2015 (11) TMI 441 - SC - Customs

Supreme Court upholds exclusion of Technical Know-how Agreement cost from customs duty valuation.

The Supreme Court upheld the Tribunal's decision to exclude the cost of a Technical Know-how Agreement from the valuation of imported goods for customs ... Inclusion of post-importation services in customs value - transaction value of imported goods - technical know-how agreement - post-importation services - precedent: Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Ltd.Inclusion of post-importation services in customs value - technical know-how agreement - transaction value of imported goods - Whether the cost of the Technical Know-how Agreement entered into with the foreign manufacturer could be included in the customs value of the imported components. - HELD THAT: - The agreement between the importer and the foreign manufacturer provided for training, supply of technical know how, manufacturing facilities and procedures, grant of use of intellectual property rights, and supply of technical information and drawings. The services described by the agreement are to be rendered after importation. As such they are not part of the value of the goods imported and cannot be added to the transaction value for assessment of customs duty. The Tribunal's deletion of the cost of the Technical Know how Agreement was upheld. The Court observed that the matter is covered by the earlier decision of this Bench in Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Ltd., and applied that precedent to reach the same conclusion.Cost of the Technical Know how Agreement, being for post importation services, is not includible in the customs value of the imported components; the Tribunal's deletion is affirmed.Final Conclusion: The appeal is dismissed; the Adjudicating Authority's addition of the cost of the Technical Know how Agreement to the customs value is not sustained as the services are post importation and therefore not includible. Issues:1. Valuation of imported goods for customs duty including Technical Know-how Agreement cost.Analysis:The case involved an importer who had imported components of Tractors from a manufacturer in Italy and declared the price of the goods for customs duty without including the cost of a Technical Know-how Agreement entered into with the same manufacturer. The Customs Authorities issued a show cause notice, and the demand was confirmed by the Adjudicating Authority. However, the Tribunal later deleted the cost of the Technical Know-how Agreement, stating that it cannot be considered as part of the import cost.Upon reviewing the Technical Know-how Agreement, the Supreme Court found that the agreement outlined services to be provided post-importation, such as training, supplying technical know-how, granting the use of Intellectual Property Rights, and providing technical information and drawings. The Court concluded that these services were not part of the import value of the goods. The judgment cited a previous case, Commissioner of Customs, Ahmedabad vs. M/s. Essar Steel Ltd., to support this interpretation.The Court's analysis focused on the nature of the services outlined in the Technical Know-how Agreement, emphasizing that they were post-importation services. As a result, the Court upheld the Tribunal's decision to exclude the cost of the agreement from the valuation of the imported goods for customs duty purposes. Consequently, the appeal was dismissed based on the findings and interpretation of the agreement's terms and the relevant legal precedent.