TaxTMI 
TaxTMI 
2005 (3) TMI 380
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....lusive right for the manufacture, fabrication, assembly, sale and installation of the Licensed Products in the Exclusive Territory and to use the patents and trademarks registered by Licensor." Article 3 of the Agreement laid down the Licensor's obligations to provide technical information and services to the licensee. Clause (a) of Article 3 reads thus : "(a) After the date of this agreement, Licensor shall immediately furnish the Licensee with all available relevant drawings, design data, basic design parameters and complete test performance data for the licensed products including sufficient detailed drawings of existing installations showing all components assemblies which form part of these installations and detailed material sheets a....
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.... (B) also facilitated payment of the above amount in 3 instalments as under:- First instalment  : 30 days after the effective data of this agreement Second instalment : 30 days after the delivery of complete technical know-how and information Third instalment : 3 (three) months after the Commencement of the Commercial Production. Appendix 2 to the agreement contained the details of the technical know-how and information to be provided by the licensor to the licensee in terms of Article 5 to enable the latter to manufacture, fabricate, assemble, erect, test, sell and operate the licensed products. 2. The Deputy Commissioner of Customs (Special Valuation Branch) held that the technical know-how fee of DM 1,00,000/- was lia....
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....fee was not to be included in the assessable value of the components under Rule 9(1)(c) of the Customs Valuation Rules. 2. Panalfa Dongwon India Ltd. v. CC [2003 (155) E.L.T. 287 (T-LB) = 2003 (56) RLT 962 (LB)] wherein the lump sum royalty paid by the party to their foreign collaborator as consideration for training of personnel, furnishing of technical information and utilisation of intellectual property rights was held not includible in the assessable value of the capital goods and raw materials imported by the assessee, on account of the fact (found by the Bench) that the amount paid had no connection with the import of the goods and its connection was with the process of manufacture of the licensed products. 3. Tata Iron & Steel Co. ....
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.... for technology supplied by the licensor and the other was a royalty payable by the appellants to the licensor at the rate of 3% of the ex-factory selling price of the licensed products. The above rule mentions "royalties and licence fees". Before us, both sides have agreed that the fee of DM 1,00,000 for technology transfer is covered by the term "licence fee" mentioned in Rule 9(1)(c). The question now to be examined is whether this fee paid by the appellants to their foreign collaborator was related to the imported components and whether it was payable, directly or indirectly, as a condition of sale of the said goods. A perusal of the relevant provisions of the licence agreement shows that the fee was paid by the appellants as considerat....
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...., when they are directly or indirectly related to the Imported goods. By way of exclusion of the cost of imports from the calculation of Royalty one finds that the there is no relationship to the imports and hence the Royalty payable is not addable." Ld. Commissioner (Appeals) misdirected herself obviously by thinking that the licence fee should be directly or indirectly related to the imported goods. Rule 9(1)(c) did not employ the expression "directly or indirectly" in the context of referring to relation between licence fee and imported goods. The rule employed this expression to connect the payment of licence fee to sale of the said goods. According to the rule, only that licence fee winch was related (not indirectly as held by the low....
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....ayment 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 the manufacture of exhaust systems under an agreement between them and their foreign collaborator. They paid a lump sum royalty of US $ 6.5 lakhs for training of personnel, furnishing of technical information and utilisatio....