SC: Post-import design and supervision charges not includible in customs value—Rule 9(1)(e) inapplicable without express sale condition
Case Name: Commissioner of Customs (Port), Kolkata v. Steel Authority of India Ltd.
Citation: Civil Appeal No. 6398 of 2009
Date of Judgment: 27 April 2020
Bench: Justice Deepak Gupta and Justice Aniruddha Bose
Held: The Supreme Court held that design, engineering, and supervision charges relating to post-importation activities such as installation, commissioning, and performance testing cannot be added to the assessable value of imported equipment under Rule 9(1)(e) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The rule applies only where such payments are a “condition of sale” for the imported goods. Since the contracts between SAIL and its foreign suppliers did not make post-importation services a condition for importing the equipment, and there was no evidence that import was contingent on availing those services, the additions directed by the customs authorities were unjustified.
Summary: SAIL imported plant and equipment for modernising its Durgapur Steel Plant under two global contracts with German and Indian consortium partners. The customs department included in the assessable value the payments for design, engineering, and foreign supervision, treating the contracts as turnkey projects under Rule 9(1)(e). The Commissioner (Appeals) affirmed these additions, but the CESTAT set them aside, holding that the drawings and services related to post-import activities and were therefore excludable under the interpretative note to Rule 4. On appeal, the Supreme Court reviewed earlier precedents Essar Steel Ltd., Tata Iron & Steel Co., Ferodo India, and others and distinguished Mukund Ltd. and Essar Gujarat, observing that unless import of equipment is conditional upon obtaining design or consultancy from the same supplier, no addition is permissible. The mere fact that the overall project had “turnkey” features did not automatically attract Rule 9(1)(e).
Decision: Appeal dismissed. The Supreme Court upheld the CESTAT’s order excluding design and supervision charges from the assessable value, reiterating that post-importation services are not dutiable unless they form a contractual condition of sale. No order as to costs.