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Customs Act, 1962-Section 2(22) (c) and (e) 12, 24 & 28(1)-Customs valuation (Determination of Price of Imported Goods) Rules, 1988-Rules 3&4- Customs duty-Levy of-On import of drawings, designs etc.-In the course of transfer of technology with foreign collaborators-Held, customs duty can be levied, since they are goods-Customs Tariff Act, 1995-Chapter 49. Sections 12 & 14-Rules 3,4, &9-Customs duty-On the imported drawings and designs, etc.-Valuation of-Plea that duty can be levied only on the media- Held, intellectual property when put on a media would be regarded as an article and hence duty is payable on its total value. Section 28(1) proviso-Rule 10-Customs duty-Non-payment of- Issuance of notice-After limitation period-Plea that notice barred by limitation, in the absence of intention to evade duty-Willful suppression or miss- statement of value of the imported goods, proved-Held, notice not barred by limitation. Sections 2 (14) , 2(22) & 12-Customs duty-Levy of-Import of drawings and designs etc.-Without payment of duty-Duty levied on entire contract value- Tariff provided that import on the goods was free of duty- Held, drawings and designs were not dutiable articles–Central Excise Act, 1944-Section 2(d)-Customs Tariff Act, 1995-Heading No. 49.06 Section 28(1)-Customs duty-Levy of–On the import of drawings and designs etc.-Drawings originally sent from India, later imported after approval of the same from the foreign collaborator-Held, duty not leviable. Customs Tariff Act, 1995-Heading No. 98.03-Customs duty-Levy of-Import of technical material by courier-Clearance of–A part of passenger baggage- Held, duty has to be paid on such goods by virtue of the Heading. Appellants, public corporations engaged in the manufacture of excisable goods, entered into technical collaboration with foreign companies. As part of the fulfilment of the contract, the contracting parties abroad, sent drawings designs etc. to India through professional couriers or by post parcels. In Civil Appeal No. 3632 of 2000 these were imported by hand through a passenger. In Civil Appeal No. 1493 of 2000, the drawings sent from India were approved by the foreign company and then sent to India. At the time of importation only the nominal value of the drawings etc., were declared. It came to the notice of the respondent that the appellants had imported drawings, designs, etc., on remitting the consideration for the same, and they had been cleared without proper declaration and without payment of correct amount of duty The respondents issued show cause notices under Section 28(1) r/w Section 24 of the Customs Act, 1962, for levying customs duty on the drawings, designs, etc. Appellants replied that since the imported materials were not `goods’, there could not be any excise duty on service since the remittance were in form A-2 and tax at source under the Income Tax Act was paid in respect of the contracts; and that the demand was barred by limitation. The Commissioner demanded duty and imposed penalty on the appellants. Appeal of the appellants before the Tribunal was dismissed. In appeal to this Court it was contended that the transaction between the appellants and their respective foreign collaborators was one of transfer of technology and hence excise duty cannot be levied on the value of ideas which are not goods; and that the contracts in these cases were for services on the basis of which permission for release of foreign exchange was obtained from Reserve Bank of India; and that even if what was imported were goods, valuation of the same had to be nominal only on the media; and that the show cause notices which were issued were barred by time inasmuch as the extended period of limitation could not be availed as the appellants had never intended to evade duty; and that the imports through the courier could not be governed by heading No. 98.03 of the Customs Tariff Act In Civil Appeal No. 3632 of 2000 appellant contended that at the time when the drawings were imported, the import of the same was free of duty and duty could not be levied even as part of the passenger baggage. Allowing Civil Appeal Nos. 3632 of 2000 and 1493 of 2000 and dismissing the other appeals, the Court. HELD : 1.1. Drawings, plans, manuals etc., specified in Chapter 49 of the Custom Tariff Act, 1995 are 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 i.e., Customs Act, 1962 and Customs Tariff Act together, there is no doubt that what has been imported into India by the appellant collaborators were goods even though the tangible articles so imported contained information or knowledge for use by the appellants. [627-D] 1.2. In view of the clear provisions of the Customs Act and the Customs Tariff Act. whenever any goods of movables of 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. [627-F] 1.3. The moment the information or advice is put on a media, whether papers of 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. [628-C] 1.4. 