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Supreme Court of India
M/S Coal India Ltd vs Commr.Of Customs(Port) Kolkata on 1 May, 2025
Author: Abhay S. Oka
Bench: Abhay S. Oka
2025 INSC 609
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8028 OF 2010
M/S. COAL INDIA LIMITED APPELLANT(S)
VERSUS
COMMISSIONER OF CUSTOMS (PORT),
CUSTOMS HOUSE, KOLKATA RESPONDENT(S)
JUDGMENT
UJJAL BHUYAN, J.
This is an appeal under Section 130E of the
Customs Act, 1962 against the order dated 20.04.2010 passed
by the Customs, Excise and Service Tax Appellate Tribunal,
Kolkata in appeal No.CDM-164/2004.
2. Be it stated that appellant had filed appeal
Signature Not Verified
Digitally signed by
ASHISH KONDLE
Date: 2025.05.01
No.CDM-164/2004 before the Customs, Excise and Service
11:42:33 IST
Reason:
Tax Appellate Tribunal, Kolkata (‘CESTAT’ for short
1
hereinafter) assailing the order dated 21.06.2004 passed by
the Commissioner of Customs (Appeals), Kolkata confirming
the order of the Assistant Commissioner of Customs and
dismissing the appeal filed by the appellant.
3. This Court by order dated 10.09.2010 had
condoned the delay and had issued notice.
4. Relevant facts may be briefly noted.
5. Appellant is a Government of India undertaking and
has subsidiaries in the country.
6. On 26.02.2000, Central Coalfields Limited, which is
a subsidiary of the appellant, had invited sealed tenders for
supply of spare parts for P&H Shovel.
7. On 28.03.2000, M/s Harnischfeger Corporation,
USA submitted its quotations through its distributor M/s
Voltas Limited. In the terms and conditions, towards
engineering and technical service fees an amount of 8 percent
of the Free on Board (FOB) amount valued on pro-rata basis
against each shipment, was to be paid to M/s Voltas Limited,
2
Kolkata in Indian rupees. Payment to be made to M/s Voltas
Limited was not to be deducted from the FOB amount.
8. On 03.04.2000, M/s Voltas Limited submitted
detailed quotation on behalf of its principal M/s Harnischfeger
Corporation, USA (foreign supplier).
9. Purchase order was placed on 20.12.2000 with the
foreign supplier for supply of spares required for P&H Shovel.
Clause 5 of the purchase order is relevant and reads thus:
5. Terms of payment:
(A) 100% of the FOB value shall be paid in US$ by means
of a confirmed, divisible and irrevocable letter of credit
which will be established in your favour through the
State Bank of India, Corporate Accounts Group Br. 34,
J.L. Nehru Road, Calcutta- 700071 (India) or their
branch at USA against presentation of the following
documents, in three sets as indicated against each:-
(i) Invoice Original plus three certified copies.
(ii) Packing List Original plus three certified copies.
(iii)Shipping
Specification Original plus three certified copies.
(iv) Certificate
of Origin Original plus three certified copies.
3
(v)Warranty
Certificate Original plus three certified copies.
(vi) Bill of Lading Original plus three certified copies.
(vii) Certificate that “No Commission, Rebate, Discount,
Margin or Egg. & Technical Service Charge etc. from the
net FOB value of the contract or over & above FOB value
of the contract is payable by M/s Harnischfeger
Corporation, USA to any agent.”
Note:-
(1) Documents from sl. no.(i) to (vii) form a
complete set.
(2) One copy of packing list & certificate of
origin should be inserted inside each package
for reference & identification purpose of the
items packed in the particular package.
(3) One copy consisting of a set of documents
from sl. no. (i) to (vii) should also be sent by
courier well in advance along with technical
literatures/pamphlets, dimensional drawings,
sketch, quality certificate, warranty certificate
etc. to avoid delay in effecting clearance of
goods and also their proper receipt at ultimate
consignee and its accountal etc. to the
following:
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(a) The Dy. Chief Engineering, C&F
Department, Coal India Ltd., 6-Lyons Range,
Calcutta- 700001 (India).
