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CASE NO.: Appeal (civil) 821  of  2000 Appeal (civil)  1021     of  2000 Appeal (civil)  1023     of  2000 Appeal (civil)  1027     of  2000 Appeal (civil)  1028     of  2000 Appeal (civil)  1029     of  2000 Appeal (civil)  1030     of  2000 Appeal (civil)  1031     of  2000 Appeal (civil)  1032     of  2000 Appeal (civil)  1033     of  2000 Appeal (civil)  1423     of  2000 Appeal (civil)  1493     of  2000 Appeal (civil)  1494     of  2000 Appeal (civil)  3250-3251        of  2000 Appeal (civil)  3632     of  2000

PETITIONER: M/S ASSOCIATED CEMENT COMPANIES LTD.

       Vs.

RESPONDENT: COMMISSIONER OF CUSTOMS

DATE OF JUDGMENT:       25/01/2001

BENCH: K.G.Balakrishna, Doraswami Raju

JUDGMENT:

1033, 1423, 1493, 1494, 3250-3251 and 3632 of 2000

J U D G M E N T L.....I.........T.......T.......T.......T.......T.......T..J

     KIRPAL, J.

     These appeals have been filed against the common order dated  15th  November, 1999 of the Customs, Excise and  Gold (Control)  Appellate  Tribunal which, while  confirming  the order  of  the Commissioner of Customs held  that  drawings, designs etc.  relating to machinery or industrial technology were  goods which were leviable to duty of customs on  their transaction value at the time of their import.  As principal arguments  on behalf of the appellants were addressed in the case  of  M/s Hotel Leela Ventures Limited by Mr.  Ashok  H. Desai,  learned senior counsel, for the sake of  convenience we  will refer to the relevant facts in that case in greater detail.

     Leela  Ventures are engaged in the business of setting up,  operating  and  maintaining Hotels  and  Resorts.   For

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designing  the  Hotels  and Resorts, it  engaged  a  foreign company  M/s  Wimberly  Allison Tong & Goo, USA  (WAT  for short) for providing architectural services including design development  drawings.  Leela Ventures had entered into four agreements  with the said foreign company in respect of four different  ventures  in  India.  Apart  from  preparing  the designs  and  drawings  the  scope of work  under  the  said agreements  included  site visits and on site  consultations with architects.

     Leela  Ventures paid WAT under the said agreements for the  services  rendered and the amount was remitted  through bank by following the procedure of remittance under Form A-2 prescribed  by the Reserve Bank of India which form is meant for  foreign exchange remittances, other than for import  of foreign  goods,  pursuant  to the permission  given  by  the Reserve Bank.

     In terms of the said agreements entered into with WAT, the  appellants  received  drawings  and  diskettes  through couriers  during the period 30th October, 1995 and 12th May, 1996.   The  drawings  so received were  part  of  technical collaboration and/or technical know-how and were accompanied by  an  airway bill and an invoice issued by the  consignor. The  courier,  in all the cases, declared the drawings  with various  descriptions  such  as  drawings,  architectural designs  etc.  The value of these drawings and designs  was declared  at  a nominal value of one dollar.   According  to Leela  Ventures  one  dollar was the correct  value  because drawings  by themselves have no value, since if the drawings are lost they could be replaced and the loss would merely be of the cost of paper.  The value declared by the courier was bonafide and was based on the invoice carried by it.  As per the  appellants,  the  declaration  by the  courier  was  in accordance  with the accepted practice at that time.  At the time  of  the imports these designs and the  diskettes  were cleared at the nominal value declared.

     The  other appellants in these appeals are also public corporations  engaged in the manufacture of excisable goods. Like  Leela Ventures the other appellants also entered  into technical  collaboration with leading manufacturers in their own  fields abroad.  The agreements provided for exchange of technology  in the form of supply of know-how, drawings  and designs  on  media training by personnel staff  and  similar other  activities.   As  a  part   of  fulfillment  of   the contracts,  the  contracting  parties abroad, from  time  to time,  sent  drawings,  designs  etc.  In the  case  of  M/s Videocon  these drawings etc.  were imported by hand through one  Mr.  Kato.  In all other cases the drawings etc.   were imported  through  Professional Courier or by post  parcels. In  each case only a nominal value was declared at the  time of its importation.

     According to the respondents, intelligence gathered by the   Directorate  of  Revenue   Intelligence  and   Special Valuation  Branch,  Bombay revealed that the appellants  had imported  drawings,  designs and plans through  couriers  on remitting  the consideration for the same but these had been cleared  without  proper declaration and without payment  of correct amount of duty.  In view of the omission on the part of  the appellants to declare the correct transaction value, show-cause  notices under Section 28(1) read with Section 24 of  the Customs Act, 1962 were issued asking the  appellants as   to  why  (a)  the   sum  remitted  or  declared  during

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investigation  as  consideration for drawings,  designs  and plans supplied by their collaborators should not be taken as transaction  value under Section 14 of the Customs Act  read with  the  Customs  Valuation Rules, 1988 as the  basis  for assessment  of  goods  to customs duty;   (b)  Customs  duty should  not  be demanded under the provisions to Section  28 (1)  of  the  Customs  Act, 1962 and  the  amount  deposited towards customs duty should not be adjusted against the duty demanded;   (c) The goods, i.e., drawings, designs and plans should  not  be  held liable to confiscation  under  Section 111(m) of the Customs Act, 1962;  and (d) Penalty should not be  imposed  under Section 112 (a) and 114A of  the  Customs Act, 1962.

     In  the  case of Leela Ventures the show-cause  notice dated  21st  January,  1998/18th February  1998  valued  the drawings  and  designs  at   Rs.   2,66,87,100/-  being  the transaction  value  and  on that value the  amount  demanded under Section 28(1) of the said Act was Rs.  26,68,310/-.

     In  response to the show-cause notice, the  appellants sent  their  replies, inter-alia, submitting that  what  was imported were not goods and there could be no excise duty on services  since the remittances were in Form A-2 and tax  at source  under the Income-Tax Act was paid in respect of  the said contracts.  It was also the case of the appellants that the  demand  was  barred by limitation since  there  was  no suppression  or  wilful  mis- statement  as  the  appellants bonafide  believed  that no customs duty was payable in  the case  of  contracted  services   represented  by   drawings, designs, etc.  which were imported.

     After  giving  an opportunity of representation  being filed  and  hearing  the learned  counsel  the  Commissioner passed  a  consolidated order dated 26th March,  1999.   The Commissioner  demanded  duty  and   imposed  penalty.    The appellants then filed appeal before the Tribunal but without success.   During  the  course  of pendency  of  the  appeal barring  three all other importers voluntarily deposited the duty as per the classification then suggested.

     In   these  appeals,  the   learned  counsel  for  the appellants   urged   four  contentions    which   had   been unsuccessfully   raised   before    the   Tribunal.    These contentions  were  (i) Excise duty cannot be levied  on  the value of ideas as they are not goods;  (ii) Even if what was imported  were  goods, the valuation of the same has  to  be nominal;   (iii)  the show-cause notices which  were  issued were  barred  by  time inasmuch as the  extended  period  of limitation of five years would not be available on the facts of  the present case;  (iv) the imports through the  courier could  not be governed by heading No.  98.03 of the  Customs Tariff  Act.   The learned Additional Solicitor General,  in his able manner, supported the Tribunals decision.  Whether drawings,  diskettes,  manual  etc.  imported are  goods  on@@                                               JJJJJJJJJJJJJJ which excise duty could be levied.@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

     The  learned counsel submitted that in all these cases the  transactions  between  the appellants and  the  foreign collaborators   were  for  transfer   of  technology.    The knowledge  or  know-how which is supplied, though  valuable, was   intangible.   The  media  is   only  the  vehicle   of

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transmission and is only incidental to the main transaction, even  if Government authorities regard this to be a contract for services and not for sale of goods.  In support of this, reliance  was  placed on the fact that the Reserve  Bank  of India  had  required  application for remission  of  foreign exchange  on  Form - A2 which is meant for foreign  exchange remittance  otherwise  than  for import of  goods.   On  the remittances   so  made  the   appellants  had  deducted  the income-tax  at  source.  It was contended that if it  was  a case of sale of goods to the appellants then the question of deducting  any income tax and paying the same would not have arisen and, on the contrary, the amount of excise duty which would have been payable would have been less than the income tax which was deducted.

     In  the alternative it was contended that even if  the transactions  are  composite  the  court  has  to  determine whether  these relate to contract for service or goods.   In this  connection,  it was submitted that when price is  paid for  photograph,  the  payment  is not for  paper  which  is developed  but is for the skill of the photographer and  the price  of  developing.  Contract for architectural  services was  stated  to be like a contract by a solicitor to give  a legal  opinion  or for a doctor to give a medical  diagnosis since the essence of the contract is the experts skill.

