2007 (2) TMI 629 - SC - Customs

Whether customs duty would be payable on the purchase price of the goods by adding the value of licence and technical knowhow etc. to the value of the imported goods?

Issues Involved:
1. Whether customs duty should include the value of the license and technical know-how in the valuation of imported goods.
2. Interpretation and application of Rule 9(1)(e) of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988.
3. Applicability of the Supreme Court decision in Tata Iron and Steel Company Limited vs. Commissioner of Central Excise and Customs Bhubaneswar, Orissa.
4. Distinction between pre-importation and post-importation payments in the context of customs duty valuation.

Detailed Analysis:

1. Inclusion of License and Technical Know-How in Customs Duty Valuation:
The core issue was whether the customs duty should be calculated by adding the value of the license and technical know-how to the value of the imported goods. The Assistant Commissioner of Customs initially opined that the amounts mentioned in both parts of the collaboration agreement (license, know-how, and equipment) should be combined, arguing that the payment for know-how was a pre-condition for the sale of the equipment. The Customs Excise and Service Tax Appellate Tribunal (CESTAT) later remitted the case for reconsideration based on the Supreme Court's decision in the TISCO case.

2. Interpretation of Rule 9(1)(e) of the Customs Valuation Rules, 1988:
Rule 9(1)(e) stipulates that all payments made as a condition of sale of imported goods should be included in the transaction value. The Deputy Commissioner of Customs upheld the earlier decision, stating that both parts of the agreement (Part-A and Part-B) were complementary and inseparable. However, the Commissioner of Customs later set aside this order, asserting that the TISCO decision was applicable, which distinguished between pre-importation and post-importation payments.

3. Applicability of the TISCO Decision:
The Supreme Court's decision in Tata Iron and Steel Company Limited vs. Commissioner of Central Excise and Customs Bhubaneswar, Orissa was pivotal. The TISCO case clarified that post-importation payments, such as those for technical know-how or services, should not be included in the assessable value of imported goods. The Commissioner of Customs applied this principle, leading to the Tribunal's dismissal of the Revenue's appeal.

4. Distinction Between Pre-Importation and Post-Importation Payments:
The judgment emphasized that the basic principle of customs duty is to assess the value of imported goods at the time and place of importation. Payments made for post-importation services or activities, such as technical assistance, should not be included in the customs duty valuation. The interpretative note to Rule 4 of the Customs Valuation Rules further supports this by excluding charges for post-importation activities from the assessable value.

Conclusion:
The Supreme Court dismissed the Revenue's appeal, affirming that the value of the license and technical know-how should not be added to the value of the imported goods for customs duty purposes. The Court held that the payments for post-importation services or activities, including technical know-how, are not to be included in the assessable value. The decision in the TISCO case was deemed applicable, and no evidence was provided to suggest that the sale price of the imported plant and machinery had been under-stated. The appeal was dismissed without any order as to costs.

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