National Organic Chemical Industries Ltd. Versus Commissioner of Custom, Mumbai>2012(01)LCX0226

2012(01)LCX0226

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

S/Shri Ashok Jindal, Member (J) and P.R. Chandrasekharan, Member (T)

National Organic Chemical Industries Ltd.

Versus

Commissioner of Custom, Mumbai

Final Order No. A/88/2012-WZB/C-KCSTB), dated 20-1-2012 in Appeal No. C/793/2003

Advocated By -

Shri Prakash Shah, Advocate, for the Appellant.
Shri Sanjay Kalara, AR,for the Respondent.

[Order per : P.R. Chandrasekharan, Member (T)]. -

This appeal is directed against Order-in-Appeal No. 296/2002-MCH, dated 7-5-2002 passed by the Commissioner of Customs (Appeals), Mumbai.

2. The facts arising for consideration in this case are as follows ;

2.1 The appellant, M/s. Polyolefins Industries Ltd. (known as "NOCIL") applied for registration of a project contract under purchase order No. IMP/36006 dated 29-4-1992 in respect of goods with the C1F value of DM
15,75,200/- under the Project Import Regulations, 1986. The said purchase order covered machinery worth DM 14,25,200/- (CIF) and drawings and designs worth DM 1,50,000/- (CIF) and the same was registered provisionally. The appellant imported the goods vide Bill of Entry No. 1391 dated 4-6-1993 and declared the goods as :

(i) Twin Screw Compounder type ZSK 92/M 385; and
(ii) Designs and Drawings.

The item at serial No. (i) above was classified under Heading No. 9801.00 while the drawings and designs were classified under 4906.00. The machinery was assessed at 35% duty while the drawings and designs were assessed free. The assessment was provisional.

2.2 In respect of the machinery at serial No. (i) value of DM 14,25,200/-was declared while for the drawings and designs, value of DM 1,50,000/- was declared. The Director General of Technical Development, the sponsoring authority for the project, recommended registration of the said import as Project Imports for a value of DM 14,25,200/- and excluded the value of drawings and designs of DM 1,50,000/- from the value of the project. When the machines were cleared vide the above Bill of Entry, the appellant noticed that the drawings and designs had not been shipped and accordingly the appellant took up the matter with the foreign supplier. Thereafter, the supplier issued a revised invoice for the value of machinery only of DM 14,25,200/-. The supplier thereafter, sent the drawings and designs by airfreight at the Sahar Air Cargo Customs and the assessments of the said drawings and designs is a subject matter of a separate proceedings before the Air Cargo Customs. The appellant vide a letter dated 7-10-1994 submitted the documents for reconciliation and finalisation of assessment as Project Import and by letter dated 7-8-1995, the Assistant Collector of Customs informed the appellant that the assessment of the goods under Project Import had been finalised and requested the appellant to submit a copy of chal-lan of cash security made by the appellant for preparing the refund order towards the cash security. The appellant vide letter dated 25-8-1995 submitted the said challan and requested for refund of the security. The department, however, did not grant the refund, in spite of a reminder by the appellant vide letter dated 14-1-1998.

2.3 On 18-3-1998 the department issued a show cause notice to the ap-pellant alleging that there was a short levy of duty since value of drawings and designs had not been included in the value of machinery and the same was liable to be added to the value of the import under Rule 9(l)(b)(iv) of the Customs Valuation Rules, 1988 and the drawings and designs were liable to be assessed under Heading 8479.89 as machinery. The appellant contested the demand. The case was adjudicated vide order dated 19-3-1999 by the Assistant Commissioner of Customs wherein he confirmed a duty demand of Rs. 10,30,612.35 by classifying the drawings and designs under Heading No. 8479.89 and charged duty at the rates applicable to machinery. The appellant contested the order before the Commissioner (Appeals), Mumbai who vide the impugned order rejected the appeal of the appellant. Hence, the appellant is before us.

3. The learned counsel for the appellant submits that when the machinery was imported, they filed a Bill of Entry wherein they classified the machinery under Heading 98.01 and the drawings and designs under Heading 49.06 and the same was assessed provisionally. The value of machinery was shown at DM 14,25,200/- and the value of drawings and designs was shown at DM 1,50,000/-. Vide letter dated 7-8-1995 the department had informed that the Project Import has been finalised and they were directed to apply for refund of 5% cash security. Vide letter dated 25-8-1995, they had submitted all required documents for refund of cash security and the department did not initiate any action in spite of reminder by the appellant on 14-1-1998. Thereafter, the appel-lant has been issued a show cause notice dated 18-3-1998 proposing to include the value of the drawings and designs in the value of the machinery imported under Rule 9(l)(b)(iv) of the Customs Valuation Rules. In the adjudication order, it is clearly recorded that "Rule 9(l)(b)(iv) does not apply in this case nor Rule 9(l)(e) of the Customs Valuation Rules". In other words, the proposition in the show cause notice has been negatived by the adjudicating authority in the order passed by him. Nevertheless, he has proceeded to assess the value of the drawings and designs (not under Heading 98.01 as Project Imports) on the ground that the. sponsoring authority has recommended project import benefits for a value of only DM 14,25,200/- and has proposed to classify the drawings and designs under Heading No. 8479.89 applicable to machinery and has applied a rate of duty of 80% BCD + 10% CVD applicable to machinery. The learned counsel argues that the order has traversed far beyond the show cause notice and has clearly denied the benefit of inclusion under project imports in respect of drawings and designs. If the benefit of classification as project import were to be denied, then the drawings and designs ought to have been assessed on imports as a separate entity on its own merits and the correct classification for drawings and designs is Heading No. 49.06 which attracts 'nil' duty. Therefore, the entire demand is ill conceived and unsustainable in law and requests that the demand be set aside.

4. The learned Appraiser (AR) appearing for Revenue reiterates the findings given in the orders of the lower adjudicating and appellate authorities.

5. We have carefully considered the rival submissions. In the show cause notice issued, the proposal was to include the value of drawings and de-signs in terms of the provisions of Rule 9(l)(b)(iv) of the Customs Valuation Rules, 1988. In the adjudication order, the adjudicating authority has concluded that the said rule does not apply to the facts of the case nor Rule 9(1 )(e). Having given a finding negativing the proposal in the show cause notice, the adjudicating authority could not have confirmed the duty demand on a totally different ground altogether. On the one hand, the department wants to include the value of the drawings and designs in the value of the machinery which has been assessed to duty under Project Imports under Heading No. 9801; at the same time, they do not want to give the benefit of Project Imports for drawings and designs on the ground that, if that value is included it would exceed the value recommended for Project Imports by the sponsoring authority. Nevertheless, they want to classify the drawings and designs under Heading 8479.89 as machinery and demand duty at the rate applicable to machinery. This stand of the department is totally untenable in law and has to be set aside. If the department wants to include the cost of the drawings and designs in the value of machinery then the classification of drawings and designs should be under Heading 98.01 as the machinery has been imported and assessed under Project Imports. If the benefit un-der Heading 98.01 cannot be given to drawings and designs for whatever reasons, then they have to be assessed independently on merits as per the classification applicable to drawings and designs. Drawings and designs are rightly classifiable under Heading No. 49.06 and the-benefit of duty-free import under this Heading has to be extended to the goods in question.

6. In view of the above position, the entire demand is unsustainable in law and the impugned orders are liable to be set aside. Accordingly, we set aside the impugned orders and allow the appeal with consequential relief, if any.

(Operative part pronounced in Court)

Equivalent 2013 (295) ELT 0100 (Tri. - Mumbai)