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2019 (2) TMI 889 - AT - CustomsValautaion of imported goods - coating plant - inclusion of fee paid for technical assistance in the assessable value - Rule 9 of the erstwhile Customs Valuation Rules, 1988 read with Section 14 (1) of the Customs Act, 1962 - Held that - In terms of Rule 9 (1)(c) of the Customs Valuation Rules, Royalty and license fee payable by the buyer to the seller directly or indirectly are required to be added to transaction value subject to two conditions, (i) these are related to the imported goods and (ii) these are payable as a condition for sale of goods being valued. After careful review of the Article 6 along with other clauses of the agreement, it can be concluded that by no stretch of imagination can it be concluded that the payment of US 2 million was a condition for the sale of the coating plant by the supplier to the Respondent. Since the one of the main conditions specified in Rule 9 (1) (c) of the Customs Valuation Rules, 1988 is not satisfied, there is no justification for addition of the said amount to the transaction value of the imported coating plant. In the case of Hindalco Industry Ltd. 2015 (5) TMI 696 - SUPREME COURT , the Hon ble Supreme Court considered and decided a similar question with reference to the license fee paid for import of capital goods for setting up of a smelter plant. The Apex Court came to a similar conclusion that such license fee pertained to service that was provided post import of the goods for manufacturing and hence, not includible in the transaction value of the imported goods. Appeal dismissed - decided against Revenue.
Issues:
Valuation of imported goods based on Technical Collaboration Agreement. Analysis: The appeal filed by Revenue challenges the Order-in-Appeal regarding the valuation of imported goods. The Respondent imported a Coating Plant from a related supplier in Austria and entered into a Technical Collaboration Agreement (TCC) with the supplier, paying US $ 2 million for technical assistance. The Department contended that this fee should be included in the assessable value of the imported goods. The Original Authority enhanced the value of the coating plant and demanded differential duty, which was later set aside by the Commissioner (Appeals). The main issue revolves around whether the US $ 2 million should be added to the transaction value of the imported coating plant as per Rule 9 of the Customs Valuation Rules, 1988. The Ld. AR for the Revenue argued that the payment was a condition for the sale of the coating plant, emphasizing the connection between the TCC and the import contract. On the other hand, the Ld. CA for the Respondent contended that the payment did not fulfill the conditions specified in Rule 9(1)(c) of the Customs Valuation Rules, as it was for technical knowhow transfer, not a condition for the sale of the plant. The Respondent relied on various case laws to support their argument, highlighting that the technical know-how fee did not directly relate to the importation of the goods. Upon review, the Tribunal examined the TCC and concluded that the US $ 2 million payment was for technical assistance and knowhow, not a condition for the sale of the coating plant. Referring to Rule 9(1)(c), the Tribunal found no justification for adding this amount to the transaction value of the imported goods. Citing precedents like Hindustan Motors Ltd. and Hindalco Industries Ltd., the Tribunal emphasized that the know-how fee did not have a direct nexus to the importation of the coating plant. Therefore, the appeal filed by Revenue was rejected, upholding the decision of the Lower authority to set aside the demand for differential duty. In summary, the judgment focused on the interpretation of the Technical Collaboration Agreement and its relation to the valuation of imported goods. By analyzing the specific clauses of the agreement and relevant legal provisions, the Tribunal determined that the technical know-how fee was not a condition for the sale of the imported coating plant, leading to the rejection of the Revenue's appeal.
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