(b) The Chief General Manager (Equipment),
Central Coalfields Limited, Darbhanga
House, Ranchi – 834001 (India).
(c) The Dy. Chief Materials Manager (P),
Central Coalfields Limited, 15, Park Street,
Calcutta – 700001 (India).
(d) The Dy. Chief Materials Manager (P),
Purchase Deptt., Central Coalfields Limited,
Darbhanga House, Ranchi – 834001 (India).
(e) The Finance Manager (HQ), Central
Coalfields Limited, Darbhanga House,
Ranchi – 834001 (India).
(f) Ultimate Consignee: The Dy. Chief
Materials Manager (S), Central Coalfields
Limited, Regional Stores, Rajrappa, Distt.
Hazaribagh (India).
(B) Product support service to be rendered by M/s Voltas
Ltd., Calcutta on payment of engineering and technical
service charges.
As confirmed earlier product support services shall be
rendered by M/s Voltas Ltd. Calcutta in all respect for
ensuring optimum availability of P&H shovels.
5
Some of the product support services which shall be
rendered by M/s Voltas Ltd., Calcutta in all respects
for ensuring optimum availability of P&H Shovels are
as under:
Regular product support visits by Voltas Service
Engineers to all the operational mine sites for
inspection of the shovels., providing technical updates,
guidance on reports and maintenance at ‘No Cost’ to
the projects.
Assist Project Engineers identity actual requirement of
spares for planned procurement, scanning of part nos.
in the enquiry/tender to ensure that correct parts are
quoted, scrutiny of orders and L/C to ensure shipment
of the right parts.
Extend assistance by providing technical write-ups for
speedy custom clearance.
Assist customer doing insurance survey at docks.
Coordinate with various agencies in regard to the
discrepancies in supplies for prompt replacement etc.
In view of the above, payment of engineering & service
charges at the rate of 8% (eight percent) of the net FOB
value of the order will be made on pro-rata basis to M/s
Voltas, Calcutta in equivalent Indian Rupees at the
exchange rate (BC selling) prevailing on the date of the bill
of lading within 21 days from the date of submission of the
following documents.
1) Pre-receipted & stamped bill: original + 2 copies
2) Full set of non-negotiable shipping documents as
per (i) to (vii) of clause (5)A.6
3) Certificate from the banker certifying the exchange
rate prevailing on the date of bill of lading – original +
2 copies.
The above documents for payment of engineering &
technical service charges should be submitted to the
Finance Manager (HQ), CCL, Ranchi with a copy to this
office.
M/s Voltas, Calcutta shall submit documentary
evidence disclosing the particulars of engineering &
technical service fees as per the agreement between M/s
Harnischfeger Corporation, USA and M/s Voltas, Calcutta
within 15 days from the date of receipt of payment to the
Director of Enforcement, Govt. of India, New Delhi against
this order.
10. Foreign supplier supplied the spares on 21.03.2001
which were received by the appellant on provisional
assessment of bills of entry made by the customs authority.
11. Assistant Commissioner of Customs passed order-
in-original dated 03.03.2004 finalizing provisional assessment
of bills of entry covering goods imported by the appellant and
its subsidiaries under several purchase orders/contracts.
Assistant Commissioner of Customs held that engineering and
technical service fees/agency commission/charges paid or
payable by the appellant and its subsidiaries to the local agent
7
of the overseas supplier i.e. M/s Voltas Limited as reflected in
the purchase order were includable in the assessable value of
the imported goods (spare parts) under Rule 9(1)(a) and Rule
9(1)(e) of the Customs Valuation (Determination of Price of
Imported Goods) Rules, 1988 read with Section 14(1)(a) of the
Customs Act, 1962. Since appellant had failed to include such
service fees/agency commission/charges in the assessable
value of spare parts so imported, this resulted in short levy of
customs duty to the tune of Rs.64,47,244.00. Accordingly, the
Assistant Commissioner of Customs (‘Assistant Commissioner’
for short) directed the appellant to pay Rs.64,47,244.00 within
15 days. He also ordered that in view of the order-in-original,
the provisional assessment stood finalized.
