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TMI Blog2024 (7) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... or process Know-How or the activity of the supervision of erection and commissioning plant are in any way, condition for the sale of goods to the appellants. The impugned order also does not identify any such conditions of sale. Moreover, the licence fee also relates to the manufacture process which is a post importation activity, just like supervision of Erection and Commissioning. In these circumstances, since the activities are clearly post importation activities and also not a condition for sale, the price paid for the same cannot for part of the assessable value of the goods. The impugned order cannot be sustained - appeal allowed. - HON'BLE MEMBER ( JUDICIAL ) , MR. RAMESH NAIR And HON'BLE MEMBER ( TECHNICAL ) , MR. RAJU Shri Surjeet Bhadu , Advocate for the Appellant Shri Ajay Kumar Samota , Superintendent ( AR ) for the Respondent ORDER RAJU Two appeals have been filed in the same proceedings. First appeal has been filed by M/s Indorma Industries Ltd., against an order of remand with directions for re-determination of Customs duty. Another appeal has been filed by appellant against the order quantifying the demand in terms of aforementioned remand order. Both orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includability of the license fee for process Know- How and supervision of erection and commissioning charges in the assessable value of the goods imported by the appellant. The Commissioner (Appeals) has upheld the includability by both this charges in the assessable value. However, since only a small part of the total machinery covered in the contract was imported in this consignment, the Commissioner (Appeals) had remanded the matter back to the original authority to apportion only the fraction of the both the charges to the extent attributable to the value of machinery imported in these Bills of Entry. 5.1 From the remand order, it is seen that the Commissioner (Appeals) had not examined the decision relied by the appellant in details. He has simply discarded the decision which pertain to the period prior to the notification of Customs valuation (Determination of Value of Imported Goods) Rules, 2007. According to him, the said decisions are not applicable after introduction of said Rules. He has also simultaneously discarded the other decisions pertaining to period after 2007 being not squarely applicable to the instance case. The appellants have produced before us the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable. Explanation.- Where the royalty, licence fee or any other payment for a process, whether patented or otherwise, is includible referred to in clauses (c) and (e), such charges shall be added to the price actually paid or payable for the imported goods, notwithstanding the fact that such goods may be subjected to the said process after importation of such goods. 7. The Order-In-Original invokes Rules 10(1)(c)and 10(1)(e) of the Customs Valuation Rules, 2007 reads as under: Rule 10(1)(c) : royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable; Rule 10(1)(e) : all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Buyer shall not, without the written consent of the Seller, disclose, transfer or assign the Licence to any person, other than any person resulting from any process of reorganization of the Buyer, any member of the group companies of the Buyer or any permitted assignees. 6.5 The Seller shall provide continuous technical support to the Buyer's technical team. Specific additional areas of support shall be in product development, quality improvements, new polymer developments etc. 6.6 The Licence only applies for the engineering design, erection, operation, production and maintenance, including Know How suitable for producing spandex suitable for textile application by the Plant and is not allowed to be used outside of Plant by the Buyer. 8.2. The contract in relation to the charges for supervision of Erection and Commissioning reads as under:- 5. SUPERVISION OF ERECTION AND COMMISSIONING OF THE PLANT 5.1 The scope of services of the Seller with respect to the erection of the Plant shall involve supervision of erection, testing, commissioning of the Plant, conducting Start-Up and performance and guarantee tests, and conducting of Test-Run of the Plant. 5.2 The detailed co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing land process data, basic machinery and facility layouts, testing and quality control data, and production and testing equipment data (including drawings of tool, jig, die and drawings of special machines and equipment of LICENSOR s design which LICENSOR and LICENSEE mutually agree as being necessary in the manufacture of CONTRACT PRODUCTS by LICENSEE) RELEASED IN AND USED BY licensor - during the term of this Agreement in the commercial production of CONTRACT PRODUCTS specifically excluding : (1) Information for innovative technology different from that at EFFECTIVE DATA, (2) such information concerning integral components and materials per se which, although forming part of or used in the manufacture of CONTRACT PRODUCTS, involve techniques or relate to fields of research, development, design, engineering or manufacture separate and distinct from CONTRACT PRODUCTS (such as, but not limited to, semiconductor devices, and other components and materials including bolts and nuts which are not manufactured in LICENSOR s facilities), and (3) information for excluded components, unit and assembly specified in Annex. I. (ii) Purchase specifications and available material - stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement was signed with OEC constituted only 16% of the total value. On these facts, we are of the opinion that the matter is squarely covered by the recent judgment of this Court in Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Ltd. [Civil Appeal No. 3042 of 2004] decided on 13th April, 2015 [2015 (319) E.L.T. 202 (S.C.)]. 8. For all these reasons, we do not find any infirmity in the impugned order of the CESTAT. Thus, this appeal, which is bereft of any merit, is accordingly dismissed. Civil Appeal No. 3469 of 2015 9. In this appeal, we find that almost on identical terms, as noted in the above Civil Appeal No. 2420 of 2005, agreements were entered into by the assessee with one M/s. Davy Dravo. Apart from the agreement for supply of equipments, other agreements are Basic Engineering and Training Agreement, Process Licence Agreement and Supervisory Services Agreement. 10. The consideration of these three agreements is laid into the valuation of supplies made by M/s. Davy Dravo. Not only the supplies which the assessee took from the said Company constituted merely 16 per cent of the total capital goods and the remaining capital goods were purchased from some other exporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case records and the submissions of the Respondent as well as the record of the personal hearing. I find that the lower authority has passed the impugned order on the ground that the relationship has not affected the price of the imported goods. But I find that imports were made from the foreign company both components and capital goods. The fact the foreign company has a 40% equity participation and has directs in the Respondent s board establishes the relationship under Rule 2(2) of the CVR, 1988. I agree with appellant that without technical know-how, the imported goods would have no value since no manufacturing activity can take place without the technical know-how. Therefore, the DM60000 paid in consideration for transfer of technical know-how would be addable to the price of imported goods in terms of Rule 9(1)(c) of the CVR, 1988 on a pro rata basis. However, regarding the payment of royalty, I do not agree with the appellant since, royalty is to be paid on sales of finished goods which is post importation activity and therefore cannot have any bearing on the price of imported goods. From the above findings, we observed that adjudicating authority has discussed about techn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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