Supreme Court of India
M/S. COAL INDIA LIMITEDversusCOMMISSIONER OF CUSTOMS (PORT), CUSTOMS HOUSE, KOLKATA
- Citation
- 2025 INSC 609
- Decided
- 1 May 2025
- Disposal
- Dismissed
- Bench
- ABHAY S OKA
Holding
Engineering and technical service fees paid to the local agent are includable in the assessable value of the imported goods as they are a condition of sale directly related to the goods, not post‑importation services.
Summary
Coal India Ltd., through its subsidiary Central Coalfields Ltd., imported spare parts for P&H shovels and was required to pay an additional 8% of the FOB value to the Indian agent Voltas Ltd. as engineering and technical service fees. The customs authorities held that these fees were part of the assessable value under Rule 9(1)(a) and 9(1)(e) of the Customs Valuation Rules, resulting in a short levy of duty of Rs 64.47 million. The appellant argued that the fees constituted post‑importation technical assistance and should be excluded under the Note to Rule 4. The Supreme Court examined the nature of the fees, finding them a condition of sale directly linked to the value of the goods and not post‑importation services. Accordingly, the Court affirmed the view of the lower authorities and dismissed the appeal.
Issues considered
- Whether engineering and technical service fees/agency commission paid to the local agent are includable in the assessable value of the imported goods under the Customs Act, 1962 and the Customs Valuation Rules.
- Whether such fees constitute post‑importation technical assistance that should be excluded from the assessable value under the Note to Rule 4 of the Customs Valuation Rules.
Legislation cited
- Customs Act, 1962s. 14(1), s. 14(1A), s. 156
- Customs Tariff Act, 1975
- Customs Valuation (Determination of Price of Imported Goods) Rules, 1988s. Note to Rule 4, s. Rule 12, s. Rule 4, s. Rule 9(1)(a), s. Rule 9(1)(e)
- General Clauses Act, 1897s. Section 22
Headnote
Issue for Consideration Whether the engineering and technical service fees/agency commission/charges paid by the appellant and its subsidiaries to the local agent of the overseas supplier were includable in the assessable value of the imported goods (spare parts) under the held by all the lower authorities. Headnotes† Customs Act, 1962 – s.14(1), (1A) – Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 – r.9(1)(a) and (e); Note to r.4 – Assessable value of the imported goods (spare parts), for the purpose of
Subjects
Customs dutyEngineering and technical service feesDirect nexus to the value of the goods importedAssessable value of imported goodsAgency commissionPost‑importation activitiesTransaction valueProduct support serviceCustoms Valuation RulesSection 14 of the Customs Act
Judgment
[2025] 5 S.C.R. 1891 : 2025 INSC 609
M/s. Coal India Limited
v.
Commissioner of Customs (Port),
Customs House, Kolkata
(Civil Appeal No. 8028 of 2010)
01 May 2025
[Abhay S. Oka and Ujjal Bhuyan,* JJ.]
Issue for Consideration
Whether the engineering and technical service fees/agency
commission/charges paid by the appellant and its subsidiaries to
the local agent of the overseas supplier were includable in the
assessable value of the imported goods (spare parts) under the
Customs Act, 1962, as held by all the lower authorities.
Headnotes†
Customs Act, 1962 – s.14(1), (1A) – Customs Valuation
(Determination of Price of Imported Goods) Rules, 1988 –
r.9(1)(a) and (e); Note to r.4 – Assessable value of the imported
goods (spare parts), for the purpose of levy of customs duty –
Assistant Commissioner of Customs passed order finalizing
provisional assessment of bills of entry covering goods
imported by the appellant and its subsidiaries under several
purchase orders – It held that the engineering and technical
service fees (8 percent of the Free on Board (FOB) amount)
paid by the appellant and its subsidiaries to the local agent
of the overseas supplier, M/s Voltas Limited as reflected in
the purchase order were includable in the assessable value of
the imported goods (spare parts) u/r.9(1)(a) and r.9(1)(e), 1988
Rules r/w s.14(1)(a), 1962 Act – Since the appellant had failed
to include such service fees/agency commission/charges in
the assessable value of spare parts so imported resulting in
short levy of customs duty amounting to Rs.64,47,244.00, the
appellant was directed to pay the same – Order confirmed
by Commissioner (Appeals) as also by CESTAT – Challenge
to – Interference, if warranted:
* Author
1892 [2025] 5 S.C.R.