12. Aggrieved by the aforesaid order dated 03.03.2004
of the Assistant Commissioner, appellant preferred an appeal
before the Commissioner of Customs (Appeals), Kolkata
(‘Commissioner (Appeals)’ hereinafter). By the order dated
21.06.2004, Commissioner (Appeals) held that the present
case is squarely covered within the purview of Rule 9(1)(a) and
8
Rule 9(1)(e) of the Customs Valuation (Determination of Price
of Imported Goods) Rules, 1988 (briefly ‘the Customs
Valuation Rules’ hereinafter). Hence, the engineering and
technical service fees/charges were includable in the
assessable value of the imported goods. Commissioner
(Appeals) confirmed the order passed by the Assistant
Commissioner and vide the order dated 21.06.2004 dismissed
the appeal.
13. This order of the Commissioner (Appeals) dated
21.06.2004 came to be challenged by the appellant before the
CESTAT which was registered as appeal No.CDM-164/2004.
CESTAT vide the order dated 20.04.2010 (‘impugned order’
hereinafter) held that payment made by the appellant to M/s
Voltas Limited was only in connection with the sale of goods
because M/s Voltas Limited was an agent/distributor of the
foreign supplier. CESTAT was of the view that payment made
by the appellant to M/s Voltas Limited had no nexus to any
services rendered by M/s Voltas Limited but was a condition
of sale. Holding that payment made to M/s Voltas Limited had
9
a direct nexus to the value of the goods imported, CESTAT
rejected the appeal.
14. Hence, the present appeal.
15. Learned counsel for the appellant submits that
engineering and technical service charges paid by the
appellant to M/s Voltas Limited could not be included in the
assessable value of the imported goods (spare parts). All the
authorities below have erroneously held to the contrary.
15.1. View taken by CESTAT that the present case is
covered by Rule 9(1)(a) and Rule 9(1)(e) of the Customs
Valuation Rules is contradictory. Provision of Rule 9(1)(e) of
the Customs Valuation Rules can be invoked only when the
payment is not covered by clauses (a) to (d) of Rule 9.
15.2. Learned counsel has referred to the Note to Rule 4
of the Customs Valuation Rules and submits that the same
has statutory force. It clearly says that value of imported
goods shall not include charges for maintenance or technical
assistance undertaken after importation of imported goods.
10
15.3. CESTAT failed to consider that M/s Voltas Limited
was an agent of the foreign supplier. It had rendered
maintenance and engineering services to the appellant and its
subsidiaries. Such services rendered by it had no direct nexus
to the value of the goods imported. Stipulation of 8 percent of
FOB payable to M/s Voltas Limited was only for the services
rendered by it. He submits that there is no direct nexus of the
said payment with the goods imported. Therefore, such
payments could not have been included in the assessable
value of the imported goods. In support of his submissions,
learned counsel has placed reliance on the following decisions:
1. Collector of Customs (Preventive), Ahmedabad Vs.
Essar Gujarat Ltd., Surat1
2. Tata Iron & Steel Co. Ltd. Vs. Commissioner of
Central Excise & Customs, Bhubaneswar2
3. Commissioner of Customs (Ports), Kolkata Vs. J.K.
Corpn. Ltd.3
4. Commissioner of Customs Vs. Ferodo India (P)
Ltd.41
(1997) 9 SCC 738
2
(2000) 3 SCC 472
3
(2007) 9 SCC 40111
15.4. Learned counsel for the appellant therefore submitsthat view taken by CESTAT cannot be sustained. Therefore,
orders of the Assistant Commissioner dated 03.03.2004,
Commissioner (Appeals) dated 29.06.2004 and the impugned
order of CESTAT dated 20.04.2010 are liable to be set aside.
16. Per contra, learned counsel for the respondent
supports the impugned order of CESTAT. Adverting to the
purchase order he submits that payment made to the Indian
agent was clearly part of the FOB amount payable to the
foreign supplier.
16.1. He also adverts to the documents titled as Voltas
Limited Terms and Conditions and submits therefrom that it
was clearly mentioned therein that prices quoted were
exclusive of its engineering and technical service fees.
