COMMISSIONER OF CUSTOMS (PORT) KOLKATAversusM/S STEEL AUTHORITY OF INDIA LTD.

                         [2020] 9 S.C.R. 109                               109


      COMMISSIONER OF CUSTOMS (PORT) KOLKATA                               A
                                   v.
            M/S STEEL AUTHORITY OF INDIA LTD.
                   (Civil Appeal No. 6398 of 2009)
                           APRIL 27, 2020                                  B
       [DEEPAK GUPTA AND ANIRUDDHA BOSE, JJ.]
       Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988: r.9(1)(e) – Valuation of imports of plant and
equipments and spares – Revenue included the price paid for design
                                                                           C
and technical documents in the transaction value of the imported
goods – Plea of assessee that drawings and technical documents
related to the post importation activities for assembly, construction,
erection, operation and maintenance of the plant and these items
could not be included in the value of imported goods – Case of
revenue was that since the case involved importation of turnkey            D
projects, the entire contract value have to be treated as transaction
value for charging custom duty – Held: Revenue has not made out
a case that the disputed items of contract do not relate to post-
importation activities – The expression “condition” contained in
r.9(1)(e) conveys the idea that something could be done only if
                                                                           E
another thing was also done – Revenue emphasised their case on
the basis that as it was a turnkey project, importation of equipments
and post-importation project implementation exercise were mutually
dependant – Reading such implied condition into the contracts
would be impermissible in the absence of any other material to
demonstrate subsistence of such condition – No part of the contract        F
was shown from which such condition could be inferred – The
provisions of r.9(1)(e) cannot be automatically applied to every
import which has surface features of a turnkey contract – Just
because different components of a contract or multiple contracts
give the shape of turnkey project to the imported items, without
                                                                           G
specific finding on existence of “condition” as contemplated in
r.9(1)(e), value of all these components could not be added to arrive
at the assessable value – Such an exercise would go against the
provisions of Interpretative Note to r.4, which is part of the Valuation
Rules in view of the provisions of r.12 thereof.
                                                                           H
                                  109
110            SUPREME COURT REPORTS                      [2020] 9 S.C.R.


A           Dismissing the appeal, the Court
             HELD: 1. An importer of equipments of a plant could always
      choose to obtain drawings and designs for undertaking post
      importation activities from an overseas consortium supplying the
      equipments. This may confer on such arrangements attributes of
B     a turnkey contract, but that fact by itself would not automatically
      attract the “condition” clause contained in Rule 9(1) (e) of the
      Valuation Rules. The revenue has proceeded with the
      understanding that since both were obtained from the same
      vendor, condition of obtaining designs etc., for post-importation
      activities was implicit in the contract. The Revenue has sought
C     to emphasise their case on the basis that as it was a turnkey
      project, importation of equipments and post-importation project
      implementation exercise were mutually dependant. Reading such
      implied condition into the contracts would be impermissible in
      the absence of any other material to demonstrate subsistence of
D     such condition. No part of the contract has been shown from which
      such condition could be inferred. [Paras 22 and 26][132-A-B, 133-
      H; 134-A-B]
            2. If a single agreement involves importation of dutiable
      equipments and also services for post-importation activities, and
E     these two sets of items are segregable, it would be open to the
      importer to claim duty-exclusion in respect of items directly
      relatable to post importation activities in cases where Rule 9 of
      the Valuation Rules are applicable. In the present appeal, involving
      two import consignments, the authorities of First Instance and
      the Appellate Authority proceeded on the basis that since all the
F     scheduled items formed part of the same contract and were linked
      with activities at post-import stage with the imported equipments,
      the provisions of Section 9(1)(e) could be invoked. Such reasoning
      infers subsistence of conditions for awarding post-importation
      work to the overseas consortia or makes import of both sets of
G     items otherwise interdependent. The orders in original showed
      that the stand of SAIL was consistent that the subject drawings
      and specifications did not relate to the equipments imported and
      was meant for post importation activities and there was no
      condition laid down that the import of the equipments were to be
      supplemented by post-importation work. [Paras 27, 28][134-E,
H     G; 135-A]
        COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                            111
            M/S STEEL AUTHORITY OF INDIA LTD.

      TISCO v. Commissioner of Central Excise Customs                        A
      (2000) 3 SCC 472 : [2000] 1 SCR 876; Mukund Limited
      v. Commissioner of Customs 2000 (120) ELT 30 –
      referred to.
      CC (Prev.), Ahmedabad v. Essar Gujarat (1997) 9 SCC
      738 : [1996] 8 Suppl. SCR 757; Andhra Petrochemicals                   B
      v. Collector of Customs, Madras (1988) 9 SCC 109;
      Commissioner, Delhi Value Added Tax v. ABB Limited
      (2016) 6 SCC 791 : [2016] 4 SCR 600 – held
      inapplicable.
                        Case Law Reference                                   C
[2000] 1 SCR 876                  referred to              Para 5
2000 (120) ELT 30                 referred to              Para 11
[1996] 8 Suppl. SCR 757           held inapplicable        Para 12
(1988) 9 SCC 109                  held inapplicable        Para 13           D
[2016] 4 SCR 600                  held inapplicable        Para 13
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6398
of 2009.
      From the Judgment and Order No. A/520-521/KOL/2006 dated               E
22.05.2006 of the Customs, Excise and Service Tax Appellate Tribunal,
Kolkata in Appeal No. C/V-537/2001 and C-01/2002.
      Dhruv Agarwal, Sr. Adv., D. L. Chidananda, Ms. Sunita Rani
Singh and B. Krishna Prasad, Advs. for the Appellant.
     S. K. Bagaria, Sr. Adv., Yashraj Singh Deora and Ms. Sonal              F
Mashankar, Advs. for the Respondent.
      The Judgment of the Court was delivered by
      ANIRUDDHA BOSE, J.
      1. The dispute in this appeal relates to valuation under the Customs   G
Act, 1962 of import of certain items made by the respondent Steel
Authority of India Ltd. (SAIL) under two contracts, bearing nos. PUR/
PC/MOD/08.01/Pt.II dated 31.10.1989 and PUR/PC/MOD/08.01/Pt-I
dated 29th March 1990. These imports were made in connection with
modernisation, expansion and modification for their plant at Durgapur in
                                                                             H
112               SUPREME COURT REPORTS                             [2020] 9 S.C.R.


