2002 (12) TMI 135 - AT - Customs

Summary

Issues:
1. Inclusion of collaboration agreement fees in the assessable value of imported goods.
2. Interpretation of legal provisions and previous court decisions regarding the addition of fees to the price of imported goods.

Issue 1: Inclusion of collaboration agreement fees in the assessable value of imported goods
The case involved the appellant, who purchased a second-hand Caustic Soda Plant from a company in Dubai and entered into a technical collaboration agreement with a Japanese company for setting up the plant in India. The question arose whether the amount paid for the collaboration agreement should be included in the assessable value of the imported plant. The Deputy Commissioner of Customs initially held that a portion of the payment should be added to the value of the imported goods under specific valuation rules. However, the Revenue disagreed and filed an appeal, arguing that the entire collaboration fees should be added to the price of the plant.

Issue 2: Interpretation of legal provisions and previous court decisions
The main contention was whether the collaboration fees were a necessary part of making the plant operational and should be included in the assessable value. The appellant argued that the sale agreement for the plant and the collaboration agreement were separate, and there was no condition for obtaining a license from the Japanese company. The appellant emphasized that the collaboration was for identifying substitute machinery and assisting in upgrading the plant, not a condition of sale. The appellant also cited Customs Valuation Rules to support their position that no royalty or license fee was required to be paid as a condition of sale. The appellant distinguished their case from a previous court decision by highlighting the lack of a license requirement in their transaction.

Judgment:
The Tribunal examined the agreements and found that the sale of the plant and the collaboration were independent of each other. There was no condition in the sale agreement requiring the buyer to obtain a license or pay a royalty to a third party. The collaboration agreement was for assisting in setting up an upgraded plant with modified machinery. The Tribunal concluded that since the collaboration was not a condition for the sale of the plant, the provisions for adding fees to the assessable value did not apply. The Tribunal held that the impugned order was erroneous in its interpretation of legal provisions and the previous court decision. Accordingly, the appeal was allowed, and the impugned order was set aside, providing consequential relief to the appellants.