Supreme Court Reports
Held: No – View taken by all the lower authorities is correct –
CESTAT carefully analysed the relevant documents and held
that the services rendered were such that appellant faced no
inconvenience at the time of importation – Amounts paid to Voltas
Limited by the appellant were not linked to any services specifically
rendered by it – Payments were made only in connection with
the sale of the goods presumably because M/s Voltas Limited
was an agent of the foreign supplier – Thus, payments made
to M/s Voltas Limited were only as a condition of sale and not
for any services rendered – Therefore, it had a direct nexus
to the value of the goods imported – 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 covered by ss.14(1) and 14(1A),
Customs Act r/w r.9(1)(e), Customs Valuation Rules. [Paras 25.1,
33, 34]
Customs Act, 1962 – s.14 – Customs Valuation (Determination
of Price of Imported Goods) Rules, 1988 – Note to r.4; r.12 –
Plea of the appellant that note to r.4 has statutory force and
it stipulates that value of imported goods shall not include
charges for maintenance or technical assistance undertaken
after importation of imported goods:
Held: This Court in J.K. Corporation Limited adverting to Note to
r.4 held 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. [Para 31]
Case Law Cited
Commissioner of Customs (Ports), Kolkata v. J.K. Corpn. Ltd.
[2007] 2 SCR 196 : (2007) 9 SCC 401; Commissioner of
Customs v. Ferodo India (P) Ltd. [2008] 3 SCR 147 : (2008) 4
SCC 563 – relied on.
Collector of Customs (Preventive), Ahmedabad v. Essar Gujarat
Ltd., Surat [1996] Supp. 8 SCR 757 : (1997) 9 SCC 738;
Tata Iron & Steel Co. Ltd. v. Commissioner of Central Excise
& Customs, Bhubaneswar [2000] 1 SCR 876 : (2000) 3 SCC
472 – referred to.
[2025] 5 S.C.R. 1893
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
List of Acts
Customs Valuation (Determination of Price of Imported Goods)
Rules, 1988; Customs Act, 1962; Customs Tariff Act, 1975; General
Clauses Act, 1897.
List of Keywords
Customs duty; Engineering and technical service fees; Direct nexus
to the value of the goods imported; Engineering and technical
service fees includable in the assessable value of imported goods;
Assessable value of the imported goods (spare parts); Service fees;
Agency commission; Agency charges in the assessable value of
spare parts imported; Not post-importation activities; Transaction
value of the imported goods; Computation of the assessable value
for the purpose of levy of customs duty; Product support service;
Local agent of the overseas supplier; Provisional assessment
of bills of entry; Foreign supplier; Supply of spare parts for P&H
Shovel; Tender for supply of spare parts for P&H Shovel; Free
on Board (FOB) amount; FOB amount valued on pro-rata basis;
CESTAT; Assistant Commissioner of Customs; Commissioner of
Customs (Appeals); Coal India Limited; Central Coalfields Limited;
M/s Voltas Limited.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8028
of 2010
From the Judgment and Order dated 20.04.2010 of the Customs,
Excise and Service Tax Appellate Tribunal, Kolkata in appeal No.
CDM-164 of 2004
Appearances for Parties
Advs. for the Appellant:
Rahul Kaushik, Ms. Bhuvneshwari Pathak, Ms. Shilpi Satyapriya
Satyam, Satyavir Singh Rana, Dhanesh Kumar.
Adv. for the Respondent:
N Venkataraman, A.S.G., Arvind Kumar Sharma, Mukesh Kumar
Maroria, V C Bharathi, Mayank Pandey, Mukul Singh, Prashant
Singh Ii.
1894 [2025] 5 S.C.R.
Supreme Court Reports
Judgment / Order of the Supreme Court
Judgment
Ujjal Bhuyan, J.
This is an appeal under Section 130E of the Customs Act, 1962 against
the order dated 20.04.2010 passed by the Customs, Excise and
Service Tax Appellate Tribunal, Kolkata in appeal No.CDM-164/2004.
