Technical know-how fee and customs valuation: contract-linked fee was includible, but provisional assessment defeated limitation, confiscation, and penalty.

Technical know-how fee contractually integrated with the supply and performance of imported plant and equipment was held includible, to the relatable extent, in the assessable value where the fee formed part of a single commercial package and was payable as a condition connected with sale. The document also notes that, because the bills of entry were provisionally assessed, the extended limitation under Section 28(1) of the Customs Act was not invocable in the manner proposed for reassessment. A bona fide valuation dispute did not by itself establish suppression or misdeclaration, so confiscation, redemption fine, and penalty were unsustainable.

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Issues: (i) Whether the technical know-how fee paid under the agreement was includible in the assessable value of the imported capital goods; (ii) Whether the extended period of limitation under Section 28(1) of the Customs Act, 1962 could be invoked; (iii) Whether suppression or misdeclaration was established so as to justify confiscation and penalty.

Issue (i): Whether the technical know-how fee paid under the agreement was includible in the assessable value of the imported capital goods.

Analysis: The agreement showed that the know-how fee covered detailed drawings, erection-related specifications, process technology, technical information concerning the plant and equipment, and assured performance of the instant coffee plant. The imported goods from the supplier were part of the plant erected under the same know-how arrangement, and the fee was therefore linked to the imported equipment. The agreement also indicated that supply of the goods and transfer of know-how formed a single commercial package and that the fee was payable as a condition connected with the sale and performance of the plant and equipment.

Conclusion: The technical know-how fee to the extent of USD 1,30,000 was includible in the assessable value of the imported capital goods and this issue was answered in favour of Revenue.

Issue (ii): Whether the extended period of limitation under Section 28(1) of the Customs Act, 1962 could be invoked.

Analysis: The record showed that the bills of entry were provisionally assessed. Where assessment is provisional, final duty liability is to be worked out on finalisation, and the limitation under Section 28 does not arise for demand on the basis of reassessment in the manner proposed in the show-cause notice.

Conclusion: The extended period of limitation was not invocable and this issue was answered against Revenue.

Issue (iii): Whether suppression or misdeclaration was established so as to justify confiscation and penalty.

Analysis: The dispute was one of valuation and the inclusion of know-how fee, which was debatable on the facts and contractual terms. In such a case, deliberate suppression or misdeclaration was not established for the purpose of confiscation and penalty.

Conclusion: Suppression or misdeclaration was not proved and confiscation, redemption fine, and penalty were unsustainable; this issue was answered in favour of the assessee.

Final Conclusion: The assessable value was to be recomputed by including the relatable portion of the know-how fee at the time of finalisation of the bills of entry, while the demand founded on limitation, confiscation, and penalty did not survive.

Ratio Decidendi: Where technical know-how is contractually integrated with the supply and performance of imported equipment, and the know-how fee is payable as part of a single commercial package or as a condition connected with sale, the relatable portion of that fee is includible in the assessable value; but provisional assessment bars invocation of limitation under Section 28 in the same manner, and a bona fide valuation dispute does not by itself establish suppression for confiscation or penalty.

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