Judgment:
1. This appeal arises from Order-in-Original No. S8/118/98 dated 22.4.98 passed by the Commissioner of Customs (Airport) Chennai. It is alleged that appellant had entered into an agreement with a foreign designer and that the company under the said agreement had received drawings and designs against remittance made to the designer and the customs duty, leviable thereon, had not been paid. Pursuance to the intelligence, a copy of the interior Design Agreement entered into by M/s. Taj Coromandel Hotel of Oriental Hotels Ltd. with M/s. Graham Salano Ltd., USA was collected. It was found that the agreement provided for: (a) Planning and providing concept designs for the various areas of Hotel; (b) Providing drawings and finishing details for the various areas of the Hotel; They also noted that phase IV provided for supply of working drawings and designs by M/s. Graham Designs Ltd., to the appellant company. They submitted a letter dated 20,10.97 stating, interalia, that:-- (a) Graham Designs, USA gave them the basis concept designs which were developed into detailed and working drawings by the company's Design Department. These drawings, colour schemes and blue prints were sent to the foreign firm for their approval. A mock up of the design was made which was inspected and approved by Graham Designs.
The total fees of US $ 2,00,000 include cost of inspection, initial concept, identification of suppliers and tender negotiations.
(b) Phase IV of the contract refers to the designs and drawings to be received by them.
(c) Payment to be made as per the contract for Phase IV is US $ 40,000.
(d) Part of Phase IV is yet to be completed by Graham Designs to the extent of US$ 4,000.
2. The statement of one Shri R. Shriram Srivatsa, Financial Controller of the company was recorded under Section 108 of the Customs Act, 1962 on 20.10.97 wherein he, interalia, stated that the Agreement envisaged 6 phases; that only Phase IV provided for supply of drawings and designs; that other phases included provision of services like inspection, identification of suppliers, supervision and tender negotiation; that the drawings as per Phase IV had been received for the various periods indicated in the impugned order wherein the value of drawings in US $ has been shown totalling to US $ 36,000. Shri R.Shriram Srivatsa further stated that drawings were being received through courier services in Chennai; that the drawings received were original hand drawn drawings; that when the drawings were imported through courier they were declared as "blue prints" and "documents", that no value was declared at the time of clearance through Customs; that it was mentioned that the goods were not for sale or resale; that no customs duty was paid no import of the drawings either after receipt of the drawings or customs authorities were approached for re-assessment and payment of appropriate of customs duty. The appellant company vide their letter dated 21.10.97 deposited a sum of Rs. 1,50,000 towards duty payable on the drawings imported by courier. On the basis of these details, the Revenue initiated proceedings calling upon the appellant to explain as to why customs duty should not be levied on the value of these goods by invoking proviso to Section 28 (1) of the Customs duty in view of mis-statement and suppression which was wilful on the part of the appellant company. It was also stated that assessable value of the imported drawings & designs was Rs. 11,70,300 and duty leviable thereon was Rs. 1,45,425. They were also called upon to explain as to why penalty should not be imposed in terms of provisions of Section 114A of the Customs Act.
3. Appellant took the stand that the item cannot be levied with customs duty as the said items cannot be considered as "designs & drawings".
They denied the allegation of mis-statement, suppression and also contended that they did not have any intention to evade payment of customs duty. They contended that they deposited an amount of Rs. 1.50 lakhs solely to co-operate with the department and exhibit their bona fides and prayed for dripping the proceedings.
4. The Commissioner in the impugned order, after due consideration, rejected their plea and confirmed the demands raised in the show cause notice solely based on the pleading and the terms of the agreement and also the admissions made by the appellant vide their letter dated 4.7.96 and also relied on the statement given by Shri R. Shriram Srivatsa, Financial Controller of the appellant company. The Commissioner has held that the items are "drawings & designs" and are required to discharge customs duty under the relevant tariff heading.
