TaxTMI 
TaxTMI 
2007 (11) TMI 205
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....ring and disposal. 2. After examining the records, we note that, in all these cases, the appellants imported components/raw material for the manufacture, in India, of final products by making use of the technical know-how provided by the suppliers against payment of lump sum fees by the importers. In a few cases, the technical know-how fee paid by the importers to the suppliers of components/raw material was a consideration for technical assistance in the setting up of the manufacturing plant also. In some cases, what was paid by the importer to the supplier of components/raw material for technical know-how for the manufacture of finished goods in India was a royalty which was paid periodically as a percentage of the net sale proceeds of the finished goods. in all cases, the Special Valuation Branch (SVB) of the Department took the stand that the technical know-how fee/royalty paid by the importers to their technical collaborators abroad had a relation to the imported goods and that such payment had been made as a condition of sale of such goods and, therefore, under Rule 9(1)(C) ibid. the amount is required to be included in the assessable value of the goods. The SVB accordingl....
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....or the rendering of the technical assistance by the suppliers of the imported components/raw material to the appellants was a condition of sale of such goods, for purposes of Rule 9(1)(C) of the Customs Valuation Rules, 1988. Further, he stated 3 distinct factual situations arising out of these cases and submitted that, on all such factual situations, the valuation issue was already covered by judgments of the Apex Court. The following are the factual situations mentioned by learned Counsel :- (A) Import of components/raw materials required for the manufacture, in India, of finished goods licensed [ the supplier of components/raw material] to be so manufactured AND Payment of a lump sum [ referred to as 'technical know-how fee' in common parlance and 'licence fee' in the text of Rule 9(1)(C) of the Customs Valuation Rules, 1988] by the importer of components/raw material to the supplier as consideration for technical know-how for the manufacture of the licensed products. (B) Import of components/raw materials required for the manufacture, in India, of finished goods licensed [ the supplier of components/raw materiall to be so manufactured AND Payme....
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....he product for a period of 5 years in terms of the relevant Technical Collaboration Agreement. In the case of M/s. TVS R & M, the assessee had imported capital goods, components and parts from M/s. Reichie De Massari, Switzerland for the manufacture, in India, of a range of modules meant for telecom industries and a lump sum of SFR 50,000 was paid by the importer to the supplier as consideration for technology transfer under the relevant agreement. In the case of M/s. Hi Tech Arai Ltd., the assessee had imported capital goods and raw materials from M/s. Arai Seisakusho Co. Ltd., Japan and M/s.Mitsubishi Corporation, Japan, for the manufacture, in India, of various licensed products and, under a Technical Collaboration Agreement, the assessee had paid US $ 19,25,000 to M/s. Arai Seisakusho Co. Ltd., Japan towards technical know-how provided by the latter. In the case of M/s. D.M. Walls Co. (F) Ltd., the assessee had imported capital goods and certain finished goods [aluminum composite panels] from M/s. Dae Myung Wall Systems Co. Ltd., Korea and M/s.Dae Myung Hwa Sung Co. Ltd., Korea for the purpose of manufacture, in India, of the licensed products and a technical know-how fee of US....
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....a line of other decisions including R. Stahl (P) Ltd. v. Commissioner of Customs, Chennai [ 2006(205) E.L.T. 682 (Tri. - Chennai)], Rane Nastech Ltd. v.Commissioner of Customs, Chennai - [2006 (199) E.L.T. 266 (Tri-Chennai)], SD Technical Service v. Commissioner of Customs, New Delhi [2003 (155) E.L.T. 274 (Tri. - LB) = 2003 (56) RLT 970 (CEGAT - LB)] and Steel Authority of India v. Commissioner of Customs, Vishakapattinam [2007 (210) E.L.t 150 (Tri. - Bang.)]. 7. In relation to factual situation 'B', learned Senior Counsel has relied on the Apex Court's judgment in the case of Commissioner of Customs, Chennai v. Toyota Kirloskar Motor (P) Ltd. [2007 (213) E.L.T. 4 (S.C.)]. He has claimed support from this judgment in relation to situation 'C' also. Learned Counsel has also relied on the Tribunal's Larger Bench decision in Polar Marmo Agglomerates Ltd. v. Commissioner of Customs, New Delhi [2003 (155) E.L.T. 283 (Tribunal - LB) = 2003 (56) RLT 967 (CEGAT - LB)] on factual situation 'B'. 8. Insofar as factual situation 'C' is concerned, learned Counsel has claimed support from Union of India v. Mahindra & Mahindra Ltd. [1995 (76) E.L.T. 481 (S.C.)]. 9. It ....