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. The appellants had represented to the Reserve Bank that the collaborators were rendering service and no 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 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. |628-G-H; 629-A| The Assistant Sales Tax Officer and Others v. B.C. Kame, Proprietor Kame, Proprietor Kame Photo Studio, [1977] I SCC 634 and Everest Copiers v. State of Tamil Nadu, [1996] 5 SCC 390, distinguished. State of Himachal Pradesh v. Associated Hotels of India Ltd., (1972) 29 STC 474; State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., (1958) 9 STC 353; Slate of Tamil Nadu v. Anandam Viswanathan, |1989] 1 SCC 613; Hindustan Shipyard Ltd. v. State of U.P., [2000] 6 SCC 579; Rainbow Colour Lab & Anr v. State of M.P. and Others, [2000] 2 SCC 385; Hindustan Aeronautics Ltd v. State of Karnataka, [1984] 1 SCC 706 and Builder’s Association of India and Others v. Union of India & Others, [1989] 2 SCC 645, referred to Deta Nominees Pty. Lit. v. Viscount Plastic Products Ply. Ltd., (1979) VR 167; Wilhelm Winter; Cynthia Zheng v. G.P. Putnam’s Sons, 938 F. 2nd 1033 9th Cir. (1991); Robinson v. Graves (1935) KB 579 and Lee v. Griffin, (1861) 1 B & S 272, referred to. `Contract of Sale of Goods’, by Benjamin, Third Edition, referred to. 2.1. Intellectual property, when put on a media, would be regarded as an article on the total value of which customs duty is payable. 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 items greatly enhance the value of the papers and ink. The charge of a duty is on the final product whether it be the encyclopaedia or the engineering or architectural drawing or any manual. [634-B-C] 2.2. 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 cither the magasine 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. [635-A-C] 2.3. The shift from the concept of price of goods, as was classically understood, is clearly discernible in the new principles. Transaction value may be 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. It would not be correct, to take the entire contract value as being the value of the imported goods. [635-E] M/s Gannon Dunkerley and Co. and Others v. State of Rajasthan and Others, [1993] 1 SCC 364; Collector of Customs (Prev.) Ahmedabad v. Essar Gujarat Ltd., (1996) 88 ELT 609 S.C. and State Bank of India v. Collector of Customs, Bombay, [2000] 1 SCALE 72, referred to. St. Albans City and District Council v. International Computers Ltd., (1996) 4 all ER 481 and Advent Systems Ltd. v. UNISYS Corporation, (925) F 2nd 670 3rd Cir (1991), referred to. 3.1. 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 it period of six months importation had expired but before the expiry of five years thereof. [643-B] 3.2. 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’, the making of such a wilful mis-statement or suppression of facts would attract the provisions of Section 28 of the Customs Act [641-B-C] Collector of Central Excise, Hyderabad v. M/s Chemphar Drugs and Liniments, Hyderabad, [1989] 2 SCC 127; Cosmic Dye Chemical v. Collector of Central Excise, Bombay, [1995] 6 SCC 117; M/s Padmini Products v. Collector of Central Excise. Bangalore, [1989] 4 SCC 275; Tamil Nadu Housing Board v. Collector of Central Excise. Madras and Another, [1995] suppl. 1 SCC 50 and Collector Central Excise v. H.M.M. Ltd., (1995) 76 ELT 497, referred to. 4. In 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 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 credit for the free allowance which was available to the passenger. [644-D-F] 5.1. In Civil Appeal No. 3632 of 2000, 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. [648-E] 5.2. 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 on 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. [647-H; 648-A-B] Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Co. Ltd., (1996) 83 ELT 3 SC and Wallace Flour Mills Company v. Collector Central Excise, (1989) 44 ELT 598, referred to. 6. The value of drawings in Civil Appeal No. 1493 of 2000, which belong to the Indian company were merely approved by the German company could only be nominal and under no circumstances the said value could be regarded as DM 60,000. The nominal value disclosed by the courier, on the facts and circumstances of the case, could not, therefore, be said to be incorrect. [649-F] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 821 of 2000.

