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TMI Blog1995 (8) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... sive of taxes, allowing deductions of amounts paid as (i) cost of packing and transport (ii) all taxes. The royalty is calculated thereafter on the net ex-factory price which reflects the basic manufacturing value, inclusive of manufacturing profits i.e. the said value also includes all payments made upto the stage of completion of manufacture, the manufacturer s interest not travelling beyond it. The appellants further contend that they do not consider the conditional approval of the price lists with the remarks `subject to verification as correct. They further contend that they were not accorded opportunity of explaining the case resulting in denial of principles of natural justice. The contentions of the appellants appear to have ample force. As discussed in this order-in-appeal No. 34/WB/83 dated 21-3-1983, having relevance to the instant appeal, the technical know-how fee paid to the foreign collaborator is for bettering of the quality of the subject product for easy marketability. It is an expense relatable to selling activity and not to manufacturing activity what is collected as royalty from the buyers is paid in full to the foreign collaborator and nothing is retained b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces would form a part of assessable value of that computer. The ld. SDR submitted that the technical know-how admittedly increased the marketability of the product, that is to say that it makes the product acceptable to buyers on account of high standards maintained by the manufacturer in accordance with the specifications laid down by the foreign collaborators who are paid a technical know-how fee. The ld. SDR also drew our attention to the case of Wipro Information Technology Ltd. reported in 1989 (39) E.L.T. 113 wherein the Tribunal had held that the entire amount of technical services collected by the assessee shall be includible in the assessable value. The ld. SDR therefore, submitted that the case law fully covered the case in their favour. 4. No one appeared for the respondents. However, as there was sufficient case law on the subject, it was decided to proceed to hear the case ex parte. 5. Technical means pertaining to the mechanical arts and applied sciences and something peculiar or specially belonging to the art or subject referred to. Know-how means knowledge of how to do a particular thing. Thus technical know-how plays a very important role in planning a product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precise meaning of this statement was not clear to us nor could the learned Chartered Accountant representing the respondents explain it further in more specific terms. We direct the Assistant Collector to verify the nature of the technical consultancy provided by the respondents in each case. If it was in the nature of advice as to how the customer could utilise the computer so as to take maximum benefit out of it and it had no connection with the designing of the equipment supplied, the service or the advice as such would not be taxable nor its value includible in the value of the computer. But any goods supplied as a part of the consultancy service would be taxable on their own merits." 10. The technical know-how fee paid to the foreign collaborator for manufacture of the product is a payment for planning the product maintaining its quality/standard and making it acceptable in the market had a connection with the cost of manufacture of the product and therefore the expenses incurred for getting this technical know-how would necessarily form part of the assessable value. 11. The Honourable Supreme Court in the case of Bombay Tyre International reported in 1983 (14) E.L.T. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo propositions relevant in this behalf, viz., (i) where the sale is effected at the factory gate, the several expenses mentioned including charges for other services after delivery to the buyer, viz., after-sales service and marketing and selling organisation expenses cannot be deducted" from the price and (ii) where the sale is effected through the assessee s sales organisation at a place or places outside the factory gate, even there the aforesaid expenses cannot be deducted. The assessee, however, will be entitled in such a case to deduct the cost of transportation (including the cost of insurance on the freight) incurred for transporting the goods from the gate to the place of delivery. The contention of Sri Chandrasekharan is that in view of the aforesaid emphatic statement, the expenses claimed by the assessee on account of the maintenance of the depots cannot be allowed. Sri Nariman, however, contends that the said observations must be understood in the light of the two bases set out in the preceding paragraph and particularly the second of them which reads : The other basis on which the claim proceeds is that the price at the factory gate and the price at a depot out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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