2. Be it stated that appellant had filed appeal No.CDM-164/2004 before
the Customs, Excise and Service Tax Appellate Tribunal, Kolkata
(‘CESTAT’ for short hereinafter) assailing the order dated 21.06.2004
passed by the Commissioner of Customs (Appeals), Kolkata
confirming the order of the Assistant Commissioner of Customs and
dismissing the appeal filed by the appellant.
3. This Court by order dated 10.09.2010 had condoned the delay and
had issued notice.
4. Relevant facts may be briefly noted.
5. Appellant is a Government of India undertaking and has subsidiaries
in the country.
6. On 26.02.2000, Central Coalfields Limited, which is a subsidiary of
the appellant, had invited sealed tenders for supply of spare parts
for P&H Shovel.
7. On 28.03.2000, 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.
8. On 03.04.2000, M/s Voltas Limited submitted detailed quotation on
behalf of its principal M/s Harnischfeger Corporation, USA (foreign
supplier).
9. Purchase order was placed on 20.12.2000 with the foreign supplier for
supply of spares required for P&H Shovel. Clause 5 of the purchase
order is relevant and reads thus:
[2025] 5 S.C.R. 1895
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
5. Terms of payment:
(A) 100% of the FOB value shall be paid in US$ by means of
a confirmed, divisible and irrevocable letter of credit which
will be established in your favour through the State Bank
of India, Corporate Accounts Group Br. 34, J.L. Nehru
Road, Calcutta- 700071 (India) or their branch at USA
against presentation of the following documents, in three
sets as indicated against each:-
(i) Invoice Original plus three certified
copies.
(ii) Packing List Original plus three certified
copies.
(iii)Shipping Specification Original plus three certified
copies.
(iv) Certificate of Origin Original plus three certified
copies.
(v) Warranty Certificate Original plus three certified
copies.
(vi) Bill of Lading Original plus three certified
copies.
(vii) Certificate that “No Commission, Rebate, Discount,
Margin or Egg. & Technical Service Charge etc. from the
net FOB value of the contract or over & above FOB value of
the contract is payable by M/s Harnischfeger Corporation,
USA to any agent.”
Note:-
(1) Documents from sl. no.(i) to (vii) form a complete
set.
(2) One copy of packing list & certificate of origin
should be inserted inside each package for reference
& identification purpose of the items packed in the
particular package.
1896 [2025] 5 S.C.R.
Supreme Court Reports
(3) One copy consisting of a set of documents from
sl. no. (i) to (vii) should also be sent by courier well
in advance along with technical literatures/pamphlets,
dimensional drawings, sketch, quality certificate,
warranty certificate etc. to avoid delay in effecting
clearance of goods and also their proper receipt
at ultimate consignee and its accountal etc. to the
following:
(a) The Dy. Chief Engineering, C&F Department, Coal
India Ltd., 6-Lyons Range, Calcutta- 700001 (India).
(b) The Chief General Manager (Equipment), Central
Coalfields Limited, Darbhanga House, Ranchi –
834001 (India).
(c) The Dy. Chief Materials Manager (P), Central
Coalfields Limited, 15, Park Street, Calcutta – 700001
(India).
(d) The Dy. Chief Materials Manager (P), Purchase
Deptt., Central Coalfields Limited, Darbhanga House,
Ranchi – 834001 (India).
(e) The Finance Manager (HQ), Central Coalfields
Limited, Darbhanga House, Ranchi – 834001 (India).
(f) Ultimate Consignee: The Dy. Chief Materials
Manager (S), Central Coalfields Limited, Regional
Stores, Rajrappa, Distt. Hazaribagh (India).
(B) Product support service to be rendered by M/s Voltas
Ltd., Calcutta on payment of engineering and technical
service charges.
As confirmed earlier product support services shall be
rendered by M/s Voltas Ltd. Calcutta in all respect for
ensuring optimum availability of P&H shovels.
Some of the product support services which shall be
rendered by M/s Voltas Ltd., Calcutta in all respects for
ensuring optimum availability of P&H Shovels are as
under:
[2025] 5 S.C.R. 1897
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
Regular product support visits by Voltas Service Engineers
to all the operational mine sites for inspection of the
shovels., providing technical updates, guidance on reports
and maintenance at ‘No Cost’ to the projects.
Assist Project Engineers identity actual requirement of
spares for planned procurement, scanning of part nos.
in the enquiry/tender to ensure that correct parts are
quoted, scrutiny of orders and L/C to ensure shipment of
the right parts.
