2005 (8) TMI 214 - AT - Customs

Summary

Issues:
- Whether technical know-how fee and royalties should be added to the transaction value of imported goods.
- Interpretation of Rule 9(1)(c) of the Customs Valuation Rules, 1988.
- Applicability of case laws in determining the assessable value.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Chennai challenged the Order-in-Appeal passed by the Commissioner (Appeals), Chennai, regarding the inclusion of technical fees and royalties in the transaction value of imported goods supplied by a foreign entity related to the appellant. The original authority added technical fees and royalties to the transaction value, which was upheld by the Commissioner (Appeals), leading the appellant to approach the Tribunal seeking relief.

The appellant argued that the technical know-how fee and royalties were not related to the imported goods but to products manufactured in India, emphasizing that their payment was not a condition of sale of the imported items. Citing Rule 9(1)(c) of the Customs Valuation Rules, 1988, the appellant contended that such charges should not be included in the assessable value. The appellant relied on various case laws, including Ferodo Indioa, Panalfa Dongwon India, Hoerbiger India Pvt Ltd., Polar Marmo Agglomerates Ltd., and SD Technical Service, to support their position.

The Revenue, represented by the learned SDR, reiterated the arguments presented in the Order-in-Original and the Order-in-Appeal, maintaining the inclusion of technical fees and royalties in the transaction value.

After a thorough review of the case records and arguments from both sides, the Tribunal found that the technical assistance agreement pertained to products manufactured in India by the appellant, not the imported goods. The Tribunal emphasized that Rule 9(1)(c) required royalties and license fees to be related to the imported goods and a condition of the sale. Since the technical fees and royalties were linked only to products manufactured in India, not the imported goods, the Tribunal concluded that the Commissioner (Appeals) erred in including them in the assessable value. The Tribunal deemed the case laws cited by the appellant relevant and found the Order-in-Appeal lacking merit, ultimately allowing the appeal with any consequential relief. The judgment was pronounced in open court on 12-8-2005.