is
stated: (SCC para 9)
“9. The basic principle of levy of customs duty, in
view of the aforementioned provisions, is that the
value of the imported goods has to be determined
at the time and place of importation. The value to
be determined for the imported goods would be
the payment required to be made as a condition of
sale. Assessment of customs duty must have a
direct nexus with the value of goods which was
payable at the time of importation. If any amount
is to be paid after the importation of the goods is
complete, inter alia, by way of transfer of licence
or technical know-how for the purpose of setting
up of a plant from the machinery imported or
running thereof, the same would not be computed
for the said purpose. Any amount paid for post-
importation service or activity, would not,
therefore, come within the purview of
determination of assessable value of the imported
goods so as to enable the authorities to levy
customs duty or otherwise. The Rules have been
framed for the purpose of carrying out the
provisions of the Act. The wordings of Sections
14 and Section14(1-A) are clear and explicit. The Rules
and the Act, therefore, must be construed, having
regard to the basic principles of interpretation in
mind.”
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
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28. Reliance, as noticed hereinbefore, however, has
been placed by the learned Additional Solicitor
General on Essar Gujarat Ltd.”

Thereafter, the decision of this Court in Essar Gujarat Limited5 was

considered and it was observed:

“36. Therefore, law laid down in Essar Gujarat Ltd.
and J.K. Corpn. Ltd. is absolutely clear and explicit.
Apart from the fact that Essar Gujarat Ltd. was
determined on the peculiar facts obtaining therein and
furthermore having regard to the fact that the entire
plant on “as-is-where-is” basis was transferred subject
to transfer of patent as also services and technical
know-how needed for increase in the capacity of the
plant, this Court clearly held that the post-importation
service charges were not to be taken into
consideration for determining the transaction value.

37. The observations made by this Court in Essar
Gujarat Ltd.1 in para 18 must be understood in the
factual matrix involved therein. The ratio of a
decision, as is well known, must be culled out from
the facts involved in a given case. A decision, as is
well known, is an authority for what it decides and not
what can logically be deduced therefrom. Even in
Essar Gujarat Ltd.1 a clear distinction has been made
between the charges required to be made for pre-
importation and post-importation. All charges levied
before the capital goods were imported were held to
be considered for the purpose of computation of
transaction value and not the post-importation one.

The said decision, therefore, in our opinion, is not an
authority for the proposition that irrespective of nature
of the contract, licence fee and charges paid for
technical know-how, although the same would have
nothing to do with the charges at the pre-importation
stage, would have to be taken into consideration
5 (1997) 9 SCC 738
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
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towards computation of transaction value in terms of
Rule 9(1)(c) of the Rules.

38. The transaction value must be relatable to import
of goods which a fortiori would mean that the
amounts must be payable as a condition of import. A
distinction, therefore, clearly exists between an
amount payable as a condition of import and an
amount payable in respect of the matters governing
the manufacturing activities, which may not have
anything to do with the import of the capital goods.”

13. The aforesaid decision found that the Technical Assistance Fee

under SectionArticle 4 had direct nexus with post importation activities and not

with importation of goods. That deduction was arrived at after considering

the individual facts and the scope of SectionArticle 4 which was to the following

effect:-

“4. Additional assistance

(a) At the licensee’s written request, the licensor
may furnish the licensee with manufacturing,
engineering and other know-how and
information relating to the licensed products
which are not readily available in the
licensor’s records but which the licensor is
willing to develop especially for the licensee,
and which shall be furnished through such
documents and assistance as designated at the
discretion of the licensor from among those
stipulated in Appendix D attached hereto and
any other documents and assistance from time
to time designated by the licensor.

(b) In the event of the preceding para (a), the
licensee shall pay the licensor all fees, and all
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

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costs and expenses incurred by the licensor in
developing and furnishing such know-how,
information, documents and/or assistance.

(c) If the assistance rendered under para (a)
hereof is technical assistance or engineering
assistance concerning the licensed products,
such assistance will be provided in
accordance with the procedures and
conditions set forth in Appendix E attached
hereto.”

The subsequent decisions of this Court in SectionCommissioner of

Customs, Ahmedabad vs. Essar Steel Ltd.6, and in SectionCommissioner of

Customs (Import), Mumbai vs. Hindalco Industries Ltd.7 have followed

the same principle that technical agreements involved in said cases

pertained to post-importation activity. To similar effect was the conclusion

by this Court in an earlier decision in SectionCommissioner of Customs, New

Delhi v. Prodelin India (P) Ltd.8 that technical know how fee was in

respect of post-importation activities and could not be added to the value

of the imported goods.

14. It is a matter of record that after considering the purchase order in

the instant case, the Tribunal found that apart from supply of equipment,

necessary software had to be embedded in the equipment before the supply

6 2015 (319) ELT 202 (2015) 8 SCC 175
7 (2015) 320 ELT 42 (SC) (2015) 14 SCC 750
8 2006 (202) ELT A130 (2006) 10 SCC 280
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

21

was effected. The facts also disclose that out of 19 items indicated in the

Bill of Entry, only 8 items were physically presented while the rest were

already embedded in the main unit. These facts are not only reflective that

the individual components were intended to contribute together and attain

a clearly defined function as dealt with in Note 4 of Section XVI as stated

above, but also indicate that software that was embedded through cards in

the main unit, was not any post-importation activity. The value of the

software and the concerned services were therefore rightly included and

taken as part of the importation.

15. The facts on record as stated above further disclose that the

Department was therefore right in invoking principle under said Note 4 and

considering the imported items as part of one apparatus or machine to be

classifiable under the heading appropriate to the function. The submission

advanced by the Appellant in that behalf therefore has to be rejected.

16. Rule 9(1)(b) of 1988 Rules as quoted above in the decision in

Toyota Kirloskar4, case shows that the value in respect of “materials,

components, parts and similar items incorporated in the imported goods”

has to be added while determining the transaction value. Said Rule 9 is

almost identical to Rule 10 of 2007 Rules. Thus, even if the governing rule
Civil Appeal No. 2498 of 2018
SectionIndusind Media Communications Ltd. vs. Commissioner of Customs, New
Delhi

22

is taken to be Rule 9 of 1988 Rules, there would be no difference in the

ultimate analysis.

17. Consequently, we do not find any merit in the present appeal.

Affirming the view taken by the Tribunal, we dismiss this appeal, without

any order as to costs.

……………………….J.

[Uday Umesh Lalit]

……………………….J.

[Vineet Saran]
New Delhi;

September 27, 2019

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