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TMI Blog1997 (2) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... powers to manufacture and sell the products, licence to use in India any Patent rights which M/s. Scragg possess or may come to possess as regards the processor on the machines and all necessary licences under patent rights. Royalty/lump-sum paid under this agreement shall constitute full compensation for use of patent right. Right to use trade mark was also granted to M/s. Himson Textiles. The Buyers were to make payment in the form of a lump-sum know-how fees of 60,000/- Pounds Sterling (net of Taxes) and royalty equal to five per cent of the net invoiced sale price of all Machines and Parts for the machines sold by M/s. Himson in India and 7.5% on export subject to taxes for a period of 5 years. The Assistant Collector of Customs GAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b)(iv) unless it is established that the transaction value is not acceptable due to specific infirmities. Here the Commissioner (Appeals) relied upon the Mahindra Mahindra decision of the Supreme Court that payments made to foreign collaborator for technical know-how are not includible in the assessable value of spares as the agreement is at arms length when there is no obligation on the part of the importers to import the goods from the collaborators. 2. Shri Gurdeep Singh the Ld. JDR contended that the perusal of the various clauses of the agreement would indicate that the collaborator exercises control over the manufacturing operations of the Respondents. The Ld. JDR submitted that what the Department seeks to do is to add to the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where and they had no obligation to purchase their requirements only from the collaborators. The Ld. Counsel cited the case Varma Trafag Instruments Pvt. Ltd. v. Collector of Customs reported in 1993 (67) E.L.T. 861 (Tribunal) in which the Tribunal following the Maruti Udyog Ltd. decision had held that the mere payment of royalty and licensing fees will not amount to control over the manufacture so long as there is no obligation to import components from collaborators. The Ld. Counsel also submitted that the decision of the Supreme Court in Essar Gujarat Ltd. (supra) is factually distinguishable. 4. The submissions made have been carefully considered. The question is whether the lump-sum know-how fees and royalty paid by the respondents t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........Therefore we are of the view that licence fee paid to Midrex will have to be added to the price of the plant to arrive at the transaction value of the plant . The Supreme Court further examined this aspect from a plain reading of Section 14 of the Customs Act for valuation of goods for purposes of assessment, and observed, The entire purpose of Section 14 is to find out the value of the goods which are being imported. The EGL in this case was purchasing a Midrex Reduction Plant in order to produce sponge iron. In order to produce sponge iron, it was essential to have technical know-how from Midrex. It was also essential to have an operating licence from them. Without these, the plant would be of no value. That is why the preconditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty for manufacturing and marketing Scragg brand draw texturising machines. Provisions of Rule 9 therefore get attracted in such a situation, in the light of the ratio of Supreme Court Judgment in the case of Essar Gujarat (supra). Accordingly assessable value of the goods imported under Section 14 of Customs Act, in this case should comprise of price of the imported parts and components, as well as the fee for operating licence and know-how, and the amount of royalty paid as per the agreement. It is therefore directed that the Assistant Commissioner concerned should redetermine the value of the goods on the above lines on the basis of actuals to be furnished by the respondents. 6. Commissioner (Appeals) has decided the case by following ..... X X X X Extracts X X X X X X X X Extracts X X X X
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