Payment of 8 percent of the FOB price to the Indian agent was
a condition of sale of the imported goods. Such payment was
made purely as a condition of sale of the imported goods. It
was based on an understanding between the foreign supplier
4
(2008) 4 SCC 563
12
and M/s Voltas Limited. Various services provided by M/s
Voltas Limited were on behalf of the foreign supplier as its
agent. The services rendered were to identify the requirement
of the spares to be imported and therefore the payments so
made had a direct nexus to the imported goods. As the local
agent, services provided by M/s Voltas Limited were pre-
importation activities and aimed at making the sale of spares
by the foreign supplier effective.
16.2. He finally submits that there is no merit in the
appeal and the same should be dismissed.
17. Submissions made by learned counsel for the
parties have received the due consideration of the Court.
18. We have already extracted Clause 5 of the purchase
order issued by Central Coal Fields Limited, a subsidiary of
the appellant. In so far terms of payment is concerned, 100
percent of FOB value had to be paid in U.S. Dollars. It was
also mentioned therein that product support service would be
rendered by M/s Voltas Limited on payment of engineering
13
and technical service charges. After referring to instances of
product support service, it was stipulated that payment of
engineering and service charges at the rate of 8 percent of the
net FOB value would be made on pro-rata basis to M/s Voltas
Limited in equivalent Indian currency at the exchange rate
prevailing on the date of the bill of lading. Product support
services included determination of actual requirement of
spares, to assist in speedy customs clearance including
insurance survey, prompt replacement in case of
discrepancies in supplies etc.
19. We may also refer to the relevant extract of the
quotation of the foreign supply which reads as under:
You are to pay an additional eight (8) percent of the
total FOB amount on a pro-rata against each
shipment to our Indian distributor M/s. Voltas Ltd.,
Calcutta in Indian rupees at the exchange rate
prevalent on the date of the consignment note/bill
of lading within 21 days from the date of
submission of their invoice along-with a set of non –
negotiable copies of the shipping documents. This
payment is to be made to Voltas and is not to be14
deducted from the FOB amount payable to us
against the Letter of Credit.
20. The foreign supply had made it clear that the
appellant had to pay an additional 8 percent of the total FOB
amount on a pro-rata basis against each shipment to M/s
Voltas Limited in Indian currency. It was clarified that this
payment was to be made to Voltas Limited and was not to be
deducted from the FOB amount payable to the foreign supplier.
21. All the imported goods were initially cleared on the
basis of provisional assessment. Thereafter, the Assistant
Commissioner passed the order-in-original dated 03.03.2004
finalising the provisional assessment. On scrutiny of
documents, Assistant Commissioner observed that Voltas
Limited was the local agent of the foreign supplier. The
product support services i.e. engineering and technical
services provided by M/s Voltas Limited were primarily related
to the type and quantum of spare parts required to be
supplied by the foreign supplier. Duty of M/s Voltas Limited
was also to assist the appellant during insurance survey at the
15
port after importation of the identified spares. Such services
were related to procurement of spares by the appellant and for
the smooth sale of spares by the foreign supplier.
21.1. Appellant and its subsidiaries had no contract with
M/s Voltas Limited for providing such services. The charges
amounting to 8 percent of net FOB value were paid to M/s
Voltas Limited as engineering and technical service charges for
smooth importation of the goods.
21.2. Engineering and technical service charges paid to
the local agent M/s Voltas Limited were 8 to 10 percent of the
transactions of the appellant with the principal i.e. the foreign
supplier. Such charges were paid as a recompense for the
services rendered towards making the sale effective. Hence,
engineering and technical service charges were nothing but
commission.
21.3. Observing that the sale had become conditional in
view of the conditions posed in quotation by the foreign
supplier, the consequential engineering and technical service
16
charges were fully covered by Rule 9(1)(e) of the Customs
Valuation Rules. Assistant Commissioner referred to the Note
to Rule 4 of the Customs Valuation Rules and observed that
engineering and technical service charges were not being paid
for maintenance of any industrial plant, machinery or
equipment. It was nobody’s case that these charges were being
paid under a contract for maintenance, erection,
commissioning of an industrial plant, equipment or machinery.
