Customs Act | Engineering Services Fees Having Direct Nexus With Import Of Goods Fall Within Assessable Customs Value : Supreme Court

The Supreme Court yesterday (May 1) ruled that engineering and technical service fees paid by the importer must be included in the assessable value of imported spare parts under the Customs Act, 1962.

The bench of Justices Abhay S. Oka and Ujjal Bhuyan upheld that the 8% technical and engineering fee charged to the appellant(Coal India) should be included in the assessable value for determining customs duty.

It was the case where the appellant floated a tender for spare parts for P&H Shovels. The Foreign supplier quoted prices through its Indian distributor, M/s Voltas Limited. Clause 5 of the purchase order stated 100% FOB (Free On Board) value to be paid in USD to the foreign supplier, and an additional 8% of FOB value to be paid to Voltas in INR for "engineering and technical services.

Since the appellant had failed to include such service fees/agency commission/charges in the assessable value of spare parts so imported, this resulted in a short levy of customs duty to the tune of Rs. 64,47,244.00. Accordingly, the Assistant Commissioner of Customs (Assistant Commissioner) directed the appellant to pay Rs. 64,47,244.00 within 15 days.

Various other authorities, including the Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”), upheld the Assistant Commissioner's order of levying 8% technical and engineering fees as part of customs duty.

Aggrieved by the CESTAT's order, the appellant approached the Supreme Court.

Affirming the impugned decision, the judgment authored by Justice Bhuyan observed:

“CESTAT had carefully analysed the relevant documents and thereafter came to the conclusion that the services rendered were such that appellant faced no inconvenience at the time of importation. Amounts paid to Voltas Limited by the appellant were not linked to any services specifically rendered by it. Payments were made only in connection with the sale of the goods presumably because M/s Voltas Limited was an agent of the foreign supplier. Thus, payments made to M/s Voltas Limited were only as a condition of sale and not for any services rendered. Therefore, it had a direct nexus to the value of the goods imported.”, the court said.

The Court stressed that if the fees levied have a direct nexus with the value of the goods imported, then it would become part of the assessable value for computing customs duty.

“The services provided were directly relatable to the import of the goods by way of product support service which is covered by Sections 14(1) and 14(1A) of the Customs Act read with Rule 9(1)(e) of the Customs Valuation Rules.”, the court observed.

“Thus on thorough consideration of all aspects of the matter, we are of the considered opinion that the view taken by all the lower authorities is correct and no interference is warranted. There is no merit in the appeal. Accordingly, the appeal is dismissed.”, the court held.

Case Title: M/S. COAL INDIA LIMITED VERSUS COMMISSIONER OF CUSTOMS (PORT), CUSTOMS HOUSE, KOLKATA

Citation : 2025 LiveLaw (SC) 517

Click here to read/download the judgment

Appearance:

For Appellant(s) Mr. Rahul Kaushik, AOR Ms. Bhuvneshwari Pathak, Adv. Ms. Shilpi Satyapriya Satyam, Adv. Mr. Satyavir Singh Rana, Adv. Mr. Dhanesh Kumar, Adv.

For Respondent(s) Mr. Arvind Kumar Sharma, AOR Mr. N Venkataraman, A.S.G.(N/P) Mr. Mukesh Kumar Maroria, AOR Mr. V C Bharathi, Adv. Mr. Mayank Pandey, Adv. Mr. Mukul Singh, Adv. Mr. Prashant Singh Ii, Adv.