Extend assistance by providing technical write-ups for
speedy custom clearance.
Assist customer doing insurance survey at docks.
Coordinate with various agencies in regard to the
discrepancies in supplies for prompt replacement etc.
In view of the above, payment of engineering & service charges
at the rate of 8% (eight percent) of the net FOB value of the
order will be made on pro-rata basis to M/s Voltas, Calcutta
in equivalent Indian Rupees at the exchange rate (BC selling)
prevailing on the date of the bill of lading within 21 days from
the date of submission of the following documents.
1) Pre-receipted & stamped bill: original + 2 copies
2) Full set of non-negotiable shipping documents as per
(i) to (vii) of clause (5)A.
3) Certificate from the banker certifying the exchange rate
prevailing on the date of bill of lading – original + 2 copies.
The above documents for payment of engineering & technical
service charges should be submitted to the Finance Manager
(HQ), CCL, Ranchi with a copy to this office.
M/s Voltas, Calcutta shall submit documentary evidence
disclosing the particulars of engineering & technical service fees
as per the agreement between M/s Harnischfeger Corporation,
USA and M/s Voltas, Calcutta within 15 days from the date of
receipt of payment to the Director of Enforcement, Govt. of
India, New Delhi against this order.
1898 [2025] 5 S.C.R.
Supreme Court Reports
10. Foreign supplier supplied the spares on 21.03.2001 which were
received by the appellant on provisional assessment of bills of entry
made by the customs authority.
11. Assistant Commissioner of Customs passed order-in-original dated
03.03.2004 finalizing 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. Accordingly, the Assistant
Commissioner of Customs (‘Assistant Commissioner’ for short)
directed the appellant to pay Rs.64,47,244.00 within 15 days. He
also ordered that in view of the order-in-original, the provisional
assessment stood finalized.
12. Aggrieved by the aforesaid order dated 03.03.2004 of the Assistant
Commissioner, appellant preferred an appeal before the Commissioner
of Customs (Appeals), Kolkata (‘Commissioner (Appeals)’ hereinafter).
By the order dated 21.06.2004, 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 (briefly ‘the Customs Valuation Rules’
hereinafter). 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 dated 21.06.2004
dismissed the appeal.
13. This order of the Commissioner (Appeals) dated 21.06.2004 came
to be challenged by the appellant before the CESTAT which was
registered as appeal No.CDM-164/2004. CESTAT vide the order
dated 20.04.2010 (‘impugned order’ hereinafter) held that payment
[2025] 5 S.C.R. 1899
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
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.
14. Hence, the present appeal.
15. Learned counsel for the appellant submits 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.
15.1. View taken by CESTAT that the present case is covered by
Rule 9(1)(a) and Rule 9(1)(e) of the Customs Valuation Rules
is contradictory. Provision of Rule 9(1)(e) of the Customs
Valuation Rules can be invoked only when the payment is
not covered by clauses (a) to (d) of Rule 9.
15.2. Learned counsel has referred to the Note to Rule 4 of the
Customs Valuation Rules and submits that the same has
statutory force. It clearly says that value of imported goods shall
not include charges for maintenance or technical assistance
undertaken after importation of imported goods.
15.3. CESTAT failed to consider that M/s Voltas Limited was an
agent of the foreign supplier. It had rendered maintenance
and engineering services to the appellant and its subsidiaries.
Such services rendered by it had no direct nexus to the
value of the goods imported. Stipulation of 8 percent of
FOB payable to M/s Voltas Limited was only for the services
rendered by it. He submits that there is no direct nexus of
the said payment with the goods imported. Therefore, such
payments could not have been included in the assessable
value of the imported goods. In support of his submissions,
learned counsel has placed reliance on the following
decisions:
1900 [2025] 5 S.C.R.
Supreme Court Reports
1. Collector of Customs (Preventive), Ahmedabad Vs.
Essar Gujarat Ltd., Surat1
2. Tata Iron & Steel Co. Ltd. Vs. Commissioner of
Central Excise & Customs, Bhubaneswar2
3. Commissioner of Customs (Ports), Kolkata Vs.
J.K. Corpn. Ltd.3
4. Commissioner of Customs Vs. Ferodo India (P)
Ltd.4
15.4. Learned counsel for the appellant therefore submits that view
taken by CESTAT cannot be sustained. Therefore, orders of
the Assistant Commissioner dated 03.03.2004, Commissioner
(Appeals) dated 29.06.2004 and the impugned order of
CESTAT dated 20.04.2010 are liable to be set aside.