A     West Bengal. For this purpose, SAIL had floated seven Global Tender
      Contract Packages. The two contracts were part of these Tender
      Contract Packages. They were registered with the customs authorities
      for the purpose of project import benefits in terms of the 1962 Act. The
      first contract involved in this appeal was with a consortium consisting of
      a German Company, Hoestemberghe & Kluisch, GMBH and H & K
B
      Rolling Mills Engineering Private Limited, an Indian Corporate entity.
      The second contract was also with a German Company, Siempelkamp
      Pressen Systeme and the Indian entity was Escon Consultants Private
      Ltd, with whom the consortium was formed. Both these contracts were
      in connection with modernisation of SAIL’s rolling mills at the aforesaid
C     plant.
             2. Schedule 3 of the first contract (bearing no.544-9/91A SVB)
      specified scope of supplies and service along with the price particulars.
      Extracts from that schedule appears from the order of the Commissioner
      of Customs being the authority of first instance, dated 3rd January 2001.
D     This order related to the first contract. We shall refer to this order in
      greater detail later in this judgment. Relevant part of that Schedule is
      reproduced below:-
         Schedule No.         Description                        Millions [I][M]


E        3.5.1A [II]          Basic design and                         2.230
                              Engineering

         3.5.2A               Plant & Equipment                         2.512
                              including commissioning
F                             spares
         3.5.3A               Spares for two years operations          0.537
                              and maintenance, insurance spares,
                              special tools and tackles.
         3.5.4A               Foreign Supervision charges during       0.675
G
                              manufacture of Indian equipment as
                              well as for erection, commissioning
                              and performance guarantee tests.
                                               (quoted from the order in verbatim).
H
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                               113
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

      In addition to this, contract price of Rs.186,144,000/- and a royalty   A
of Rs.10 per tonne of thermax bars produced during first five years of
operation was also to be paid to the Indian entity of the consortium
under the contract for supplies and services made by the latter.
       So far as the second contract is concerned, the scope of supplies
and services to be effected by the consortium appears from the following      B
part of the third schedule, which again has been reproduced in the second
order (bearing no.544-9/91A SVB) of the authority of first instance,
dated 1st June 2001:-
Schedule No.           Description                         Millions [I] [M]
                                                                              C
3.5.1.1. [ii]          basic design and engineering           6.650

3.5.1.1 [v]            technical services for Project         1.000
                       management like planning,
                       procurement, inspection,
                       expediting, etc.                                       D

3.5.1.1 [vi]           As built drawings                      0.100

3.5.1.3                Plant & Equipment including            24.627
                       commissioning spares                                   E
3.5.1.4                All mechanical & electrical
                       spares for 2 years operation &         2.251
                       maintenance, insurance spares
                       including special tools & tackles
                                                                              F
3.5.1.6                Foreign supervision charges        2.842
                       during manufacture of Indian
                       equipment as well as for erection,
                       commissioning & performance
                       guarantee tests                                        G

3.5.1.11               Training                               0.200
                       Total:                                37.670

                                     (quoted from the order in verbatim)      H
114            SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A           3. The basic wording of the two contracts are more or less similar,,
      Clause (c) thereof stipulates:-
            “The Contractor has agreed to undertake basic and detail design
            and engineering, layout engineering, training services, procurement,
            manufacturing, shop testing, supply and delivery of the complete
B           Plant and Equipment, materials both imported and indigenous at
            site and carry out installation/construction of all civil works,
            supervision, erection, testing and successful commissioning of the
            PROJECT and demonstrate the Performance Guarantees etc.
            for the Project under the Terms and Conditions mentioned
            hereinafter. The CONTRACTOR has also agreed to render the
C           services for insurance, port clearance including stevedoring,
            transportation, safe custody, handling, unloading, loading,
            transportation to site and any other services required to complete
            the PROJECT under this contract.”
             4. As would be evident from the subject heads contained in the
D     above-referred extracts from the third schedule to each of these contracts,
      the consortia were to supply plant, equipments and spares as also certain
      basic designs and supervisory services at site. SAIL wanted import duty
      to be charged on the plant and equipments alone. SAIL’s stand is that
      the price for the plants and equipments included all design and engineering
E     for their manufacture. But designs and drawings specified in the schedule
      were all post-importation project related and project implementation
      activities. The customs authorities on the other hand added the basic
      design and engineering fee of DM 2.23 million and supervision charges
      during manufacture of Indian equipments and for erection, commissioning
      and performance guarantee tests of 0.675 million to the invoice value. In
F     respect of the second contract, direction was made for addition of basic
      design and engineering fee of DM 6.65 million, as built drawings of DM
      0.1 million and supervision charges during manufacture of Indian
      equipments and for erection, commissioning and performance guarantee
      tests of DM 2.842 million to the invoice value. The dispute had reached
G     the Commissioner of Customs for Special Valuation Branch, the authority
      of first instance, after a questionnaire was sent to SAIL, which was
      responded to. The authority of first instance heard the representative of
      SAIL. In the final orders, the authority of the first instance directed the
      aforesaid additions. The said authority observed that the contractor was
      entrusted with the work on a turnkey basis, where the entire supplies
H     and services were dependant on each other. On this premise, the
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                               115
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

provisions of Rule 4 and Rule 9 (1) (e) of the Customs Valuation              A
(Determination of Price of Imported Goods Valuation Rules, 1988
(hereinafter referred as the “1988 Rules”) was invoked to sustain such
additions to the invoice value in respect of both the contracts. The
underlying reasoning for the said orders of the authority of first instance
was that the commercial arrangements constituted turnkey contracts
                                                                              B
and package deal, which made it conditional for the purchaser to buy the
equipments which complied with the technical specifications of SAIL.
As a consequence, sale of the equipments was conditional as the different
aspects of the schedules of supply and service were interrelated. The
transaction value of the imported goods was directed to include the price
paid for the basic design and engineering, drawings, supervision of           C
erection, commissioning, performance guarantee and technical services
under Rule 4 read with Rule 9(1)(e) of the 1988 Rules.
       5. Appeals by SAIL against both these orders were rejected by
the Commissioner of Customs (Appeals) by two separate orders passed
on 11th July, 2001 and 7th September 2001. We find from the orders of         D
the Appellate authority that the case of TISCO vs. Commissioner of
Central Excise Customs reported in (2000) 3 SCC 472 was cited
before it by SAIL. This decision was distinguished by the Appellate
authority and the findings of the authority of first instance was sustained
on the basis of Rule 9(1)(e) of the 1988 Rules.
                                                                              E
      6. Further appeals of SAIL however, was decided in their favour
by Customs, Excise and Service Tax, Appellate Tribunal, Kolkata
(CESTAT) by a common order passed on 22nd May, 2006. These appeals
were registered before the CESTAT as C/V-537/2001 and C-01/2002.
The CESTAT formulated the points for determination in the following
terms :-                                                                      F

