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2006 (7) TMI 722 - AT - Customs

Issues:
Customs Valuation Rules interpretation regarding technical know-how fee in relation to imported machinery.

Analysis:
The appeal challenged the Commissioner of Customs (Appeals) order upholding the apportioning of a technical know-how fee to the CIF invoice value of imported machinery for manufacturing threads. The joint venture agreement between the appellant and a foreign collaborator included provisions for licensing products, but the licensed products did not mention machinery. The consideration clause of the agreement specified a lump sum payment for technical know-how, to be paid in three installments. The appellant argued that the Customs Valuation Rules provision invoked by the authorities could not apply as the fees for licensed products did not relate to the imported machinery. The department's representative contended that the machinery imported could not function without the disclosed know-how, thus the fees were attributable to the machinery and should be included in the Customs duty calculation. The Tribunal noted that the license fees did not directly or indirectly relate to the imported machinery as per the agreement terms, and there was no evidence establishing a connection between the fees and the imported goods.

In a previous case involving the same appellant, the Tribunal had set aside a similar order, emphasizing that the Customs Valuation Rules require inclusion of fees directly related to the imported goods in the price calculation. The Tribunal highlighted that the technical know-how payment was not a condition for the sale of the machinery, as per the agreement terms. The absence of evidence linking the license fees to the imported machinery led to the conclusion that the fees should not be included in the price of the imported goods. The Tribunal, therefore, set aside the Commissioner (Appeals) order, as there was no established nexus between the license fees and the imported machinery, contrary to the Customs Valuation Rules requirements. The appeal was allowed, and the Commissioner's decision was overturned based on the lack of evidence supporting the inclusion of the technical know-how fee in the Customs duty calculation.

 

 

 

 

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