2003 (9) TMI 222 - AT - Customs

Import Duty Ruling: Tribunal Excludes Technical Licence Fee from Assessable Value, Appeal Granted.

The Tribunal concluded that the authorities erred in including the technical licence fee in the assessable value of the imported goods. It determined that ... Valuation (Customs) - Technical licence fee - Whether technical licence fee can be loaded to the value of the goods imported - HELD THAT:- On going through the terms of the agreement it is clear that the licence obtained was for manufacture of five items referred in the earlier portion of the order. Lump sum payment of US$ 4,50,000 as licence fee is directly connected with the manufacture of the above product in India. It has no relation whatsoever to the Capital Goods, Consumables and Components and Parts imported by the appellant. Larger Bench of this Tribunal had occasion to consider a similar issue in detail with reference to various decisions of the Supreme Court as well as Tribunal in S.D. Technical Services [2003 (5) TMI 85 - CEGAT, NEW DELHI]. In the above case there was an agreement between the parties under which the appellants were given the right to manufacture and assemble in India licensed equipment for use in railway locomotives and rolling stock with the technical know-how supplied by the foreign collaborator. Appellant imported few sets of complete Air Brake distributors in CKD condition and otherwise. Revenue proposed to add technical know-how fee to the value of the goods imported. It was held that technical know-how relates to manufacture of the licensed product in India and that even if the brake distributors, door closer etc. could be assembled with the goods, it will not become licensed equipment in terms of the agreement in respect of which technical know-how has been granted. We are not able to accept the reason given by the Commissioner to reject the above contention. It is true that the Supreme Court in Himson Textiles Engr. Industries Ltd. v. CC, Mumbai [2000 (2) TMI 94 - SC ORDER] remanded the matter for fresh consideration, but a reading of the above order would clearly show that the Apex Court has taken the view that the ratio of CC, Ahmedabad v. Essar Gujarat Ltd.[1996 (11) TMI 426 - SUPREME COURT] will not be applicable in the facts of the case and that in remand proceedings the Commissioner has to take into consideration the decision of the Tribunal in CC, Bombay v. Maruti Udyog Ltd. [1989 (4) TMI 321 - SC ORDER] which was approved by the Supreme Court. Thus, we hold that the authorities below have erred in including the licence fee to the assessable value of the goods imported by the appellant. The order impugned is therefore set aside and the appeal stands allowed. Issues: Whether technical licence fee can be loaded to the value of the goods imported.Summary:The appellant, a joint venture company, entered into a Licence and Technical Assistance Agreement (LTAA) with Mando Machinery Corporation, Korea, involving payment for technical information. The Deputy Commissioner held that the technical licence fee was includible in the assessable value of the imported goods. The matter was remanded by the Tribunal for fresh consideration by the Commissioner (Appeals), who added the technical licence fee to the assessable value invoking Rule 9(1)(c) of the Customs Valuation Rules, 1988.The appellant contended that the inclusion of the licence fee in the invoice value was not justified. The appellant argued that the licence fee had no relation to the goods imported and cited a Larger Bench decision of the Tribunal in support. The Tribunal found merit in the appellant's contentions, stating that the licence fee was directly connected to the manufacture of specific products and had no relation to the imported goods. The Tribunal referenced previous decisions to support its conclusion that the licence fee cannot be added to the value of the imported goods.In conclusion, the Tribunal held that the authorities erred in including the licence fee in the assessable value of the imported goods. The impugned order was set aside, and the appeal was allowed.