16. Per contra, learned counsel for the respondent supports the impugned
order of CESTAT. Adverting to the purchase order he submits that
payment made to the Indian agent was clearly part of the FOB
amount payable to the foreign supplier.
16.1. He also adverts to the documents titled as Voltas Limited
Terms and Conditions and submits therefrom that it was
clearly mentioned therein that prices quoted were exclusive
of its engineering and technical service fees. Payment of 8
percent of the FOB price to the Indian agent was a condition
of sale of the imported goods. Such payment was made
purely as a condition of sale of the imported goods. It was
based on an understanding between the foreign supplier and
M/s Voltas Limited. Various services provided by M/s Voltas
Limited were on behalf of the foreign supplier as its agent.
The services rendered were to identify the requirement of the
spares to be imported and therefore the payments so made
had a direct nexus to the imported goods. As the local agent,
services provided by M/s Voltas Limited were pre-importation
1 (1997) 9 SCC 738
2 (2000) 3 SCC 472
3 (2007) 9 SCC 401
4 (2008) 4 SCC 563
[2025] 5 S.C.R. 1901
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
activities and aimed at making the sale of spares by the foreign
supplier effective.
16.2. He finally submits that there is no merit in the appeal and the
same should be dismissed.
17. Submissions made by learned counsel for the parties have received
the due consideration of the Court.
18. We have already extracted Clause 5 of the purchase order issued
by Central Coal Fields Limited, a subsidiary of the appellant. In
so far terms of payment is concerned, 100 percent of FOB value
had to be paid in U.S. Dollars. It was also mentioned therein that
product support service would be rendered by M/s Voltas Limited
on payment of engineering and technical service charges. After
referring to instances of product support service, it was stipulated
that payment of engineering and service charges at the rate of 8
percent of the net FOB value would be made on pro-rata basis to
M/s Voltas Limited in equivalent Indian currency at the exchange rate
prevailing on the date of the bill of lading. Product support services
included determination of actual requirement of spares, to assist
in speedy customs clearance including insurance survey, prompt
replacement in case of discrepancies in supplies etc.
19. We may also refer to the relevant extract of the quotation of the
foreign supply which reads as under:
You are to pay an additional eight (8) percent of the total
FOB amount on a pro-rata against each shipment to
our Indian distributor M/s. Voltas Ltd., Calcutta in Indian
rupees at the exchange rate prevalent on the date of the
consignment note/bill of lading within 21 days from the
date of submission of their invoice along-with a set of
non -negotiable copies of the shipping documents. This
payment is to be made to Voltas and is not to be deducted
from the FOB amount payable to us against the Letter of
Credit.
20. The foreign supply had made it clear that the appellant had to pay
an additional 8 percent of the total FOB amount on a pro-rata basis
against each shipment to M/s Voltas Limited in Indian currency. It
was clarified that this payment was to be made to Voltas Limited
1902 [2025] 5 S.C.R.
Supreme Court Reports
and was not to be deducted from the FOB amount payable to the
foreign supplier.
21. All the imported goods were initially cleared on the basis of provisional
assessment. Thereafter, the Assistant Commissioner passed
the order-in-original dated 03.03.2004 finalising the provisional
assessment. On scrutiny of documents, Assistant Commissioner
observed that Voltas Limited was the local agent of the foreign
supplier. The product support services i.e. engineering and technical
services provided by M/s Voltas Limited were primarily related to
the type and quantum of spare parts required to be supplied by the
foreign supplier. Duty of M/s Voltas Limited was also to assist the
appellant during insurance survey at the port after importation of
the identified spares. Such services were related to procurement of
spares by the appellant and for the smooth sale of spares by the
foreign supplier.
21.1. Appellant and its subsidiaries had no contract with M/s Voltas
Limited for providing such services. The charges amounting
to 8 percent of net FOB value were paid to M/s Voltas Limited
as engineering and technical service charges for smooth
importation of the goods.
