2017 (4) TMI 370 - AT - Customs

Valuation - technical know-how - includibility - The original adjudicating authority held that the payment of said technical know-how fee is a condition for sale and the same is related to the import of goods i.e. parts, units and sub-assemblies and therefore, is includible in the value of import of plano milling centre M machine - Held that - foreign collaborator have a significant role in deciding what the appellant can import from others. This would clearly amount to imposition of condition of sale - the appellants are not free to import the parts, units and sub-assemblies from any source. They can do so only if the foreign collaborator allows them to do so - there is a condition of sale attached to the transfer of technical know-how, the amount is includible in the assessable value - appeal dismissed - decided against appellant.

Summary

Issues:
Interpretation of technical know-how agreement in relation to the import of goods and its impact on the assessable value.

Analysis:
The appeal involved the interpretation of a technical know-how and technical service agreement between M/s. Manugraph India Ltd. (MIL) and Polygraph Export Import, Berlin. The original adjudicating authority and the Commissioner (Appeals) held that the payment made for technical know-how was a condition for sale and should be included in the value of import of a specific machine. The main argument presented by the appellants was that the technical know-how was for the manufacture of printing machines, and there was no condition for the sale of goods in the agreement. The appellants imported components from various sources, not just the foreign collaborator, which, according to them, should not impact the assessable value.

Upon reviewing the agreement, it was noted that MIL was not free to import goods from any source as the agreement specified that parts, units, and sub-assemblies to be imported had to be decided jointly with the foreign collaborator. The use of the word "shall" in the agreement indicated that MIL could not procure goods from other sources without the collaborator's consent, thereby imposing a condition of sale. The consideration paid for technical know-how included information necessary for manufacturing, maintaining, and selling products, which encompassed designs, drawings, and parts required for machine production. Consequently, the Tribunal found that a condition of sale was attached to the transfer of technical know-how, leading to the dismissal of the appeal and upholding of the original order.

In conclusion, the judgment emphasized the importance of analyzing the terms of agreements, especially regarding the import of goods, to determine the impact on assessable value. The decision highlighted that restrictions on sourcing components imposed by collaborators could constitute conditions of sale, affecting the valuation of imported machinery.