LexCOMMISSIONER OF CUSTOMS, AHMEDABAD versus MIS. ESSAR STEEL LTD.
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(2015] 3 S.C.R. 1062 A COMMISSIONER OF CUSTOMS, AHMEDABAD B v. MIS. ESSAR STEEL LTD. Civil Appeal No.3042 of 2004 APRIL 13, 2015 [A.K. SIKRI AND R. F. NARIMAN, JJ.] Customs Act, 1962 - s. 14 - Valuation of goods for purposes of assessment - Assessee entering into technical C ·service agreement with foreign supplier in relation to implementation of a project to set up a plant in India for production of certain goods - Subsequently, purchase order for import of plant and machinery placed - Assessment to 0 customs duty - Payment made for the technical services agreement, if to be added to the value of the plant that is imported, inasmuch as such payment has been made as a condition of sale of the imported plant in terms of r. 9(1 )(e) - Held: Conjoint reading of the technical services E agreement and the purchase order, do not lead to the conclusion that fees for the technical services agreement is in any way a pre-condition for the sale of the plant itself - Technical services agreement read as a whole is only to successfully set up, commission and operate the plant after F it has been imported into India - On facts, r. 9(1)(e) would not be attracted - Thus, consideration for the technical services to be provided by the foreign company cannot be added to the value of the equipment imported to set up the plant in India - Customs Valuation (Determination of Price G of Imported Goods) Rules, 1988 - r. 9(1)(e). H Dismissing the appeal, the Court HELD: 1.1 A cursory reading of Section 14 of the 1062 COMMNR. OF CUSTOMS, AHMEDABAD v. ESSAR 1063 STEEL LTD. Customs Act, 1962 makes it clear that customs duty is A chargeable on goods by reference to their value at a price at which such goods or like goods are ordinarily sold or offered for sale at the time and place of importation in the course of international trade. This would mean that any amount that is referable to the B imported goods post-importation has necessarily to be excluded. It is with this basic principle in mind that the rules made under sub-clause i(A) have been framed and have to be interpreted. [Para 7] [1075-C-D] 1.2 A reading of Rule 4 and Rule 9 of the Customs C Valuation (Determination of Price of Imported Goods) Rules of 1988, makes it clear that only those costs and services that are actually paid or payable for imported goods pre-import are to be added for the purpose of determining the value of the imported goods. [Para 8] D [1077-E-F] 1.3 On an analysis of the technical services agreement dated 13.4.1991, it is clear that the respondent has only associated foreign Company as a E technical consultant. There is no transfer of know-how or patents, trademarks or copyright. What is clear is that technical services to be provided by foreign Company ·is basically to coordinate and advise the respondent so that the respondent can successfully set up, F commission and operate the plant in India. Coordination and advice is to take place post-importation in order that the plant be set up and commissioned in India. In fact, all the clauses of this agreement make it clear that such services are only post-importation. Clause 9 on which G a large part of the agreements ranged again makes it clear that ownership of patents, know-how, copyright and other intellectual property rights shall remain vested in the technical consultant and none of these will be transferred to the respondent. The respondent becomes H 1064 SUPREME COURT REPORTS [2015] 3 S.C.R. A owner of that portion of documents, drawings, plans and specifications originally created by the technical consultant pursuant to the agreement. This again refers only to documents, drawings etc. of setting up, commissioning and operating the plant, all of which are B post-importation of the plant into India. In fact, clause 13 of the purchase order dated 21.6.1991 is important in that liquidated damages are only payable for delay in commissioning the plant and for failure to achieve the stipulated performance, both of which are post- C importation activities. [Paras 9 and 10] [1077-H, 1078- A-F] 1.4 A conjoint reading of the technical services agreement and the purchase order do not lead to the D conclusion that the technical services agreement is in any way a pre-condition for the sale of the plant itself. On the contrary, the technical services agreement read as a whole is really only to successfully set up, commission and o
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