2004 (5) TMI 458 - AT - Customs

Summary

Issues:
- Whether the lump sum fee for transfer of production know-how related to the manufacture of rotor blades should be added to the value of imported goods under Rule 9(1)(c) of Customs Valuation Rules, 1988.

Detailed Analysis:

1. Background and Agreements:
The appellant, a joint venture company, imported raw materials, components, and capital goods from a foreign collaborator. The assessing authority considered the know-how transfer fee of 7.5 million DKK as addable to the transaction value under Rule 9(1)(c). The Commissioner (Appeals) initially ruled against adding the fee, stating it was not related to the imported components. The Tribunal remanded the case for further adjudication.

2. Contentions of the Appellant:
The appellant argued that the technical know-how fee did not meet the conditions under Rule 9(1)(c) as it was not a royalty or license fee related to the imported goods. The fee was for technical expertise in manufacturing products in India, post-importation activities, and training, not for the imported capital goods or raw materials. The appellant cited relevant tribunal decisions to support their position.

3. Department's Argument and Commissioner's View:
The Department contended that the technical know-how transfer was integral to converting raw materials/components into finished products, justifying the addition of the fee under Rule 9(1)(c). The Commissioner opined that the imported goods were used to generate licensed products (rotor blades), making the technical license fee liable for inclusion.

4. Tribunal's Analysis and Decision:
The Tribunal reviewed the agreement on know-how transfer, noting that the fee was for the transfer of production know-how related to rotor blades. The Tribunal found no merit in adding the fee to the imported goods, as it was not directly related to them. It rejected the argument that the import of molds was conditional on the know-how fee payment. The Tribunal concluded that both conditions under Rule 9(1)(c) were not met and allowed the appeal, setting aside the impugned order.

In summary, the Tribunal held that the lump sum fee for technical know-how transfer was not to be added to the value of the imported goods under Rule 9(1)(c) as it was not a condition of the sale of the imported items. The decision was based on the lack of direct relation between the fee and the imported goods, supported by the terms of the agreement and relevant tribunal precedents cited by the appellant.