The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench has held that projectors imported for leasing to cinema halls are not liable to Countervailing Duty (CVD) on the basis of Retail Sale Price (RSP) or Maximum Retail Price (MRP).
The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the importer was entitled to seek amendment of Bills of Entry under Section 149 of the Customs Act, 1962 on the basis of contemporaneous documents available at the time of import.
The appellant, SVF Entertainment Private Limited, imported digital projectors from China and Taiwan during April 2010. The projectors were not intended for retail sale but were installed in cinema halls across West Bengal under “Right to Use” arrangements along with related equipment such as UPS systems, servers, computers and cables.
During assessment of the Bills of Entry, Customs authorities allegedly adopted an arbitrary valuation methodology. The assessing officer assumed the MRP of the imported projectors at nearly three times their FOB value and further loaded the assessable value by applying insurance at 1.125% of FOB value and freight at 20% of FOB value in one of the consignments. The importer contended that these assumptions were substantially higher than the actual costs incurred.
After paying duty and clearing the goods due to urgent business requirements, the importer sought refund of the excess duty paid. However, the refund claim was rejected on the ground that the original assessment had not been challenged. This triggered a series of proceedings involving refund claims, appeals and applications for amendment of Bills of Entry under Section 149 of the Customs Act.
The principal question before the Tribunal was whether digital projectors imported for leasing to cinema halls could be subjected to RSP-based assessment for levy of CVD, or whether duty should have been assessed on transaction value.
The Tribunal also examined whether Customs authorities were justified in adopting freight at 20% of FOB value despite availability of actual freight documents; adopting insurance at 1.125% of FOB value despite actual insurance records being available; and rejecting the importer’s request for amendment of Bills of Entry under Section 149 of the Customs Act.
The Tribunal accepted the assessee’s contention that the imported projectors were never intended for retail sale. Instead, they were supplied to cinema halls under leasing and “Right to Use” arrangements while ownership remained with the importer.
Referring to the legal framework governing levy of CVD on the basis of RSP, the Tribunal observed that such assessment is permissible only when two conditions are fulfilled:
- The imported goods are required under the Legal Metrology law to declare a retail sale price on the package; and
- The goods are notified under Section 4A of the Central Excise Act.
According to the Tribunal, the first condition itself was absent because the projectors were not intended for retail sale. Consequently, there was no legal requirement to declare an RSP on the imported goods.
The Bench relied extensively on earlier decisions including UFO Moviez India Ltd. and Bharti Telemedia Ltd., where imported equipment supplied on lease and not sold in the retail market was held ineligible for RSP-based assessment.
The Tribunal reiterated that under the Legal Metrology framework, RSP becomes relevant only where goods are intended for retail sale to the ultimate consumer.
Examining the precedents, the Tribunal noted that where ownership remains with the importer and goods are merely provided on lease or right-to-use basis, there is no transfer of property and therefore no “sale” in the legal sense. As a result, the goods cannot be treated as retail packages requiring declaration of MRP.
Applying these principles to digital cinema projectors leased to theatre owners, the Bench concluded that the goods could not be assessed on RSP basis and duty was required to be calculated on transaction value.
The importer had argued that Customs authorities ignored actual freight and insurance documents and instead adopted deemed percentages of FOB value.
According to the records, actual freight expenditure for one consignment was approximately ₹2.24 lakh, whereas Customs loaded freight at more than ₹10.55 lakh by applying the 20% FOB formula. Similarly, actual insurance costs of ₹7,759 and ₹1,265 were disregarded and replaced with substantially higher notional figures calculated at 1.125% of FOB value.
The assessee contended that Rule 10 of the Customs Valuation Rules permits deemed freight and insurance values only where actual figures are not ascertainable. Since contemporaneous invoices and insurance documents were available, Customs was required to adopt the actual costs.
Another important aspect of the ruling concerns Section 149 of the Customs Act.
The Tribunal noted the importer’s contention that amendment of Bills of Entry can be allowed on the basis of documents that existed at the time of import, provided their genuineness is not disputed. The importer relied on right-to-use agreements, invoices, insurance records and other contemporaneous documents that were already in existence when the imports took place.
The Bench also took note of judicial precedents holding that Section 149 does not prescribe any limitation period for seeking amendment and that amendment proceedings are distinct from appellate remedies under Section 128 of the Customs Act.
Allowing the appeal, the CESTAT held that digital projectors imported for leasing to cinema halls were not intended for retail sale and therefore could not be subjected to RSP-based assessment for levy of CVD. The Tribunal concluded that duty was payable on transaction value and examined the valuation issues relating to freight, insurance and amendment of Bills of Entry in that context.
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