      “[i] whether the basic design and engineering fee of DM 2.230
      million and foreign supervision charges of DM 0.675 million are
      liable to be added to the invoice values of imported equipments
      under Rule 9 of the Valuation Rules? [Appeal No. C/V-537/2001]
                                                                              G
      [ii] whether the charges towards basic design and engineering
      fee of DM 6.650 million, fee for as built drawings of DM 0.100
      million and also supervision charges of DM 2.842 million are liable
      to be added to the invoice values of the imported equipments under
      Rule 4 of the Valuation Rules read with Section 14 of the said
      Act? [Appeal No. C-1/2002]”                                             H
116             SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A            7. The Tribunal held that the drawings and technical documents
      related to post importation activities for assembly, construction, erection,
      operation and maintenance of the plant and those items could not be
      included in the value of imported goods. Referring to Rules 9 (1) (b) (iv)
      and 9(1) (e) of the Valuation Rules 1988, the Tribunal held:-
B           “Similarly reliance upon the decision of the Supreme Court in
            Collector of Customs (Preventive), Ahmedabad Vs. Essar Gujarat
            Ltd., 1996(88) ELT 609 (SC) is also completely misplaced. From
            the judgment of the Supreme Court it would be seen that what
            has been held to be added therein under Rule 9(1) (e) of the
            Valuation Rules and process license fee, the payment for transfer
C           of technology under the process license agreement and whatever
            expenditure was needed to be incurred for dismantling the plant
            which was sold on “as in where is basis” in the foreign country
            and making it ready for delivery on board the vessel to be exported
            to India. The Supreme Court specifically held that apart from this
D           all other services rendered under the Engineering and Consultancy
            fees cannot be added. The said decision of the Supreme Court,
            contrary to the findings of the Deputy Commissioner and
            Commissioner (Appeals), supports the appellant’s case.
            The perusal of the orders-in-original reveals that there is no dispute
            whatsoever with the services as shown when the designs and
E
            drawings and engineering/technical services were small enabled
            to locate plant direction and overall project implementation for
            manufacturing iron and steel projects to be commissioned in India
            and the costs and charges were collected when the design and
            drawings and engineering services in relation to the components
F           to be imported and/or imported. In such circumstances, it is to be
            held that the lower authorities have heard improportionate to hold
            that the said charges are to be added to the assessable value as
            assessed relying upon the case of TISCO reported in 2000 (37)
            RLT 239 (S.C.). Para 8, 11 and 15 to 17 thereof refer. We do not
            find any reason to uphold the reasoning of the Deputy
G
            Commissioner in this regard.
            In view of the clear cut decision in the case of Tata Iron & Steel
            Co. Ltd. case (supra), we find that the issue is very settled by
            series of decisions of this Tribunal and heard the case referred
            into Indo Gulf Corpn. Ltd. v. Commr. of Customs, 2005(182) ELT
H           77(T).
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                               117
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

      Neither in Section 14 of the said Act nor in the Valuation Rules is     A
      there any provision which provides that the cost of drawings and
      technical documents required for procurement or manufacture of
      goods in India by the importer or which relates to post importation
      activities for assembly, construction, erection, operation and
      maintenance of the plant are to be included in the price of
                                                                              B
      equipments for determining their transaction value and
      consequently their assessable value for the purpose of levy of
      customs duty under the said Act. On the contrary the
      “Interpretative Notes” to Rule 4 of the Valuation Rules, 1988
      makes it explicitly clear that value of imported goods shall not
      include, inter alia, the charges for construction, erection, assembly   C
      maintenance of technical assistance undertaken after importation
      of the imported goods such as 3 of the Contract in the instant
      case in determining the assessable value of the imported
      equipments imported by the appellant is wholly erroneous, ultra
      vires the said Act and/or the Customs Valuation Rules, 1988. This
                                                                              D
      also the Deputy Commissioner and the Commissioner (Appeals)
      failed to appreciate and/or take into consideration and thereby
      arrived at patently erroneous finding.
      In terms of Rule 9 [1] [b] [iv] of the Valuation Rules, 1988, in
      determining the transaction value the value apportioned as
      appropriate of, inter alia, engineering, design and plans and           E
      sketches undertaken elsewhere than in India and “necessary for
      the production of the imported goods” which were supplied directly
      or indirectly by the buyer free of charge or at a reduced cost to
      the supplier or imported goods for use in producing the imported
      goods being value are to be included. This is because such supply       F
      of free of charge or at a reduced cost would result in a lower
      price for the imported goods than the price that the supplier would
      have charged if such goods/services were to be paid for in full.
      This rule is also inapplicable in the instant case as there has been
      no supply or any engineering’s or drawings by the appellant to the
      foreign seller. Moreover, there was no supply free of charge or at      G
      reduced cost. Hence this rule also has no applicability whatsoever
      in the present case.”                            (quoted verbatim)
     8. It is against this order the revenue is in appeal before us. Before
we examine the arguments advanced by Mr. Agarwal, Senior Counsel
                                                                              H
118            SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A     for the appellant and Mr. Bagaria, Senior Counsel for the assessee, we
      shall advert to the statutory provisions which are applicable in the facts
      of this case. These are Sections 12, 14 (as it stood at the time of
      importation) of the Customs Act, Rules 4 and 9 of the 1988 Rules. These
      provisions stipulate:-
B           Sections 12 and 14 of the Customs Act 1962
            “12. Dutiable goods.— (1) Except as otherwise provided in this
            Act, or any other law for the time being in force, duties of customs
            shall be levied at such rates as may be specified under [the Customs
            Tariff Act, 1975 (51 of 1975)], or any other law for the time being
C           in force, on goods imported into, or exported from, India.
            [(2) The provisions of sub-section (1) shall apply in respect of all
            goods belonging to Government as they apply in respect of goods
            not belonging to Government.]
            14. Valuation of goods for purposes of assessment—(1) For
D           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
E           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
F
            (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
G           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 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
H           determined in accordance with the rules made in this behalf.
     COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                              119
M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