     The  learned  counsel contended that  the  transaction between   the  appellants  and   their  respective   foreign collaborators  was  one  for transfer of  technology.   This knowledge  or know-how though valuable was intangible.   The technology  when transmitted to India on some media does not get  converted from an intangible thing to tangible thing or chattel.   Media  is  only vehicle for transmission  and  is wholly  incidental  to  the  main transaction.   By  way  of analogy it was submitted that legal opinions or judgments of Courts  when  communicated on legal briefs or  as  certified copies do not constitute transfer of goods by the counsel to his  clients  or  by a Court to a  litigant.   Reliance  was placed on the decision of U.S.  9th Circuit Court of Appeals in  Wilhelm  Winter;  Cynthia Zheng vs.  G.P.Putnams  Sons, 938  F.2nd  1033  (9th  Cir.   1991).   In  that  case,  the plaintiffs  had bought an encyclopaedia on mushroom, a  book published   by  the  defendants.   On   the  basis  of   the information contained therein the plaintiffs became severely ill  from cooking and eating mushrooms after relying on  the information  obtained  from  the  said  encyclopaedia.   The plaintiffs  sued the publishers and sought damages based  on products liability, breach of warranty etc.  The trial Court held  that  the  information contained in a book  is  not  a product  for the purposes of strict liability under products liability law.  Affirming the trial Court, the Circuit Court of  appeals  came  to  the   conclusion  that  the  products liability  law reflects its focus on tangible items and does not  take  into consideration the unique characteristics  of ideas  and  expressions.   In other words,  the  quality  of information  contained in a book would not be regarded as  a product  for  the purposes of product liability  law.   This would  not  detract from the fact that the encyclopaedia  of mushroom  would be regarded as goods containing  information supplied  by the author and published by the defendants.  As we shall presently see this case can be of little assistance for deciding the point in issue.

     Before  we deal with the aforesaid contentions  raised on  behalf  of  the appellants, it is appropriate  to  first

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consider  the relevant provisions applicable in the  present case.   Section  2(22)  of  the  Customs  Act  contains  the definition  of  the word goods which is as follows:   (a) vessels,  aircrafts and vehicles;  (b) stores;  (c) baggage; (d)  currency and negotiable instruments;  and (e) any other kind of movable property;

     Section 156 of the Customs Act gives the Central Govt. power  to make rules consistent with the Act and sub-section 2(a) thereof enables the framing of rules to provide for the manner  of  determining  the price of imported  goods  under sub-section  (1A) of Section 14.  In exercise of the  powers conferred  by the aforesaid Section 156 of the Customs  Act, the   Central   Govt.    has    framed   Customs   Valuation (Determination of Price of Imported Goods) Rules, 1988.  For the  purpose of this case, two Rules which are important are Rules 3 and 4 which read as follows:

     3.   Determination  of the method of valuation.-  For the purpose of these rules,-

     (i)  the  value  of  imported   goods  shall  be   the transaction  value;  (ii) if the value cannot be  determined under the provisions of clause (i) above, the value shall be determined  by proceeding sequentially through Rules 5 to  8 of these rules.

     4.   Transaction value.- (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) above shall be accepted:

     Provided that-

     (a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which- (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  (iii)  do  not substantially  affect the value of the goods;  (b) 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;   (c) no part of the proceeds  of  any subsequent resale, disposal or 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 (d) the buyer and seller  are  not related, or where the buyer and seller  are related,  that  transaction value 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 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- (i) the  transaction value  of identical goods, or of similar goods, in sales  to unrelated  buyers  in India;  (ii) the deductive  value  for

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identical  goods or similar goods;  (iii) the computed value for  identical  goods  or similar goods.  Provided  that  in applying  the values used for comparison, due 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  values shall not be established  under  the provisions of clause (b) of this sub-rule.

     Rule  10 provides for declaration by the importer  and is  as follows:  10.  Declaration by the importer.- (1) The importer or his agent shall furnish

     (a) a declaration disclosing full and accurate details relating  to the value of imported goods;  and (b) any other statement,  information or document including an invoice  of the manufacturer or producer of the imported goods where the goods  are imported from or through a person other than  the manufacturer  or  producer, as considered necessary  by  the proper  officer  for determination of the value of  imported goods under these rules.

     (2)   Nothing  contained  in   these  rules  shall  be construed  as restricting or calling into question the right of  the  proper officer of customs to satisfy himself as  to the  truth  or  accuracy  of  any  statement,   information, document or declaration presented for valuation purposes.

     (3)  The  provisions of the Customs Act, 1962  (52  of 1962)  relating  to  confiscation, penalty  and  prosecution shall  apply to cases where wrong declaration,  information, statement or documents are furnished under these rules.

     Section  2 of the Customs Tariff Act provides for  the rates  at which the customs duty is levied under the Customs Act,  1962.  As specified in First and the Second  Schedule, Chapter  98  inter alia applies to passengers  baggage  and heading  No.   98.03 states that on all dutiable  articles, imported  by  a  passenger  or a member of  a  crew  in  his baggage,  customs duty will be paid at the standard rate of duty of 150%.

     Reliance  was  placed  by Mr.  Desai on  a  number  of decisions  of this Court, relating to levy of sales tax,  in support  of  his  contention that in contract by  supply  of services  there is no sale of goods and, as such, no customs duty could be imposed on the intellectual property which was obtained.  We will first refer to the decisions so cited.

     This  Court  in  The Assistant Sales Tax  Officer  and Others  vs.  B.C.  Kame, Proprietor Kame Photo Studio (1977) 1 SCC 634 was called upon to decide the question that when a photographer undertakes a photograph and thereafter supplies prints  to his clients whether it could be said that he  had entered  into  a contract for sale of goods.   The  question which  this  Court  posed  was whether  the  contract  is  a contract of work and labour or a contract for sale.  It held that  a  contract for sale is one whose main object  is  the transfer  of property in, and the delivery of the possession of,  a chattel as a chattel to the buyer where, however, the principle  object  of  work undertaken by the payee  of  the price  is  not  the transfer of a chattel qua  chattel,  the contract  is one of work and labour.  After referring to the

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earlier  decisions  of  this Court in the case of  State  of Himachal  Pradesh  vs.   Associated  Hotels  of  India  Ltd. (1972)  29  STC  474  and the State of  Madras  vs.   Gannon Dunkerley  & Co.  (Madras) Ltd.  (1958) 9 STC 353, in  which case  the  Constitution  Bench had held that in  a  building contract  the  property materials do not pass to  the  other party  as in a contract for sale of movable property, it was concluded  that  when  a photographer  takes  a  photograph, develops  the negative or does some other photographic  work and  thereafter  supplies the prints to his clients then  it could  not  be said that he had entered into a contract  for sale  of  goods.   The  question   of  levy  of   sales-tax, therefore, did not arise.

     In  Kames  case  (supra) reference was  made  to  the decision  of Robinson vs.  Graves (1935) KB 579 where it was held  that a contract by an artist to paint a portrait of  a lady was a contract for work and labour and not for the sale of goods as the substance of the contract was that skill and labour  should  be  exercised  upon the  production  of  the portrait and that it was only ancillary to the contract that there  would  pass  from  the artist to  his  customer  some material.  In Robinsons case an earlier decision of Lee vs. Griffin   (1861)   1  B  &  S  272  was  attempted   to   be distinguished.   Lee  vs.   Griffin  was a  case  where  the plaintiff had contracted to make a set of artificial denture to  fit  them  into his patients mouth.  The  patient  died after  the  denture  was made without  having  accepted  the denture  though  he  had an opportunity of  doing  so.   The plaintiff  sued  executor for the goods bargained and  sold. It was held in that case that wherever a contract is entered into for the manufacture of chattel there the subject-matter of  the  contract  is a sale and delivery  of  the  chattel. Blackburn  J,  specifically  observed as follows:   If  the contract  be such that, when carried out, it would result in the  sale  of a chattel, the party cannot sue for  work  and labour but, if the result of the contract is that they party has  done work and labour which ends in nothing that  become the  subject of a sale, the party cannot sue for goods  sold and  delivered.  The case of an attorney employed to prepare a  deed  is an illustration of this latter  proposition,  it cannot  be  said  that  the paper and ink  he  uses  in  the preparation  of  the deed are goods sold and delivered I  do not  think that the test to apply these cases is whether the value  of the work exceeds that of the material used in  its execution for, if a sculptor were employed to execute a work of  art, greatly as his skill and labour, supposing it to be of  the  highest description, might exceed the value of  the marble  in which he worked, the contract would in my opinion nevertheless be a contract for the sale of chattel.

