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Issues: (i) Whether the amount paid for technical know-how and licence rights was includible in the assessable value of the imported machinery under the customs valuation rules; (ii) Whether the demand could be defeated on the ground that the customs duty, CVD and SAD would be available as credit and therefore the situation was revenue neutral.
Issue (i): Whether the amount paid for technical know-how and licence rights was includible in the assessable value of the imported machinery under the customs valuation rules.
Analysis: The agreement was not treated as a mere sale of documents or transfer of know-how as goods. Its terms showed a licence structure, with the parties described as licensor and licensee, and the grant was for the right to use the proprietary technology embedded in the imported machinery. The machinery could not be used without the know-how licence, and the payment was therefore linked to the use of the technology integral to the imported capital goods. On those facts, the payment was held to fall within the assessable value on the reasoning applicable to cases where the technology licence is a condition, at least in substance, for making the goods operational.
Conclusion: The know-how and licence fee was held includible in the assessable value, against the assessee.
Issue (ii): Whether the demand could be defeated on the ground that the customs duty, CVD and SAD would be available as credit and therefore the situation was revenue neutral.
Analysis: The credit argument was rejected because the imported items were capital goods and not immediately usable inputs. Any credit, even if available, would arise only later, after installation and commencement of production, whereas the duty liability arose at import. The claim of revenue neutrality was therefore not accepted on the facts.
Conclusion: The revenue neutrality defence was rejected, against the assessee.
Final Conclusion: The appeal failed on merits and the demand of customs duty was sustained.
Ratio Decidendi: Where a know-how licence is inseparable from the operational use of imported capital goods and the goods cannot be put to use without that licence, the licence fee is includible in the assessable value, even if the agreement is framed as a separate technology arrangement.
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