2008 (4) TMI 114 - AT - Customs

Imported components and parts for the manufacture of the licensed products (aircrafts) in India whether technical know-how fee paid by assessee to foreign company for receiving technical know-how and assistance is includible in value of imported components or not in terms of Rule 9 (1) (c) of the Customs Valuation Rules impugned fee are not includible to the invoice price of the imported goods

Summary

Issues:
1. Inclusion of technical know-how fee in the assessable value of imported components and parts.
2. Interpretation of the Technical Collaboration Agreement between the parties.
3. Applicability of Rule 9 (1) (c) of the Customs Valuation Rules.

Analysis:

Issue 1: Inclusion of technical know-how fee
The dispute revolved around whether the technical know-how fee paid by the appellants to the Italian company should be added to the assessable value of the imported components and parts. The Deputy Commissioner directed the inclusion of the fee based on the relationship between the parties. The Commissioner (Appeals) initially allowed the appeal, but the Tribunal remanded the case. The Tribunal considered the Technical Collaboration Agreement and noted that the payment of the know-how fee was a condition of sale of the goods. However, upon further examination of the Agreement, the Tribunal found no nexus between the fee and the imported components/parts. It was clarified that the fee was for the supply of technical know-how for manufacturing the licensed products in India, not a condition for the sale of components/parts. