2011 (7) TMI 160 - AT - Customs

Assessable value - Whether lumpsum fees paid by the appellant to the parent company needs to be included in the value of the capital goods which were imported - Rule 9 of the Customs Valuation Rules 1988 - it has to be decided that whether the disclosure fees paid by the appellant to the foreign collaborator needs to be included in the value of the imported capital goods machinery plant and equipments - In the present case no effort was made by the Department to ascertain whether there exists a price adjustment between cost incurred by the buyer on account of royalty/licence fees payments and the price paid for imported items - The admitted fact therein was that M/s. HWIL had technical know-how to the equipment which were imported by the appellant and they were to pay a technical know-how fees to M/s. HWIL and were to give performance guarantee to Steel Authority of India Ltd. which had connection with the goods imported - Appeal is allowed

Summary

Issues:
1. Inclusion of disclosure fees and royalty fees in the assessable value of imported goods.
2. Interpretation of Customs Valuation Rules in relation to technical know-how fees.
3. Applicability of precedents in determining the inclusion of technical know-how fees in the value of imported goods.

Analysis:
1. The appeal challenged the decision regarding the inclusion of disclosure fees and royalty fees paid by the appellant in the assessable value of imported capital goods for manufacturing carburetors. The Commissioner of Customs (Import) directed an appeal before the Ld. Commissioner (Appeals) who reversed the decision of the adjudicating authority, leading to this appeal.

2. The appellant argued that the technical information and fees paid were solely for the manufacture of carburetors, not directly related to the imported goods. Citing precedent cases like Commissioner of Customs Vs. Ferodo India Pvt. Ltd., it was contended that fees not connected to the imported goods should not be included in the valuation. The Revenue, on the other hand, claimed that the technical know-how was essential for using the imported machinery, thus justifying the inclusion of fees.

3. The Tribunal examined the agreement, finding that the imported machinery was not proprietary in nature and the technical know-how was for manufacturing carburetors in India. Relying on Supreme Court judgments and previous Tribunal decisions, including Totalfinaelf India Ltd. and Avery India Limited, it was concluded that fees unrelated to the imported goods should not be included in the valuation. The Tribunal distinguished the case of Otto India Pvt. Ltd., emphasizing the unique circumstances of each case.

4. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The decision highlighted the importance of a direct or indirect link between fees and imported goods for inclusion in the assessable value, in accordance with Customs Valuation Rules and established legal precedents.