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Issues:
1. Interpretation of Technical Collaboration/Technical Assistance Agreement for import of Ball Bearing and Raw Material. 2. Customs valuation based on technical fee and royalty payments. 3. Legality and propriety of the Order-in-Original and Commissioner (Appeals) decision. 4. Application of relevant case laws in determining the inclusion of know-how fees under Rule 9. Interpretation of Technical Collaboration Agreement: The appellant, an importer of Ball Bearing and Raw Material, entered into a Technical Collaboration/Technical Assistance Agreement with an affiliate company. The agreement granted a non-transferrable license for design, manufacture, and sale of upgraded products in India. The agreement specified the supply of Know-how by the affiliate company within a stipulated time frame. Additionally, the appellant paid a lump sum technical fee and royalty on the net ex-factory sale price of the upgraded products. The Commissioner (Appeals) held that the know-how fees were inseparable from the imported goods, indicating that the fees were includable under Rule 9 based on the Supreme Court decision in Mahindra & Mahindra. Customs Valuation and Royalty Payments: The Deputy Commissioner enhanced the transaction value by 5.26% for imports of finished SKF brand bearings due to a commission deducted from the invoice price issued to the appellant. However, the Order-in-Original dated 31-1-2001 accepted the appellant's submissions, ruling out additions to the transaction value on account of technical know-how fee and royalty payments. The Commissioner (Appeals) disagreed, stating that the lump sum know-how fees were related to the imported goods and should be included under Rule 9. Legality and Propriety of Orders: The Commissioner of Customs directed an appeal challenging the legality and propriety of the Deputy Commissioner's order. The Commissioner (Appeals) held that the know-how fees were integral to the imported goods and cited the Mahindra & Mahindra case to support this view. However, the appellate tribunal found discrepancies in the Commissioner (Appeals) order, noting a lack of specification regarding the provisions of the agreement supporting the decision. Application of Case Laws: The appellate tribunal analyzed the agreement clause related to raw materials approved by the affiliate company and concluded that the payments were for assistance in indigenous manufacture of upgraded ball bearings. Referring to the S.D. Technical Service case, the tribunal determined that the payments constituted running royalty to the foreign collaborator, thus allowing the appeal concerning the royalty portion of the loading. The appeal was disposed of accordingly.
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