2010 (12) TMI 68 - AT - Customs

Valuation of import of capital goods - technical know-how fee and royalty paid by the importer to their foreign collaborator - Held that - We are of the view that the original authority should meticulously examine the provisions of the agreement and also consider the conduct of the importer in the context of determining the question whether the fees paid by the appellant to the foreign collaborator require to be added to the assessable value of the goods under import. The adjudicating authority is required to examine whether both the conditions prescribed under Rule 9(1)(c) have been cumulatively satisfied by the Revenue so as to claim inclusion of the above fees in the assessable value of the goods under import. - matter remanded back.

Summary

Issues:
Assessable value determination based on technical know-how fee and royalty paid to foreign collaborator.

Comprehensive Analysis:

Issue 1: Assessable value determination
The appeal challenges the order of the appellate Commissioner, which included technical know-how fee and royalty paid to a foreign collaborator in the assessable value of imported goods. The appellant obtained technical know-how and assistance under an agreement with the German company and imported components and capital goods. The authorities applied Rule 4 read with Rule 9 of the Customs Valuation Rules, 1988 to load the value by 20% due to the payment of technical fees. The appellant argued that the authorities did not specify the clause of Rule 9(1) applied and failed to show the satisfaction of the conditions under Rule 9(1)(c) for inclusion of fees in the assessable value. Various legal precedents were cited to support both sides' arguments.

Issue 2: Legal arguments
The appellant contended that the fees were not a condition of sale, while the Revenue argued that the fees were linked to the import of goods as per the agreement's provisions. The appellant emphasized that the agreement did not mandate purchasing goods from the foreign collaborator, contrary to the Revenue's stance. The authorities were criticized for not thoroughly examining the agreement's provisions, especially Article 6.4, which the Revenue relied on. The necessity of a nexus between fee payment and imported goods, as well as the condition of sale, was highlighted as per Rule 9(1)(c).

Issue 3: Decision and Remand
After considering the arguments, the Tribunal found that a detailed examination of the agreement and the conduct of the importer was necessary to determine the fees' inclusion in the assessable value. The adjudicating authority was directed to scrutinize if the conditions under Rule 9(1)(c) were met by the Revenue, ensuring a fair opportunity for the appellant to present evidence. The lack of a purchase order was noted, and the authority was instructed to request and consider it if provided. Consequently, the appeal was allowed for remand, emphasizing the need for a comprehensive review and a reasoned decision on the matter.

This detailed analysis outlines the key aspects of the legal judgment regarding the determination of assessable value based on technical fees paid to a foreign collaborator, addressing the arguments presented and the Tribunal's decision for remand.