     Referring  to the case of Robinson vs.  Graves and Lee vs.  Griffin in Contract for Sale of Goods, Benjamins Third Edition  states at pages 39- 40 as follows:  In Robinson v. Graves   however,   the  Court   of   Appeal   reintroduced, purportedly  as  a  qualification to this rule, what  is  in effect  the criterion of relative importance as between work and  materials  which had been rejected in Lee v.   Griffin, although  the court professed to be considering what was the substance  of the contract rather than the more  substantial component  in the product ultimately delivered.  In Robinson v.   Graves,  Greer  L.J.   said:  If you  find  that  the substance of the contract was the production of something to be  sold...   then  that  is a sale of goods.   But  if  the substance  of the contract, on the other hand, is that skill

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and  labour  have to be exercised for the production of  the article  and  that it is only ancillary to that  that  there will  pass  from the artist to his client or  customer  some materials  in  addition  to  the   skill  involved  in   the production  of  the  portrait,  that   does  not  make   any difference  to  the  result, because the  substance  of  the contract  is  the  skill  and experience of  the  artist  in producing  the  picture.  This   statement,  with  respect, overlooks the fact that what passes to the client is not the materials  but the finished picture, of which both the  work and  the  materials  are components.  Lee  v.   Griffin  and Robinson vs.  Graves cannot be reconciled:  the reasoning in each case could have been applied to the facts of the other. It has yet to be appreciated that a decision of this problem can  be  reached only by adopting one or the other of  these equally  arbitrary  rules. (Emphasis added) The  test  laid down  in  Lee  vs.   Griffin   had  been  preferred  by  the Australian  Courts.   In  Deta  Nominees  Pty.   Ltd.   vs. Viscount  Plastic  Products  Pty.   Ltd.  1979  VR  167  the Supreme  Court of Victoria, Australia described Robinson vs. Graves  as  a hard case and rejected its test as  illogical and  unsatisfactory wrong in principle and too  erratic to be useful.

     The  principle enunciated in Kames case was  followed by   this  Court  in  State  of  Tamil  Nadu  vs.    Anandam Viswanathan (1989) 1 SCC 613.  In this case, this Court held that  a  contract  for  printing   of  question  paper   for educational  institutions constituted a works contract  and, therefore, exempted from tax.  In Everest Copiers vs.  State of  Tamil Nadu (1996) 5 SCC 390 in respect of the Assessment Year  1978-79,  this  Court has held that  making  photostat copies  on paper with xerox machine and delivering the  same to  the  customer  for payment was a contract  for  work  or service  and not a contract of sale.  The transfer of  paper was  only  incidental  and hence such  transaction  was  not exigible to sales tax.

     In Hindustan Shipyard Ltd.  vs.  State of A.P.  (2000) 6  SCC 579, this Court was called upon to decide whether the transaction  of  building of a ship after an order had  been placed  amounted to sale as defined under the A.P.   General Sales  Tax Act or was it a works contract.  While coming  to the conclusion that the transaction in question had amounted to  a  sale  this  Court observed that in  order  to  decide whether such a transaction is a contract of sale or contract for  works or service the same had to be culled out from the term of the contract.

     All  the  aforesaid  decisions related to  the  period prior to the Forty- sixth Amendment of the Constitution when Article 366 (29A) was inserted.  At that time in the case of a  works  contract  it was held that the same could  not  be split and State Legislature had no legislative right to seek to  levy  sales  tax on a transaction which was not  a  sale simpliciter of goods.  Rainbow Colour Lab & Anr.  Vs.  State of  M.P.   and Others (2000) 2 SCC 385 was, however, a  case relating  to  the definition of the word sale in the  M.P. General  Sales Tax Act, 1958 after its amendment  consequent to  the insertion of Article 366 (29A).  The question  there was  whether  the job rendered by a photographer  in  taking photographs,  developing and printing films would amount  to works  contract for the purpose of levy of sales tax.   This Court held that the work done by the photographer was only a service  contract and there was no element of sale involved.

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After  referring to earlier decisions of this Court, it  was observed at page 391 as follows:

     15.   Thus, it is clear that unless there is sale and purchase  of goods, either in fact or deemed, and which sale is  primarily  intended and not incidental to the  contract, the  State  cannot  impose  sales tax on  a  works  contract simpliciter in the guise of the expanded definition found in Article  366(29-A)(b)  read with Section 2(n) of  the  State Act.   On facts as we have noticed that the work done by the photographer  which  as held by this Court in Kame  case  is only  in the nature of a service contract not involving  any sale of goods, we are of the opinion that the stand taken by the respondent State cannot be sustained.

     Even  though in our opinion the decisions relating  to levy  of sales tax would have, for reasons to which we shall presently  mention,  no application to the case of  levy  of customs  duty,  the  decision  in Rainbow  Colour  Lab  case (supra)  requires consideration.  As a result of the  Forty- sixth Amendment, sub-article 29A of Article 366 was inserted as a result whereof tax on the sale or purchase of goods was to  include  a  tax  on the transfer of  property  in  goods (whether  as  goods or in some other form) involved  in  the execution  of  a  works  contract.    Taking  note  of  this amendment  this Court in Rainbow Colour Lab at page  388-389 observed as follows:

     11.   Prior to the amendment of Article 366, in  view of  the judgment of this Court in State of Madras v.  Gannon Dunkerley  &  Co.  (Madras) Ltd.  the States could not  levy sales  tax  on  sale of goods involved in a  works  contract because the contract was indivisible.  All that has happened in  law  after the 46th Amendment and the judgment  of  this Court in Builders case is that it is now open to the States to  divide the works contract into two separate contracts by a legal fiction:  (i) contract for sale of goods involved in the  said works contract, and (ii) for supply of labour  and service.   This  division of contract under the amended  law can  be made only if the works contract involved a  dominant intention  to  transfer  the property in goods  and  not  in contracts  where the transfer in property takes place as  an incident of contract of service.  The amendment, referred to above,  has  not  empowered  the   State  to  indulge  in  a microscopic  division  of contracts involving the  value  of materials  used  incidentally  in such contracts.   What  is pertinent  to  ascertain in this connection is what was  the dominant intention of the contract.  Every contract, be it a service  contract or otherwise, may involve the use of  some material  or  the other in execution of the  said  contract. The  State  is  not empowered by the amended law  to  impose sales  tax  on  such  incidental   materials  used  in  such contracts

     In  arriving  at  the aforesaid conclusion  the  Court referred  to  the  decision  of   this  Court  in  Hindustan Aeronautics  Ltd.  vs.  State of Karnataka (1984) 1 SCC  706 and Everest Copier (supra).  But both these cases related to pre-Forty-sixth  Amendment era where in a works contract the State  had  no  jurisdiction to bifurcate the  contract  and impose  sales  tax  on  the transfer of  property  in  goods involved  in  the  execution  of   a  works  contract.   The Forty-sixth  Amendment  was  made precisely with a  view  to empower  the  State  to bifurcate the contract and  to  levy sales  tax  on  the value of the material  involved  in  the

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execution  of  the works contract, notwithstanding that  the value  may  represent a small percentage of the amount  paid for  the  execution  of  the works contract.   Even  if  the dominant  intention  of the contract is the rendering  of  a service,  which  will amount to a works contract, after  the Forty-sixth  Amendment  the State would now be empowered  to levy  sales tax on the material used in such contract.   The conclusion  arrived  at in Rainbow Colour Lab case,  in  our opinion,  runs counter to the express provision contained in Article 366 (29A) as also of the Constitution Bench decision of  this Court in Builders Association of India and  Others vs.  Union of India and Others (1989) 2 SCC 645.

     According  to  Section 12 of the Customs Act, duty  is payable  on goods imported into India.  The word goods has been  defined  in  Section 2(22) of the Customs Act  and  it includes in sub-clause (c) baggage and sub-clause (e) any other  kind  of  movable property.  It is clear  from  mere reading  of  the said provision that any  immovable  article brought into India by a passenger as part of his baggage can make  him  liable  to pay customs duty as  per  the  Customs Tariff  Act.  An item which does not fall within sub-clauses (a),  (b),  (c) or (d) of Section 2(22) will be regarded  as coming  under Section 2(22) (e).  Even though the definition of  the goods purports to be an exclusive one, in effect  it is  so worded that all tangible movable articles will be the goods  for the purposes of the Act by residuary clause 2(22) (e).   Whether movable article comes as a part of a baggage, or is imported into the country by any other manner, for the purpose  of  the  Customs Act, the provision of  Section  12 would  be attracted.  Any media whether in the form of books or  computer  disks or cassettes which  contain  information technology  or ideas would necessarily be regarded as  goods under  the  aforesaid provisions of the Customs Act.   These items  are  moveable goods and would be covered  by  Section 2(22)(e) of the Customs Act.

     The  rate  at which the customs duty is to be  imposed has  to  be such as may be specified in the  Customs  Tariff Act.   This is stipulated by Section 12 of the Customs  Act. Thus  the two Acts have to be read in conjunction with  each other.

     Section  2  of the Tariff Act states that the rate  at which  duties  of customs shall be levied under the  Customs Act  are  specified in the First and Second Schedule to  the said  Act.   Chapter  49 of the First  Schedule  relates  to printed  books,  newspapers, pictures and other products  of the  printing industry;  manuscripts, typescripts and plans. Note  2  in Chapter 49 states that the term  printed  also means reproduced by means of a duplicating machine, produced under  the  control of a computer,  embossed,  photographed, photocopied,  thermocopied  or typewritten.   Heading  49.05 pertains  to maps and hydrographic or similar charts of all kinds,  including atlases, wall maps, topographic plans  and globes.   Heading No.  49.06 specifies plans and  drawings for  architectural,  engineering,   industrial,  commercial, topographical  or similar purposes, being originals drawn by hand;   handwritten  texts;  photographic  reproductions  on sensitised  paper  and carbon copies of the foregoing.   The residuary heading No.  49.11 reads as follows:

     Other  printed matter, including printed pictures and photographs

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     Rate  of  duty Standard Preferential Areas  4911.10 Trade  advertising 25%  material, commercial catalogues and the like

     - Other:

     4911.91    Pictures,  designs 25%   and  photographs 4911.99  Other 25%

     Drawings, plans, manuals etc.  specified in Chapter 49 of  the  Tariff Act are thus statutorily regarded  as  goods attracting  a specified rate of customs duty on their import into  India.  There is no challenge to any of the  statutory provisions and reading the two Acts together there can be no manner  of  doubt that what has been imported into India  by the appellants, through the courier or otherwise, from their technical  collaborators were goods even though the tangible articles  so imported contained information or knowledge for use by the appellants.

