2017 (4) TMI 197 - AT - Customs

Valuation - includibility - lump sum amount of ₹ 4,00,000/- paid by the appellant to a foreign entity as technical know-how fees - Held that - Since it has been held by Commissioner (Appeals) that the equipment and machine directly purchased by the licensee are not connected with the technical know-how purchased by the appellant, the question of adding technical know-how fees to the said imports does not arise - appeal allowed - decided in favor of appellant.

Summary

Issues:
Includibility of lump sum technical know-how fees paid to a foreign entity in the imported goods valuation.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI was filed by M/s. Bright Brothers Ltd. against the order of the Commissioner (Appeals) who had allowed the Revenue's appeal against the original adjudicating authority. The core issue revolved around the includibility of a lump sum amount of &8377; 4,00,000/- paid by the appellant to a foreign entity as technical know-how fees. Initially, the adjudicating authority had accepted the declared invoice value of the imported goods after reviewing the documents submitted by the appellant. However, the Commissioner (Appeals) overturned this decision, leading to the appeal before the Tribunal by the appellants.

The counsel for the appellant argued that the technical agreement license clearly stated that the technical know-how transfer was not related to the equipment and machinery directly purchased by the appellant. The Commissioner (Appeals) erred in setting aside the original adjudicating authority's decision based on this observation. The counsel emphasized that the technical know-how was specifically related to acquiring, installing, and connecting the proposed production line for manufacturing products, not the products themselves. This distinction was crucial in determining the includibility of the technical know-how fees in the imported goods valuation.

Upon reviewing the submissions from both parties, the Tribunal found merit in the appellant's argument. The Commissioner (Appeals) had acknowledged that the technical know-how under transfer was unrelated to the equipment and machinery directly purchased by the appellant. It was clarified that the technical know-how was connected to successfully setting up the production line for manufacturing products. Consequently, since the technical know-how fees were not linked to the equipment and machinery imported by the appellant, the Tribunal concluded that there was no basis for adding these fees to the imported goods valuation. Therefore, the appeal was allowed in favor of the appellants, highlighting the critical distinction between the technical know-how for production processes and the physical goods imported.