22. From a perusal of the order-in-original, it is seen
that appellant was granted personal hearing in which
representative of the appellant stated that it will pay any short
levy of duty as per law after considering the facts.
23. On the basis of the above, Assistant Commissioner
vide the order-in-original dated 03.03.2004 held that engineering
and technical service fees/agency commission/charges paid by
the appellant and its subsidiaries to the local agent of the
foreign supplier were includible in the assessment value of the
imported goods. Therefore, there was short levy of customs
duty to the tune of Rs. 64,47,244.00. Accordingly, appellant
17
was directed to pay the said amount within 15 days. This
finalized the provisional assessment.
24. Commissioner (Appeals) vide the order dated
21.06.2004 adverted to Clause 5(B) of the purchase order
which mandated that product support service would be
provided by M/s Voltas Limited in all respects for ensuring
optimum availability of P&H Shovels. Thereafter,
Commissioner (Appeals) held as under:
In the present case, quotation by the foreign
supplier was received by the appellant along with
offer of M/s. Voltas Ltd., Calcutta. Thus together,
those formed the basis of contract and set out the
conditions of sale. In the present case, payment of
engineering & technical service charges constituted
an integral/inseparable condition of sale of
imported goods. Since the payment of service
charges to M/s. Voltas was dictated by the
condition of sale to satisfy the obligation of the
seller/foreign supplier, the inclusion of the said
charges in the assessable value by the lower
authority under the provisions of Rule 9(1)(e) clearly
prescribes for inclusion of all other payments
actually made or to be made as a condition of sale18
of the imported goods, by the buyer to the seller or
by the buyer to a third party to satisfy an obligation
of the seller to the extent that such payments are
not included in the price actually paid or payable.
The present case is squarely covered within the
ambit of Rule 9(1)(e) of CVR’88 and accordingly, the
aforesaid charges shall be added/includible in the
transaction under Section 14 of the Act read with
provisions of CVR’88.
24.1. Looking into the nature of imports, Commissioner
(Appeals) held that services provided by the Indian agent was
on behalf of the foreign seller and was directly related to the
sale of imported goods. Provision for such service and payment
of service charges constituted a condition of sale. In such
circumstances, the first appellate authority upholding the view
taken by the Assistant Commissioner held that engineering
and technical service charges were includible in the assessable
value of the imported goods.
25. When this order was appealed against, CESTAT vide
the impugned order held:
19
6.1 We have carefully considered the submissions
from both sides and closely examined the records
produced. It is apparent that there is
agency/distributor agreement entered into
between Voltas Ltd. and the American based
supplier viz. Harnischfeger Corporation, U.S.A.
The documents such as purchase order of the
appellant, the quotation by the American supplier
and documents of M/s Voltas Ltd. relied upon
clearly referred M/s Harnischfeger Corporation as
the principal and M/s Voltas Ltd. as the agent or
distributor. We have not been shown any
agreement between M/s Voltas Ltd. and the
appellant. The services undertaken by M/s Voltas
Ltd., apparently, are only at the instance of the
US based supplier as the appellant has no choice
in importing the spares without availing the
services of Voltas Ltd., who is the agent of the
American based supplier. It is also seen that the
amounts paid to Voltas Ltd. by the appellant are
not linked to any services specifically rendered by
them. We are not in agreement with the
submissions of the Ld. Sr. Advocate on behalf of
the appellant that 8 to 10% value of the imported
parts have been adopted only as a measure for
payment for services rendered by M/s Voltas Ltd.
It is clearly a condition for sale of the goods to the
20
appellant. If there are no imports, no payments
are apparently due to be made to whatever
services attributed to M/s Voltas. In other words,
the payments have been made only in connection
with the sale of goods, apparently due to reason
that M/s Voltas Ltd., is an agent/distributor of
the US based supplier.