     In view of the clear provisions of the Customs Act and the  Tariff  Act, which have been referred to herein  above, whenever  any  goods or moveables or tangible  articles  are imported into this country customs duty is payable.  For the purpose of attracting levy it would be immaterial as to what are the types of goods imported or what is contained in them or  recorded thereon.  The contents will be relevant for the purpose of valuation.  Therefore the decisions of this Court relating  to  the  levy  of  sales tax  in  cases  of  works contracts  will have no application here.  In the sales  tax cases  referred  to hereinabove no doubt the question  which arose  was  whether, in a works contract, where there was  a supply  of materials and services in a indivisible contract, but  there the question had arisen because the States power prior to the Forty-sixth Amendment to the Constitution, were not  entitled to bifurcate or split up the contract for  the purpose  of  levying  sales tax on the element  of  moveable goods  involved in the contract.  Apart from the decision in Rainbow  Colour  Labs  case, which does not  appear  to  be correct,    the   other    decisions    cited   related   to pre-Forty-sixth   Amendment    period.     Furthermore   the provisions  of the Customs Act and the Tariff Act are  clear and  unambiguous.   Any moveable articles,  irrespective  of what they may be or may contain would be goods as defined in Section  2(22) of the Customs Act.  It is true that what the appellants  had  wanted was technical advice or  information technology.   Payment  was  to be made for  this  intangible asset.  But the moment the information or advice is put on a media,  whether paper or diskettes or any other thing,  that what  is supplied becomes chattel.  It is in respect of  the drawings,  designs etc.  which are received that payment  is made  to  the foreign collaborators.  It is these papers  or diskettes  etc.  containing the technological advice,  which are  paid for and used.  The foreign collaborators part with them  in  lieu of money.  It is, therefore, sold by them  as chattel  for  use  by the Indian  importer.   The  drawings, designs,  manuals  etc.   so  received are  goods  on  which customs  duty  could be levied.  The decision of Winter  vs. Putnams  case (supra) is also of no help to the  appellants as in that case, it was the quality of information regarding mushrooms  which was not regarded as a product event  though the encyclopaedia containing the information was regarded as goods.   Here  we  are  not concerned with  the  quality  of information  given  to  the  appellants.   The  question  is whether  the  papers  or diskettes etc.   containing  advice

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and/or information are goods for the purpose of Customs Act. The answer, in our view, is in the affirmative.  With regard to  the  submission  on behalf of the  appellants  that  the contracts in these cases were for services and it is on that basis  that  permission  from  Reserve  Bank  of  India  was obtained for release of foreign exchange.  The submission of Mr.   Rohatgi, in reply, was that the Reserve Bank does  not adjudicate  on  the question whether the technical  material being  imported  are  goods  or   not  for  the  purpose  of imposition  of customs duty.  We agree with this submission. The  appellants had represented to the Reserve Bank that the collaborators   were   rendering  service    and   on   this representation  remittances were allowed.  The Reserve  Bank must  have examined the applications from the point of  view of  release of foreign exchange.  It was not an adjudicating authority  under the Customs Act.  Had there been any  doubt about  the question whether what was imported were goods  or not  then,  perhaps, the grant of permission to remit  money for  services  rendered  and  payment of  taxes  in  respect thereof   may  have  been  relevant.    But  here,  on   the examination  of  the law applicable to the levy  of  customs duty  the  position  is  free from any  ambiguity.   As  has already  been  observed hereinabove the  drawings,  designs, manuals  etc.   imported  through couriers were  goods  on which  customs duty was payable.  The action of the  Reserve Bank  cannot result in negating the statutory provisions  of the Customs Act and the Tariff Act applicable in the instant cases.   The belief of the appellants that what was imported were  not goods, as the Reserve Bank had also regarded the payment  was  being  made for services and  not  goods,  was clearly erroneous and misplaced.

     Re:  Valuation

     In  support  of the contention that even if  what  was imported  were  goods on which customs duty was payable  the value  thereof should be nominal, it was contended that  the levy  could only be on the media on which transfer was  made and  not  on the whole of the intellectual  content.   While referring  to Builders Association of India case (supra)  it was  submitted  that there this Court had held that  in  the case  of works contract levy of sales tax was permitted only on  that component of the works contract which was relatable to  goods.   Similarly, in the case of M/s Gannon  Dunkerley and  Co.   and  Others vs.  State of  Rajasthan  and  Others (1993)  1  SCC 364 it was held that tax on sale of goods  in works  contract  was based upon the value of goods  as  they relate  to  the  entire project and  charges  for  planning, designing  and  architect  fee could be excluded.   It  was, therefore,  argued that in the present cases only the  media on  which the know-how was transmitted could be subjected to duty and its value was only nominal.

     In  the case of Hotel Leela Ventures the  Commissioner had  taken  the whole of the value of the contract  for  the purpose  of  levy  of  duty while in the  case  of  Sterlite Industries, as also in some other cases, an adhoc percentage of  about one-third of the total contract value was taken as the  basis for levy of the tax.  At the time of  importation the  couriers had, however, given the value of dollar one in respect of the media on which the information was stored.

     Section  14 of the Customs Act deals with valuation of goods  for  purposes of assessment.  The said section is  as follows:

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      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  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 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 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 Central  Government  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   Central  Government,  or   (ii) ascertained  in  such manner as the Central  Government  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  the  Foreign Exchange Regulation Act, 1973 (46 of 1973)."

     In  exercise of this power under the Customs Act,  the Central    Government    promulgated    Customs   Valuation (Determination  of  Price of Imported Goods)  Rules,  1988. Three  Rules which are relevant are Rules 3,4 and 9.   While Rules  3 and 4 have been quoted hereinabove Rule 9 reads  as follows:

     9.   Cost  and  services.-  (1)  In  determining  the transaction  value,  there  shall  be  added  to  the  price actually paid or payable for the imported goods,-

     (a)  the  following cost and services, to  the  extent they  are incurred by the buyer but are not included in  the price  actually  paid  or payable for  the  imported  goods, namely:-  (i)  commissions  and   brokerage,  except  buying commissions;   (ii) the cost of containers which are treated as  being  one  for  customs  purposes  with  the  goods  in question;   (iii) the cost of packing whether for labour  or materials;

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     (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 production  and  sale  for export  of imported goods, to the extent that such value has not  been  included in the price actually paid  or  payable, namely :- (i) materials, components, parts and similar items incorporated  in  the  imported goods;   (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   plans  and  sketches  undertaken elsewhere  than in India and necessary for the production of the imported goods;

     (c) royalties and licence fees related to the imported goods  that  the  buyer  is required  to  pay,  directly  or indirectly,  as  a condition of 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;

     (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.

     (2)   For   the  purposes  of  sub-section   (1)   and sub-section  (1A) of Section 14 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 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:  Provided that   (i) where the cost of transport referred to in clause (a) is  not ascertainable, such cost shall be twenty per cent of the  free  on  board value of the goods;  (ii)  the  charges referred  to in clause (b) shall be one per cent of 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;

     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 per cent of the free  on  board value  of  the goods plus cost of 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

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shall  be made under this rule on the basis of objective and quantifiable data.

     (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.

