M/S. GMRENERGY LTD. versus COMMISSIONER OF CUSTOMS, BANGALORE

Citation: [2015] 10 S.C.R. 106 · Decided: 27-10-2015 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Disposed off

Judgment (excerpt)

A 
B 
[2015] 10 S.C.R. 106 
M/S. GMRENERGY LTD. 
v. 
COMMISSIONER OF CUSTOMS, BANGALORE 
(Civil Appeal No. 4920 of 2007) 
OCTOBER27, 2015 
[A. K. SIKRI AND R. F. NARIMAN, JJ.] 
Customs Valuation (Determination of Price of Imported 
c Goods) Rules, 1988- r. 4 rw r. 9(1 )(d) & (e), r. 10- Customs 
Act, 1962- s. 46(4): 
Transaction value - Import of parts of the Gas Turbine · 
Hot Section of a power plant which have to be replaced after 
0 
12, 500 fired hours of use under a Long Term Assured Parts 
Supply Agreement(LTAPSA) entered into with foreign 
company -
Valuation of - Appellant entered into an 
agreement for seri/ice and supply of parts with the company 
being a LTAPSA - Import of various parts of the said plant 
E under two bills of entry - Parts identified as having to be 
replaced re-exported back to the company under cover of 
shipping bills before the aforesaid bills of entry presented 
for import of the replaced parts to the customs authorities -
Appellant paid customs duty based on the value declared in 
F the said bills of entry but did not make any payment to the 
company based on these invoices since payments had 
already been made based on fired hour charges - Issuance 
of show cause notice that 1/3rd of the value of the imported 
items be added to the invoice value as that was said to 
G represent the amount of the parts that were replaced and re-
exported back to the company - Evasion of customs duty 
and goods liable to confiscation - Commissioner of Customs 
upheld the demand holding that as per the LTAPSA since 
assessee declared only the differential value of the returned 
H parts and the parts imported, 1 /3rd of the invoice value of the 
106 
M/S. GMR ENERGY LTD. v. COMMISSIONER OF 
107 
CUSTOMS, BANGALORE 
imported parts needs to be added to arrive at the correct A 
assessable value - Tribunal upheld the order- On appeal, 
held: Commissioner of Customs and the tribunal were wrong 
in concluding that the invoice price is only an incremental 
value price and not the price of the articles supplied by the 
company - Thus, order of Commissioner and tribunal set B 
aside. 
Exemption notification - Benefit of - Import of goods 
under bills of entry - Exemption notification - Claim of, by 
appellant- Importer-appellant did not produce the certificate C 
at the time of import - Denial of benefit of exemption 
notification to the appellant by the Department, however, 
allowed by the tribunal- On appeal, held: Once the authorities 
are satisfied that the goods are required for renovation, the 
customs department does not need to go deep into the matter D 
and by hairsplitting and semantic niceties deny the benefit 
of the exemption notification - Tribunal was right in setting 
aside the finding of the Commissioner. 
Allowing the assessee's appeal and dismissing the E 
revenue's appeal, the Court 
HELD: 1.1 Rules 4 and 9 of the Customs Valuation 
(Determination of Price of Imported Goods) Rules, 1988 
would only apply in case imported goods are "sold" for F 
export to India. On facts, there is no sale. All that happens 
under the LTAPSA is that parts are replaced without any 
further charge after a certain number of hours of the 
running of the power plant. This being the case, the 
assessee was correct in submitting that neither Rules 4 G 
nor Rule 9 would apply, as Rule 4 itself, if applicable, 
makes Rule 9 also apply. Rule 4(2)(g) and Rule 9(1)(d) 
refer only to the very goods that are imported _and not to 
goods which may have been imported much earlier to 
the imported goods. Therefore, what is necessary is that H 
108 
SUPREMECOURTREPORTS 
(2015] 10 S.C.R. 
A there should be proceeds which arise from re-sale, 
disposal, or use of the very imported goods by the buyer. 
The case of the department is that these sub-rules are 
attracted only because there was an earlier sale at the 
time when the entire plant was imported and that 
B subsequently there would be a disposal of goods 
imported much after the plant was set up by the buyer. 
As it is clear that there is no subsequent re-sale, disposal 
or use of the very imported goods-that is the parts 
imported under the two bills of entry dated 25.6.2003, 
C the assessee is right in his contention that in any case 
neither of these sub-rules would apply to the facts of 
the instant case. Equally, Rule 9(1)(e) would have no 
application for the reason that there is no other payment 
0 
actually made or to be made as a condition of sale of the 
imported go

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