2005 (12) TMI 380 - AT - Customs

Summary

Issues:
1. Inclusion of technology transfer fee in the value of imported goods under Customs (Valuation) Rules, 1988.

Analysis:
The appeal was filed against the Order-in-Appeal passed by the Commissioner of Customs (Appeals), Chennai, regarding the inclusion of a technology transfer fee in the value of imported goods. The appellants imported components of a clutch system and paid a technology transfer fee to the foreign supplier. The lower authorities included this fee in the value of the imported goods under the Customs (Valuation) Rules, 1988. The appellant challenged this decision.

The appellant's counsel argued that the technology transfer fee was paid only for manufacturing products in India and not related to the imported goods. They emphasized that the fee was not a condition of sale for the imported goods. The counsel cited various decisions supporting their argument. On the other hand, the Revenue's representative contended that the technology transfer fee was for assembling the imported items into a clutch system, making it related to the imported goods and a condition of sale. They referenced a previous Tribunal decision to support their position.

Upon reviewing the case records and the Technology Transfer Agreement, it was found that the fee was paid for manufacturing the clutch assembly in India. Only a small percentage of components/raw materials required for the finished product were imported from the foreign company transferring the technology. The majority of components were procured locally. The Tribunal concluded that the technology transfer fee was for know-how transfer and not directly related to the imported goods. They cited several decisions to support their ruling and distinguished the case relied upon by the Revenue. Consequently, the appeal was allowed with consequential relief.

In summary, the Tribunal held that the technology transfer fee was not includible in the assessable value of the imported goods as it was primarily for know-how transfer and not a condition of sale for the imported items. The decision was based on a detailed analysis of the Technology Transfer Agreement and relevant precedents, ultimately leading to the allowance of the appeal.