     As  is  evident  from  the perusal  of  the  aforesaid provisions,  namely,  Sections 12 and 14 of the Customs  Act and  Rules  3,4  and  9 the value of  the  goods  which  are imported  is  deemed  to  be the price  at  which  they  are ordinarily  sold.  Sub-section (1A) provides that the  price referred  to  in  sub- section (1) of Section  14  shall  be determined in accordance with the rules made in this behalf. As  per Rules 3 and 4 the transaction value of the  imported goods,  subject  to  adjustment under Rule 9, is to  be  the price  actually paid or payable for the goods when sold  for export  to India.  Rule 9 (1) (b) (iv) is important for that shows  that  engineering, development, artwork, design  work and plans and sketches would form part of the price of goods for  the purpose of determining its value for levy of  duty. In  this  connection,  it  will be useful to  refer  to  the following  passage from a decision of this Court in the case of  Collector  of  Customs  (Prev.),  Ahmedabad  vs.   Essar Gujarat  Ltd.  1996 (88) E.L.T.  609 (S.C.) at page 616 para 17:

       The entire purpose of Section 14 is to find out the value  of  the goods which are being imported.  The  EGL  in this  case was purchasing a Midrex Reduction Plant in  order to produce sponge iron.  In order to produce sponge iron, it was  essential  to have technical know-how from Midrex.   It was  also essential to have an operating licence from  them. Without  these, the plant would be of no value.  That is why the  pre-condition of a process licence of Midrex was placed in  the  agreement with TIL.  It will not be proper to  view that  agreement  with  TIL in isolation in this  case.   The plant  would  be  of  no  value if  it  could  not  be  made functional.   EGL  wanted  to  buy   the  plant  in  working condition.   This could only be achieved by paying not  only the  price  of the plant, but also the fees for the  licence and the technical know-how for making the plant operational. Therefore,  the value of the plant will comprise of not only the  price paid for the plant but also the price payable for the  operation  licence and the technical know-how.  Rule  9  should be construed bearing this in mind. added) (Emphasis

     Significantly  Chapter  49 also includes  items  which have  substantial intellectual value as opposed to the value of  the paper on which it is put.  Newspapers,  periodicals, journals,  dictionaries etc.  are to be found in Chapter  49 wherein  maps,  plans  and  other  similar  items  are  also included,  while Chapter 97 talks about original engravings. It  is clear that intellectual property when put on a  media would  be regarded as an article on the total value of which customs duty is payable.

     To  put  it  differently, the legislative  intent  can easily  be  gathered by reference to the  Customs  Valuation Rules  and  the specific entries in the Customs Tariff  Act. The  value of an encyclopaedia or a dictionary or a magazine is  not only the value of the paper.  The value of the paper is  in fact negligible as compared to the value or price  of an encyclopaedia.  Therefore, the intellectual input in such

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items greatly enhance the value of the papers and ink in the aforesaid examples.  This means that the charge of a duty is on  the final product whether it be the encyclopaedia or the engineering or architectural drawings or any manual.

     Similar  would  be  the  position in  the  case  of  a programme  of  any kind loaded on a disc or a  floppy.   For example  in  the case of music the value of a popular  music cassette  is several times more than the value of the  blank cassette.   However,  if a pre-recorded music cassette or  a popular  film or a musical score is imported into India duty will  necessarily  have  to be charged on the value  of  the final  product.   In this behalf we may note that  in  State Bank  of  India vs.  Collector of Customs, Bombay  2000  (1) Scale  72, the Bank had, under an agreement with the foreign company, imported a computer software and manuals, the total value  of  which  was  US $ 4,084,475.  The  bank  filed  an application  for  refund of customs duty on the ground  that the basic cost of software was US $ 401.047.  While the rest of  the  amount  of  US $ 3,683,428 was payable  only  as  a licence  fee for its right to use the software for the  bank countrywide.   The claim for the refund of the customs  duty paid  on  the  aforesaid amount of US $  3,683,428  was  not accepted  by  this  Court as in its opinion,  on  a  correct interpretation  of Section 14 read with the rules, duty  was payable  on the transaction value determined therein and  as per Rule 9 in determining the transaction value there has to be  added  to  the price actually paid or  payable  for  the imported  goods, royalties and the licence fee for which the buyer  is  required  to  pay, directly or  indirectly  as  a condition of sale of goods to the extent that such royalties and  fees  are  not included in the price actually  paid  or payable.   This  clearly  goes to show that  when  technical material  is  supplied  whether in the form of  drawings  or manuals  the  same are goods liable to customs duty  on  the transaction value in respect thereof.

     It  is  misconception  to contend that what  is  being taxed  is intellectual input.  What is being taxed under the Customs  Act  read with Customs Tariff Act and  the  Customs Valuation Rules is not the input alone but goods whose value has  been enhanced by the said inputs.  The final product at the   time  of  import  is   either  the  magazine  or   the encyclopaedia  or  the engineering drawings as the case  may be.  There is no scope for splitting the engineering drawing or the encyclopaedia into intellectual input on the one hand and  the  paper  on which it is scribed on the  other.   For example, paintings are also to be taxed.  Valuable paintings are  worth  millions.   A  painting or  a  portrait  may  be specially  commissioned  or an article may be  tailor  made. This  aspect is irrelevant since what is taxed is the  final product  as  defined and it will be an absurdity to  contend that the value for the purposes of duty ought to be the cost of  the  canvas and the oil paint even though the  composite product, i.e., the painting is worth millions.

     It  will  be  appropriate  to note  that  the  Customs Valuation  Rules,  1988 are framed keeping in view the  GATT protocol and the WTO agreement.  In fact our Rules appear to be  an  exact copy of the GATT and WTO.  For the purpose  of valuation  under the 1988 Rules the concept of  transaction value  which was introduced was based on the aforesaid GATT protocol  and WTO agreement.  The shift from the concept  of price  of  goods, as was classically understood, is  clearly discernible in the new principles.  Transaction value may be

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entirely  different  from  the classic concept of  price  of goods.   Full  meaning has to be given to the rules and  the transaction  value  may  include many items  which  may  not classically  have  been  understood to be part of  the  sale price.

     The  concept that it is only chattel sold as  chattel, which  can  be regarded as goods has no role to play in  the present  statutory  scheme as we have already observed  that the  words  goods as defined under the Customs Act has  an inclusive  definition  taking within its ambit an  immovable property.   The  list of goods as prescribed by the law  are different  items  mentioned  in various chapters  under  the Customs  Tariff Act, 1997 or 1999.  Some of these items  are clearly items containing intellectual property like designs, plans etc.

     In the case of St Albans City and District Council vs. International  Computers Ltd.  (1996) 4 All ER 481 Sir  Iain Glidewell  in  relation to whether computer programme  on  a disc  would  be  regarded as goods observed at page  493  as follows:

     Suppose   I   buy  an   instruction  manual  on   the maintenance  and  repair of a particular make of  car.   The instructions are wrong in an important respect.  Anybody who follows them is likely to cause serious damage to the engine of  his  car.  In my view, the instructions are an  integral part  of the manual.  The manual including the instructions, whether  in a book or a video cassette, would in my  opinion be  goods  within  the meaning of the 1979  Act,  and  the defective  instructions  would  result in a  breach  of  the implied terms in s 14.

     If this is correct, I can see no logical reason why it should  not  also be correct in relation to a computer  disk onto  which  a program designed and intended to instruct  or enable  a computer to achieve particular functions has  been encoded.   If  the  disk is sold or hired  by  the  computer manufacturer,  but  the program is defective, in my  opinion there  would  be prima facie be a breach of the terms as  to quality  and fitness for purpose implied by the 1979 Act  or the 1982 Act.

     The above view, in our view, appears to be logical and also  in  consonance  with the Customs  Act.   Similarly  in Advent  Systems Limited vs.  UNISYS Corporation 925 F 2d 670 (3d  Cir  1991) it was contended before the Court in  United States  that  software referred to in the agreement  between the   parties  was  a  product   and  not  a  good   but intellectual   property  outside  the   ambit   of   Uniform Commercial  Code.   In the said Code, goods were defined  as all  things (including specially manufactured goods)  which are  moveable  at the time of the identification for  sale. Holding  that computer software was a good the court  held as follows:

     Computer  programs are the product of an intellectual process,  but  once  implanted  in   a  medium  are   widely distributed  to computer owners.  An analogy can be drawn to a  compact  disc recording of an orchestral rendition.   The music is produced by the artistry of musicians and in itself is  not  a good, but when transferred to a  laser-readable disc  becomes a readily merchantable commodity.   Similarly,

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when  a professor delivers a lecture, it is not a good, but, when transcribed as a book, it becomes a good.

     That  a  computer  program  may  be  copyrightable  as intellectual  property does not alter the fact that once  in the  form  of a floppy disc or other medium, the program  is tangible,  moveable  and available in the marketplace.   The fact  that  some  programs  may  be  tailored  for  specific purposes  need not alter their status as goods because the Code definition includes specially manufactured goods.

     We  are  in agreement with the aforesaid  observations and  hold that the value of the goods imported would  depend upon the quality of the same and would be represented by the transaction value in respect of the goods imported.

     It would not be correct, as was done in Leela Ventures case,  to take the entire contract value as being the  value of  the  imported goods.  What is the transaction  value  in respect thereof has to be ascertained.  In most of the other cases  this has been done by adopting about one-third of the contract  value  as  being  the  transaction  value  of  the imported goods for the purpose of levy of customs duty.

     In   Leela  Ventures  case   the   Commissioner   must re-determine  the  transaction  value of the  drawings  etc. imported  keeping  in view the terms of the  agreements  and then impose the levy.

     Re:  Limitation:

     The  next  submission on behalf of the appellants  was that  in  the  case of short levy or non-levy  of  duty  the normal  period  for issuing a notice seeking to realise  the difference  in the duty levied and imposable is that of  six months.  This period is extendable to five years only if the proviso  to  Section 28 (1) can be validly invoked.  It  was the case of the appellants that there was never an intention on  their part to evade duty.  Agreements entered into  with foreign  collaborators had been disclosed to the  Government of  India  who  had  approved the remittances  as  fees  for technical  services  rendered.   Payments had been  made  as directed  by the Reserve Bank of India by resorting to  Form A-2  and deducting tax at source on the remittances so made. Service  tax  which was payable was also deposited and  this clearly shows that the appellants bonafide believed that the value  of the drawings and other technical material imported was only nominal.

