2015 (10) TMI 549 - SC - Customs

Dispute on Transaction value for determination of Import Duty - inclusion of consideration paid for technical information provided - post importation activity Held That - it becomes clear that the technical information which was to be provided by the Japanese company to the respondent was for the manufacture of the contract products by the respondent herein, naturally, after the setting up of the plant. This cost is, thus, incurred after the importation of the goods. - Decision made in the case Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Limited 2015 (4) TMI 486 - SUPREME COURT followed Appeal dismissed against the Revenue.

Summary

Issues:
1. Interpretation of technical know-how agreement for import duty calculation.

Analysis:
The Supreme Court dealt with a case involving a joint venture between two companies to produce air conditioners/radiators. The dispute arose regarding the transaction value for import duty calculation of machinery components imported by the joint venture company. The disagreement centered around whether the consideration paid for technical know-how provided by the Japanese company should be included in the transaction value for import duty assessment.

The Court noted the existence of a technical know-how agreement between the respondent and the Japanese company, outlining the nature of technical information to be provided. The Court highlighted that the technical information was intended for the manufacture of contract products by the respondent after setting up the plant, indicating that the cost was incurred post-importation of goods. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) had previously held that the consideration for technical information cannot be included in the transaction value as it pertains to post-importation activities.

In its analysis, the Court referred to a prior judgment in the case of 'Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Limited', where a similar issue was addressed. The Court found that the technical information provided by the Japanese company was for activities post-importation, aligning with the CESTAT's decision. Consequently, the Court dismissed the appeal, citing the precedent set in the aforementioned case as a basis for their decision.

This judgment underscores the importance of distinguishing between pre-importation and post-importation costs in determining the transaction value for import duty calculation. It clarifies that costs incurred for technical know-how meant for activities post-importation should not be included in the transaction value, as established in previous legal precedents.