Legal principle

Goods which the Customs Tariff Act itself makes free of import duty (such as drawings and designs under heading 49.06) are 'goods' under Section 2(22) but not 'dutiable goods' under Section 2(14), since duty is neither chargeable nor outstanding, and no customs duty can therefore be levied on them.

Court decision

Civil Appeal No. 1493 of 2000 (H & K Rolling Mill Engineers) and Civil Appeal No. 3632 of 2000 (Videocon VCR Ltd.) were allowed and the orders of the Commissioner and Tribunal set aside: for H & K the nominal value declared by the courier was correct since the payment was not shown attributable to the drawings, and for Videocon no duty was leviable as the drawings were classifiable under heading 49.06 whose import is free. The other appeals were dismissed (upholding liability), with the Commissioner directed, in Leela Ventures' case, to determine the transaction value of the drawings, designs etc. out of the total contract value and impose the levy thereon. There was no order as to costs.

Facts

Appellants, including M/s Hotel Leela Ventures and other corporations, entered technical collaboration or architectural service agreements with foreign companies and received drawings, designs and diskettes through couriers, post parcels or by hand (in Videocon's case via one Mr. Kato), declaring only nominal values (e.g., one dollar) at import. DRI and Special Valuation Branch intelligence indicated that consideration had been remitted for these drawings and designs, which were cleared without proper declaration and without payment of correct duty. Show-cause notices under Section 28(1) read with Section 24 of the Customs Act proposed treating the remitted sums as transaction value under Section 14, demanding duty, confiscation under Section 111(m) and penalties under Sections 112(a) and 114A. The Commissioner by a consolidated order dated 26 March 1999 demanded duty and imposed penalty (for Leela, drawings valued at Rs. 2,66,87,100 with duty of Rs. 26,68,310), and the CEGAT confirmed this by common order dated 15 November 1999.

Key provisions

• Section 28(1), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 2(22), Customs Act, 1962 — Definitions
• Section 11A, Customs Act, 1962 — Definitions
• Section 156, Customs Act, 1962 — General power to make rules
• Section 2, Customs Tariff Act, 1975 — Duties specified in the Schedules to be levied
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 78, Customs Act, 1962 — Determination of rate of duty and tariff valuation in respect of baggage
• Section 77, Customs Act, 1962 — Declaration by owner of baggage
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods