MIS ASSOCIATED CEMENT COMPANIES LTD. v. COMMISSIONER OF CUSTOMS

Section 12 of Customs Act provides that the duties of customs shall be · C 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 of the 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 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 baggage. On this short ground alone the appeal of Videocon has to be allowed.

C.A. No. 1493 of2000. F [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 & G 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. B 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. G 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 of the Commissioner and Customs, Excise & Gold (Control) Appellate Tribunal in their cases are H

650 SUPREME COURT REPORTS [2001] I S.C.R.

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