2004 (2) TMI 612 - Commissioner - Customs

Summary

Issues:
Customs Valuation Rules 1988 - Rule 2(2) investigation of relationship, technical collaboration agreement, payment of technical know-how fees and royalty, import of capital goods, adjustment under Rule 9, includibility of technical know-how fees and royalty, nexus with imported goods, applicability of Rule 4, Rule 9(1)(b) and Rule 9(1)(c) regarding value addition, case laws interpretation, relevance of case laws, knowledge for manufacture of licensed products, relation to imported goods, applicability of previous judgments, competitive conditions for purchase, running royalty on manufactured goods, technical know-how related to finished products, capital goods import for plant installation.

Analysis:
The case involved a dispute regarding the valuation of imported goods under Customs Valuation Rules 1988. The appellant, an Indian company engaged in a joint venture with a foreign company, imported components for local assembly and manufacture. The issue arose due to the payment of technical know-how fees and royalty under a Technical Collaboration Agreement. The department initiated an investigation under Rule 2(2) to determine the relationship and the impact of these payments on the valuation of imported goods.

The lower authority accepted the transaction value declared in the invoice under Rule 4 of Customs Valuation Rules 1988, stating that the technical know-how fees were related to the production of finished products and not to the capital goods being imported. The department appealed, arguing that the technical know-how was essential for processing the imported goods and should be included in the valuation under Rule 9(1)(b).

The respondent, on the other hand, contended that the technical know-how fees were not directly related to the imported goods but to the knowledge for manufacturing the final products. They cited various case laws to support their argument and emphasized that the payment of fees was not a condition for the sale of parts and components.

Upon review, the Commissioner upheld the lower authority's decision, stating that there was no evidence of the buyer supplying goods or services for the production of imported goods. The Commissioner also noted that the technical know-how fees were for manufacturing licensed products, not for the imported capital goods. The Commissioner found the department's cited case laws irrelevant to the present case and emphasized that the technical know-how was not related to the capital goods imported for plant installation.

In conclusion, the Commissioner ruled in favor of the appellant, maintaining that the technical know-how fees and royalty were not includible in the valuation of imported goods under Rule 9(1)(b) as they were not directly linked to the imported goods but to the knowledge for manufacturing the licensed products. The judgment highlighted the importance of analyzing the specific nature of payments in relation to the imported goods and manufacturing processes involved.