M-S ASSOCIATED CEMENT COMPANIES LTD. v. COMMISSIONER OF CUSTOMS

Citation: [2001] 1 S.C.R. 608

Court: Supreme Court of India

Bench: B.N. KIRPAL, DORAISWAMY RAJU, K.G. BALAKRISHNAN

Judgment text

MIS ASSOCIATED CEMENT COMPANIES LTD. --"(. v. COMMISSIONER OF CUSTOMS JANUARY 25, 2001 [B. N. KIRPAL, DORAISWAMY RAJU AND K. G. BALAKRISHNAN, JJ. ] Customs Act, 1962--Section 2(22) (c) and (e) 12, 24 & 28(1)--Customs mluation (Determination of Price of Imported Goods) Rules, 1988-Rules 3&4-Customs duty-Levy of-On import of drall'ings, designs etc. -ln the course of transfer of technology ll'ith foreign collaborators-Held, customs duty can be levied, since they are goods-Customs TariffAct, 1995-Chapler 49. Sections 12 & 14-Rules 3, 4, & 9-Customs duty--On the imported drawings and designs, etc. -Valuation of-Plea that duty can be levied only on the media-Held, intellectual property when put an a media would be regarded as an article and hence duty is payable on its total value. Section 28(!

) proviso-Rule 10-Customs duty-Non-payment of- Issuance of notice-After limitation period-Plea that notice barred by limitation, in the absence of intention to evade duty-Willfiil suppression or miss-statement of value of the imported goods, proved-Held, notice not barred hy limitation. Sections 2 {14) , 2(22) & 12-Customs d1:ty-levy of-Import of _. drawings and designs etc. -Without payment of duty--Duty levied on entire contract value-Tariffprovided that import on the goods was free of duty- Held, drawings and designs were not dutiable articles-Central Excise Act, 1944-Section 2(d)--Customs Tariff Act, 1995-Heading No. 49. 06 Section 28(! )-Customs duty-levy of-On the import ofdrawings and designs etc. --Drawings originally sent ji-om India, later imported after . ,,... ___ approval of the same from the foreign collaborator-Held, duty not /eviable. Customs Tariff Act, 1995--Heading No. 9R.

03--Customs duty-levy of-Import of technical material hy courier--Clearance of-A part of passenger haggage-Held, duty has to be paid on such goods by virtue of ASSO CEMENT CO. LTD v. COM MR. OF CUSTOMS 609 the Heading Appellants, public corporations engaged in the manufacture of excisable goods, entered into technical collaboration with foreign companies. As part of the fulfilment of the contract, the contracting parties abroad, sent drawings designs etc. to India through professional couriers or by post parcels. In Civil Appeal No. 3632 of 2000 these were imported by hand through passenger. In Civil Appeal No. 1493 of 2000, the drawings sent from India were approved by the foreign compally and then sent to India. At the time of importation only the nominal value of the drawings etc. , were declared. It came to the notice ofthe respondent that the appellants had imported drawings, designs, etc.

, on remitting the consideration for the same, and they had been cleared without proper declaration and without payment of correct amount of duty The respondents issued show cause notices under Section 28(1) r/w Section 24 ofthe Customs Act, 1962, for levying customs duty on the drawings, designs, etc. Appellants replied that since the imported materials were not 'goods', there could not be any excise duty on service since the remittance were in form A-2 and tax at source under the Income Tax Act was paid in respect of the contracts; and that the demand was barred by limitation. The Commissioner demanded duty and imposed penalty on the appellants. Appeal of the appellants before the Tribunal was dismissed.

In appeal to this Court it was contended that the transaction between the appellants and their respective foreign collaborators was one of transfer of technology and hence excise duty cannot be levied on the value of ideas which are not goods; and that the contracts in these cases were for services on the basis of which permission for release of foreign exchange was obtained from Reserve Bank of India; and that even if what was imported were goods, valuation of the same had to be nominal only on the media; and that the show cause notices which were issued were barred by time inasmuch as the extended period of limitation could not be availed as the appellants had never intended to evade duty; and that the imports through the courier could not be governed by heading No. 98. 03 of the Customs Tariff Act. In Civil Appeal No.

3632 of2000 appellant contended that at the time when the drawings were imported, the import of the same was free ofduty and duty could not be levied even as part of the passenger baggage. Allowing Civil Appeal Nos. 3632 of 2000 and 1493 of 2000 and dismissing the other appeals, the Court. HELO: I. I. Drawings, plans, manuals etc. , specified in Chapter 49 of the Custom Tariff Act, 1995 arc statutorilv rcaarded as goods attractina a " ~ , 0 specified rate ofcustoms duty on their import into India. There is no challenge to any of the statutory provisions and reading the two Acts i. e. , Customs Act, 1962 and Customs Tariff Act together, there is no doubt that what has been imported into India by the appellant collaborators were goods even though the tangible articles so imported contained information or knowledge for use by the appellants. 1627-01 1. 2. In view of the clear provisions ofthe Customs Act and the Customs Tariff Act.

whenever any goods of movables of tangible articles are imported into this country, customs duty is payable. For the purpose of attracting levy it would be immaterial as to what are the types of goods imported or what is contained in them or recorded thereon . The contents will be relevant for the purpose of valuation. 1627-Fl 1. 3. The moment the information or advice is put on a media, whether papers of diskettes or any other thing, that what is supplied becomes chattel. It is in respect of the drawings, designs etc. , which are received that payment is made to the foreign collaborators. It is these papers or diskettes etc. , containing the technological advice, which are paid for and used. The foreign collaborators part with them in lieu of money. It is, therefore, sold by them as . )-- --chattel for use by the Indian importer. The drawings, designs, manuals etc. , so received are goods on which customs duty could be levied. 1628-q 1. 4.