25.1. CESTAT had carefully analysed the relevant
documents and thereafter came to the conclusion that the
services rendered were such that appellant faced no
inconvenience at the time of importation. Amounts paid to
Voltas Limited by the appellant were not linked to any services
specifically rendered by it. Payments were made only in
connection with the sale of the goods presumably because M/s
Voltas Limited was an agent of the foreign supplier. Thus,
payments made to M/s Voltas Limited were only as a
condition of sale and not for any services rendered. Therefore,
it had a direct nexus to the value of the goods imported.
21
26. We may now have a look at Section 14 of the
Customs Act, 1962 (‘Customs Act’ hereinafter) as it stood at
the relevant point of time which is as follows.
14. Valuation of goods for purposes of
assessment – (1) For the purposes of the Customs
Tariff Act, 1975 (51 of 1975), or any other law for
the time being in force whereunder a duty of
customs is chargeable on any goods by reference
to their value, the value of such goods shall be
deemed to be-
the price at which such or like goods are ordinarily
sold, or offered for sale, for delivery at the time and
place of importation or exportation, as the case
may be, in the course of international trade,
where-
(a) the seller and the buyer have no interest in the
business of each other; or
(b) one of them has no interest in the business of the
other,
and the price is the sole consideration for the sale
or offer for sale:
Provided that such price shall be calculated
with reference to the rate of exchange as in force
on the date on which a bill of entry is presented
under Section 46, or a shipping bill or bill of22
export, as the case may be, is presented under
Section 50;
(1A) Subject to the provisions of sub-section
(1), the price referred to in that sub-section in
respect of imported goods shall be determined in
accordance with the rules made in this behalf.
(2) Notwithstanding anything contained in
sub-section (1) or sub-section (1A) if the Board is
satisfied that it is necessary or expedient so to do,
it may, by notification in the Official Gazette, fix
tariff values for any class of imported goods or
export goods, having regard to the trend of value of
such or like goods, and where any such tariff
values are fixed, the duty shall be chargeable with
reference to such tariff value.
(3) For the purposes of this section-
(a) “rate of exchange” means the rate of exchange-
(i) determined by the Board, or
(ii) ascertained in such manner as the Board
my direct,for the conversion of Indian currency into
foreign currency or foreign currency into Indian
currency;
23
(b) ‘foreign currency” and “Indian currency”
have the meanings respectively assigned to
them in clause (m) and clause (q) of section 2 of
the Foreign Exchange Management Act, 1999
(42 of 1999).”26.1. Thus, what Section 14(1)(a) provides for is that for
the purpose of the Customs Tariff Act, 1975 or any other law
for the time being in force whereunder a duty of customs is
chargeable on any goods by reference to their value, the value
of such goods shall be deemed to be the price at which such or
like goods are ordinarily sold or offered for sale, for delivery at
the time or place of importation or exportation, as the case
may be, in the course of international trade where the seller or
buyer had no interest in the business of each other or one had
no interest in the business of the other. As per sub-section
(1A), subject to the provisions of sub-section (1), the price
referred to in that sub-section in respect of the imported goods
shall be determined in accordance with the rules made in this
behalf.
24
27. In exercise of the powers conferred by Section 156
of the Customs Act read with Section 22 of the General
Clauses Act, 1897, the Customs Valuation Rules have been
framed. Rule 4 deals with transaction value. The transaction
value of the imported goods shall be the price actually paid or
payable for the goods when sold for export to India, adjusted
in accordance with the provisions of Rule 9 of the Customs
Valuation Rules.
28. Rule 9 deals with cost and services. In this case, we
are concerned with sub-rule (a) and sub-rule (e). We extract
Rule 9 as under:
Rule 9. Cost and Services- (1) In determining the
transaction value, there shall be added to the price
actually paid or payable for the imported goods,-
(a) the following cost and services, to the extent
they are incurred by the buyer but are not
included in the price actually paid or payable for
the imported goods, namely-
(i) commissions and brokerage, except buying
commissions;
25
(ii) the cost of containers which are treated as
being one for customs purposes with the
goods in question;
(iii) the cost of packing whether for labour or
materials;
* * * * *
(e) all other payments actually made or to be
made as a condition of sale of the
imported goods, by the buyer to the seller, or
by the buyer to a third party to satisfy an
obligation of the seller to the extent that such
payments are not included in the price
actually paid or payable.
