1995 (2) TMI 197 - AT - Customs

Tribunal includes entire payment in assessable value, rejects reproduction rights claim

TRACTORS & FARM EQUIPMENT LTD. Versus COLLECTOR OF CUSTOMS, MADRAS

TRACTORS & FARM EQUIPMENT LTD. Versus COLLECTOR OF CUSTOMS, MADRAS - 1995 (78) E.L.T. 154 (Tribunal) Issues Involved:1. Assessable value of imported goods.2. Applicability of Rule 9(1)(c) of the Customs (Valuation) Rules, 1988.3. Relevance of the Customs Cooperation Council publication.4. Interpretation of the Memorandum of Understanding (MOU) between the parties.Detailed Analysis:1. Assessable Value of Imported Goods:The appellants contended that the assessable value of the drawings imported under the MOU between M/s. Tractors & Farm Equipment Ltd. (TAFE) and M/s. Massey Ferguson Manufacturing Ltd. (MF) should be only lb10,000, which represents the intrinsic value of the goods. They argued that the remaining amount of lb1,75,000 in the invoice was for the right to reproduce the goods in India and should not be included in the assessable value. The Tribunal, however, upheld the Collector (Appeals)'s view that the entire amount of lb1,75,000 should be included in the assessable value as the payment was for the technical know-how and documentation necessary for manufacturing tractors and not merely for the right to reproduce the goods.2. Applicability of Rule 9(1)(c) of the Customs (Valuation) Rules, 1988:The appellants argued that under Rule 9(1)(c), charges for the right to reproduce imported goods in the country of importation should not be added to the price in determining the customs value. The Tribunal noted that Rule 9(1)(c) and its interpretative note stipulate that royalties and license fees related to the imported goods must be added to the transaction value unless they are for the right to reproduce the goods. However, the Tribunal found no evidence in the MOU that any part of the lb1,75,000 was specifically for the right to reproduce the imported drawings and manuals.3. Relevance of the Customs Cooperation Council Publication:The appellants referred to a publication by the Customs Cooperation Council titled 'The Brussels Definition of Value and the GATT Valuation Agreement' to support their contention. The Tribunal, however, agreed with the respondents that this publication, being a study prepared by the Secretariat of the Customs Cooperation Council, does not have statutory force and cannot be relied upon for interpreting the Customs Valuation Rules, 1988. The issue had to be decided purely based on Rule 9(1)(c) and its interpretative note.4. Interpretation of the Memorandum of Understanding (MOU) Between the Parties:The Tribunal examined the MOU, which detailed the provision and supply of technical assistance, documentation, and training by MF to TAFE for upgrading tractor specifications and manufacturing facilities. The MOU specified a payment of lb1,55,000 for five sets of drawings and an additional lb20,000 for various manuals. The Tribunal concluded that the consideration of lb1,55,000 was entirely for the drawings supplied and not for the right to reproduce the goods. The payment to Wallace Cartwright & Co. Ltd. for photocopies and related services was also included in the assessable value. The Tribunal found no merit in the appellants' claim that the amount paid was for the right to reproduce the goods and confirmed the Collector (Appeals)'s findings.Conclusion:The Tribunal dismissed the appeal, confirming that the entire amount of lb1,75,000 paid under the MOU should be included in the assessable value of the imported drawings and manuals. This decision was incorporated as part of the Final Order No. 253/93-C, dated 29-7-1993.