The beliefofthe appellants that what was imported were not 'goods', as the Reserve Bank had also regarded the payment was being made for services and not goods, was clearly erroneous and misplaced. The appellants had represented to the Reserve Bank that the collaborators were rendering service and no this representation remittances were allowed. The Reserve Bank must han examined the applications from the point of view of release of foreign exchange. It was not an adjudicating authority under the Customs Act. Had there been any doubt about the question whether what was imported were goods or not then, perhaps the grant of permission to remit money for services rendered and payment of taxes in respect thereof may have been relevant. But here, on the examination of the law applicable to the levy of -customs duty the position is free from any ambiguity. As the drawings, designs, manuals etc. , imported through couriers were 'goods' on which customs duty was payable.

The action of the Reserve Bank cannot result in negating the statutory provisions of the Customs Act and the Tariff Act ASSO. CEMENT CO. LTD v. COM MR. OF CUSTOMS 611 _applicable in the instant cases. 1628-G-H; 629-AI ':he Assis/an/ Sales Tax Officer and Others v. B. C. Kame, Proprietor Kmne, Proprietor Kame Photo Studio, 1197711 SCC 634 and Everest Copiers v. Siate a/Tamil Nadu, 1199615 SCC 390, distinguished. State ofHimachal Pradesh v. Associated Hotels ofIndia ltd. , (1972) 29 STC 474; Stale of Madras v. Gannon Dunkerley and Co. (Madras) ltd. , (1958) 9 STC 353; Stale of Tamil Nadu v. Anandan1 Viswanathan, 1198911 SCC 613; Hindustan Shipyard ltd. v, State of UP. , 120001 6 SCC 579; Rainbow Colour lab & Anr v. State ofMP. and Others, 120001 2 SCC 385; Hindustan Aeronautics ltd v. State of Karnataka, 119841 I SCC 706 and Builder's Association ofIndia and Others v. Union ofIndia & Others, 119891 2 sec 645, referred to Dela Nominees Pty. lit. v. Viscount Plastic Products Pty. ltd.

, (1979) VR 167; Wilhelm Winter; Cynthia Zheng v. G. P. Putnam's Sons, 938 F'. 2nd 1033 9th Cir. (1991); Robinson v. Graves (1935) KB 579 and lee v. Griffin, (1861) I B & S 272, referred to. 'Contract ofSale ofGoods', by Benjamin, Third Edition, referred to. 2. 1. Intellectual property, when put on a media, would be regarded as an article on the total value of which customs duty is payable. The legislative · intent can easily be gathered by reference to the Cus_toms Valuation Rules and the specific entries in the Customs Tariff Act. The value of an encyclopaedia or a dictionary or a magazine is not only the value of the paper. The value of the paper is in fact negligible as compared to the value or_price of an encyclopaedia. Therefore, the intellectual input in such items greatly enhance the value of the papers and ink. The charge of a duty is on the final product whether it be the encyclopaedia or the engineering or architectural drawing or any manual. 1634-B-CI 2. 2.

It is misconception to contend that what is being taxed is intellectual input. What is being taxed under the Customs Act read with Customs Tariff Act and the Customs Valuation Rules is not the input alone but goods whose value has been enhanced by the said inputs. The final product at the time of import is either the magasine or the encyclopaedia or the engineering drawings as the case may be. There is no scope for splitting the engineering· drawing or the encyclopaedia into intellectual input on the one hand and the paper, on which it is scribed on the other. For example, paintings are also to be taxed. Valuable paintings are worth millions. A painting or a portrait may be specially commissioned or an article may be tailor-made. This aspect is irrelevant since what is taxed is the final product as defined. [635-A-CI ' 2. 3. The shift from the concept of price of goods, as was classically understood, is clearly discernible in the new principles.

Transaction value may be entirely different from the classic concept of price of goods. Full meaning has to be given to the rules and the transaction value may include many items which may not classically have been understood to be part of the sale price. It would not be correct, to take the entire contract value as being the value of the imported goods. 1635-E[ Mis Gannon Dunkerley and Co. and Others \'. State of Rajasthan and Others, IJ 993[ l SCC 364; Collector of Customs (Prev. ) Ahmedabad v. Essar Gujarat ltd. , (l 996) 88 ELT 609 S. C. and State Bank of India v. Collector ofCustoms, Bombay, 120001 I SCALE 72, referred to. St. Albans City and District Council v. International Computers Ltd. , (1996) 4 all ER 481 and Advent Systems ltd. v. UNISYS Corporation, (925) F 2nd 670 3rd Cir (1991 ), referred to. 3. I.

There was a wilful suppression or mis-statement of the value of tJte goods imported and, therefore, the respondents were entitled to invoke the provisions of the proviso to Section 28 (l) of the Customs Act and issue show-cause notice even it period of six months importation had expired but before the expiry of five years thereof. 1643-BI 3. 2. The proviso to Section 28 can inter a/ia be invoked when any duty has not been levied or has been short-levied by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter, his agent or employee. Even if both the expressions 'mis-statement' and 'suppression of facts' are to be qualified by the word 'wilful', the making of such a wilful mis-statement or suppression of facts would attract the provisions of Section 28 of the Customs Act. 1641-B-CI Collector uf Central Excise, Hyderabad v. Mis Chemphar Drugs and ... ,___ linime111s, Hyderabad, 1198912 SCC 127; Cosmic Dye Chemical v.