   (2) Notwithstanding anything contained in sub-section (1) or sub-        A
   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
                                                                            B
   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
                                                                            C
   (ii) ascertained in such manner as the Board may 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            D
   section 2 of the Foreign Exchange Management Act, 1999 (42 of
   1999).”
   Rule 4 and Rule 9 of the 1988 Rules
   4. Transaction value.
                                                                            E
   (1) The transaction value of 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
   these rules.
   (2) The transaction value of imported goods under sub-rule (1)           F
   above shall be accepted:
   Provided that-
   a. The sale is in the ordinary course of trade under fully competitive
      conditions;
                                                                            G
   b. The sale does not involve any abnormal discount or reduction
      from the ordinary competitive price;
   c. The sale does not involve special discounts limited to exclusive
      agents; or
                                                                            H
120      SUPREME COURT REPORTS                            [2020] 9 S.C.R.


A     d. Objective and quantifiable data exist with regard to the
         adjustments required to be made, under the provisions of rule
         9, to the transaction value;
      e. There are no restrictions as to the disposition or use of the
         goods by the buyer other than restrictions which-
B        (i) are imposed or required by law or by the public authorities
         in India; or
         (ii) limit the geographical area in which the goods may be resold;
         or

C        (iii) do not substantially affect the value of the goods;
      f. the sale or price is not subject to same condition or consideration
         for which a value cannot be determined in respect of the goods
         being valued;
      g. no part of the proceeds of any subsequent resale, disposal or
D        use of the goods by the buyer will accrue directly or indirectly
         to the seller unless an appropriate adjustment can be made in
         accordance with the provisions of Rule 9 of these rules; and
      h. the buyer and seller are not related,
        or where the buyer and seller are related, that transaction value
E       is acceptable for customs purposes under the provisions of sub-
        rule (3) below.
        (3) (a) Where the buyer and seller are related, the transaction
        value shall be accepted provided that the examination of the
        circumstances of the sale of the imported goods indicate that
F       the relationship did not influence the price.
      (b) In a sale between related persons, the transaction value shall
      be accepted, whenever the importer demonstrates that the
      declared value of the goods being valued, closely approximates to
      one of the following values ascertained at or about the same time-
G
      (i) the transaction value of identical goods, or of similar goods, in
      sales to unrelated buyers in India;
      (ii) the deductive value for identical goods or similar goods;
      (iii) the computed value for identical goods or similar goods.
H
     COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                               121
M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

   Provided that in applying the values used for comparison, due             A
   account shall be taken of demonstrated difference in commercial
   levels, quantity levels, adjustments in accordance with the
   provisions of Rule 9 of these rules and cost incurred by the seller
   in sales in which he and the buyer are not related;
   (c) substitute value shall not be established under the provisions        B
   of clause (b) of this sub-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,-
                                                                             C
   (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            D
   customs purposes with the goods in question;
   (iii) the cost of packing whether for labour or materials;
   (b) the value, apportioned as appropriate, of the following goods
   and services where supplied directly or indirectly by the buyer
   free of charge or at reduced cost for use in connection with the          E
   production and sale for export of imported goods, to the extent
   that such value has not been included in the price actually paid of
   payable, namely :-
   (i) materials, components, parts and similar items incorporated in
   the imported goods;                                                       F

   (ii) tools, dies, moulds and similar items used in the production of
   the imported goods;
   (iii) materials consumed in the production of the imported goods;
   (iv) engineering, development, art work, design work, and and             G
   plans and sketches undertaken elsewhere than in India and
   necessary for the production of the imported goods;
   (c) royalties and license fees related to the imported goods that
   the buyer is required to pay, directly or indirectly, as a condition of
                                                                             H
122      SUPREME COURT REPORTS                            [2020] 9 S.C.R.


A     the sale of the goods being valued, to the extent that such royalties
      and fees are not included in the price actually paid or payable.
      (d) the value of any part of the proceeds of any subsequent resale,
      disposal or use of the imported goods that accrues, directly or
      indirectly, to the seller;
B     (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.
C     (2) For the purposes of sub-section (1) and sub section (1A) of
      Section14 of the Customs Act, 1962 (52 of 1962) and these rules,
      the value of the imported goods shall be the value of such goods,
      for delivery at the time and place of importation and shall include-
      (a) the cost of transport of the imported goods to the place of
D     importation;
      (b) loading, unloading and handling charges associated with the
      delivery of the imported goods at the place of importation; and
      (c) the cost of insurance:
E     Provided that-
      (i) Where the cost of transport referred to in clause (a) is not
      ascertainable, such cost shall be twenty percent of the free on
      board value of the goods;
      (ii) The charges referred to in clause (b) shall be one per cent of
F     the free on board value of the goods plus the cost of transport
      referred to in clause (a) plus the cost of insurance referred to in
      clause (c);
      (iii) Where the cost referred to in clause (c) is not ascertainable,
      such cost shall be 1.125% of free on board value of the goods;
G
      Provided further that in the case of goods imported by air, where
      the cost referred to in clause (a) is ascertainable, such cost shall
      not exceed twenty per cent of free on board value of the goods:
      Provided also that where the free on board value of the goods is
      not ascertainable, the costs referred to in clause (a) shall be twenty
H
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                              123
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

