M/S APPOLLO TYRES LTD. versus THE COLLECTOR OF CUSTOMS AND ANR.

Citation: [1996] SUPP. 9 S.C.R. 802 · Decided: 10-12-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
MIS APPOLLO TYRES LTD. 
v. 
THE COLLECTOR OF CUSTOMS AND ANR. 
DECEMBER 10, 1996· 
[S.P. BHARUCHA AND S.C. SEN, JJ.] 
Customs Ac~ 1962 : Section 14 
Customs duty-Goods imponed-Assessable value--Detennination of 
Customs Valuation Rules 1963 : Rule B-Applicability of 
Assessee setting up a tyre manufacturing plant-Entering into an agree-
ment for know how-Appointment of purchase agent under the agreemenr-In 
tenns of the agreement goods purchased through Agent-Goods made to 
D specifications and not purchased off the shelf-Goods purchased by Agent 
directly in the name of Assessee after approval by latte,.._Service charges paid 
by the Assessee for procurement of goods-Held not includible in the asses-
sable value of goods. 
The appellants were setting up a plant for the manufacture of-tyres. · 
E They entered into an agreement with General Tyre International Company 
under which the General Company was appointed its agent for procure· 
ment of equipment, machinery, spares, accessories and raw materials 
required for. the plant. Under the terms of the agreement, for items to be 
procured for the appellants, the General Company was to obtain quota-
F lions from the appropriate suppliers and submit them, with its recommen· 
dations to the appellants for final approval. Approved goods were to be 
purchased directly in the name of the appellants. Besides payment for 
goods, transportation charges and insurance premia, the appellants 
agreed to pay procurement charges @ 3% of the FOB value of the items 
G of equipment. Accordingly, the appellants procured through the in· 
strumentality of the General Company ten items of equipment which were 
cleared on the basis of their invoice value. Thereafter, the assessable value 
of these items of equipment was recomputed and enhanced by adding to 
the invoice value thereof the procurement charges thereof i.e. to say 3% of 
the FOB value of each items of equipment. The assessee's appeal to the 
H Central Board succeeded, and therefrom the Revenue went in appeal to 
802 
f'
APPOLLO TYRES LID. v. COLLECTOR OF CUSfOMS [BHARUCHA, J.] 
803 
the Central Excise and Gold(Control) Appellate Tribunal. The Tribunal A 
held that as the imported goods were machinery made to specification and 
not off the shelf, the assessable value thereof could be determined only 
under Rule 8 of the Customs Valuation Rules by the best judgment method 
and no other. Consequently it held that the proctire'!tent charges paid by 
the assessee was not an irrelevant factor In determining the assessable B 
value of the goods. The appellant·assessee preferred appeal before this 
Court. 
Allo'!1ng the.appeal, this Court 
HELD : It is difficUJt to accept the Tribunal's reasoning that the C 
assessable value of machinery made to specifications and not purchased 
off the shelf can only be determined by the best judgment method and no 
other. The Tribunal, apparently, failed to take notice of the fact that this 
was not a case where the invoices produced by the appellant or the 
agreement had been rejected. It was the case of Revenue that to the value 
mentioned in those invoices 3% should be added by reason of the terms of D 
the agreement. A best judgment assessment, therefore, was not called for 
and had not been made. The provisions of the agreement show beyond any 
doubt that the value of the items of equipment was not enhanced thereby. 
Consequently, the order of the Tribunal is set aside and that of the Central 
Board of Excise and Customs is restored. [806-D-E; 809-C] 
E 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2704 of 
1987. 
From the Judgment and Order dated 12.2.87 of the Customs Excise 
and Gold (control) Appellate Tribunal, New Delhi in A.No.1330 of 1981-A. F 
J. Vellapally, Ms. Amrita Mitra and Ravinder Narain for the Appel-
!ant. 
K.N. Bhatt, Additional Solicitor General and P. Parmeswaran for the 
Respondents. 
G 
The Judgment of the Court was delivered by 
S.P. BHARUCHA, J. Under appeal is the judgment and order of the 
Customs, Excise and Gold (Control) Appellate Tribuna~ New Delhi. The 
Tribunal allowed the appeal of the Revenue setting aside the order of H 
804 
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R. 
A Control Board of Excise & Customs and restoring the order of the Collec-
tor of Customs, subject to the modification or reducing the quantum of 
penalty. 
The appellants were setting up a plant for the manufacture of tyre. 
B They entered into an agreement for the supply of technica

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