COMMISSIONER OF CUSTOMS (PORT) KOLKATA versus M/S STEEL AUTHORITY OF INDIA LTD.

Citation: [2020] 9 S.C.R. 109 · Decided: 27-04-2020 · Supreme Court of India · Bench: DEEPAK GUPTA · Disposal: Dismissed

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Judgment (excerpt)

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COMMISSIONER OF CUSTOMS (PORT) KOLKATA
v.
M/S STEEL AUTHORITY OF INDIA LTD.
(Civil Appeal No. 6398 of 2009)
APRIL 27, 2020
[DEEPAK GUPTA AND ANIRUDDHA BOSE, JJ.]
Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988: r.9(1)(e) – Valuation of imports of plant and
equipments and spares – Revenue included the price paid for design
and technical documents in the transaction value of the imported
goods – Plea of assessee that drawings and technical documents
related to the post importation activities for assembly, construction,
erection, operation and maintenance of the plant and these items
could not be included in the value of imported goods – Case of
revenue was that since the case involved importation of turnkey
projects, the entire contract value have to be treated as transaction
value for charging custom duty – Held:  Revenue has not made out
a case that the disputed items of contract do not relate to post-
importation activities – The expression “condition” contained in
r.9(1)(e) conveys the idea that something could be done only if
another thing was also done – Revenue  emphasised their case on
the basis that as it was a turnkey project, importation of equipments
and post-importation project implementation exercise were mutually
dependant – Reading such implied condition into the contracts
would be impermissible in the absence of any other material to
demonstrate subsistence of such condition – No part of the contract
was  shown from which such condition could be inferred – The
provisions of r.9(1)(e) cannot be automatically applied to every
import which has surface features of a turnkey contract – Just
because different components of a contract or multiple contracts
give the shape of turnkey project to the imported items, without
specific finding on existence of “condition” as contemplated in
r.9(1)(e), value of all these components could not be added to arrive
at the assessable value – Such an exercise would go against the
provisions of Interpretative Note to r.4, which is part of the Valuation
Rules in view of the provisions of r.12 thereof.
[2020] 9 S.C.R. 109
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SUPREME COURT REPORTS
[2020] 9 S.C.R.
Dismissing the appeal, the Court
HELD: 1.  An importer of equipments of a plant could always
choose to obtain drawings and designs for undertaking post
importation activities from an overseas consortium supplying the
equipments. This may confer on such arrangements attributes of
a turnkey contract, but that fact by itself would not automatically
attract the “condition” clause contained in Rule 9(1) (e) of the
Valuation Rules. The revenue has proceeded with the
understanding that since both were obtained from the same
vendor, condition of obtaining designs etc., for post-importation
activities was implicit in the contract. The Revenue has sought
to emphasise their case on the basis that as it was a turnkey
project, importation of equipments and post-importation project
implementation exercise were mutually dependant. Reading such
implied condition into the contracts would be impermissible in
the absence of any other material to demonstrate subsistence of
such condition. No part of the contract has been shown from which
such condition could be inferred. [Paras 22 and 26][132-A-B, 133-
H; 134-A-B]
2. If a single agreement involves importation of dutiable
equipments and also services for post-importation activities, and
these two sets of items are segregable, it would be open to the
importer to claim duty-exclusion in respect of items directly
relatable to post importation activities in cases where Rule 9 of
the Valuation Rules are applicable. In the present appeal, 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
infers subsistence of conditions for awarding post-importation
work to the overseas consortia or makes import of both sets of
items otherwise interdependent. The orders in original showed
that 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-importat

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