      per cent of the free on board value of the goods plus cost of          A
      insurance for clause (i) above and the cost referred to in clause
      (c) shall be 1.125 % of the free on board value of the goods plus
      cost of transport for clause (iii) above].
      (3) Additions to the price actually paid or payable shall be made
      under this rule on the bases of objective and quantifiable data.       B
      (4) No addition shall be made to the price actually paid or payable
      in determining the value of the imported goods except as provided
      for in this rule.”
       9. The main case of the appellant is that these two cases involved
importation of turnkey projects and the entire contract value have to be     C
treated as the transaction value for the purpose of charging customs
duty. Mr. Agarwal has submitted that the design and the other items,
which were the subject of dispute, were integrally linked with the
equipments and supply of the services were conditions for importation
of the equipments. It has also been argued on behalf of the revenue that     D
the contracts were integrated from basic planning and designing till
implementation at site and what was imported was a project and not
merely equipments. On this count, our attention was drawn to Rule 9(1)(e)
of the 1988 Rules, which we have quoted earlier in this judgment.
        10. The Tribunal did not accept this plea of revenue. The Tribunal   E
in the impugned order accepted SAIL’s plea for segregating the value of
equipments and the other fees on services covered by the same contracts,
the latter charges meant for post-importation phase of the arrangement
between the contracting parties. It found that the designs and drawings
and engineering/technical services were for plant direction and overall
project implementation for manufacturing iron and steel to be                F
commissioned in India and charges were collected by the consortium
when the design and drawings and engineering services in relation to the
components were to be imported. It is also not the revenue’s case before
us that these designs and drawings and the services were in relation to
the imported equipments and goods.                                           G
      11. Major part of the argument on behalf of the revenue advanced
before us, however, was anchored to Rule 9(1)(e) of the 1988 Rules.
The revenue’s contention on this point, which formed the basis of the
orders of the authority of the first instance as also the first appellate
authority has been that these were turnkey contracts and hence import
                                                                             H
124             SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A     of designs and drawings etc. even for post-importation activities should
      be treated as condition of import of the equipments. Mr. Agarwal has
      relied on the decision of this Court in the case of Mukund Limited vs.
      Commissioner of Customs reported in [2000 (120) ELT 30] confirming
      an order of the Tribunal in addition to the value of design and engineering,
      imported into this country the supervision charges in India during design,
B
      erection and performance guarantee test. This Court, in its order passed
      on 8th December 1999, held:-
            “1. This is a contract that contemplates the supply of basic design
            and engineering drawings and the supervision of erection, testing
            and commissioning based thereon. One is as much a part and a
C           condition of the contract as the other.
            2. We find, therefore, no merit in the appeal. It is dismissed with
            costs.”
             12. The case of Mukund Limited (supra) dealt with setting up
D     of a cleaning plant as part of basic oxygen furnace shop of SAIL
      (coincidentally the same respondent), for their Rourkela Steel Plant. For
      this purpose their contractor, Mukund Limited had entered into an
      agreement with an overseas Company, Davy Mckee (Stockton) Limited.
      In pursuance of that contract, Davy were to provide basic design and
      drawing and also supervise the detailed engineering erection and
E     commissioning of the gas cleaning plant in India apart from training of
      personnel abroad. The fabrication, manufacture etc. however was to be
      done in India with indigenous goods based on designs supplied by Davy.
      The contract amount was £20,00,000 and charges for design and
      engineering, supervision in India during design, erection, commissioning
F     and performance guarantee test valued at £6,57,900 and training charges
      of £82,600 were to be paid separately. Relying on a decision of this
      Court in CC (Prev.), Ahmedabad vs. Essar Gujarat reported in [(1997)
      9 SCC 738], the Tribunal found in the order reported in 1999 (112) ELT
      479(T):-

G           “6. The payment of $ (sic) 6,57,900 noted above in the price
            schedule is towards the services indicated above in the Agreement
            and which is a necessary concomitant to the supply of Design
            and Engineering drawings for the gas cleaning plant made by Davy
            Mckee and imported by the appellants. The appellants have been
            entrusted with the setting up of gas cleaning plant, and this could
H           only be achieved not only by purchasing the basic design and
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                               125
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

      engineering drawings imported from Davy Mckee but also the              A
      whole engineering package of supervision of detail drawing,
      erection, commissioning and performance guarantee test. The
      payment made in foreign exchange towards supervision charges
      during design, erection and commissioning will necessarily have
      to form part of the assessable value of the imported goods and
                                                                              B
      the value thereof will include not only the price paid for design
      and engineering but also for supervision charges. This will follow
      from Rule 9 of the Valuation Rules which provides for addition of
      certain costs and services to the transaction value. Rule 9(1)(e)
      covers all other payments actually made or to be made as a
      condition of sale of imported goods by the buyer to the seller.”        C
                                                        (quoted verbatim)
       This was a case where Tribunal reached finding on fact that the
two sets of items were to be added to reach the assessable value as the
plant could be set up as per the basic design only and the second set of
designs, drawings and activities intricately interlinked. This case did not   D
involve importation of any equipment.
       13. Another judgment of this Court in the case of Andhra
Petrochemicals vs. Collector of Customs, Madras reported in
[(1988) 9 SCC 109] was cited before us by Mr. Agarwal. But ratio of
that authority would not be applicable in the facts of this case, as the      E
disputed amount involved payment made by the importer to their overseas
associate towards engineering, design work, plant, sketches etc. which
were necessary for production of imported goods. This was a case
attracting Rule 9(1)(b)(iv) of the 1988 Rules. Factually, this authority is
distinguishable. The other authority on which Mr. Agarwal has placed          F
reliance is a decision of this Court in the case of Commissioner, Delhi
Value Added Tax vs. ABB Limited reported in (2016) 6 SCC 791. In
this case the controversy was as to whether a contract for supply,
installation, testing and commissioning of traction electrification power
supply and power distribution for the Dwarka Section of Delhi Metro
Rail Corporation Limited could be subjected to Delhi value added tax or       G
not. But this case dealt with the issues of works contract and movement
of goods by inter-state trade for computing value added tax. The
transaction in that case was held to be movement of goods by way of
imports or by way of inter-state trade and hence covered by the Central
Sales Tax Act. The only factual similarity in both these cases is that the    H
126             SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A     case of ABB Limited (supra) also related to turnkey project. But
      “import” under that statute and the charging section in the Customs Act
      for imposing duty (under Section 12) are not the same. The mechanism
      for arriving at transaction value or assessable value under the two statutes
      are different and distinct. This authority can have no impact on the
      subject-controversy.
B
             14. The appellant’s case in substance is that on a composite reading
      of Section 14 of the Act, Rules 4 and 9(1)(e) of the 1988 Rules, the price
      of drawings, design etc., should be added to the invoice value of the
      imported equipments, as those intangible items formed an integral part
      of the arrangement agreed upon between the two consortia and SAIL.
C     The revenue described such arrangement as turnkey contracts. It has
      been specifically argued that such intangible items constituted conditions
      of sale within the meaning of Rule 9(1)(e) of the 1988 Rules and these
      are not post importation charges.
             15. Stand of the respondent, on the other hand is that those items
D     related to post importation activities of SAIL in India for implementation
      of their project. Their case is that only imported equipments could be
      subjected to duty. Referring to the charging provision for levy of duty,
      being Section 12 as also Section 14 of the Act, it was argued that to
      reach the assessable value, Rule 9 of the 1988 Rules was the only mode.
E     So far as subject-dispute is concerned, Rule 9(1) (e) read with the
      interpretative note did not permit addition of value of post-importation
      items. Spares and other specifications concerning such equipments were
      already included in the price of the equipments. In support of his argument
      for exclusion of post importation services which may be obtained from a
      foreign consortium, Mr. Bagaria referred to the aforesaid Note, which
F     reads as:-
            “Note to Rule 4
            Price actually paid or payable
            The price actually paid or payable is the total payment made or to
G           be made by the buyer to or for the benefit of the seller for the
            imported goods. The payment need not necessarily take the form
            of a transfer of money. Payment may be made by way of letters
            of credit or negotiable instruments. Payment may be made directly
            or indirectly. An example of an indirect payment would be the
            settlement by the buyer, whether in whole or in part, of a debt
H
            owed by the seller.
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                                127
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

