Know-how fee to be included in machinery value per Customs Valuation Rules

The Tribunal confirmed that the know-how fee should be included in the assessable value of the imported machinery, based on Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. The decision aligned with the agreement among the parties, where the technical information and designs were proprietary to the foreign entity. This ruling was consistent with a previous case, Andhra Petro Chemicals Ltd. v. Collector of Customs, Madras, where costs of drawings and designs were added to the machinery's value.

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Issues:
1. Inclusion of know-how amount in the assessable value of proprietary equipment imported.
2. Interpretation of Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988.
3. Application of Rule 9(1)(b)(iv) to the present case.
4. Analysis of the agreement among the parties regarding the supply and manufacture of proprietary equipment.
5. Comparison with the decision in Andhra Petro Chemicals Ltd. v. Collector of Customs, Madras case.

Issue 1: Inclusion of know-how amount in the assessable value:
The dispute arose regarding whether the amount paid as know-how fee after a certain date should be included in the assessable value of proprietary equipment imported. The Assistant Commissioner held it was not liable, but the Commissioner of Customs (Appeals) disagreed.

Issue 2: Interpretation of Rule 9(1)(b)(iv):
Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988 states that the value of engineering, development, design work, etc., undertaken elsewhere than in India and necessary for production, should be added to the price of imported goods. The Revenue argued that the know-how fee should be included based on this rule.

Issue 3: Application of Rule 9(1)(b)(iv) to the case:
The appellants argued that Rule 9(1)(b)(iv) was not applicable as no design was supplied for the proprietary equipment by the buyer. They contended that the services covered by the rule should have been supplied by the buyer, which was not the case here.

Issue 4: Analysis of the agreement on proprietary equipment:
The agreement among the parties specified that the proprietary equipment was to be supplied by M/s. Mitsubishi Corporation, manufactured by M/s. Toshiba Corporation or as per M/s. Toshiba's design. The technical aspects and designs were proprietary to M/s. Toshiba Corporation, and the know-how agreement covered all necessary technical information for production.

Issue 5: Comparison with Andhra Petro Chemicals case:
The Revenue compared the present case with Andhra Petro Chemicals Ltd. v. Collector of Customs, Madras case where the Tribunal held that costs of drawings and designs supplied by a foreign entity should be added to the value of machinery. The Revenue argued that a similar approach should be taken in this case.

In conclusion, the Tribunal confirmed the impugned order, stating that the know-how fee should be included in the assessable value of the imported machinery, as it covered the cost of drawings and designs necessary for production. The decision was based on the interpretation of Rule 9(1)(b)(iv) and the specifics of the agreement among the parties involved.

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