6. Ld. Counsel raised same points as has been raised before the Commissioner to contend that the item is not 'goods' for the purpose of classification as "designs & drawings" under chapter heading 4906.00 read with sub-heading 4901.90 of CETA'85. It is his contention that there was no intention to suppress any facts and hence there was question of invoking larger period does not arise. He also stated that during the relevant period Section 114A had not been promulgated and hence question of levying mandatory penalty does not arise, in this regard, he relied on the judgment rendered in the case of Gujarat State Export Corporation Ltd. v. CC, Ahmedabad, 2002 (145) ELT 661 (Tri.-Mumbai) and also that of Apex Court judgment rendered in the case of CCE, Coimbatore v. Elgi Equipments Ltd., 2001 (74) ECC 284 (SC) : 2001 (128) ELT 52.
7. Ld. DR pointed out to the admission made by appellants in their letter dated 4.7.96 as well as the statement given by Shri R. Shriram Srivatsa and the fact that they have deposited the amount. He drew our attention to the Apex Court judgment rendered in Associated Cement Companies Ltd. v. CC, 2001 (74) ECC 1 (SC): 2001 (128) ELT 21 (SC) wherein the Apex Court have analysed great detail the definition of "Drawings & designs" and also has noted about larger period being invocable in case the party did not disclose the details. He also relied on the judgment of the tribunal rendered in Givo Ltd. and Anr.
v. CC, New Delhi, 2002 (52) RLT 646 (CEGAT-Del.) which has followed the Larger Bench judgment rendered in a similar case and has confirmed the invocation or larger period for confirmation of demands where the party has not disclosed the details. Ld. DR points out that appellants ought to have disclosed the details of the agreement and should have deposited the duty initially at the time of import. As they have clearly admitted their guilt and hence the larger period was invocable.
8. On a careful consideration of the submissions, we notice that appellants themselves vide letter dated 4.7.1996 through International Couriers have given the details of the drawings and the specifications required for the purpose of interior decoration. Lt. Counsel pointed out that these drawings are meant for interior decoration and are not goods. However, we notice that appellants themselves have clearly admitted that these are required for the purpose of carrying on interior decoration and that M/s. Graham Designs Ltd. gave them the basic concept designs which were developed into detailed and working drawings by their company's Design Department. They have indicated that these are all details for which they are required to pay charges of US $ 36,000 without which, appellants could not have carried out the work.
The Apex Court in the case of Associated Cement Companies Ltd. (supra) has dealt with in great detail about the intellectual property in the form of "drawings & designs" which are intangible goods when put on media, it is to be regarded as an article; and on the total transaction value of which customs duty is payable. The Hon'ble Apex Court has also in great detail held that such "drawing & designs" charges are required to be paid on such import of intellectual property. Therefore, the ratio of the cited Apex Court's judgment would clearly apply to the fact of this case. Appellants have clearly admitted that the item imported through international courier was "drawings & designs" required for the purpose of interior decoration. Such goods are required to be classified under the relevant chapter heading as noted by the Commissioner in the impugned order. We also notice that appellants have admitted their fault in not declaring the same to the department and have deposited the amounts to show that they had clear bona-fides for the purpose of granting benefit of time bar. In a similar circumstance in the case of Givo Ltd. and Anr. v. CC, New Delhi (supra), the Tribunal has rejected the plea of time bar and has confirmed the demands as the party had not disclosed all the details.
Therefore, in terms of these judgments, we are not in a position to given any relief to the appellant. Hence, we reject their pleas and confirm the duty amounts assessed on the "drawings & designs" imported by the appellants through couriers.
9. In so far as the levy of mandatory penalty under Section 114A of the Customs Act is concerned, we notice that three imports were made during the period much earlier to the date of promulgation of the said section. Therefore, there is no cause for imposing penalty under Section 114A of the Customs Act as held by the Apex Court in the case of CCE, Coimbatore v. Elgi Equipments Ltd. (supra) which has been followed by the Tribunal in Gujarat State Export Corporation Ltd, v.CC, Ahmedabad (supra). In that view of the matter, the mandatory penalty imposed by the Commissioner in the present case is set aside.
The impugned order is modified to the extent indicated above and disposed of accordingly.