21.2. Engineering and technical service charges paid to the local
agent M/s Voltas Limited were 8 to 10 percent of the transactions
of the appellant with the principal i.e. the foreign supplier. Such
charges were paid as a recompense for the services rendered
towards making the sale effective. Hence, engineering and
technical service charges were nothing but commission.
21.3. Observing that the sale had become conditional in view of
the conditions posed in quotation by the foreign supplier, the
consequential engineering and technical service charges were
fully covered by Rule 9(1)(e) of the Customs Valuation Rules.
Assistant Commissioner referred to the Note to Rule 4 of the
Customs Valuation Rules and observed that engineering and
technical service charges were not being paid for maintenance
of any industrial plant, machinery or equipment. It was nobody’s
case that these charges were being paid under a contract for
maintenance, erection, commissioning of an industrial plant,
equipment or machinery.
[2025] 5 S.C.R. 1903
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
22. From a perusal of the order-in-original, it is seen that appellant was
granted personal hearing in which representative of the appellant
stated that it will pay any short levy of duty as per law after considering
the facts.
23. On the basis of the above, Assistant Commissioner vide the order-
in-original dated 03.03.2004 held that engineering and technical
service fees/agency commission/charges paid by the appellant
and its subsidiaries to the local agent of the foreign supplier were
includible in the assessment value of the imported goods. Therefore,
there was short levy of customs duty to the tune of Rs. 64,47,244.00.
Accordingly, appellant was directed to pay the said amount within
15 days. This finalized the provisional assessment.
24. Commissioner (Appeals) vide the order dated 21.06.2004 adverted
to Clause 5(B) of the purchase order which mandated that product
support service would be provided by M/s Voltas Limited in all
respects for ensuring optimum availability of P&H Shovels. Thereafter,
Commissioner (Appeals) held as under:
In the present case, quotation by the foreign supplier was
received by the appellant along with offer of M/s. Voltas
Ltd., Calcutta. Thus together, those formed the basis of
contract and set out the conditions of sale. In the present
case, payment of engineering & technical service charges
constituted an integral/inseparable condition of sale of
imported goods. Since the payment of service charges
to M/s. Voltas was dictated by the condition of sale to
satisfy the obligation of the seller/foreign supplier, the
inclusion of the said charges in the assessable value
by the lower authority under the provisions of Rule
9(1)(e) clearly prescribes for inclusion of all other
payments actually made or to be made as a condition of
sale of the imported goods, by the buyer to the seller or
by the buyer to a third party to satisfy an obligation of the
seller to the extent that such payments are not included
in the price actually paid or payable. The present case
is squarely covered within the ambit of Rule 9(1)(e) of
CVR’88 and accordingly, the aforesaid charges shall be
added/includible in the transaction under Section 14 of
the Act read with provisions of CVR’88.
1904 [2025] 5 S.C.R.
Supreme Court Reports
24.1. Looking into the nature of imports, Commissioner (Appeals)
held that services provided by the Indian agent was on behalf
of the foreign seller and was directly related to the sale of
imported goods. Provision for such service and payment
of service charges constituted a condition of sale. In such
circumstances, the first appellate authority upholding the view
taken by the Assistant Commissioner held that engineering and
technical service charges were includible in the assessable
value of the imported goods.
25. When this order was appealed against, CESTAT vide the impugned
order held:
6.1 We have carefully considered the submissions from
both sides and closely examined the records produced.
It is apparent that there is agency/distributor agreement
entered into between Voltas Ltd. and the American based
supplier viz. Harnischfeger Corporation, U.S.A. The
documents such as purchase order of the appellant, the
quotation by the American supplier and documents of M/s
Voltas Ltd. relied upon clearly referred M/s Harnischfeger
Corporation as the principal and M/s Voltas Ltd. as
the agent or distributor. We have not been shown any
agreement between M/s Voltas Ltd. and the appellant.
The services undertaken by M/s Voltas Ltd., apparently,
are only at the instance of the US based supplier as the
appellant has no choice in importing the spares without
availing the services of Voltas Ltd., who is the agent of
the American based supplier. It is also seen that the
amounts paid to Voltas Ltd. by the appellant are not
linked to any services specifically rendered by them. We
are not in agreement with the submissions of the Ld. Sr.
Advocate on behalf of the appellant that 8 to 10% value of
the imported parts have been adopted only as a measure
for payment for services rendered by M/s Voltas Ltd. It is
clearly a condition for sale of the goods to the appellant.
