Per Shri K.S. Venkataramani:

The appellants as contractors of Steel Authority of India Ltd. Rourkela Steel Plant in Orissa, have been entrusted with the setting up of gas cleaning plant as part of Basic Oxygen Furnace shop. For this purpose the appellants entered into an agreement and signed a contract on 27.2.93 with M/s Davy Mckee (Stockton) Ltd. by which M/s Davy were to provide basic design and drawing and also supervise the detailed engineering erection and commissioning of the gas cleaning plant in India and were also to undertake training of personal abroad. They were also to render technical services and undertake guarantee test for the efficient functioning of the gas cleaning plant. The fabrication, manufacture etc. are to be done in India with indigenous goods based on the designs supplied by M/s Davy.

2. In pursuance of the agreement a consignment of Design and Engineering Drawings were imported at Mumbai Customs, Air Cargo Complex for which Bill of Entry was filed on 20.8.96. The Asstt. Commissioner of Customs found that as per para 2.3 of the annexure I of the contract besides the amount of £ 20,00,000/- for design and engineering, the supervision charges in India during design, erection, commissioning and performance guarantee test £ 6,57,900 as well as training charges £ 82,600 were to be paid separately. The Asstt. Commissioner held that these charges should also be included in the assessable value of Drawings for design and engineering for the gas cleaning plant imported by the appellants. The Asstt. Commissioner concluded that supervision charges and training charges are part of design and engineering costs i.e. part of transaction value as per Sec. 14 of Customs Act read with Rule 9(1)(e) of Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988. The Asstt. Commissioner passed an Order in Assessment accordingly on 11.10.96 which, on being challenged, was upheld by the Commissioner of Customs (Appeals) Airport Mumbai. Hence the present appeal.

3. We have heard Shri K.G. Krishnan, ld. Consultant for the appellants and Shri S.V. Singh, the ld. D.R.

4. The submissions made by both the parties have been carefully considered. The question is whether the lower authorities were right in determining the assessable value in this case by adding to it supervision charges and training charges paid by the appellants to Davy Mckee (Stockton).

5. The payments are in terms of the Agreement between the parties dated 27.2.93. Annexure I to the Agreement is summary price schedule according to which the following are the payments:

As per the contract Davy Mckee agreed to undertake the basic design and engineering, layout engineering, co-ordination, training services, supervision of detail engineering and drawing, and supervision of erection, testing and successful commissioning of gas cleaning plant, and demonstrate the performance guarantees. The Agreement also indicates at para 1.3.1:-

"The design and engineering services of the CONTRACTOR shall generally include amongst others the following:

a) Basic design and layout and general engineering, as specified;

b) Supervision of detail engineering and drawing, as specified."

Therefore, providing of basic design and drawing of the gas cleaning plant and supervision of detail engineering and drawing form an inseparable item as per the contract to be performed by Davy Mckee. "Supervision" in the Agreement has been defined to mean the control and directions given by Davy Mckee during the execution of contract work. The various responsibilities cast on Davy Mckee as part of supervision are to ensure correctness of detail design drawings. To advise the erection work of all plant and equipment to ensure that the erection work is in accordance with engineering standard, to supervise the performance guarante