2017 (4) TMI 261 - AT - Customs

Valuation - fees for engineering services - includibility - Held that - there is no evidence to support the contention that the said amount of DM6,00,000 was in the nature of technical know-how fee linked to the sale of the said items covered under the bill of entry - fee for technical services which are related to post-importation activities are not liable to be included in the assessable value even if connected with the goods under import - demand related to the technical services agreement set aside - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Inclusion of fees paid under the 'engineering service agreement' in the assessable value of imported goods.
2. Determination of whether the fees constituted a 'know-how fee' linked to the sale of imported goods.
3. Applicability of Supreme Court precedents on the inclusion of technical service fees in the assessable value.

Detailed Analysis:

1. Inclusion of Fees Paid Under the 'Engineering Service Agreement' in the Assessable Value of Imported Goods:
The Revenue appealed against the exclusion of DM 6,00,000 from the assessable value in the impugned order of the Commissioner of Customs (Appeals) Mumbai-I. The original authority had included this amount in the assessment, considering it as fees paid by the importer to M/s Hayes Lemmerz GmbH, Germany under an 'engineering service agreement' dated 17th June 1992. The first appellate authority found that the fees were related to setting up a plant in India for manufacturing 'truck wheels' and were for project engineering, product engineering, and training, which were not related to the importation of goods. Hence, these fees were excluded from the assessable value.

2. Determination of Whether the Fees Constituted a 'Know-How Fee' Linked to the Sale of Imported Goods:
Revenue contended that the engineering service agreement encompassed more than just plant layout and capacity study, machine design and selection, product and tooling design, and procedures for operating and product testing on a design level. They argued that it was a 'know-how fee' required as a condition for the sale of imported goods, relying on the Supreme Court's decision in Essar Gujarat Ltd. The Tribunal found no evidence to support that the DM 6,00,000 was a technical 'know-how fee' linked to the sale of the imported items. Hence, the decision in Essar Gujarat Ltd was not applicable.

3. Applicability of Supreme Court Precedents on the Inclusion of Technical Service Fees in the Assessable Value:
The Tribunal referred to the Supreme Court's decision in Commissioner of Customs, Ahmedabad v. Essar Steel Ltd., which dealt with the inclusion of fees for technical services in setting up and commissioning a plant. The Court held that technical services for setting up, commissioning, and operating the plant post-importation were not to be included in the assessable value. The Tribunal distinguished this case from Essar Gujarat Ltd., where the fees were for a license essential for operating the imported plant. The Tribunal concluded that the first appellate authority correctly excluded the fees related to the technical services agreement from the assessable value.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the first appellate authority's decision to exclude the fees paid under the 'engineering service agreement' from the assessable value of the imported goods. The Tribunal found that the fees were related to post-importation activities and not a condition for the sale of the imported goods, aligning with the Supreme Court's precedent in Essar Steel Ltd.