2007 (2) TMI 1 - SC - Customs

Valuation(Customs)- Licence, Knowhow and technology should not be included in the imported goods No case made out that sale price of imported good is under stated

Summary

Issues Involved:
1. Whether customs duty should be payable on the purchase price of goods by adding the value of the license and technical know-how to the value of imported goods.
2. Interpretation and application of Rule 9(1)(e) of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988.
3. Applicability of the Supreme Court's decision in Tata Iron and Steel Company Limited v. Commissioner of Central Excise and Customs Bhubaneswar, Orissa.

Issue-wise Detailed Analysis:

1. Whether customs duty should be payable on the purchase price of goods by adding the value of the license and technical know-how to the value of imported goods:
The Supreme Court analyzed whether the customs duty should include the value of the license and technical know-how in the assessable value of imported goods. The Tribunal had previously allowed the appeal, remitting the matter for a de novo decision, emphasizing the decision in Tata Iron and Steel Company Limited v. Commissioner of Central Excise and Customs Bhubaneswar, Orissa. The Court noted that the value of imported goods is determined at the time and place of importation, and any amount paid for post-importation services or activities, such as technical know-how, should not be included in the assessable value for customs duty. The Court stated, "Any amount paid for post-importation service or activity, would not, therefore, come within the purview of determination of assessable value of the imported goods so as to enable the authorities to levy customs duty or otherwise."

2. Interpretation and application of Rule 9(1)(e) of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988:
The Court examined Rule 9(1)(e) which states that all other payments made as a condition of sale of imported goods should be included in the transaction value. The Court referred to the interpretative notes to Rule 4, which specify that charges for post-importation activities, such as technical assistance, should not be included in the value of imported goods. The Court emphasized, "The value of imported goods shall not include the following charges or costs, provided that they are distinguished from the price actually paid or payable for the imported goods: (a) Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment."

3. Applicability of the Supreme Court's decision in Tata Iron and Steel Company Limited v. Commissioner of Central Excise and Customs Bhubaneswar, Orissa:
The Court found that the decision in Tata Iron and Steel Company Limited (TISCO) was applicable to the present case. In TISCO, the Court held that charges for post-importation activities should not be included in the assessable value of imported goods. The Court reiterated, "The part of the Interpretative Note to Rule 4 relied on by the Tribunal has been couched in a negative form and is accompanied by a proviso. It means that the charges or costs described in clauses (a), (b) and (c) are not to be included in the value of imported goods subject to satisfying the requirement of the proviso that the charges were distinguishable from the price actually paid or payable for the imported goods."

Conclusion:
The Supreme Court dismissed the appeal, holding that the value of the license and technical know-how should not be added to the value of the imported goods for the purpose of levying customs duty. The Court found no merit in the Revenue's contention and upheld the Tribunal's decision. The Court concluded, "We cannot, therefore, accept the contention of Mr. Radhakrishnan. More over, no case has been made out that the sale price of the imported plant and machinery had been under-stated." The appeal was dismissed with no order as to costs.