2008 (5) TMI 253 - AT - Customs

Plant and machinery imported for sulphuric acid plant project import - loading of value of the imported plant and machinery u/r 9 of Customs Valuation Rules, 1988 since licence fee paid consists of both imported and indigenous equipment, licence fees on basic engineering fees cannot be included in the value of plant and machinery imported impugned order is liable to be set aside Rule 9(1)(e) has no applicability- importer s appeal is allowed

Issues Involved:
1. Whether the value of the capital goods imported for the sulphuric acid plant should be loaded by 2.03% under Rule 9 of the Customs Valuation Rules, 1988.
2. Applicability of Rule 9(1)(b)(iv) and Rule 9(1)(e) of the Customs Valuation Rules, 1988.
3. Inclusion of license fees and basic engineering fees in the value of imported goods.
4. Relevance of previous judgments and decisions in similar cases.

Detailed Analysis:

1. Loading of Value by 2.03%:
The adjudicating authority had loaded the value of the imported sulphuric acid plant by 2.03% to arrive at the correct assessable value. This was based on the payment of Rs. 2.2 crores made under the agreement, which was apportioned between imported and indigenous goods. The Commissioner (Appeals) upheld this decision, leading to the current appeal. The appellant argued that the import of the sulphuric acid plant was in continuation of the copper smelting plant, for which no value was loaded. The Tribunal had previously ruled in favor of the appellant, stating that license fees and basic engineering fees should not be included in the value of imported goods.

2. Applicability of Rule 9(1)(b)(iv) and Rule 9(1)(e):
The Tribunal examined the applicability of Rule 9(1)(b)(iv) and Rule 9(1)(e) of the Customs Valuation Rules, 1988. Rule 9(1)(b)(iv) pertains to the addition of engineering, development, art work, design work, and plans and sketches necessary for the production of imported goods. The Tribunal found that this rule was not applicable as the engineering fees were not supplied by the buyer free of charge or at reduced cost. Rule 9(1)(e) covers other payments made as a condition of sale of imported goods. The Tribunal concluded that this rule could not be invoked simultaneously with Rule 9(1)(b)(iv), and the basic engineering fees were not related to the imported goods.

3. Inclusion of License Fees and Basic Engineering Fees:
The Tribunal reiterated that the license fees paid by the appellant were for obtaining the right to use the technology for manufacturing copper matte and were not related to the capital goods imported. The license agreement granted the right to use the Outokumpu Process and did not include the right to grant sub-licenses. The Tribunal emphasized that the license fees and basic engineering fees were not conditions of sale for the imported goods. The capital goods imported were standard goods available off-the-shelf and did not incorporate the flash smelting technology for which the license fees were paid.

4. Relevance of Previous Judgments:
The Tribunal relied on its previous decision in the appellant's own case, where it was held that the license fees and basic engineering fees could not be included in the value of imported goods. The Tribunal also referred to several other judgments, including those of the Hon'ble Supreme Court and other Tribunals, which supported the view that license fees and engineering fees should not be added to the value of imported goods unless they are directly related to the production of those goods.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, concluding that the value of the capital goods imported for the sulphuric acid plant should not be loaded by 2.03%. The Tribunal's decision was based on the reasoning that the license fees and basic engineering fees were not related to the imported goods and were not conditions of sale. The Tribunal's findings were consistent with previous judgments and legal principles.

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