      Activities undertaken by the buyer on his own account, other than        A
      those for which an adjustment is provided in Rule 9, are not
      considered to be an indirect payment to the seller, even though
      they might be regarded as of benefit to the seller. The costs of
      such activities shall not, therefore, be added to the price actually
      paid or payable in determining the value of imported goods:
                                                                               B
      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              C
         imported goods such as industrial plant, machinery or equipment;
         (b) the cost of transport after importation;
         (c) duties and taxes in India.
      The price actually paid or payable refers to the price for the           D
      imported goods. Thus the flow of dividends or other payments
      from the buyer to the seller that do not relate to the imported
      goods are not part of the customs value.”
      16. Learned counsel for the respondent relied on the following
authorities in support of his submissions:
                                                                               E
      “1. (2015) 8 SCC 175: Commissioner of Customs Vs. Essar
      Steel
      2. (2000) 3 SCC 472: M/s Tata Iron & Steel Co. Ltd. Vs.
      CCE
      3. (2007) 9 SCC 401: Commissioner of Customs Vs. J.K.                    F
      Corp. Ltd.
      4. (2015) 14 SCC 750: Commissioner of Customs Vs.
      Hindalco Industries
      5. (2015) 16 SCC 506: Commissioner, Customs Vs. Denso                    G
      Kirloskar Industries
      6. (2007) 5 SCC 371: Commissioner of Customs Vs. Toyota
      Kirloskar
      7. (2008) 4 SCC 563: Commissioner of Customs Vs. Ferodo
      India (P) Ltd.                                                           H
128            SUPREME COURT REPORTS                            [2020] 9 S.C.R.


A            17. In the case of Essar Steel Limited (supra), there were two
      contracts with the overseas exporter. One was a purchase order for
      setting up of a plant. The other was between Met Chem Canada Inc.
      with Essar Ltd. to associate the former as a technical consultant to
      render technical services in relation to implementation of a project to set
      up a plant in India for manufacture of hot rolled steel coils in India. The
B
      technical service agreement was in relation to implementation of the
      project. The revenue had taken the stand that customs duty was to be
      imposed was on both the goods and the intangible items as these were
      not independent of each other and the contract for design engineering
      and technical services constituted condition of sale for the contract of
C     supply of goods. This is a stand similar to that taken by revenue in this
      case as well. This Court, referring to various authorities held that it was
      not permissible on the part of the revenue to include in the assessable
      value the value or charges for items which were to be used or utilized
      for post importation activities. In paragraph 14 of the said report, it has
      been observed and held:-
D
            “14. Another thing to be noticed is that a conjoint reading of the
            technical services agreement and the purchase order do not lead
            to the conclusion that the technical services agreement is in any
            way a pre- condition for the sale of the plant itself. On the contrary,
            as has been pointed out above, the technical services agreement
E           read as a whole is really only to successfully set up, commission
            and operate the plant after it has been imported into India. It is
            clear, therefore, that clause 9(1)(e) would not be attracted on the
            facts of this case and consequently the consideration for the
            technical services to be provided by Met Chem Canada Inc. cannot
F           be added to the value of the equipment imported to set up the
            plant in India.”
             18. This Court, while dealing with the case of Essar Steel Limited
      (supra) had referred to the case of Tata Iron and Steel Company
      Ltd. (supra). The latter authority related to importation made under an
G     umbrella contract, which branched into two. One related to agreement
      for supply of technical documentation (MD 301) and the other for sale
      of equipments and materials pertaining to a blast furnace and three
      torpedo ladle cars (MD 302). The value of MD 301 was 12.5 million
      DM and MD 302 was 13.5 million DMs. The consignment under MD
      301 was cleared by the customs authorities having nil duty component
H
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                              129
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

as importer claimed the same to be classified under sub-heading              A
no.4906.00 of the Customs Tariff Act, 1985. But while scrutinising the
consignment under MD 302, the customs authorities initiated action for
including the value of MD 301 for determining the assessable value.
The dispute reached the Tribunal. In paragraph 7 of the said report
comprising of the judgment of this Court, the finding of the Tribunal has
                                                                             B
been summarised:-
      “7. The appellant and other notices preferred appeals before the
      Customs, Excise and Gold (Control) Appellate Tribunal, Calcutta
      which have been disposed of by a common order. The Tribunal
      has held that the three contracts entered into between the seller,
      i.e., SNP and the appellant were in fact parts of one package, that    C
      is, the three constituted one composite agreement. The technical
      documentation supplied to the appellant could be divided into three
      parts: (i) those pertaining to the imported equipment, (ii) those
      pertaining to the equipment which has yet to be procured or
      manufactured by the appellant, and (iii) those relatable to post-      D
      import activities undertaken by the appellant for assembly,
      construction, erection, operation and maintenance of the imported
      equipment. The value of the contract to the extent of (i) above
      was liable to be included in the value of equipments and materials
      imported by the appellant though the value of the technical
      documents covered by (ii) and (iii) above could have been              E
      excluded for payment of customs duty by reference to the
      Interpretative Note to Rule 4 of the Customs Valuation Rules,
      1988 (hereinafter “the Rules”, for short). However, since separate
      values have not been shown, the benefit of the Interpretative Note
      to Rule 4 abovesaid was not available to the appellant and the         F
      entire value of the two contracts was liable to be clubbed together
      for the purpose of levying customs duty.”
      19. It was held and observed by this Court in the case of Tata
Iron and Steel Company Ltd. (supra):-
      “16. It is nobody’s case that the seller had an obligation towards     G
      a third party which was required to be satisfied by it and the
      buyer (i.e. the appellant) had made any payment to the seller or to
      a third party in order to satisfy such an obligation. The price paid
      by the appellant for drawings and technical documents forming
      the subject-matter of contract MD 301 can by no stretch of             H
130      SUPREME COURT REPORTS                            [2020] 9 S.C.R.


