COMMISSIONER OF CUSTOMS, MAHARASHTRA versus M/S. GALAXY ENTERTAINMENT (I) P. LTD. AND ORS.

Citation: [2007] 6 S.C.R. 133 · Decided: 08-05-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Dismissed

Judgment (excerpt)

'i' 
< 
.. .,._ 
,.. 
~ 
~ 
' 
COMMISSIONER OF CUSTOMS, MAHARASHTRA 
v. 
MIS. GALAXY ENTERTAINMENT (I) P. LTD. AND ORS. 
MAYOS, 2007 
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] 
Customs Valuation (Determination of Price of Imported Goods) Rules, 
1988-Rule 4(1)-Customs Valuation-Import of 20-Lane Bowling alley-
Inclusion of Technical and Installation fee in assessable value-Department's 
case that assessee undervalued the price of equipment and disguised part of 
cost of equipment as Technical and Installation Fee payable to subsidiary 
of the foreign supplier-Held: There was no undervaluation-Declared value 
of equipment was the proper negotiated price-Transaction value under Rule 
4(1) is to be taken-Technical and Installation fee was post-clearance 
agreement to generate revenue and not a disguise to arrive at the true value 
of the import. 
Respondents-assessee imported 20-Lane Bowling alley from AMF Co 
.based in USA. Assessee was issued show cause notice alleging that it had 
undervalued the said equipment by declaring the price at US$ 15000 CIF as 
against the normal price of US $ 30000 for a lane; and that they had disguised 
part of the cost of the equipment as Technical and Installation Fee which was 
payable to the subsidiary of the foreign supplier-AMF Co. amounting to Rs.5.9 
A 
B 
c 
D 
E 
lacs payable over a period of three years, and hence was liable to confiscation 
subject to payment of redemption fund. Adjudicating Authority confirmed the F 
demand holding that the transaction value under Rule 4(1) of the Customs 
r 
Valuation (Determination of Price oflmported Goods) Rules, 1988 cannot be 
taken but invoked Rule 5(l)(c) of the Customs Valuation Rules and called 
upon the assessee to pay duty on the price amounting tn Rs.28.33 lacs. 
Assessee filed an appeal. Tribunal allowed the appeal holding that there being G 
no undervaluation, there was no reason to deviate from the valuation under 
Rule 4(1); that the declared value of the equipments at the rate of US $15199 
per lane was the negotiated price; and there was no suppression as the 
Technical and Installation Agreement was post-clearance agreement. Hence 
the present appeal. 
133 
H 
134 
SUPREME COURT REPORTS 
[2007] 6 S.C.R. 
A 
Dismissing the appeals, the Court 
'i 
..... 
HELD: 1.1. The Tribunal was right in coming to the conclusion that the 
cost per lane at US$ 15000 was proper negotiated price. It cannot be said 
that the cost of the equipment was deliberately bifurcated and that the Technical 
and Installation Charges Agreement was a disguise to arrive at the true value 
B of the import. The foreign supplier had its subsidiary in India; that subsidiary 
was AMF Co. It is not the case of the Department that the said subsidiary was 
a bogus company. (Para 5] (137-C-E) 
1.2. The equipment was suppHed by AMF Co which wanted to promote 
-~ 
f. 
c 
the game in India. 20-Lane Bowling Alley was the biggest in Asia. The foreign 
supplier wanted the said equipment to be installed properly. The said equipment 
was synthetic item. To install that item required specialiud knowledge. That 
expertise was available with AMF Co-subsidiary of the foreign supplier. As a 
matter of promotion, the Technical and Installation Charges agreement 
• 
stipulated raising of revenue for next three years by charging a fee of Rs.5.90 
D per game for one million games bowled aggregating to Rs.59 lacs. Therefore, 
that agreement had no nexus with the sale proceeds of the equipment paid by 
the assessee to AMF Co. (Para 5) [137-C-F) 
r 
1.3. The post-clearance agreement was revenue generation agreement. 
' 
Rs.59 lacs was not a quantified amount Rs.59 lacs was calculated on the basis 
E that one million games were likely to be bowled in the next three years. That 
• 
risk was taken by AMF-Co. Even under Rules of Interpretation to the Customs 
Valuation Rules, post-clearance agreements are excluded. Further, even under 
the order of the Adjudicating Authority the validity or the genuineness of the 
Technical and Installation Charges Agreement is not doubted. The import by 
F Delhi Co. of 6-Lane Bowling Alley has been taken by the Department as the 
basis of valuation under Rule 5(1)(c). In fact, in case of Delhi Co the department 
has also taken into account the cost of Technical and Installation services at 
Rs.28.33 lacs which in the instant case is Rs. 59 lacs. The instant case is of 
' 
20-Lanes. One cannot compare the impugned transaction with the transaction 
which

Excerpt shown. Read the full judgment & AI analysis in Lexace.