Charges for Supervision of Installation and Field Efficiency Test paid to Overseas Suppliers are Not Post-importation Charges, Can’t be included in Assessable Value: CESTAT [Read Order]

In a recent case before the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Bangalore, the Kerala State Electricity Board Ltd filed an appeal against an impugned order passed by Commissioner of Customs, charges for supervision of installation and field efficiency test paid to overseas suppliers were excluded from the value of post- importation charges.

The respondent, Kerala State Electricity Board Ltd. Vydyuthi Bhavan,registered under a project contract with Commissioner of Customs for availing project benefits under Project Import Regulations, 1986 i.e., concessional rate of duty for import of goods for setting up of a Hydro-Electric Power Project at Kuttiyadi.

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On completion of the project, the respṣondent was directed for reconciliation and on the basis of scrutiny of records and it was alleged that the respondent had not paid duty of Rs.96,23,121.50 on the charges of Supervision of Installation and Field Efficiency Test, which was not included in the total value of project cost. The said demand was confirmed by the adjudicating authority. The appellant, the Commissioner of Customs was represented by Adv.Kuryan Thomas.

Aggrieved by this order, the respondent filed an appeal before the Commissioner ( Appeals ). The appeal was allowed, setting aside the order of adjudicating authority. The representative of revenue in appeal reiterated the findings of the adjudicating authority. The authority submitted that the respondent had registered under Project Import Regulations, 1986 for availing concessions on duty of imports of goods for setting up power projects in Kuttiyadi.

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The authority submitted that all took place before 2002, hence, Rule 9(1)(e) of the Customs Valuation Rules, 1988 would apply for determination of value of imported goods. And as per the rule “all other payments actually made or to be made as a condition of sale of imported goods, by the buyer to the seller, are to be added to the price actually paid or payable for the imported goods.”Therefore charges of supervision of installation and field efficiency test should be added to computation of assessable value for determination of customs duty on the project, as it is an integral part of the contract.

The respondents counsel on the other hand submitted that Supervision of Installation and Field Efficiency Test were post-import activities, hence its value cannot be included in the valuation of customs duty. The counsel also stated that the adjudicating authority had erroneously observed the charges being part of the assessable virtue of Rule 9(1)(e) of the Customs Valuation Rules, 1988. The submission was that as per Section 14 of the Customs Act, 1962, the customs duty must have a direct nexus with the value of the goods payable at the time of importation.

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The two-member bench of Dr. D.M. Misra and R. Bhagya Devi observed that the issue in the appeal regarding the question ‘whether the value of ‘Supervision of Installation’ and ‘Field Efficiency Test’ should be included in the value of the project import for levy of customs duty.

The revenue had claimed that the charges paid to overseas supplier of goods is a condition of sale, hence included in the value of the goods, but the bench is of the opinion that  it cannot be called as a condition of sale of the goods.

Therefore the charges paid are not to be included in the assessable value of the imported goods as post-importation charges, the tribunal held.

Hence, the impugned order was upheld and revenue appeal was dismissed. 

To Read the full text of the Order CLICK HERE

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