2009 (1) TMI 643 - AT - Customs

Tribunal excludes technical fees from imported component value, stresses contractual evidence

The Tribunal ruled in favor of the appellants, holding that the technical know-how fee and royalty should not be added to the assessable value of imported ... Valuation Issues:The issues involved in the judgment are the valuation of imported components and parts u/s Customs Valuation Rules, 1988, and the inclusion of royalty and technical know-how fees in the assessable value.Valuation of Imported Components and Parts:The appellants, engaged in manufacturing electric motors, imported components from collaborators and sold under the name 'Crompton Greaves Ltd.' The Dy. Commissioner accepted the value based on quotation and purchase order. The revenue contended that adjustments u/s Rule 9 are mandatory as technical know-how is essential for processing imported goods. The Commissioner (A) upheld the revenue's appeal, stating that the technical know-how fee and royalty are related to imported goods. However, the appellants argued that there was no condition to procure components only from collaborators. The Tribunal found no evidence of such a condition, ruling that the royalty and lump sum fee cannot be added to the assessable value.Inclusion of Royalty and Technical Know-How Fees:The revenue argued that royalty and lump sum fee should be added to the invoice value as a condition of sale. The Commissioner (A) agreed, noting the collaboration agreement and the import of goods from collaborators. The appellants contended that the fees were only for finished goods manufactured in India, not for imported parts. They cited Supreme Court decisions and Tribunal rulings to support their stance. The Tribunal found that the procurement of raw materials was not a condition of sale, as per the technology agreement. Therefore, it held that the royalty and lump sum fee should not be included in the assessable value, overturning the Commissioner (A)'s order and allowing the appeal.This judgment clarifies the valuation of imported components and the inclusion of royalty and technical know-how fees in the assessable value, emphasizing the importance of contractual conditions and evidence in determining such values u/s Customs Valuation Rules, 1988.