Collector ()/ Central Excise, Bombay, [19951 6 SCC 117; Mis Padmini Products v. Collector ()f Central Excise, Bangalore, [19891 4 SCC 275; Tamil Nadu Housing Board v. Collector ofCentral Excise. Madras and Another. [1995[ suppl. I SCC 50 and Collector Central Excise v. H. M. M. ltd. , (1995) 76 ELT ASSO. CEMENT CO. LTD v. COMMR. OF CUSTOMS 613 497, referred to. 4. In the present cases, the technical. material which was received was cleared as part of passenger baggage. Whether the courier or the person bringing the technical material was a person nominated by the collaborator or by the appellants is of no consequence. because the levy under Section 12 of the Customs Act is on the goods imported into India. In other words, the subject matter of the tax is not the person importing or exporting but the subject matter of the tax is the goods imported. Ifsuch goods are i~ported as a part of the baggage then by virtue of heading No. 98. 03 r~te of duty prescribed therein has to be paid.

The underlying principle prior to May, 1995 in relation to taxing the passengers' baggage was that the said baggage which contained dutiable articles was not to be taxed separately as articles but the baggage as a composite unit was to be taxed in its entirety, after giving credit for the free allowance which was available to the passenger. 1644-D-FI 5. 1. In Civil Appeal No. 3632 of2000, the drawings and designs which were imported by the appellant were correctly classifiable under heading No. 49. 06 and the tariff itself providing that the import of the same is free, the said drawings and designs were not dutiable articles and, therefore, no customs duty was leviable thereon even as a part of the passenger. (648-E( 5. 2. Under the Central Excise Act, 1944 in definition ofwords "excisable goods" under Section 2(d), the very specification or inclusion of goods in the First and Second Schedule ofthe Central Excise TariffAct would make them excisable goods subject to duty.

Under the Customs Act, the provisions seem to be somewhat different. While by virtue ofSection 2(22) all kinds of movable property would be 'goods' but it is only those goods which would be regarded as 'dutiable goods' under Section 2(14) which are chargeable to duty and on which duty has not been paid. The expression "chargeable to duty on which duty ha. snot been paid' indicates that goods on which duty has been paid or on which on duty is leviable, and therefore no duty is payable, will not be regarded as 'dutiable goods' . It is only if payment of duty is outstanding or leviable that goods will be regarded as dutiable goods. (647-H; 648-A-Bf Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Co. ltd. , (1996) 83 ELT 3 SC and Wallace Flour Mills Company v. Collector Central Excise, (1989) 44 ELT 598, referred to. 6. The value of drawings in Civil Appeal No.

1493 of 2000, which belong to the Indian company were 1nerely approved by the German company could only be nominal and under no circumstances the said value could be regarded as DM 60,000. The nominal value disclosed by the courier, on the facts and circumstances of the case, could not, therefore, be said to be incorrect. 1649-F] CIVIL APPELLATE JURISDICTION: Civil Appeal No. 821 of2000. From the Judgment and Order dated 15. 11. 99 of the Central Excise -,.... · Customs and Gold (Control) Appellate Tribunal, West Zone, Mumbai in A. No. C. 445-R/99in 0. No. C-11/3169/WZB/ 1999. With C. A. Nos. 1021, 1023, 1027, 1028, 1029, 1030,1031, 1032, 1033, 1423, 1493, 1494, 3250-51 and 3632 of2000. Harish N. Salve, Solicitor General, Mukul Rohtagi, Additional Solicitor General, Ashok H. Desai, A. N. Haksar, Joseph Vellapally Anant Haksar, Jay Savla, V. Lakshmikumaran, V. S. Nankani, N. Menon, Ms. Reena Bagga, Ms. M. Ogra, Ms. Hemantika Wahi, Ms.

Sumita Hazarika, Kamal Bulchandani, Uday Kumar, Vikram Malik, Rajiv Dutta, Ravinder Narain, F. Sorabjee, Yashmin Godrej, Sanjiv Sen, Rajan Narain, Agni Pushp Singh, Ms. Bhawna Gupta, U. A. Rana, Rajesh Nair, Ms. Shally Maggon, Gaurishankar Murthy, Ms. Nisha Bagchi, Ms. Rekha Pandey, P. Parmeswaran, Prakash Shah, Naresh Thakar, Kapii Sharma, Om Prakash and Ms. Meenakshi Ogra for the appearing parties. The Judgment of the Court was delivered by KIRPAL, J. These appeals have been filed against the common order dated 15th November, 1999 ofthe Customs, Excise and Gold (Control) Appellate Tribunal which, while confirming the order of the Commissioner of Customs held that drawings, designs etc. , relating to machinery or industrial technology were goods which were leviable to duty of customs on their transaction value at the time of their import. As principal arguments on behalf •and sketches would form part of the price of goods for the purpose of determining its value for levy of duty.

In this connection, it will be useful to refer to the following passage from a decision of this Court in the case of Collector of Customs (Prev. ), Ahmedabad v. Essar Gujarat Ltd, (1996) 88 E. L. T. 609 S. C. at page 616 para 17: "The entire purpose of Section 14 is to find out the value of the goods - -~( whic:1 are being imported. The EGL in this case was purchasing a Midrex Reduction Plant in order to produce sponge iron. In order to produce sponge iron, it was essential to have technical know-how from Midrex. It was also essential to have an operating licence from them. Without these, the plant would be of no value. That is why the pre-condition of a process licence of Midrex was placed in the agreement with TIL. It will not be proper to view that agreement with TIL in isolation in this case. The plant would be of no value if it could not be made functional. EGL wanted to buy the plant in working condition.

This could only be achieved by paying not only the price of the plant, but also the fees for the licence and the technical knowhow for making the plant operational. Therefore, the value of the plant will comprise of not only the price paid for the plant but also the price payable for the operation licence and the technical know-how. Rule 9 should be construed bearing this in mind. " (Emphasis added) Significantly Chapter 49 also includes items which have substantial intellectual value as opposed to the value of the paper on which it is put. Newspapers, periodicals, journals, dictionaries etc. , are to be found in Chapter 49 wherein maps, plans and other similar items are also included, while - Chapter 97 talks about original engravings. It is clear that intellectual property when put on a media would be regarded as an article on the total value of which customs duty is payable.