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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
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
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
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
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
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
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
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.
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
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

 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
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:

 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;

 (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
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
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
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,
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
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
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
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.

 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
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
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
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.

 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)
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
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 ]
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Discussion

One thought on “Customs Act, 1962-Section 2(22) (c) and (e) 12, 24 & 28(1)-Customs valuation (Determination of Price of Imported Goods) Rules, 1988-Rules 3&4- Customs duty-Levy of-On import of drawings, designs etc.-In the course of transfer of technology with foreign collaborators-Held, customs duty can be levied, since they are goods-Customs Tariff Act, 1995-Chapter 49. Sections 12 & 14-Rules 3,4, &9-Customs duty-On the imported drawings and designs, etc.-Valuation of-Plea that duty can be levied only on the media- Held, intellectual property when put on a media would be regarded as an article and hence duty is payable on its total value. Section 28(1) proviso-Rule 10-Customs duty-Non-payment of- Issuance of notice-After limitation period-Plea that notice barred by limitation, in the absence of intention to evade duty-Willful suppression or miss- statement of value of the imported goods, proved-Held, notice not barred by limitation. Sections 2 (14) , 2(22) & 12-Customs duty-Levy of-Import of drawings and designs etc.-Without payment of duty-Duty levied on entire contract value- Tariff provided that import on the goods was free of duty- Held, drawings and designs were not dutiable articles–Central Excise Act, 1944-Section 2(d)-Customs Tariff Act, 1995-Heading No. 49.06 Section 28(1)-Customs duty-Levy of–On the import of drawings and designs etc.-Drawings originally sent from India, later imported after approval of the same from the foreign collaborator-Held, duty not leviable. Customs Tariff Act, 1995-Heading No. 98.03-Customs duty-Levy of-Import of technical material by courier-Clearance of–A part of passenger baggage- Held, duty has to be paid on such goods by virtue of the Heading. Appellants, public corporations engaged in the manufacture of excisable goods, entered into technical collaboration with foreign companies. As part of the fulfilment of the contract, the contracting parties abroad, sent drawings designs etc. to India through professional couriers or by post parcels. In Civil Appeal No. 3632 of 2000 these were imported by hand through a passenger. In Civil Appeal No. 1493 of 2000, the drawings sent from India were approved by the foreign company and then sent to India. At the time of importation only the nominal value of the drawings etc., were declared. It came to the notice of the respondent that the appellants had imported drawings, designs, etc., on remitting the consideration for the same, and they had been cleared without proper declaration and without payment of correct amount of duty The respondents issued show cause notices under Section 28(1) r/w Section 24 of the Customs Act, 1962, for levying customs duty on the drawings, designs, etc. Appellants replied that since the imported materials were not `goods’, there could not be any excise duty on service since the remittance were in form A-2 and tax at source under the Income Tax Act was paid in respect of the contracts; and that the demand was barred by limitation. The Commissioner demanded duty and imposed penalty on the appellants. Appeal of the appellants before the Tribunal was dismissed. In appeal to this Court it was contended that the transaction between the appellants and their respective foreign collaborators was one of transfer of technology and hence excise duty cannot be levied on the value of ideas which are not goods; and that the contracts in these cases were for services on the basis of which permission for release of foreign exchange was obtained from Reserve Bank of India; and that even if what was imported were goods, valuation of the same had to be nominal only on the media; and that the show cause notices which were issued were barred by time inasmuch as the extended period of limitation could not be availed as the appellants had never intended to evade duty; and that the imports through the courier could not be governed by heading No. 98.03 of the Customs Tariff Act In