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....oms, New Delhi [2000 (120) E.L.T. 265 (Tribunal)]. Reliance was also placed on the Apex Court's judgment in Associated Cement Companies Ltd. v. Commissioner of Customs [2001 (128) E.L.T. 21 (S.C.)] and the decision in Matsushita Television & Audio (I) Ltd. v. Commissioner of Customs [2007 (211) E.L.T. 200 (S.C.)]. SDR also opined that the legislative intent behind Rule 9(1)(C) of the CVR, 1988 could be gathered from the corresponding provisions of the CVR, 2007. 11. We have considered the submissions of both sides. In the case of Prodelin India (P) Ltd. (supra) cited by learned Counsel, under a Joint Venture Agreement between M/s. Prodelin Corporation, USA and one Shri Ashok Mago of New Delhi, the assessee-company was set up for assembly of VSAT antennas, accessories and other communication equipments in India and for the marketing of these products in India. A technical fee of US $ 2,58,000 was paid by the assessee to the US company for the assistance rendered in India by the latter for the design and assembly of antenna systems. The Revenue sought to include the amount in the assessable value of the components/parts imported by the assessee from the US company, under Rule 9(1)....
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....n collaborator in respect of post-importation activities is not includible in the assessable value of the imported goods under Rule 9(1)(C) of the CVR read with Section 14 of the Customs Act. This ruling is squarely applicable to all the fact situations in the present appeals. 12. In the case of Birla Tyres (supra), the assessee had paid Italian Lira 5,40,000,000 as a lump sum to their technical collaborators in Italy as consideration for technical know-how in the form of basic engineering documentation etc., which was to be used in the manufacture of radial tyres in India. The Tribunal held that the know-how fee had relation only to the activity of manufacture of tyres in India and therefore it was not to be included in the assessable value of the machinery imported by them. The civil appeal filed by the department against the Tribunal's decision was dismissed by the Apex Court vide 2002 (143) E.L.T. A183 (S.C.). The decision of the Tribunal's Larger Bench in S.D. Technical Service case (supra) and the decision of this Bench in Stahl case (supra) and Rane Nastech case (supra) are also in support of the appellants' case on fact situation 13. In the case of Toyota Kirloskar Mo....
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....nt between the assessee and their foreign collaborator, which suggests that they have paid royalty as a condition of purchase of the imported goods. Thus the royalty paid by any of the appellants to their foreign collaborator does not satisfy the twin conditions of Rule 9(1)(C), to be included in the assessable value of the imported goods. 15. We have also examined the case law cited by learned SDR. He has heavily relied on the Supreme Court's decision in Essar Gujarat case (supra). We need only say that the case of Essar Gujarat Ltd. was clearly distinguished by the Apex Court in Toyota Kirloskar Motor case and by the Tribunal's Larger Bench in S.D. Technical Service case and in the case of Panalfa Dongwon India Ltd. v. Commissioner of Customs, Mumbai [2003 (155) E.L.T. 287 (Tri.-LB) = 2003 (56) RLT 962 (CEGAT - LB)]. Learned SDR has argued that, where relationship in terms of Rule 2(2) between the buyer and the seller of the imported goods is established, the question whether technical know-how fee/royalty paid by the buyer (importer) to the seller (foreign collaborator) is liable to be added to the invoice value of the goods under Rule 9(1)(C) cannot be decided upon in terms ....