To put it differently, the legislative intent can easily be gathered by reference to the Customs Valuation Rules and the specific entries in the Customs Tariff Act. The value ·of an encyclopaedia or a dictionary . or a magasinc is not only the value of the paper. The value of the paper is in fact negligible as compared to the value or price of an encyclopaedia. Therefore, the intellectual input in such items greatly enhance the value of the papers and ink in the aforesaid examples. This means that the charge of a duty is on the final product whether it be the encyclopaedia or the engineering or architectural drawings or any manual. Similar would be the position in the case of a programme of any kind loaded on a disc or a floppy. For example in the case of music the value of a popular music cassette is several times more than the value of the blank cassette.

However, if a pre-recorded music cassette or a popular film or a musical score is imported into India duty will necessarily have to be charged on the value of the final product. In this behalf we may note that in State Bank ofIndia v. Co! Iector ofCustoms, Bombay, (2000) 1 Scale 72, the Bank had, under an agreement with the foreign company, imported a computer software and manuals, the total value of which was US$ 4,084,475. The bank ,. filed an application for refund of customs duty on the ground that the basic cost of software was US $ 401. 047. While the rest of the amount of US $ 3,683,428 was payable only as a licence fee for its right to use the software for the bank countrywide.

The claim for the refund of the customs duty paid on the aforesaid amount of US $ 3,683,428 was not accepted by this Court as in its opinion, on a correct interpretation of Section 14 read with the rules, duty was payable on the transaction value determined therein and as per Rule 9 in determining the transaction value there has to be added to the price actually paid or payable for the imported goods, royalties and the licence fee for which the buyer is required to pay, directly or indirectly as a condition of sale of goods to the extent that such royalties and fees are not included in the price actually paid or payable. This clearly goes to show that when technical material is supplied whether in the form of drawings or manuals the same are goods liable to customs duty on the transaction value in respect thereof. ASSO. CEMENT CO. LTD v. COMMR. OF CUSTOMS [K! Rl'AL, J] 635 It is misconception to contend that what is· being taxed is intellectual input.

What is being taxed under the Customs Act read with Customs Tariff Act and the Customs Valuation Rules is not the input alone but goods whose value has been enhanced by the said inputs. The final product at the time of import is either the magazine or the encyclopaedia or the engineering drawings as the case may be. There is no scope for splitting the engineering drawing or the encyclopaedia into intellectual input on the one hand and the paper on which it is scribed on the other. For example, paintings are also to be taxed. Valuable paintings are worth millions. A painting or a portrait may be specially commissioned or an article may be tailor made. This aspect is irrelevant since what is taxed is the final product as defined and it will be an absurdity to contend that the value for the purposes of duty ought to be the cost of the canvas and the oil paint even though the composite product, i. e. , the painting is worth millions.

It will be appropriate to note that the Customs Valuation Rules, 1988 are framed keeping in view the GATT protocol and the WTO agreement. In fact our Rules appear to be an exact copy of the GATT and WTO. For the purpose ofvaluation under the 1988 Rules the concept of "transaction value" which was introduced was based on the aforesaid GA TT protocol and WTO agreement. The shift from the concept of PTice of goods, as was classically understood, is clearly discernible in the new principles. Transaction value may be entirely different from the classic concept of price of goods. Full meaning has to be given to the rules and the transaction value may include many items which may not classically have been understood to be part of the sale price.

The concept that it is only chattel sold as chattel, which can be regarded as goods has no role to play in the present statutory scheme as we have already observed that the words "goods" as defined under the Customs Act has an inclusive definition taking within its ambit any moveable property. The list of goods as prescribed by the law are different items mentioned in various chapters under the Customs Tariff Act, 1997 or 1999. Some ofthese items are clearly items containing intellectual property like designs, plans etc. __fa- In the case of St. Albans City and District Council v. International Computers ltd. (1996) 4 All ER 481 Sir lain Glidewell in relation to whether computer programme on a disc would be regarded as goods observed at page 493 as follows: "Suppose I buy an instruction manual on the maintenance and repair of a pai1icular make of car. The instructioi1s are wrong in an important respect.

Anybody who follows them is Iikely to cause serious damage to the engine of his car. In my view, the instructions are an integral part of the manual. The manual including the instructions, whether in a book or a video cassette, would in my opinion be 'goods' within the meaning of the l979 Act, and the defective instructions would result in a breach of the implied terms in s 14. If this is correct, I can see no logical reason why it should not also be correct in relation to a computer disk onto which a programme designed and intended to instruct or enable a computer to achieve particular functions has been encoded. If the disk is sold or hired by the computer manufacturer, but the programme is defective, in my opinion there would be prima facie be a breach of the terms as to quality and fitness for purpose implied by the 1979 Act or the 1982 Act. " The above view, 111 our view, appears to be logical and also in consonance with the Customs Act. Similarly in Advent Systems limited v.

UNISYS Corporation 925 F 2d 670 (3d Cir 1991) it was contended before the Court in United States that software referred to in the agreement between the parties was a "product" and not a "good" but intellectual property outside ). the ambit of Uniform Commercial Code. Jn the said Code, goods were defined as "all things (including specially manufactured goods) which are moveable at the time of the identification for sale". Holding that computer sofiware was "good'. the court held as follows: "Computer programmes are the product of an intellectual process, but once implanted in a medium are widely distributed to computer owners. An analogy can be drawn to a compact disc recording of an orchestral rendition. The music is produced by the artistry of musicians and in itself is not a "good". but when transferred to a laser-readable disc becomes a readily merchantable commodity.