If there are no imports, no payments are apparently due
to be made to whatever services attributed to M/s Voltas.
In other words, the payments have been made only in
connection with the sale of goods, apparently due to
[2025] 5 S.C.R. 1905
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
reason that M/s Voltas Ltd., is an agent/distributor of the
US based supplier.
25.1. CESTAT had carefully analysed the relevant documents and
thereafter came to the conclusion that the services rendered
were such that appellant faced no inconvenience at the time
of importation. Amounts paid to Voltas Limited by the appellant
were not linked to any services specifically rendered by it.
Payments were made only in connection with the sale of
the goods presumably because M/s Voltas Limited was an
agent of the foreign supplier. Thus, payments made to M/s
Voltas Limited were only as a condition of sale and not for
any services rendered. Therefore, it had a direct nexus to the
value of the goods imported.
26. We may now have a look at Section 14 of the Customs Act, 1962
(‘Customs Act’ hereinafter) as it stood at the relevant point of time
which is as follows.
14. Valuation of goods for purposes of assessment –
(1) For the purposes of the Customs Tariff Act, 1975 (51
of 1975), or any other law for the time being in force
whereunder a duty of customs is chargeable on any goods
by reference to their value, the value of such goods shall
be deemed to be-
the price at which such or like goods are ordinarily sold,
or offered for sale, for delivery at the time and place of
importation or exportation, as the case may be, in the
course of international trade, where-
(a) the seller and the buyer have no interest in the
business of each other; or
(b) one of them has no interest in the business of the
other,
and the price is the sole consideration for the sale
or offer for sale:
Provided that such price shall be calculated with
reference to the rate of exchange as in force on
the date on which a bill of entry is presented under
1906 [2025] 5 S.C.R.
Supreme Court Reports
Section 46, or a shipping bill or bill of export, as the
case may be, is presented under Section 50;
(1A) Subject to the provisions of sub-section (1),
the price referred to in that sub-section in respect of
imported goods shall be determined in accordance
with the rules made in this behalf.
(2) Notwithstanding anything contained in sub-section
(1) or sub-section (1A) if the Board is satisfied that
it is necessary or expedient so to do, it may, by
notification in the Official Gazette, fix tariff values for
any class of imported goods or export goods, having
regard to the trend of value of such or like goods,
and where any such tariff values are fixed, the duty
shall be chargeable with reference to such tariff value.
(3) For the purposes of this section-
(a) “rate of exchange” means the rate of exchange-
(i) determined by the Board, or
(ii) ascertained in such manner as the Board my
direct,
for the conversion of Indian currency into foreign
currency or foreign currency into Indian currency;
(b) ‘foreign currency” and “Indian currency” have the
meanings respectively assigned to them in clause (m)
and clause (q) of section 2 of the Foreign Exchange
Management Act, 1999 (42 of 1999).”
26.1. Thus, what Section 14(1)(a) provides for is that for the purpose
of the Customs Tariff Act, 1975 or any other law for the time
being in force whereunder a duty of customs is chargeable
on any goods by reference to their value, the value of such
goods shall be deemed to be the price at which such or like
goods are ordinarily sold or offered for sale, for delivery at
the time or place of importation or exportation, as the case
may be, in the course of international trade where the seller
or buyer had no interest in the business of each other or
one had no interest in the business of the other. As per
[2025] 5 S.C.R. 1907
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
sub-section (1A), subject to the provisions of sub-section
(1), the price referred to in that sub-section in respect of the
imported goods shall be determined in accordance with the
rules made in this behalf.
27. In exercise of the powers conferred by Section 156 of the Customs
Act read with Section 22 of the General Clauses Act, 1897, the
Customs Valuation Rules have been framed. Rule 4 deals with
transaction value. The transaction value of the imported goods shall
be the price actually paid or payable for the goods when sold for
export to India, adjusted in accordance with the provisions of Rule
9 of the Customs Valuation Rules.
