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M/s GMR Energy Ltd. v. Commissioner of Customs, Bangalore

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 4920 of 2007)Decided 27 Oct 2015
Civil Appeal No. 4920 of 2007
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

GMR Energy imported replacement hot-section parts for a gas-turbine power plant under a long-term parts supply agreement with GE, USA. Used parts were returned to GE. Customs officers said that one-third of the invoice value should be added to the declared price because of this return arrangement, and they also denied the company a duty exemption for renovating power plants. The company said its invoices showed GE's normal list prices and that it held a state government certificate supporting the exemption.

Decision Breakdown

The Court held that the valuation rules based on "sale for export" (Rules 4 and 9) did not apply, because the replacement parts were not sold and no resale proceeds accrued to the seller. The invoices reflected list or catalogue prices, so the Commissioner's and Tribunal's conclusion that the invoice price was only an incremental value was wrong, and the company's appeal was allowed. On the Revenue's appeal, the Court held that once the competent state authorities had certified the goods were needed for renovation, customs officers could not deny the exemption through hair-splitting arguments, so the Revenue's appeal was dismissed. The Tribunal's order was upheld on the exemption, except for two sub-clauses of one of its paragraphs that the Court left intact.

Lesson Learnt

Import duty is generally charged on the price actually paid for the goods, and tax authorities cannot add amounts for a related return arrangement unless they show the importer actually received a benefit from the goods. For exemptions that depend on government approval, a certificate from the competent authority can be decisive.

Official source (sci.gov.in)View Judgment (PDF)

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