Similarly, when a professor delivers a lecture, it is not a good, but, when transcribed as a book, it becomes a good. That a computer programme may be copyrightable a~ intellectual property does not alter the fact that once in the form of a floppy disc or other medium, the programme is tangible, moveable and available in the marketplace. The fact that some programmes may be tailored for specific purposes need not alter their status as "goods" because the Code definition includes "specially manufactured goods". We are in agreement with the aforesaid observations and hold that the value of the goods imported would depend upon the quality of the same and would be represented by the transaction value in respect of the goods imported. It would not be correct, as was done in Leela Ventures case, to take the entire contract value as being the value of the imported goods. What is the transaction value in respect thereof has to be ascertained.

In most of the other cases this has been done by adopting about one-third of the contract value as being the transaction value of the imported goods for the purpose of levy of customs duty. In Leela Ventures case the Commissioner must re-determine the transaction value of the drawings etc. , imported keeping in view the terms of the agreements and then impose the levy. Re: Limitation: The next submission on behalf of the appellants was that in the case of short levy or non-levy of duty the normal period for issuing a notice seeking to realise the difference in the duty levied and imposable is that of six months. This period is extendable to five years only if the proviso to Section 28 (I) can be validly invoked. It was the case of the appellants that there was never an intention on their part to evade duty. Agreements entered into with foreign collaborators had been disclosed to the Government of India who had approved the remittances as fees for technical services rendered.

Payments had been made as directed by the Reserve Bank of India by resorting to Form A-2 and deducting tax at source on the remittances so made. Service tax which was payable was also deposited and this clearly shows that' the appellants bonafide believed that the value of the drawings and other technical material imported was only nominal. While relying on various decisions of this Court, it was submitted that the proviso to Section 28 (l) of the Customs Act can only apply if there is a positive inaction or deliberate attempt. to mislead the revenue. On the facts of the present case, it was submitted that none of the ingredients of the proviso would enable the enlarg. ement of the limitation from six months to five years was present. Our attention was drawn to the cases of Collector of Central Excise, Hyderabad v. Mis Chemphar Drugs and Liniments, Hyderabad, [1989] 2 SCC 127, Cosmic Dye Chemical v. Collector ofCentral Excise, Bombay, [l 995] 6 SCC l l7, Mis Padmini Products v.

Collector of Central Excise, Bangalore, [1989] 4 SCC 275, Tamil Nadu Housing Board v. Collector ofCentral Excise, Madras and Another, [l995] Suppl. l SCC 50 and Collector ofCentre/ Excise v. H. MM limited(l995) 76 ELT 497. In all these cases the Court was concerned with the applicability of the proviso to Section l l-A of the Central Excise Act which, like in the case of Customs Act, contemplated the increase in period of limitation for issuing a show-cause notice in the case of non-levy or short-levy to five years from a normal period of six months. The said Section l l A along with the proviso reads as under: "Section l lA. Recovery of duties not levied or not paid or shortlevied or short-paid or erroneously refunded.

-( l) When any duty of excise has not been levied or paid or has been short-levied or shortpaid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the ruJes made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if, for the words "six months", tlie words 'five years' were substituted. Explanation.

-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be. (2) The Central Excise Officer shall, after considering the representation, if any , made by the person on whom notice is served under subsection (I), determine the amount of duty of excise due from such person (not being in excess @fthe amount specified in the notice) and thereupon such person shall pay the amount so determined. (3) For the purposes of this section,- (i) "refund" includes rebate of duty of excise on excisable goods ASSO. CEMENT CO. LTD v. COMMR. Ol' CUSTOMS [KIRPAL, J.

] 639 exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (ii) "relevant date" means,- (a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid - (A) where under the rules made under this Act a periodical return, showing partiCulars of the duty paid on the excisable goods removed during the period to which the said return relates, is to be filed by a manufacturer or a producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed; (B) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; ___,..

(C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder; (b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund. " While interpreting the said provision in each of the aforesaid cases, it was observed by this Court that for proviso to Section 11 A can be invoked, the intention to evade payment of duty must be shown. This has been clearly brought out in Cosmic Dye Chemical case (supra) where the Tribunal had held that so far as fraud, suppression or mis-statement of facts was concerned the question of intent was immaterial. While dis- agreeing with the aforesaid interpretation this Court at page 119 obs-:rved as follows: "6.

Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i. e. , intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word 'wilful' preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or rules" are again qualified by the immediately following words "with intent to evade payment ofduty", It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section l l-A. Misstatement or suppression of fact must be wilful.

" The aforesaid observations show that the words "with intent to evade payment of duty" were of utmost relevance while construing the earlier expression regarding the mis-statement or suppression of facts contained in the proviso. Reading the proviso as a whole the Court held that intent to evade duty was essentially before the proviso could be invoked. . ..... _ Though it was sought to be contended that Section 28 of the Customs Act is in pari materia with Section 11 A of the Excise Act, we find there is one material difference in the language of the two provisions and that is the words "with intent to evade payment of duty" occurring in proviso to Section 11A of the Excise Act are missing in Section 28 (1) of the Customs Act and the proviso in particular. The said sub-section 28(1) of the Customs Act reads as follows:- "28. Notice for payment of duties, interest etc.

- (l) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may,- (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year; (b) in any other case, within six months, from the relevant date, serve notic~ on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

Provided that where any duty has not been levied or has been shortlevied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words "one year" and "six months", the words "five years" were substituted. Explanation. -Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or six months or five years, as the case may be. " The proviso to Section 28 can inter alia be invoked when any duty has not been levied or has been short-levied by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter, his agent or employee.

