2025 INSC 609

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8028 OF 2010

M/S. COAL INDIA LIMITED APPELLANT(S)

VERSUS

COMMISSIONER OF CUSTOMS (PORT),

CUSTOMS HOUSE , KOLKATA RESPONDENT(S)

J U D G M E N T

UJJAL BHUYAN, J.

This is an appeal under Sect ion 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

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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,

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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:

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

(ii) Packing List

(iii)Shipping

Specification

(iv) Certificate

of Origin

Original plus three certified copies.

Original plus three certified copies.

Original plus three certified copies.

Original plus three certified copies.

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(v)Warranty

Certificate

(vi) Bill of Lading

Original plus three certified copies.

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.

(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:

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(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.

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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:

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.

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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.

10. Foreign supplier supplied the spares on 21.03.2001

which were received by the appellant on provision al

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

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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

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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 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

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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.

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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:

1. Collector of Customs (Preventive), Ahmedabad Vs.

Essar Gujarat Ltd., Surat

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2. Tata Iron & Steel Co. Ltd. Vs. Commissioner of

Central Excise & Customs, Bhubaneswar

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3. Commissioner of Customs (Ports), Kolkata Vs. J.K.

Corpn. Ltd.

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4. Commissioner of Customs Vs. Ferodo India (P)

Ltd.

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1

(1997) 9 SCC 738

2

(2000) 3 SCC 472

3

(2007) 9 SCC 401

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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

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(2008) 4 SCC 563

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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 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

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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 replace ment 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

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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 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

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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

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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.

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

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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

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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.

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:

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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

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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 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.

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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 Section 46, or a shipping bill or bill of

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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;

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(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 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.

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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;

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(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.

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

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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

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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 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:

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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

30

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-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.

………………………………J.

[ABHAY S. OKA]

.……………………………J.

[UJJAL BHUYAN]

NEW DELHI;

MAY 01, 2025.