TaxTMI 
TaxTMI 
2005 (3) TMI 378
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....of manufacture of solid and energy-absorbing "steering columns" and "steering joint assemblies" for automobiles, for which purpose the company entered into "Licence and Technical Assistance Agreements" with M/s. NSK Ltd. Japan. M/s. Nastech Europe Ltd., UK and M/s. Torrington Co. USA. The agreement with NSK Ltd., Japan was entered into on 23-2-97 and, thereunder, M/s. NSK Ltd. were to provide technical documents (vide Article III) and technical assistance (vide Article LV) to the appellants for manufacture of steering columns and steering joint assemblies (licensed products) for Maruti, Honda, Telco and Hyundai cars. A similar Licence and Technical Assistance Agreement with Nastech Europe Ltd. executed on 12-12-97 provided for grant of tech....
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....s fees payable by them to their foreign collaborators was not at all related to the goods imported and that such payment was not a condition of sale of the said goods. Therefore, it was argued. Rule 9(1)(c) was not applicable. Counsel pointed out that the appellants had substantially reduced the quantum of imports under the above agreements over the years. In the year 1999-2000 the imports were to the extent of 79% of the total material cost. The import content of the total material cost for the manufacture of the licensed products was gradually reduced over the years and, accordingly, it was approximately 45% in 2003-04. However, the payments due to the technical collaborators remained the same, irrespective of the reduction in the quantum....
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....ion and knowledge, tangible or intangible, reasonably necessary to enable Licensee to manufacture and assemble Steering Columns and to assemble Steering Joints". This "know-how" is part of the licence granted to the appellants by each of their technical collaborators. For instance. Article 2.1 of one of the Agreements reads thus : "NSK hereby grants Licensee (i) an exclusive license under the Licensed Patents and/or Know-How to manufacture and assemble Steering Columns and assemble Steering Joints in the Territory and (ii) a non-exclusive license to use and sell Licensed Products in the Territory". Technical information & knowledge in tangible form are to be supplied as "technical documents" by the licensor to the licensee. Article 3.....
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....the manufacture and assembly of the Steering Columns and assembly of the Steering Joints. Such technical assistance shall be made during the initial seven (7) years from the receipt of the first one-third of the Technical Documents Fees provided for in Paragraph 6.1. The number of Engineers and the period during which they will be dispatched shall be determined by mutual consent between the parties. Such technical assistance shall not exceed forty (40) Man-Days to support each Licensed Product". "NSK shall render services to train Licensee's engineering trainees (hereinafter referred to as "Trainees") at NSK's facilities in Japan during the initial seven (7) years from the receipt of the Technical Documents Fees. The number of Trainees s....
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....w one cannot think of the licensed product coming into existence from the imported components. Such observations, however, would not satisfy the requirement of Rule 9(1)(c) for including technical know-how fee (licence fee) in the assessable value of the imported components under Rule 9(1)(c), which is extracted hereunder :- "9. Goods,- COST and SERVICE - (1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods. (c) Royalty and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalities and fees are not included in the price actually paid o....
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....f the appellants' case. In the case of S.D. Technical Service (supra), the assessee had made a lump sum payment as consideration for disclosure of technical know-how by their foreign collaborator. It was found that this payment was only related to the indigenous manufacture of licensed equipments and not related to the imported components and hence the amount was not to be added to the assessable value of the imported goods under Rule 9(1)(c). We are bound by the ratio of the decision of the Tribunal's Larger Bench in S.D. Technical Services (supra). The decision of the Larger Bench in the case of Panalfa Dongwon India Ltd. (supra) is also to the same effect. In that case, capital goods and raw materials were imported by the assessee for....