28. Rule 9 deals with cost and services. In this case, we are concerned
with sub-rule (a) and sub-rule (e). We extract Rule 9 as under:
Rule 9. Cost and Services- (1) In determining the
transaction value, there shall be added to the price actually
paid or payable for the imported goods,-
(a) the following cost and services, to the extent they
are incurred by the buyer but are not included in
the price actually paid or payable for the imported
goods, namely-
(i) commissions and brokerage, except buying
commissions;
(ii) the cost of containers which are treated as
being one for customs purposes with the goods
in question;
(iii) the cost of packing whether for labour or
materials;
* * * * *
(e) all other payments actually made or to be made
as a condition of sale of the imported goods, by
the buyer to the seller, or by the buyer to a third
party to satisfy an obligation of the seller to the
extent that such payments are not included in
the price actually paid or payable.
1908 [2025] 5 S.C.R.
Supreme Court Reports
29. Rule 12 of the Customs Valuation Rules says that the interpretative
notes specified in the schedule shall apply for the interpretation of
the rules. In the Note to Rule 4, it is stated:
The value of imported goods shall not include the following
charges or costs, provided that they are distinguished from
the price actually paid or payable for the imported goods:
(a) Charges for construction, erection, assembly,
maintenance or technical assistance, undertaken
after importation on imported goods such as industrial
plant, machinery or equipment;
(b) The cost of transport after importation;
(c) Duties and taxes in India.
30. In J.K. Corporation Limited (supra), this Court considered the question
as to whether customs duty would be payable on the purchase
price of the goods by adding the value of the license and technical
knowhow to the value of the imported goods. It was in that context,
this Court held as under:
9. The basic principle of levy of customs duty, in view of
the aforementioned provisions, is that the value of the
imported goods has to be determined at the time and place
of importation. The value to be determined for the imported
goods would be the payment required to be made as a
condition of sale. Assessment of customs duty must have
a direct nexus with the value of goods which was payable
at the time of importation. If any amount is to be paid after
the importation of the goods is complete, inter alia, by way
of transfer of licence or technical know-how for the purpose
of setting up of a plant from the machinery imported or
running thereof, the same would not be computed for the
said purpose. Any amount paid for post-importation service
or activity, would not, therefore, come within the purview of
determination of assessable value of the imported goods
so as to enable the authorities to levy customs duty or
otherwise. The Rules have been framed for the purpose
of carrying out the provisions of the Act. The wordings of
Sections 14 and 14(1-A) are clear and explicit. The Rules
[2025] 5 S.C.R. 1909
M/s. Coal India Limited v.
Commissioner of Customs (Port), Customs House, Kolkata
and the Act, therefore, must be construed, having regard
to the basic principles of interpretation in mind.
31. Note to Rule 4 has been explained by this Court in J.K. Corporation
Limited (supra). This Court after adverting to the relevant portion of
the Note to Rule 4 held 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.
32. This position was also explained by this Court in Ferodo India (P) Ltd.
(supra). Relevant portion of the aforesaid decision reads as follows:
7. Under Section 14 of the Customs Act, 1962, the assessable
value of imported goods is deemed to be the price at
which such or like goods are ordinarily sold or offered
for sale for delivery at the time and place of importation
or exportation, as the case may be, in the course of
international trade, where the seller and the buyer have
no interest in the business of each other and the price is
the sole consideration for the sale or offer of sale.
8. The CVR, 1988 recognises the fundamental principle of
arm›s length price while dealing with transaction value. The
Rules provide for the determination of the correct price
of goods that are imported in the country or exported out
of the country uninfluenced by relationship between the
transacting parties.
9. Transaction value, deductive value, computed value and
residual value methods are the methods prescribed in
the Rules, to be followed sequentially in that order in the
matter of determination of arm›s length pricing.
10. To determine the assessable value for the levy of customs
duty on imported goods, Section 14 of the 1962 Act has
to be read with the provisions of the CVR, 1988 because
under Section 14(1) there is reference to a deemed price
of goods imported and under Section 14(1-A) such deemed
price is to be determined in accordance with the CVR, 1988.
33. Applying the above ratio to the facts of the present case, we find
that the services rendered by the Indian agent were not post-
1910 [2025] 5 S.C.R.
Supreme Court Reports
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.
34. Thus on thorough consideration of all aspects of the matter, we
are of the considered opinion that the view taken by all the lower
authorities is correct and no interference is warranted. There is no
merit in the appeal. Accordingly, the appeal is dismissed.
Result of the case: Appeal dismissed.
†
Headnotes prepared by: Divya Pandey
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