The Supreme Court has held that the engineering and technical service fees/charges were includable in the assessable value of the imported goods for the purpose of charging the customs duty.
The bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan has observed 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.
The appellant/assessee, Coal India is a Government of India undertaking and has subsidiaries in the country. Central Coalfields Limited, which is a subsidiary of the appellant, had invited sealed tenders for supply of spare parts for P&H Shovel. 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, Kolkata in Indian rupees. Payment to be made to M/s Voltas Limited was not to be deducted from the FOB amount.
Assistant Commissioner of Customs passed orderfinalizing 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 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. The Assistant Commissioner of Customs directed the appellant to pay Rs.64,47,244.00 within 15 days. The provisional assessment stood finalized.
The appellant preferred an appeal before the Commissioner of Customs (Appeals), Kolkata. By the order, Commissioner (Appeals) held that the present case is squarely covered within the purview of Rule 9(1)(a) and Rule 9(1)(e) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. 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 dismissed the appeal.
The order of the Commissioner (Appeals) came to be challenged by the appellant before the CESTAT which was registered as appeal. CESTATheld 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 a direct nexus to the value of the goods imported, CESTAT rejected the appeal.
The appellant contended 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.
The court stated 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. 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.
The court while dismissing Coal India’s appeal held that the view taken by all the lower authorities is correct and no interference is warranted. There is no merit in the appeal.
Case Details
Case Title: M/S. Coal India Limited Versus Commissioner Of Customs (Port), Customs House, Kolkata
Case No.: CIVIL APPEAL NO. 8028 OF 2010
Date: MAY 01, 2025