     While  relying on various decisions of this Court,  it was  submitted  that  the proviso to Section 28 (1)  of  the Customs  Act can only apply if there is a positive  inaction or  deliberate attempt to mislead the revenue.  On the facts of  the  present  case, it was submitted that  none  of  the ingredients  of the proviso would enable the enlargement  of the  limitation  from six months to five years was  present. Our attention was drawn to the cases of Collector of Central Excise,  Hyderabad  vs.  M/s Chemphar Drugs  and  Liniments, Hyderabad  (1989)  2  SCC  127 ,  Cosmic  Dye  Chemical  vs. Collector  of  Central Excise, Bombay (1995) 6 SCC 117,  M/s Padmini Products vs.  Collector of Central Excise, Bangalore (1989) 4 SCC 275, Tamil Nadu Housing Board vs.  Collector of Central  Excise, Madras and Another 1995 Supp (1) SCC 50 and Collector  of Central Excise vs.  H.M.M.  Limited 1995  (76) ELT  497.   In all these cases the Court was concerned  with

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the  applicability  of  the proviso to Section 11-A  of  the Central  Excise Act which, like in the case of Customs  Act, contemplated  the  increase  in  period  of  limitation  for issuing  a  show-  cause notice in the case of  non-levy  or short-levy to five years from a normal period of six months. The said Section 11A along with the proviso reads as under:

     Section  11A.   Recovery of duties not levied or  not paid or short-levied or short-paid or erroneously refunded.- (1)  When any duty of excise has not been levied or paid  or has been short-levied or short-paid or erroneously refunded, a  Central  Excise Officer may, within six months  from  the relevant  date,  serve notice on the person chargeable  with the duty which has not been levied or paid or which has been short-levied  or  short-paid  or  to  whom  the  refund  has erroneously  been  made, requiring him to show cause why  he should not pay the amount specified in the notice:

     Provided  that  where any duty of excise has not  been levied  or  paid or has been short-levied or  short-paid  or erroneously  refunded  by reason of fraud, collusion or  any wilful   mis-statement   or  suppression    of   facts,   or contravention of any of the provisions of this Act or of the rules  made thereunder with intent to evade payment of duty, by  such  person  or  his  agent,  the  provisions  of  this sub-section  shall  have effect, as if, for the  words  six months, the words five years were substituted.

     Explanation.-  Where  the  service of  the  notice  is stayed by an order of a court, the period of such stay shall be  excluded in computing the aforesaid period of six months or five years, as the case may be.

     (2)   The   Central  Excise   Officer   shall,   after considering  the representation, if any , made by the person on  whom  notice is served under sub-section (1),  determine the amount of duty of excise due from such person (not being in  excess  of  the  amount specified  in  the  notice)  and thereupon such person shall pay the amount so determined.

     (3) For the purposes of this section,-

     (i)  refund  includes  rebate of duty of  excise  on excisable  goods  exported  out  of India  or  on  excisable materials  used  in  the  manufacture  of  goods  which  are exported out of India;

     (ii) relevant date means,-

     (a)  in  the case of excisable goods on which duty  of excise  has not been levied or paid or has been short-levied or short-paid

     (A)  where  under  the  rules made under  this  Act  a periodical  return, showing particulars of the duty paid  on the  excisable goods removed during the period to which  the said  return relates, is to be filed by a manufacturer or  a producer  or a licensee of a warehouse, as the case may  be, the  date  on which such return is so filed;  (B)  where  no periodical  return  as aforesaid is filed, the last date  on which  such return is to be filed under the said rules;  (C) in  any other case, the date on which the duty is to be paid under this Act or the rules made thereunder;

     (b)  in  a case where duty of excise is  provisionally

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assessed  under  this Act or the rules made thereunder,  the date  of  adjustment  of  duty after  the  final  assessment thereof;

     (c)  in  the case of excisable goods on which duty  of excise  has  been  erroneously refunded, the  date  of  such refund.

     While  interpreting the said provision in each of  the aforesaid  cases,  it  was observed by this Court  that  for proviso  to  Section  11A can be invoked, the  intention  to evade  payment of duty must be shown.  This has been clearly brought  out  in Cosmic Dye Chemical case (supra) where  the Tribunal  had  held  that so far as  fraud,  suppression  or mis-statement  of facts was concerned the question of intent was  immaterial.   While  dis- agreeing with  the  aforesaid interpretation this Court at page 119 observed as follows:

     6.   Now so far as fraud and collusion are concerned, it  is  evident that the requisite intent, i.e.,  intent  to evade  duty  is  built  into these very words.   So  far  as misstatement or suppression of facts are concerned, they are clearly  qualified by the word wilful preceding the  words misstatement  or  suppression  of facts which  means  with intent  to evade duty.  The next set of words contravention of  any  of the provisions of this Act or rules  are  again qualified by the immediately following words with intent to evade  payment  of duty.  It is, therefore, not correct  to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for   the   purpose  of  the   proviso  to   Section   11-A. Misstatement or suppression of fact must be wilful.

     The  aforesaid observations show that the words  with intent  to  evade payment of duty were of utmost  relevance while  construing  the  earlier   expression  regarding  the mis-statement  or  suppression  of facts  contained  in  the proviso.  Reading the proviso as a whole the Court held that intent  to  evade  duty was essentially before  the  proviso could be invoked.

     Though  it was sought to be contended that Section  28 of  the  Customs Act is in pari materia with Section 11A  of the  Excise Act, we find there is one material difference in the  language  of the two provisions and that is  the  words with  intent to evade payment of duty occurring in proviso to  Section 11A of the Excise Act are missing in Section  28 (1)  of the Customs Act and the proviso in particular.   The said sub-section 28(1) of the Customs Act reads as follows:-

     28.  Notice for payment of duties, interest etc.- (1) When  any duty has not been levied or has been  short-levied or  erroneously  refunded, or when any interest payable  has not been paid, part paid or erroneously refunded, the proper officer may,-

     (a)  in the case of any import made by any  individual for his personal use or by Government or by any educational, research  or charitable institution or hospital, within  one year;

     (b) in any other case, within six months,

     from  the  relevant date, serve notice on  the  person

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chargeable  with  the  duty or interest which has  not  been levied  or charged or which has been so short-levied or part paid  or  to  whom  the refund has  erroneously  been  made, requiring him to show cause why he should not pay the amount specified in the notice.

     Provided  that  where any duty has not been levied  or has  been short- levied or the interest has not been charged or  has  been  part paid or the duty or  interest  has  been erroneously  refunded  by reason of collusion or any  wilful mis-statement or suppression of facts by the importer or the exporter  or  the  agent  or employee  of  the  importer  or exporter,  the  provisions  of this sub-section  shall  have effect  as if for the words one year and six months, the words five years were substituted.

     Explanation.-  Where  the  service of  the  notice  is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or six months or five years, as the case may be.

     The  proviso  to Section 28 can inter alia be  invoked when  any duty has not been levied or has been  short-levied by  reason  of  collusion  or any  wilful  mis-statement  or suppression  of  facts by the importer or the exporter,  his agent  or  employee.   Even if both  the  expressions  mis- statement and suppression of facts are to be qualified by the  word  wilful, as was done in the Cosmic Dye  Chemical case while construing the proviso to Section 11A, the making of such a wilful mis-statement or suppression of facts would attract the provisions of Section 28 of the Customs Act.  In each  of  these  appeals it will have to be seen as  a  fact whether  there has been a non-levy or short-levy and whether that  has  been  by  reason  of  collusion  or  any   wilful mis-statement or suppression of facts by the importer or his agent or employee.

     In  the  present  cases,   the  technical  literature, drawings, manuals etc.  were imported through courier and in one  case  through Mr.  Kato.  In each of these cases it  is only  a  nominal  value which was disclosed at the  time  of importation.   All this technical literature, drawings  etc. were  brought  and  cleared  as personal  baggage.   In  our opinion,  to examine whether the proviso to Section 28A  (1) was  validly  invoked it is necessary to see the  provisions relating to the clearance of the personal baggage.

     Chapter  XI  contains   special  provisions  regarding baggage,  goods  imported or exported by post,  and  stores. Section 77 of the Customs Act provides that the owner of any baggage  shall,  for  the  purpose of clearing  it,  make  a declaration  of its contents to the proper officer.  Section 81  enables the Central Board of Excise and Customs to  make regulations  in  respect of baggage and the said Section  81 reads as follows:

     Section  81.  Regulations in respect of baggage.- The Board may make regulations,

     (a) providing for the manner of declaring the contents of any baggage;  (b) providing for the custody, examination, assessment  to duty and clearance of baggage;  (c) providing for  the transit or transhipment of baggage from one customs station to another or to a place outside India.