Even if both the expressions 'mis-statement' and 'suppression of facts' are to be qualified by the word 'wilful', as was done in the Cosmic Dye Chemical case while construing the proviso to Section 11 A, the making of such a wilful mis-statement or suppression of facts would attract the provisions of Section 28 of the Customs Act. In each of these appeals it will have to be seen as a fact whether there has been a non-levy or short-levy and whether that has been by reason of collusion or any wilful mis-statement or suppression of facts by the importer or his agent or employee. In the present cases, the technical literature, drawings, manuals etc. , were imported through courier and in one case through Mr. Kato. In each of -i. these cases it is only a nominal value which was disclosed at the time of importation. All this technical literature, drawings etc. , were brought and cleared as personal baggage.

Jn our opinion, to examine whether the proviso to Section 28 (I) was validly invoked it is necessary to see the provisions relating to the clearance of the personal baggage. Chapter XI contains special provisions regarding baggage, goods imported or exported by post, and stores. Section 77 of the Customs Act provides that the owner of any baggage shall, for the purpose of clearing it, make a declaration of its contents to the proper officer. Section 81 enables the Central Board of Excise and Customs to make regulations in respect of baggage and the said Section 81 reads as follows: "Section 81. Regulations in respect of baggage. - The Board may make regulations, (a) providing for the manner of declaring the contents ofany baggage; (b) providing for the custody, examination, assessment to duty and clearance of baggage; (c) providing for the transit or transhipment of baggage from one customs station to another or to a place outside India.

" Under Rule JO of the Customs Valuation (Determination of Price of Imported Goods) Rules I988, the importers are required to furnish, inter alia, a declan;tion disclosing full and accurate details relating to the value of the imported goods and any other statement, any information or document etc. as considered necessary for determination of the value of imported goods. Under the said Section baggage declaration forms have been prescnbed which inter alia require the owner of the baggage to disclose the description of the goods as well as the value in respect thereof. It is as owner of the baggage containing the drawings and other technical literature and manual etc. , that the couriers cleared the goods. They may not be the owners of the drawings etc. , but for the purpose of clearance of the baggage, containing the said articles, the courier was the owner of the baggage.

The Tribunal has held, and in our opinion correctly, that the sender as well as the receiver were aware of the value of the goods. The courier acted as the conduit or the agent and would only have declared such value in respect of the goods imported as must have been instructed by the sender and or receiver. The decla~tion by the courier of the value of the drawings in the Leela Ventures case and other technical material in the case of other appellants must have been done by the courier either at the behest of the sender or the receiver or at his own behest. In either case the declaration of the value of the drawings as being very nominal was clearly a mis-statement or a mis-representation offacts. According to the baggage declaration forms it is for the passenger to give value of the goods being brought in by him.

When the value of the goods which were dutiable in the present cases was shown as only nominal, while in actual fact the correct value was much more, there was clearly an attempt on the part of the passenger, namely, the courier, to have the goods cleared through customs authorities by grossly undervaluing the value thereof. The courier gave a specific value of one dollar in respect of the drawings when both the sender and the appellants knew fully well as to how important and valuable these goods were. In the case of Leela Ventures it was on the basis ofthe architectural drawings that the renovation etc. , was to take place whereas the technical material made available to the other appellants was necessary for their purpose. We have already held that the value of the goods so imported was not merely the cost of the price of the media but also the intellectual input on the media as represented by architectural drawings or users manuals etc.

The value of architectural drawings was not merely the cost of the paper and the ink but would be much more. In some of the cases we were informed that the appellants had the1i1selves volunteered that about one-third of the total ainount ~ payable to the collaborators should be taken as a figure representing the transaction value of the technical material so imported. The Tribunal as well as the Commissioner were right in coming to the conclusion that there was a wilful suppression or mis-statement of the value of the goods imported and, therefore, the respondents were entitled to invoke the provisions of the proviso to Section 28 (1) of the Customs Act and issue show-cause notice even if period of six months importation had expired but before the expiry of five years thereof in the case of all the appellants except in the cases of Mis. H&R Rolling Mill Engineers Pvt. Ltd. (C. A. No. 1493 of 2000) and M/s. Videocon VCR Ltd. (C. A. No. 3632 of2000). Re: Whether heading No. 98.

03 appliable. Prior to 26th May, 1995 goods which were imported by the appellants through couriers were taxed under Chapter 98 of the Customs Tariff Act. Heading No. 98. 03 provides that "all dutiable articles, imported by a passenger or a member of a crew in his baggage" was taxable at the standard rate of 150 per cent. This rate of duty was, of course, su~ject to such exemptions which were issued from time to time. With effect from 26th May, 1995, when the President gave his assent to the Finance Bill, 1995, the Customs Tariff Act stood amended as a result whereof goods imported through courier services were exempted from the operation of Chapter 98. A circular dated 30th May, 1995 issued by the Ministry of Finance, Govt. Of India specifically provided that henceforth imports by courie_rs shall not be classified as baggage under heading No. 98. 03.

The practice of charging a uniform duty at the rate of 80 per cent ad valorem on articles imported through couriers in terms ofexemption notification 'dated l st March, 1994 was to be discontinued with immediate effect. Couriers Imports (Clearance) Regulations, 1995 were framed and notified on 26th May, 1995 as a result of which the imports through courier were to be classified as imports falling under the respective customs tariffs and headings. One of the results of the framing ofthe said Regulations was that the goods imported ____ .. _,i.. by couriers were to be divided into three categories which are (a) documents (b) samples and free gifts and (c) dutiable goods. In connection with the imports made, prior to the promulgation of the' Couriers' Regulation, the learned counsel submitted that the respondents had erred in assuming that the disputed material had been brought into the country as passenger baggage. It was contended that the appellants had n.

ot specified the manner in which the material was to be sent by the foreign collaborators. It was submitted that Entry 98. 03 was a special provision providing for special procedure and an omnibus rate of duty applicable to all goods imported by passengers or a crew member as their baggage. This provision, it was contended, was wholly inapplicable to corporate entities. The appellants were not natural persons and they were quite incapable of being treated as passengers. In any event, it was submitted, after clearance of the disputed items there was no scope for the respondents to initiate proceedings against the appellants or in respect of the material allegeci to have been imported and the said proceedings, if any, could have been initiated only against the passenger from whom less duty than what was legitimate was recovered, namely, from the courier. We are unable to agree with the aforesaid contentions.

