2005 (5) TMI 530 - AT - Customs

Summary

Issues Involved:
1. Whether the disclosure fee is liable to be added to the transaction value of the imported components for the purpose of finalization of the assessment under Rule 9(1)(c) of the Customs Valuation Rules, 1988.
2. Whether the relationship between the importer and supplier influenced the transaction value.

Issue-wise Detailed Analysis:

1. Addition of Disclosure Fee to Transaction Value:
The primary issue was whether the disclosure fee paid by the appellant to Komatsu under the License and Technical Assistance Agreement (LTA Agreement) should be included in the transaction value of the imported components for customs valuation purposes. The Customs Valuation Rules, 1988, specifically Rule 9(1)(c), was the focal point for this determination. This rule states that "royalties and license 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" should be added to the transaction value.

Both parties agreed that the disclosure fee qualifies as a "license fee" under Rule 9(1)(c). For the fee to be included in the assessable value, two conditions must be cumulatively satisfied:
- The disclosure fee must be related to the imported goods.
- The fee must be required to be paid, directly or indirectly, as a condition of the sale of the imported goods.

The appellant argued that the fee was related to the licensed product (hydraulic excavators) and not the imported components. The disclosure fee was a consideration for the transfer of technology necessary for manufacturing the hydraulic excavators, not for the components themselves. The Tribunal found that the nexus of the technical know-how was with the manufactured product (licensed product) rather than the inputs (imported components) used in the manufacture of that product. Therefore, the first condition under Rule 9(1)(c) was not satisfied, making it unnecessary to examine the second condition.

2. Influence of Relationship on Transaction Value:
The Deputy Commissioner of Customs initially rejected the transaction value, holding that the importer and supplier were "related" under Rule 2(2)(vi) of the Customs Valuation Rules, 1988, and that their relationship influenced the transaction value. However, the Commissioner (Appeals) and both parties later agreed that any relationship between the appellant and Komatsu was irrelevant in this context. The Tribunal confirmed that the relationship did not influence the transaction value for the purpose of adding the disclosure fee under Rule 9(1)(c).

Conclusion:
The Tribunal concluded that the disclosure fee was not related to the imported components and, therefore, could not be added to the transaction value under Rule 9(1)(c). As a result, the impugned order was set aside, and the appeal was allowed. The provisional assessment was to be finalized accordingly.

Order:
The appeal was allowed, and the provisional assessment was to be finalized without including the disclosure fee in the transaction value of the imported components. The order was pronounced in open court on 25-5-2005.