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     Under  Rule 10 of the Customs Valuation (Determination of  Price  of Imported Goods) Rules 1988, the importers  are required  to  furnish, inter alia, a declaration  disclosing full  and  accurate  details relating to the  value  of  the imported  goods and any other statement, any information  or document  etc.  as considered necessary for determination of the value of imported goods.

     Under  the said Section baggage declaration forms have been  prescribed  which inter alia require the owner of  the baggage  to disclose the description of the goods as well as the value in respect thereof.  It is as owner of the baggage containing  the drawings and other technical literature  and manual  etc.  that the couriers cleared the goods.  They may not  be the owners of the drawings etc.  but for the purpose of  clearance of the baggage, containing the said  articles, the  courier was the owner of the baggage.  The Tribunal has held,  and in our opinion correctly, that the sender as well as  the receiver were aware of the value of the goods.   The courier  acted  as the conduit or the agent and  would  only have declared such value in respect of the goods imported as must  have  been instructed by the sender and  or  receiver. The  declaration by the courier of the value of the drawings in  the Leela Ventures case and other technical material  in the  case  of  other appellants must have been done  by  the courier  either at the behest of the sender or the  receiver or at his own behest.  In either case the declaration of the value  of  the drawings as being very nominal was clearly  a mis-statement  or a mis-representation of facts.   According to  the baggage declaration forms it is for the passenger to give  value of the goods being brought in by him.  When  the value  of the goods which were dutiable in the present cases was  shown as only nominal, while in actual fact the correct value  was  much more, there was clearly an attempt  on  the part  of  the  passenger, namely, the courier, to  have  the goods  cleared  through  customs   authorities  by   grossly undervaluing the value thereof.  The courier gave a specific value of one dollar in respect of the drawings when both the sender  and  the  appellants  knew  fully  well  as  to  how important  and  valuable these goods were.  In the  case  of Leela  Ventures  it  was on the basis of  the  architectural drawings that the renovation etc.  was to take place whereas the   technical  material  made   available  to  the   other appellants was necessary for their purpose.  We have already held  that the value of the goods so imported was not merely the cost of the price of the media but also the intellectual input  on the media as represented by architectural drawings or  users manuals etc.  The value of architectural  drawings was  not merely the cost of the paper and the ink but  would be  much  more.  In some of the cases we were informed  that the  appellants  had  themselves   volunteered  that   about one-third  of the total amount payable to the  collaborators should  be  taken as a figure representing  the  transaction value of the technical material so imported.

     The Tribunal as well as the Commissioner were right in coming to the conclusion that there was a wilful suppression or  mis-statement  of the value of the goods  imported  and, therefore,  the  respondents  were entitled  to  invoke  the provisions  of the proviso to Section 28 (1) of the  Customs Act and issue show-cause notice even if period of six months importation  had expired but before the expiry of five years thereof  in  the  case of all the appellants except  in  the cases  of  M/s H&R Rolling Mill Engineers Pvt.  Ltd.   (C.A. No.1493  of 2000) and M/s Videocon VCR Ltd.  (C.A.   No.3632

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of 2000).

     Re:  Whether heading No.  98.03 appliable

     Prior  to 26th January, 1995 goods which were imported by  the appellants through couriers were taxed under Chapter 98  of the Customs Tariff Act.  Heading No.  98.03  provides that  all  dutiable articles, imported by a passenger or  a member of a crew in his baggage was taxable at the standard rate  of  150 per cent.  This rate of duty was,  of  course, subject  to  such exemptions which were issued from time  to time.

     With  effect  from 26th May, 1995, when the  President gave  his  assent  to the Finance Bill,  1995,  the  Customs Tariff  Act stood amended as a result whereof goods imported through courier services were exempted from the operation of Chapter  98.  A circular dated 30th May, 1995 issued by  the Ministry  of Finance, Govt.  Of India specifically  provided that  henceforth imports by couriers shall not be classified as  baggage  under  heading  No.  98.03.   The  practice  of charging  a  uniform  duty  at the rate of 80  per  cent  ad valorem  on  articles imported through couriers in terms  of exemption  notification  dated  1st March, 1994  was  to  be discontinued   with  immediate   effect.   Couriers  Imports (Clearance)  Regulations,  1995 were framed and notified  on 26th  May,  1995  as a result of which the  imports  through courier  were to be classified as imports falling under  the respective customs tariffs and headings.  One of the results of  the  framing of the said Regulations was that the  goods imported  by  couriers  were  to   be  divided  into   three categories  which  are  (a) documents (b) samples  and  free gifts and (c) dutiable goods.

     In  connection  with  the imports made, prior  to  the promulgation  of  the  Couriers   Regulation,  the  learned counsel submitted that the respondents had erred in assuming that the disputed material had been brought into the country as  passenger baggage.  It was contended that the appellants had not specified the manner in which the material was to be sent  by  the foreign collaborators.  It was submitted  that Entry  98.03  was a special provision providing for  special procedure  and  an  omnibus rate of duty applicable  to  all goods  imported  by  passengers or a crew  member  as  their baggage.   This  provision,  it was  contended,  was  wholly inapplicable to corporate entities.  The appellants were not natural  persons  and  they were quite  incapable  of  being treated  as  passengers.   In any event, it  was  submitted, after clearance of the disputed items there was no scope for the   respondents  to  initiate   proceedings  against   the appellants  or  in respect of the material alleged  to  have been  imported and the said proceedings, if any, could  have been  initiated  only against the passenger from  whom  less duty  than  what was legitimate was recovered, namely,  from the courier.

     We are unable to agree with the aforesaid contentions. Heading  of  Chapter  98  clearly shows  that  the  same  is applicable  to passengers baggage.  As a matter of fact, in each  of the present cases, the technical material which was received  was cleared as part of passenger baggage.  Whether the  courier  or the person bringing the technical  material was  a  person  nominated  by the  collaborator  or  by  the appellants  is  of  no consequence because  the  levy  under Section  12 of the Customs Act is on the goods imported into

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India.  In other words, the subject matter of the tax is not the  person importing or exporting but the subject matter of the  tax is the goods imported.  If such goods are  imported as  a  part  of the baggage then by virtue  of  heading  No. 98.03  rate of duty prescribed therein has to be paid.   The underlying  principle  prior  to May, 1995  in  relation  to taxing  the  passengers baggage was that the  said  baggage which  contained  dutiable  articles  was not  to  be  taxed separately  as articles but the baggage as a composite  unit was  to be taxed in its entirety, after giving a credit  for the free allowance which was available to the passenger.

     It  cannot be denied that the imports were made by the appellants.   The courier or any other passenger may be  the mode  or  the manner of physical importation of  the  goods, just  as  the  said goods may have been  imported  by  post. Section  28  of  the  Customs   Act,  however,  enables  the Government  to  issue  notice to the persons  importing  the articles  into India.  It is by reason of the  collaborators agreements  that  the drawings, manuals, technical  material etc.   were  sent  by  the   foreign  collaborators  to  the appellants  and it is the appellants who were the  importers who  alone  could  be  made liable in case  of  non-levy  or short-levy  of customs duty.  The word importer in Section 2  (26)  of  the Customs Act includes the owner and  as  the appellants  were  the owners of the goods,  certainly  after these  were received by them, it is only from them that  the short-fall  in  duty levied could have been recovered.   The parties  took a chance in importing the articles through the courier.  Initially they were successful in having the goods cleared  by  declaring a nominal value in  respect  thereof. They  may  not  have been able to do this if  the  technical material  and  goods  had been imported, not as  a  part  of passengers  baggage,  but in the ordinary course of  import either through post or by filing bill of entry.

     We,  therefore,  concur  with the  conclusion  of  the Tribunal and the Commissioner that the provisions of Chapter 98 were rightly applied on the facts of these cases.

     CIVIL  APPEAL  NO.  3632 OF 2000 [M/s.   Videocon  VCR Ltd.  vs.  Commissioner of Customs]

     The   appellant   had  entered    into   a   technical collaboration  agreement  with  M/s.   Toshiba  Corporation, Japan  on 13th October, 1989.  The total contract value  was hundred  million  Japanese Yen as fees which was settled  at seventy   million  Japanese  Yen.    Apart  from   providing technical information, M/s.  Toshiba Corporation was also to render  consulting  and training services and had  permitted made  use of Toshiba patent.

     With the approval of Reserve Bank of India, remittance was made in Form A-2 and service tax paid.@@          JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

     On   29th   June,  1992   Mr.   Kato,   presumably   a representative  of M/s.  Toshiba, brought with him to  India drawings  and designs as part of his personal baggage.  This was cleared without payment of duty.

     On  26th  May 1997, a show cause notice was issued  to M/s.   Videocon alleging that duty was payable under Chapter 98  heading  No.  98.03 and the appellant was  charged  with mis-declaration   and   suppression   which   entitled   the

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invocation of extended period of limitation of five years.

     Reply  to show cause notice was filed in which it was, inter  alia,  stated  that there was no  mis-declaration  or suppression   and  that  the   drawings  and  designs   were classifiable  under heading No.  49.06 of Chapter 49 and  in 1992-93  tariff,  import  of such drawings and  designs  was free.