Heading of - Chapter 98 clearly shows that the same is applicable to passengers' baggage. As a matter of fact, in each of the present cases, the technical material which was received was cleared as part of passenger baggage. Whether the courier or the person bringing the technical material was a person nominated by the collaborator or by the appellants is of no consequence because the levy under Section 12 of the Customs Act is on the goods imported into India. In other words, the subject matter of the tax is not the person importing or exporting but the subject matter of the tax is the goods imported. If such goods are imported as a part of the baggage then by virtue of heading No. 98. 03 rate of duty prescribed therein has to be paid.

The underlying principle prior to May, 1995 in relation to taxing the passengers' baggage was that the said baggage which contained dutiable articles was not to be taxed separately as articles but the baggage as a composite unit was to be taxed in its entirety, ~ after giving a credit for the free allowance which was available to the passenger. It cannot be denied that the imports were made by the appellants. The courier or any other passenger may be the mode or the manner of physical importation of the goods, just as the said goods may have been imported by post. Section 28 of the Customs Act, however, enables the Government to issue notice to the persons importing the articles into India. It is by reason of the collaborators agreements that the drawings, manuals, technical material etc. were sent by the foreign collaborators to the appellants and it is the appellants who were the importers who alone could be made liable in case of ~ non-levy or short-levy of customs duty.

The word 'importer' in Section 2 (26) of the Customs Act includes the owner and as the appellants were the owners · of the goods, certainly after these were received by them, it is only from them that the short-fall in duty levied could have been recovered. -The parties took a chance in importing the articles through the courier. Initially they were successful in havi~g the goods cleared by declaring a nominal value in respect thereof. They may not have been able to do this if the technical material_and goods had been imported, not as a part ofp~sserigers''baggage, but in the ordinary course of import either through post or by f! ling bill of . . entry~ We, therefore, concur with the conclusion of the Tribunal and the Commissioner that the provisiof! s of Chapter 98 were rightly applied on the . · facts of these cases. CIVIL APPEAL NO 3632 OF 2000. [Mis. Videocon VCR ltd. , v. Commissioner ofCustoms] The appellant had entered into a technical collaboration agreement with Mis.

Toshiba Corporation, Japan on 13th October, I989. The total contract value was hundred million Japanese Yen as fees which was settled at seventy million Japanese Yen. Apart from providing technical information, Mis. Toshiba Corporation was also to render consulting and training services and had permitted made use of Toshiba patent. With the approval of Reserve Bank of India, remittance was made in -Form A-2 and service tax paid. On 29th June, 1992 Mr. Kato, presumably a representative of Mis. Toshiba, brought with him to India drawings and designs as part of his personal baggage. This was cleared without payment of duty. + On 26th May 1997, a show cause notice was issued to Mis_ Videocon alleging_that duty was payable under Chapter 98 heading No. 98. 03 and the appellant was charged with mis-declaration and suppression which entitled the invocation of extended period of-limitation of five years. Reply to show cause notice was filed in which it was, in.

ter a/ia, stated that there was no mis-declaration or suppression and that the drawings and designs were classifiable under heading No. 49. 06 of Chapter 49 and in 1992- 93 tariff, import of such drawings and designs was free_ On 26th March, 1999, an order was passed against the appellant classifying the drawings and designs under sub-heading No. 4911. 99 and ~ -diagrams and films under sub-heading 3705. 90. No reason was given as to why these drawings and designs were not classifiable under heading No. 49. 06. The entire contract value was taken as a valuation of technical information received and duty and penalty was imposed. On appeal to the Tribunal, the appellant met with partial success to the extent that the valuation was determined at one-third of the contract value of hundred million Yen, even though the settled value was seventy million Yen.

The case of the appellant that import in 1992-93 was free was not considered as the Tribunal proceeded on the basis that all imports were during the period 1993-96 when under Chapter 49, import was dutiable but by notification the tariff rate was less or nil. It was contended by Mr. Bulchandani on behalf of appellant that at the -time when the drawings were imported into India, the import of the same was free and even if the drawings were to be regarded as part of the baggage of Mr. Kato, thereby applying the provisions of heading No. 98. 03, even then no duty could be imposed. It was further contended that in any case the extended period of limitation of five years could not be attracted in the present case. We find force in the contention of the appellant. Heading No. 98. 03 of Chapter 98 of the Schedule in the Tariff Act imposes a prescribed duty of 150 per cent on 'dutiable articles' imported by a 'passenger or a member of a crew in his baggage.

What is, therefore, to be seen is whether the drawings and designs were dutiable articles. Heading No. 49. 06 under Chapter 49 of the Customs Tariff for the year 1992-93 provides as follows: + "Plans and drawings for architectural; engineering, industrial, commercial, topographical or similar purposes, being originals drawn by hand; hand-written texts; photographic reproductions on sensitised paper and carbon copies of the foregoing" The rate of duty specified therein in Column (4) was "free". According _.... ~ to Section 78 of the Customs Act, the rate of duty and tariff value applicable to baggage shall be the rate and valuation in force on tile date on which a declaration is made for clearing the baggage. It was the contention of the learned counsel for the appellant that as articles in question would fall under heading No. 49. 06 they were free of duty.