Civil Appeal No. 3632 of 2000 appellant contended that at the time when the drawings were imported, the import of the same was free of duty and duty could not be levied even as part of the passenger baggage. Allowing Civil Appeal Nos. 3632 of 2000 and 1493 of 2000 and dismissing the other appeals, the Court. HELD : 1.1. Drawings, plans, manuals etc., specified in Chapter 49 of the Custom Tariff Act, 1995 are 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 i.e., Customs Act, 1962 and Customs Tariff Act together, there is no doubt that what has been imported into India by the appellant collaborators were goods even though the tangible articles so imported contained information or knowledge for use by the appellants. [627-D] 1.2. In view of the clear provisions of the Customs Act and the Customs Tariff Act. whenever any goods of movables of 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. [627-F] 1.3. The moment the information or advice is put on a media, whether papers of 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. [628-C] 1.4. 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. The appellants had represented to the Reserve Bank that the collaborators were rendering service and no 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 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. |628-G-H; 629-A| The Assistant Sales Tax Officer and Others v. B.C. Kame, Proprietor Kame, Proprietor Kame Photo Studio, [1977] I SCC 634 and Everest Copiers v. State of Tamil Nadu, [1996] 5 SCC 390, distinguished. State of Himachal Pradesh v. Associated Hotels of India Ltd., (1972) 29 STC 474; State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., (1958) 9 STC 353; Slate of Tamil Nadu v. Anandam Viswanathan, |1989] 1 SCC 613; Hindustan Shipyard Ltd. v. State of U.P., [2000] 6 SCC 579; Rainbow Colour Lab & Anr v. State of M.P. and Others, [2000] 2 SCC 385; Hindustan Aeronautics Ltd v. State of Karnataka, [1984] 1 SCC 706 and Builder’s Association of India and Others v. Union of India & Others, [1989] 2 SCC 645, referred to Deta Nominees Pty. Lit. v. Viscount Plastic Products Ply. Ltd., (1979) VR 167; Wilhelm Winter; Cynthia Zheng v. G.P. Putnam’s Sons, 938 F. 2nd 1033 9th Cir. (1991); Robinson v. Graves (1935) KB 579 and Lee v. Griffin, (1861) 1 B & S 272, referred to. `Contract of Sale of Goods’, by Benjamin, Third Edition, referred to. 2.1. Intellectual property, when put on a media, would be regarded as an article on the total value of which customs duty is payable. 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 items greatly enhance the value of the papers and ink. The charge of a duty is on the final product whether it be the encyclopaedia or the engineering or architectural drawing or any manual. [634-B-C] 2.2. 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 cither the magasine 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. [635-A-C] 2.3. The shift from the concept of price of goods, as was classically understood, is clearly discernible in the new principles. Transaction value may be 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. It would not be correct, to take the entire contract value as being the value of the imported goods. [635-E] M/s Gannon Dunkerley and Co. and Others v. State of Rajasthan and Others, [1993] 1 SCC 364; Collector of Customs (Prev.) Ahmedabad v. Essar Gujarat Ltd., (1996) 88 ELT 609 S.C. and State Bank of India v. Collector of Customs, Bombay, [2000] 1 SCALE 72, referred to. St. Albans City and District Council v. International Computers Ltd., (1996) 4 all ER 481 and Advent Systems Ltd. v. UNISYS Corporation, (925) F 2nd 670 3rd Cir (1991), referred to. 3.1. 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 it period of six months importation had expired but before the expiry of five years thereof. [643-B] 3.2. 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’, the making of such a wilful mis-statement or suppression of facts would attract the provisions of Section 28 of the Customs Act [641-B-C] Collector of Central Excise, Hyderabad v. M/s Chemphar Drugs and Liniments, Hyderabad, [1989] 2 SCC 127; Cosmic Dye Chemical v. Collector of Central Excise, Bombay, [1995] 6 SCC 117; M/s Padmini Products v. Collector of Central Excise. Bangalore, [1989] 4 SCC 275; Tamil Nadu Housing Board v. Collector of Central Excise. Madras and Another, [1995] suppl. 1 SCC 50 and Collector Central Excise v. H.M.M. Ltd., (1995) 76 ELT 497, referred to. 4. In 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 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 credit for the free allowance which was available to the passenger. [644-D-F] 5.1. In Civil Appeal No. 3632 of 2000, 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. [648-E] 5.2. 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 on 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. [647-H; 648-A-B] Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Co. Ltd., (1996) 83 ELT 3 SC and Wallace Flour Mills Company v. Collector Central Excise, (1989) 44 ELT 598, referred to. 6. The value of drawings in Civil Appeal No. 1493 of 2000, which belong to the Indian company were merely approved by the German company could only be nominal and under no circumstances the said value could be regarded as DM 60,000. The nominal value disclosed by the courier, on the facts and circumstances of the case, could not, therefore, be said to be incorrect. [649-F] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 821 of 2000.

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