2008 (7) TMI 688 - AT - Customs

Summary

Issues:
1. Whether technical know-how fee paid by the assessee to the overseas supplier should be added to the transaction value of the imported goods for customs duty calculation under Rule 9(1)(c) of the Customs Valuation Rules.

Analysis:

Issue 1:
The appeal challenged an order upholding the proposal to add technical know-how fee paid by the assessee to the overseas supplier to the transaction value of the imported goods for customs duty calculation under Rule 9(1)(c) of the Customs Valuation Rules. The assessee paid 3,00,000 French Francs (FF) and later 5,00,000 FF as technical know-how fee to the supplier for transfer of technical know-how required for manufacturing products in India. The contention was that the technical know-how fee was not related to the imported capital goods and inputs, and hence should not be added to the transaction value. The argument was supported by citing a Supreme Court judgment where it was held that such fees need not be added if they are not a condition for the supply of imported goods and have no relation to the imported goods.

Issue 1 Analysis:
The Tribunal analyzed the agreements and found no requirement for the assessee to pay technical know-how fee to the foreign collaborators as a condition for importing capital goods or inputs. There was no discernible relation between the technical know-how fee and the imported goods as per Rule 9(1)(c). The payment of technical know-how fee was found to be related to the products manufactured in India. Since there was no evidence of the payment of 5,00,000 FF, the proposal to include this amount in the assessable value of the imported goods was deemed unwarranted. The Tribunal ruled in favor of the assessee, holding that the technical know-how fee need not be added to the price of the imported capital goods or inputs for customs duty calculation under Rule 9(1)(c) of the Customs Valuation Rules.

In conclusion, the appellate tribunal set aside the impugned order and held that the technical know-how fee paid by the assessee to the foreign supplier should not be added to the price of the imported capital goods or inputs for customs duty calculation under Rule 9(1)(c) of the Customs Valuation Rules. The appeal was allowed.