A     imagination fall within the meaning of “an obligation of the seller”
      to a third party. There was also no payment made as a condition
      of sale of imported goods as such. Rule 9(1)(e) also, therefore,
      has no applicability.
      17. So far as the Interpretative Note to Rule 4 is concerned it is
B     no doubt true that the Interpretative Notes are part of the Rules
      and hence statutory. However, the question is one of their
      applicability. The part of the Interpretative Note to Rule 4 relied
      on by the Tribunal has been couched in a negative form and is
      accompanied by a proviso. It means that the charges or costs
      described in clauses (a), (b) and (c) are not to be included in the
C     value of imported goods subject to satisfying the requirement of
      the proviso that the charges were distinguishable from the price
      actually paid or payable for the imported goods. This part of the
      Interpretative Note cannot be so read as to mean that those charges
      which are not covered in clauses (a) to (c) are available to be
D     included in the value of the imported goods. To illustrate, if the
      seller has undertaken to erect or assemble the machinery after its
      importation into India and levied certain charges for rendering
      such service the price paid therefor shall not be liable to be
      included in the value of the goods if it has been paid separately
      and is clearly distinguishable from the price actually paid or payable
E     for the imported goods. Obviously, this Interpretative Note cannot
      be pressed into service for calculating the price of any drawings
      or technical documents though separately paid by including them
      in the price of imported equipments. Clause (a) in the third para
      of the Note to Rule 4 is suggestive of charges for services rendered
F     by the seller in connection with construction, erection etc. of
      imported goods. The value of documents and drawings etc. cannot
      be “charges for construction, erection, assembly etc.” of imported
      goods. Alternatively, even on the view as taken by the Tribunal on
      this Note, the drawings and documents having been supplied to
      the buyer-importer for use during construction, erection, assembly,
G     maintenance etc. of imported goods, they were relatable to post-
      import activity to be undertaken by the appellant. Such charges
      were covered by a separate contract, i.e. contract MD 301. They
      could not have been included in the value of imported goods merely
      because the value of documents referable to imported equipments
H     and materials was mixed up with the value of those documents
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                                 131
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

      which were referable to equipment which was yet to be procured            A
      or imported or manufactured by the appellant; the value of the
      latter category of documents also being neither dutiable nor
      clubbable with the value of imported goods. The Tribunal has not
      doubted the genuineness of the contracts entered into between
      the appellant and SNP. Rather it has observed vide para 10.2 of
                                                                                B
      its order that entering into two contracts (MD 301 and MD 302)
      was a legal necessity. The Tribunal has also stated that it was not
      recording any finding of “skewed split-up”. Shri Ashok Desai, the
      learned Senior Counsel for the appellant has pointed out that under
      Chapter Heading 49.06 of the Customs Tariff Act, 1975 plans
      and drawings for engineering and industrial purposes being originals      C
      drawn by hand as also their photographic reproductions on
      sensitised papers and carbon copies thereof are declared free
      from payment of customs duty. Sub-rules (3) and (4) of Rule 9
      clearly provide that additions to the price actually paid or payable
      are permissible under the Rules if based on objective and
                                                                                D
      quantifiable data and no addition except as provided for by Rule 9
      is permissible.”
       20. Revenue laid stress on the decision of this Court in the case of
Essar Gujarat (supra). We have earlier referred to this authority in
this judgment. This case involved importation of a plant, which was
originally installed in Germany. The Indian importer, Essar Gujrat, had         E
entered into an agreement with the overseas owner of that plant in
Germany. That owner was Teviot Investments Limited. The agreement
Essar Gujarat had with Teviot for purchase of the plant, however, was
subject to Essar obtaining transfer of operational license from another
corporation, Midrex International BV. Question arose as to whether the          F
license fees paid to Midrex should be included to the value of the plant
or not. The revenue case was that the stipulation of obtaining the license
from Midrex was a condition for sale. If this condition was not fulfilled,
the sale would have had fallen through. Thus, to give effect to the plant
sale agreement, there was an element of necessity or compulsion to
enter into the licensing agreement with Midrex.                                 G

       21. SAIL had taken specific stand before the authority of the first
instance that it was not a condition for them to take design and engineering,
which related to post importation activities from the supplier only. In
terms of the schedule of the agreement, the purchaser (that is SAIL)
had right to change the goods to be supplied by the supplier at any time.       H
132             SUPREME COURT REPORTS                            [2020] 9 S.C.R.


