2008 (3) TMI 114 - AT - Customs

Imported goods - royalty is calculated on basis of the net ex-factory sale price of product exclusive of excise duties minus the cost of the standard bought-out components & landed cost of imported components irrespective of the source of procurement including ocean freight insurance customs duties etc. - royalty payment has no nexus to be impugned goods - there was no Condition of Sale - technical-know-how/licence fee is not to be included in the value of the consignment of raw materials

Summary

Issues: Appeal against inclusion of technical know-how/license fee in the value of imported raw materials.

Analysis:

1. Interpretation of Technology Licence Agreement:
The appeal was filed by the Revenue against the Order-in-Appeal, contesting the inclusion of technical know-how/license fee in the value of imported raw materials. The Ld. Commissioner (Appeals) analyzed the Technology Licence Agreement and concluded that the royalty payment had no nexus with the imported goods. The Commissioner emphasized that the concept of 'Condition of Sale' as per the Essar case had not been correctly interpreted by the reviewing authority. The Revenue argued that the technical know-how and royalty should be included in the value as per Custom Valuation Rules, citing judgments from previous cases. However, the Ld. Commissioner found no contradiction in his order and maintained that the technical know-how/license fee was not related to the imported raw materials but to the manufacturing process.

2. Contradiction in the Commissioner's Order:
The Revenue contended that there was a contradiction in the Commissioner (Appeals) order regarding the inclusion of technical know-how/license fee in the value of imported goods. However, the Tribunal found no inconsistency in the Commissioner's findings. The Revenue failed to provide any evidence to counter the Commissioner's conclusion that the fee was not linked to the imported raw materials but to the manufacturing process. The Tribunal upheld the Commissioner's decision, stating that since the imported items were raw materials, the inclusion of technical know-how/license fee was not warranted.

3. Final Decision and Dismissal of Appeal:
After thorough consideration of the arguments presented, the Tribunal concluded that the Ld. Commissioner (Appeals) had correctly determined that the technical know-how/license fee should not be included in the value of the imported raw materials. The Tribunal found no merit in the Revenue's appeal and dismissed it accordingly. The decision was based on the understanding that the fee was not associated with the imported raw materials but pertained to the manufacturing process, thus affirming the Commissioner's order.

In summary, the judgment by the Appellate Tribunal CESTAT, Mumbai upheld the decision of the Ld. Commissioner (Appeals) to exclude the technical know-how/license fee from the value of imported raw materials, emphasizing that the fee was not directly related to the imported goods but to the manufacturing process. The Tribunal dismissed the Revenue's appeal, finding no grounds to interfere with the Commissioner's order.