Customs Act, 1962 – ss.111, 130E – Customs Tariff Act, 1975 – s.XVI of the First Schedule – Appellant imported certain goods – It was alleged that appellant had intentionally not declared the true and correct value and correct classification of imported equipments which were meant to be interconnected to perform a function of ‘Head End’ – A show cause notice was issued to the appellant – The Principal Commissioner of Customs (Import) held that declaration made by the appellant was false in material particular and redetermined the value of all the goods imported – Aggrieved, the appellant filed customs appeal before the Tribunal – Appellant contended that there was no undervaluation of the goods and Note
4 to s.XVI of the First Schedule to the Act, 1975 had no application in the matter – Appellant also submitted that classification of the imported goods was to be under 8525 and not under 8543 – Tribunal held goods would be covered by heading 8525 and not heading 8543 and further held that there was mis-declaration established in respect of valuation, therefore, appellant was liable for the penalty – On appeal before the Supreme Court, the appellant contended that certain activities like engaging the services for appropriate software etc. were post-import activities and could not be taken into account for the purposes of valuation – Held: The facts 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 reflected that individual components were intended to contribute together and attain clearly defined functions as dealt with in Note 4 of s.XVI and also indicated that software that was embedded through cards in the main unit was not any post-importation activity – Therefore, the value of the software was rightly included – The Department was right in invoking principle under said Note 4 and considering the imported items as part of one apparatus to be classifiable under COMMR.
the heading appropriate to the function – Thus, the view taken by Tribunal affirmed.
Dismissing the appeal, the Court
HELD: 1. 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 the issue of classification is concerned, the question is whether the items imported 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 Customs Tariff Act, 1975. [Para 11] [1057-D-F]
2. 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 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. [Para 14] [1062-E-G]
3. 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. [Para 15] [1063-A]
4. Rule 9(1)(b) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 as quoted in the decision in Toyota Kirloskar 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 the Customs Valuations (Determination of Value of Imported Goods) Rules, 2007. Thus, even if the governing rule is taken to be Rule 9 of 1988 Rules, there would be no difference in the ultimate analysis. [Para 16] [1063-B-C]
Commissioner of Customs (Port), Chennai v. Toyota Kirloskar Motors P. Ltd. 2007 (213) ELT 4 (SC) : (2007) 5 SCC 371 : [2007] 7 SCR 94 ; Essar Gujarat Limited (1997) 9 SCC 738 : [1996] 8 Suppl. SCR 757 – relied on.
Commissioner of Customs v. Multi Screen Media Private Limited 2015 (322) ELT 421 (SC) : (2015) 16 SCC 263; Commissioner of Customs, Ahmedabad v. Essar Steel Ltd. 2015 (319) ELT 202 : (2015) 8 SCC
175 : [ 2015] 4 SCR 1062 ; Commissioner of Customs (Import), Mumbai v. Hindalco Industries Ltd. 2015 (320) ELT 42 (SC) : (2015) 14 SCC 750 ; Commissioner of Customs, New Delhi v. Prodelin India (P) Ltd. 2006 (202) ELT A130 : (2006) 10 SCC 280 : [2006] 5 Suppl. SCR
678 – referred to.
SET India Pvt. Ltd. v. Commissioner of Customs, Cochin 2003 (152) ELT 190 (Tribunal – Mumbai)
– referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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