A             22. An importer of equipments of a plant could always choose to
      obtain drawings and designs for undertaking post importation activities
      from an overseas consortium supplying the equipments. This may confer
      on such arrangements attributes of a turnkey contract, but that fact by
      itself would not automatically attract the “condition” clause contained in
      Rule 9(1) (e) of the Valuation Rules. In the cases of Essar Steel
B
      Ltd.(supra) and Tata Iron and Steel Co. Ltd.(supra), the contracts
      had certain elements of “turnkey” features. The case of Essar Gujarat
      (supra) is distinguishable, as the subject of import there carried a condition
      for entering into a licensing agreement with a third party.
            23. This decision was considered by this Court in Essar Steel
C     (supra) and Essar Gujarat (supra). It was explained by this Court in
      the case of Essar Steel (supra) in paragraphs 17 and 18 of the report:
             “17. The Court held that the amount of 20 lakh Deutsche Marks
             and 101 lakh Deutsche Marks were both payable for the right to
             use Midrex process and patents. In short, these amounts were
D            payable for the transfer of technology under a process licence
             agreement entered into with Midrex. The judgment states that
             without such licence the plant could not be operated at all by the
             importer without the technical know-how from Midrex. In any
             case, the plant could not be operated or be made functional. This
E            being the case, since these amounts had to be paid before the
             plant could at all be set up, these amounts would be added to the
             value of the imported plant.
             18. However, so far as the sum of 231 Lakh Deutsche Marks is
             concerned, since this was payment for engineering and technical
F            consultancy to set up and commission the plant in India, this amount
             would have to be excluded. This Court held that 10% of this
             amount only should be added to the value of the plant as the plant
             had been sold abroad on an as is where is basis and needed to be
             dismantled abroad before it was ready for delivery in India.
             Obviously, therefore this 10% is attributable to a pre-import stage.
G            Further, the amount of 22 Lakh Deutsche Marks payable for
             theoretical and practical training of personnel outside India again
             could not be added as this amount would presumably be attributable
             to trained personnel who would be used in the commissioning and
             operation of the plant, which would, therefore, be attributable to a
H            post-importation event. Thus, properly read, the judgment in Essar
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                                  133
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

       Gujarat case actually supports the respondent in that the payment         A
       for engineering and technical consultancy services in India cannot
       be added to the value of the imported plant. Also, in the present
       case, there is no transfer of technology under a license. Therefore,
       no question arises as to whether without such license the plant to
       be set up in India could be operated at all. The judgment also
                                                                                 B
       concludes in favour of the respondent the fact that all amounts
       payable for training of personnel outside India cannot be added to
       the value of the plant.”
        24. We have already summarised the respondent’s case that the
disputed items on which the customs authorities intended to impose duty
all related to post importation activities and could not be included in the      C
assessable value. It has been urged on behalf of the respondent that
neither clause 9 (1) b (iv), nor 9 (1) (e) could be made applicable so far
as the subject items are concerned. The imported items according to the
respondent are the equipments and the engineering drawings etc. forming
part of the contract were not necessary for production of the imported           D
goods. It has also been urged that the customs authority had wrongly
contended that the subject drawings etc. were purchased as the condition
that the sale of the imported goods and this excluded application of clause
9 (1) (e) of the 1988 Rules. In this regard interpretative note to Rule 4
was relied upon. Reference was made, in particular, to clause (a) of that
Note.                                                                            E

       25. Revenue has not made out a case that the disputed items of
contract do not relate to post-importation activities. The statutory provision
relied upon by the Revenue to bring the subject-items within the duty net
is Rule 9 (1) (e) of the 1988 Rules.
                                                                                 F
       26. The expression “condition”, simply put, conveys the idea that
something could be done only if another thing was also done. In the
given context, it would imply that import of equipments could be allowed
by the other party provided the design features for post-importation
activities were also obtained from the same supplier or from a firm as
per the overseas supplier’s direction. But there is no material before us        G
to suggest that import of equipments was effected with simultaneous
obligation of SAIL that the designs relating to post-importation activities
should also be obtained from the same entity. The revenue has proceeded
with the understanding that since both were obtained from the same
vendor, condition of obtaining designs etc., for post-importation activities     H
134             SUPREME COURT REPORTS                           [2020] 9 S.C.R.


A     was implicit in the contract. The Revenue has sought to emphasise their
      case on the basis that as it was a turnkey project, importation of
      equipments and post-importation project implementation exercise were
      mutually dependant. In our opinion, reading such implied condition into
      the contracts would be impermissible in the absence of any other material
      to demonstrate subsistence of such condition. No part of the contract
B
      has been shown to us from which such condition could be inferred.
      Necessity of subsistence such condition has been laid down in the case
      of Ferodo India (P) Ltd. for invoking rule 9 (1) (e). In our opinion, the
      provisions of Rule 9 (1) (e) cannot be automatically applied to every
      import which has surface features of a turnkey contract. Just because
C     different components of a contract or multiple contracts give the shape
      of turnkey project to the imported items, without specific finding on
      existence of “condition” as contemplated in clause 9 (1) (e), value of all
      these components could not be added to arrive at the assessable value.
      Such an exercise would go against the provisions of Interpretative Note
      to Rule 4, which is part of the Valuation Rules in view of the provisions
D
      of Rule 12 thereof.
             27. Similar were the revenue’s contentions in Essar Steel (supra)
      and Tata Iron & Steel Co. Ltd. (supra), except that in the factual
      context of those two cases, there were different sets of agreements.
      But that difference is more of form than of content. If a single agreement
E     involves importation of dutiable equipments and also services for post-
      importation activities, and these two sets of items are segregable, it would
      be open to the importer to claim duty-exclusion in respect of items directly
      relatable to post importation activities in cases where Rule 9 of the
      Valuation Rules are applicable. The cases of J.K. Corp. Ltd. (supra),
F     Hindalco Industries, Denso Kirloskar (supra), Toyota Kirloskar
      (supra) all deal with exclusion of value of post-import activities.
             28. In the present appeal, involving two import consignments, the
      authorities of First Instance and the Appellate Authority proceeded on
      the basis that since all the scheduled items formed part of the same
G     contract and were linked with activities at post-import stage with the
      imported equipments, the provisions of Section 9 (1) (e) could be invoked.
      Such reasoning infers subsistence of conditions for awarding post-
      importation work to the overseas consortia or makes import of both sets
      of items otherwise interdependent. We find from the orders in original
      that the stand of SAIL was consistent that the subject drawings and
H
      COMMISSIONER OF CUSTOMS (PORT) KOLKATA v.                                135
 M/S STEEL AUTHORITY OF INDIA LTD. [ANIRUDDHA BOSE, J.]

specifications did not relate to the equipments imported and was meant         A
for post importation activities and there was no condition laid down that
the import of the equipments were to be supplemented by post-importation
work.
       29. In such circumstances, we do not find any reason to interfere
with the order of the Tribunal. The appeal is dismissed.                       B
       30. There shall be no order as to costs. All connected applications
shall stand disposed of.


Devika Gujral                                              Appeal dismissed.   C




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