     On  26th March, 1999, an order was passed against  the appellant  classifying  the  drawings   and  designs   under sub-heading  No.   4911.99  and  diagrams  and  films  under sub-heading  3705.90.   No reason was given as to why  these drawings and designs were not classifiable under heading No. 49.06.   The entire contract value was taken as a  valuation of  technical information received and duty and penalty  was imposed.

     On  appeal  to  the Tribunal, the appellant  met  with partial  success  to  the  extent  that  the  valuation  was determined  at  one-third of the contract value  of  hundred million  Yen,  even  though the settled  value  was  seventy million  Yen.   The  case of the appellant  that  import  in 1992-93  was  free  was  not   considered  as  the  Tribunal proceeded  on  the  basis that all imports were  during  the period  1993-96  when under Chapter 49, import was  dutiable but by notification the tariff rate was less or nil.

     It  was  contended  by Mr.  Bulchandani on  behalf  of appellant  that at the time when the drawings were  imported into  India, the import of the same was free and even if the drawings  were to be regarded as part of the baggage of  Mr. Kato, thereby applying the provisions of heading No.  98.03, even then no duty could be imposed.

     It was further contended that in any case the extended period of limitation of five years could not be attracted in the present case.

     We  find  force  in the contention of  the  appellant. Heading  No.   98.03  of Chapter 98 of the Schedule  in  the Tariff  Act  imposes  a prescribed duty of 150 per  cent  on dutiable articles imported by a passenger or a member of a crew  in  his  baggage.  What is, therefore, to be  seen  is whether  the  drawings and designs were  dutiable  articles. Heading  No.   49.06 under Chapter 49 of the Customs  Tariff for the year 1992-93 provides as follows:

     Plans  and  drawings for architectural,  engineering, industrial,  commercial, topographical or similar  purposes, being   originals  drawn  by   hand;   hand-written   texts; photographic  reproductions  on sensitised paper and  carbon copies of the foregoing

     The  rate of duty specified therein in Column (4)  was free.   According  to Section 78 of the Customs  Act,  the rate of duty and tariff value applicable to baggage shall be the  rate  and  valuation in force on the date  on  which  a declaration  is  made for clearing the baggage.  It was  the contention  of the learned counsel for the appellant that as articles  in  question would fall under heading  No.   49.06 they  were  free  of  duty.  Therefore, they  could  not  be regarded  as  dutiable articles and its value could  not  be included  in the baggage of the passenger for the purpose of levy of customs duty.

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     While  dealing with the provisions of the Excise  Act, this  Court  in Collector of Central Excise,  Hyderabad  Vs. Vazir  Sultan  Tobacco  Co.   Ltd.    1996(83)  ELT  3  (SC) referring  to  an  earlier decision in the case  of  Wallace Flour  Mills  Company Vs.  Collector of Central Excise  1989 (44)  ELT 598 had observed that if by virtue of an exemption notification  the rate of duty was reduced to nil, the goods specified  in  the  Tariff Act would still  be  regarded  as excisable goods on which nil rate of duty was payable.

     It  appears to us that the aforesaid decisions,  which were  sought to be invoked by the respondent in an effort to submit  that the drawings and designs, which came as a  part of  passenger  baggage  were dutiable goods,  would  not  be applicable.   In Vazir Sultan and Wallace Flour Mills  cases (supra),  this Court considered the definition of excisable goods in Section 2(d) of the Central Excise Act, 1944 which was as follows:

       ’Excisable goods’ means goods specified in the [the First  Schedule  and  the Second Schedule]  to  the  Central Excise  Tariff  Act, 1985 (5 of 1986) as being subject to  a duty of excise and includes salt".

     Under the Customs Act, there are two definitions which are relevant.  Section 2(22) defines goods as follows:@@     JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

     Goods includes- (a) vessels, aircrafts and vehicles; (b)  stores;   (c)  baggage;  (d)  currency  and  negotiable instruments;  and (e) any other kind of movable property.

     In  addition thereto, Section 2(14) defines  dutiable goods as follows:

     dutiable  goods means any goods which are chargeable to duty and on which duty has not been paid.

     Under  the  Central Excise Act, 1944 in definition  of words  excisable  goods  under   Section  2(d),  the  very specification  or inclusion of goods in the First and Second Schedule  of  the Central Excise Tariff Act would make  them excisable goods subject to duty.  Under the Customs Act, the provisions  seem to be somewhat different.  While by  virtue of  Section  2(22)  all kinds of movable property  would  be goods  but it is only those goods which would be  regarded as dutiable goods under Section 2(14) which are chargeable to duty and on which duty has not been paid.  The expression chargeable  to  duty  on  which duty  has  not  been  paid indicates that goods on which duty has been paid or on which no  duty is leviable, and therefore no duty is payable, will not  be regarded as dutiable goods.  It is only if payment of  duty  is  outstanding  or leviable that  goods  will  be regarded as dutiable goods.

     Section  12 of Customs Act provides that the duties of customs  shall  be levied at such rates as may be  specified under  the Customs Tariff Act.  When the Customs Tariff  Act itself  provides  that  the import of drawings  and  designs under  heading  No.   49.06 is free, it must  follow  that these   drawings  and  designs,   though  goods,  were   not chargeable  to  duty.   In  view of the  difference  in  the language  of  the Excise and Customs Acts, the decisions  in the  cases  of Vazir Sultan and Wallace Flour Mills  (supra)

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may  not  be  very  apposite  and  if  no  customs  duty  is chargeable  either by reason of tariff not providing for  it or  because of the exemption notification, those goods  will not  be  regarded as dutiable goods on which duty  has  not been paid.  It is sufficient in the present case to observe that  the  drawings and designs which were imported  by  the appellant  were  correctly  classifiable under  heading  No. 49.06 and the tariff itself providing that the import of the same  is  free,  the  said drawings  and  designs  were  not dutiable  articles  and,  therefore,  no  customs  duty  was leviable  thereon  even as a part of the passenger  baggage. On  this short ground alone the appeal of Videocon has to be allowed.

     C.A.   No.   1493  of  2000 [M/s H &  K  Rolling  Mill Engineers Pvt.  Ltd.  Vs.  The Commissioner of Customs]

     The  appellant is a joint venture company.  Sixty  per cent of its shareholders are Indians while forty per cent of the  shares  are  held  by H & K,  Germany.   The  appellant supplies technology to Bhilai Steel Plant and it is required to  pay to the German company licence fee of DM 2,40,000 and engineering fee of DM 60,000.

     The appellant prepared designs and drawings which were sent to H & K, Germany for the limited purpose of getting it checked  and  approved.   It is stated  that  the  appellant received a fax message from the German company approving the designs  and  drawings.   Copy of the designs  and  drawings which  had been prepared and sent by the appellant came back to  India through courier containing the stamp and  approval of  the  German  company.   Like in the case  of  M/s  Leela Ventures  income tax was deducted at source for the payments made  to the German company after permission of the  Reserve Bank of India had been obtained.

     In  the  show  cause notice which was  issued  it  was proposed  to regard the drawings which had come through  the courier at DM 60,000 equivalent to Rs.  11,03,800/- as being subject  to  levy of duty.  In the show cause notice it  was stated  that  these technical drawings were supplied by  the German  company  and  being goods imported  through  courier services were classifiable under heading No.  98.03 and duty and penalty was payable in respect thereof.

     Unlike  other  cases, we find that these  drawings  in respect  of  which  customs duty had been  levied  were  not something which had originated from Germany.  These drawings were  prepared  by  the Indian company of which  the  German company  was  a shareholder.  These drawings were  no  doubt sent  to Germany for approval but the agreement between  the parties  does  not  show that the payment of DM  60,000  was directly  relatable  or  attributable to  the  approval  and despatch  of  the  said  drawings   to  India.   Under   the agreements  between  the parties apart from the licence  fee payable  by  the Indian company, for the use of the name  of the German company and engineering fee, money was payable in terms  of the agreement.  As we have already observed  there is  nothing  to  show  that this amount  of  DM  60,000  was relatable  only  to  the approval of the  said  designs  and drawings.

     Be  that  as it may the value of these drawings  which belong  to  the Indian company were merely approved  by  the

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German   company  could  only  be   nominal  and  under   no circumstances the said value could be regarded as DM 60,000. The nominal value disclosed by the courier, on the facts and circumstances of this case, could not, therefore, be said to be  incorrect.   The  order  passed  against  the  appellant levying  the  customs duty and penalty is, therefore, to  be set aside.  Ordered accordingly.

     Conclusion:

     As  a result of the aforesaid discussion, Civil Appeal No.   1493 of 2000 of M/s H & K Rolling Mill Engineers  Pvt. Ltd.  and Civil Appeal No.  3632 of 2000 of M/s Videocon VCR Ltd.   are  allowed and the orders of the  Commissioner  and Customs, Excise & Gold (Control) Appellate Tribunal in their cases are set aside.  The other appeals are dismissed but in the case of Leela Ventures, out of the total contract value, the Commissioner will determine the transaction value of the drawings,  designs,  etc.  imported through the courier  and then  impose the levy thereon.  There will be no order as to costs.

     ..J.  [ B.N.  Kirpal ]