29. Rule 12 of the Customs Valuation Rules says that
the interpretative notes specified in the schedule shall apply
for the interpretation of the rules. In the Note to Rule 4, it is
stated:
The value of imported goods shall not include the
following charges or costs, provided that they are
distinguished from the price actually paid or
payable for the imported goods:
(a) Charges for construction, erection,
assembly, maintenance or technical
assistance, undertaken after importation26
on imported goods such as industrial plant,
machinery or equipment;
(b) The cost of transport after importation;
(c) Duties and taxes in India.
30. In J.K. Corporation Limited (supra), this Court
considered the question as to whether customs duty would be
payable on the purchase price of the goods by adding the
value of the license and technical knowhow to the value of the
imported goods. It was in that context, this Court held as
under:
9. The basic principle of levy of customs duty,
in view of the aforementioned provisions, is that
the value of the imported goods has to be
determined at the time and place of importation.
The value to be determined for the imported goods
would be the payment required to be made as a
condition of sale. Assessment of customs duty
must have a direct nexus with the value of goods
which was payable at the time of importation. If
any amount is to be paid after the importation of
the goods is complete, inter alia, by way of transfer
of licence or technical know-how for the purpose of
setting up of a plant from the machinery imported
or running thereof, the same would not be
27
computed for the said purpose. Any amount paid
for post-importation service or activity, would not,
therefore, come within the purview of
determination of assessable value of the imported
goods so as to enable the authorities to levy
customs duty or otherwise. The Rules have been
framed for the purpose of carrying out the
provisions of the Act. The wordings of Sections 14
and 14(1-A) are clear and explicit. The Rules and
the Act, therefore, must be construed, having
regard to the basic principles of interpretation in
mind.
31. Note to Rule 4 has been explained by this Court in
J.K. Corporation Limited (supra). This Court after adverting to
the relevant portion of the Note to Rule 4 held that what would
be excluded for computing the assessable value for the
purpose of levy of customs duty is any amount paid for post-
importation activities including any amount paid for post-
importation technical assistance.
32. This position was also explained by this Court in
Ferodo India (P) Ltd. (supra). Relevant portion of the aforesaid
decision reads as follows:
28
7. Under Section 14 of the Customs Act, 1962, the
assessable value of imported goods is deemed to
be the price at which such or like goods are
ordinarily sold or offered for sale for delivery at
the time and place of importation or exportation,
as the case may be, in the course of international
trade, where the seller and the buyer have no
interest in the business of each other and the
price is the sole consideration for the sale or offer
of sale.
8. The CVR, 1988 recognises the fundamental
principle of arm’s length price while dealing with
transaction value. The Rules provide for the
determination of the correct price of goods that
are imported in the country or exported out of the
country uninfluenced by relationship between the
transacting parties.
9. Transaction value, deductive value, computed
value and residual value methods are the
methods prescribed in the Rules, to be followed
sequentially in that order in the matter of
determination of arm’s length pricing.
10. To determine the assessable value for the levy of
customs duty on imported goods, Section 14 of
the 1962 Act has to be read with the provisions of
the CVR, 1988 because under Section 14(1) there
is reference to a deemed price of goods29
imported and under Section 14(1-A) such deemed
price is to be determined in accordance with the
CVR, 1988.
33. Applying the above ratio to the facts of the present
case, we find that the services rendered by the Indian agent
were not post-importation activities. The services provided
were directly relatable to the import of the goods by way of
product support service which is covered by Sections 14(1)
and 14(1A) of the Customs Act read with Rule 9(1)(e) of the
Customs Valuation Rules.
34. Thus on thorough consideration of all aspects of the
matter, we are of the considered opinion that the view taken
by all the lower authorities is correct and no interference is
warranted. There is no merit in the appeal. Accordingly, the
appeal is dismissed.
………………………………J.
[ABHAY S. OKA]
.……………………………J.
[UJJAL BHUYAN]
NEW DELHI;
MAY 01, 2025.
30
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