2008 (11) TMI 208 - AT - Customs

Valuation technical know how post importation services / activities Held that - They are manufacturer of sophisticated automobile components. For the said purpose they have entered into a cooperation agreement with the Finland based company for get ting investment, procuring capital goods, assisting in setting up the plant, providing technical know-how for manufacture of final products. The raw material supply is only one of the aspects of said agreement. Since the payment for know how is not related to imports of raw material, addition is not allowed - The cost towards such post importation services (i.e.. several post importation activities including erection, commissioning and training of persons) does not require to be added, as the goods are required to be valued at the time and place of importation

Summary

Issues:
- Determination of assessable value for imported goods based on relationship between the appellant and the supplier.
- Consideration of payment for technical know-how in relation to imported raw materials.
- Assessment of additional consideration for post importation services.
- Interpretation of the cooperation agreement between the appellant and the Finland-based supplier.

Analysis:
1. Assessable Value based on Relationship:
The original authority added Rs. 70 lakh to the total value of imports, alleging that the relationship between the appellant and the supplier influenced the price of imported goods. However, the Tribunal found that the mere shareholding by the foreign supplier in the Indian importer cannot justify rejecting the transaction value of the import. The Tribunal emphasized that the payment for technical know-how was not directly related to the import of raw materials, and hence, the addition to the assessable value was unjustified.

2. Payment for Technical Know-How:
The appellant argued that the payment of 2 lakh US$ was for technical know-how and not for raw materials. The Tribunal agreed, noting that the payment was part of a cooperation agreement for setting up a plant and manufacturing final products. The Tribunal held that the payment for technical know-how was not linked to the import of raw materials, and therefore, the addition to the assessable value was unwarranted.

3. Additional Consideration for Post Importation Services:
The department contended that the value of post importation services should be added to the assessable value of capital goods. However, the Tribunal found that the cost of post importation services, such as erection, commissioning, and training, did not need to be included in the assessable value. The Tribunal accepted the appellant's argument that the balance amount was for services rendered in India, which had not been effectively refuted.

4. Interpretation of Cooperation Agreement:
The Tribunal analyzed the cooperation agreement between the appellant and the Finland-based supplier. It was observed that the supplier assisted in procuring capital goods and providing technical know-how, among other services. The Tribunal concluded that the value of goods was separate from the cost of post importation services, and therefore, the appellant's claim regarding the payment for services rendered in India was upheld.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant based on the lack of justification for additions to the assessable value and the interpretation of the cooperation agreement between the parties.