Therefore, they could not be regarded as dutiabl"e articles and its value could not be included in· the baggage of the passenger for the purpose of levy of customs duty. While dealing with the provisions of the Excise Act, this Court in Collector of Central Excise, Hyderabad, v. Vazir Sultan Tobacco Co. ltd. , (1996) 83 ELT 3 SC referring to an earlier decision in the case of Wallace Flour Mills Company v. Collector ofCentral Excise, (1989) 44 ELT 598 had observed that if by virtue of an exemption notification the rate of duty was reduced to nil, the goods specified in the Tariff Act would still be regarded as excisable goods on which nil rate of duty was payable. It appears to us that the aforesaid decisions, which were sought to be invoked by the respondent in an effort to submit that the drawings and designs, which came as a part of passenger baggage were dutiable goods, would not be applicable.

In Vazir Sultan and Wallace Flour Mills cases (supra), this Court considered the definition of "excisable goods" in Section 2(d) of the Central Excise Act, 1944 which was as follows: '"Excisable goods' mean5 goods specified in the [the First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt". Under the Customs Act, there are two definitions which are relevant. Section 2(22) defines "goods" as follows: "Goods" includes- (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property. " In addition thereto, Section 2(14) defines "dutiable goods" as follows: "dutiable goods" means any goods which are chargeable to duty and on which duty has not been paid". Under the Central Excise Act.

1944 in definition of words "excisable good;" under Section 2(d), the very specification or inclusion of goods in the First and Second Schedule of the Central Excise Tariff Act w0uld make them · excisable goods subject to duty. Under the Customs Act, the provisions ·seem to be somewhat different. While by virtue of Section 2(22) all kinds of movable property would be 'goods' but it is only those goods which would be regarded as 'dutiable goods' under Section 2(14) which are chargeable to duty and on which duty has not been paid. The expression "chargeable to duty on which dutY has not been paid" indicates that goods on which duty has been paid or on which no duty is leviable, and therefore no duty is payable, will not be regarded as 'dutiable goods'. It is only if payment of duty is outstanding or leviable that goods will be regarded as dutiable goods.

Section 12 of Customs Act provides that the duties of customs shall be · levied at such rates as may be specified under the Customs Tariff Act. When the Customs Tariff Act itself provides that the import of dr! lwings and designs under heading No. 49. 06 is 'free', it must follow that these drawings and designs, though goods, were not chargeable to duty. In view ofthe difference in the language of the Excise and Customs Acts, the decisions in the cases ofVazir Sultan and Wallace Flour Mills (supra) may not be very apposite and if no customs duty is chargeable either by reason of tariff not providing for it or because of the exemption notification, those goods will not be regarded as dutiable goods "on which duty has not been paid". It is sufficient in the present case to observe that the drawings and designs which were imported by the appellant were correctly classifiable under heading No. 49.

06 and the tariff itself providing that the import ofthe same is free, the said drawings and designs were not dutiable articles and, therefore, no customs duty was leviable thereon even as a part of the passenger baggage. On this short ground alone the appeal of Videocon has to be allowed. C. A. No. 1493 of2000. + [Mis H & K Rolling Mill Engineers Pvt. ltd. v. The Commissioner of Customs] The appellant is a JOlllt venture company. Sixty per cent of its shareholders are Indians while forty per cent of the shares are held by H & K. Germany. The appellant supplies technology to Bhilai Steel Plant and it is required to pay to the German company licence fee of DM 2,40,000 and engineering fee of DM 60,000. The appellant prepared designs and drawings which were sent to H &' K. Germany for the limited purpose of getting it checked and approved. It is stated that the appellant received a fax message from the German company ASSO. CEMENT CO. LTD v. COMMR. OF CUSTOMS [KIRPAL . I.

] 649 approving the designs and drawings. Copy of the designs and drawings which had been prepared and sent by the appellant came back to India through courier containing the stamp and approval of the German company. Like in the case of Mis Leela Ventures income tax was deducted at source for the payments made to the Gennan company after pennission of the Reserve Bank of India had been obtained. In the show cause notice which was issued it was proposed to regard the drawings which had come through the courier at OM 60,000 equivalent to Rs. 11,03,800 as being subject to levy of duty. In the show cause notice it was stated that these technical drawings were supplied by the German company and being goods imported through courier services were classifiable under heading No. 98. 03 and duty and penalty was payable in respect thereof. Unlike other cases, we find that these drawings in respect of which customs duty had been levied were not something which had originated from Germany.

These drawings were prepared by the Indian company of which the German company was a shareholder. These drawings were po doubt sent to Germany for approval but the agreement between the parties does not show ti'at the payment of DM 60,000 was directly relatable or attributable to the approval and despatch of the said drawings to India. Under the agreements between the parties apart from the licence fee payable by the Indian company, for the use of the name of the German company and engineering fee, money was payable in terms of the agreement. As we have already observed there is nothing to show that this amount of OM 60,000 was relatable only to the approval of the said designs and drawings. Be that as it may the value of these drawings which belong to the -+ Indian company were merely approved by the German company could only be nominal and under no circumstances the said value could be regarded as OM 60,000.

The nominal value disclosed by the courier, on the facts and circumstances of this case. could not, therefore, be said to be incorrect. The order passed against the appellant levying the customs duty and penalty is, therefore, to be set aside. Ordered accordingly. Conclusion; As a result of the aforesaid discussion, Civil Appeal No. 1493 of 2000 of Mis H & K Rolling Mill Engineers Pvt. Ltd. and Civil Appeal No. 3632 of 2000 of Mis Videocon VCR Ltd. are allowed and the orders ofthe Commissioner and Customs, Excise & Gold (Control) Appellate Tribunal in their cases are A ·set aside. The other appeals are dismissed but in the case of Leela Ventures, out of the total contract value, the Commissioner will detennine the transaction value of the drawings, designs, etc. , imported through the courier and then impose the levy thereon. There will be no order as to costs. K. K. T. Appeals allowed dismissed. B --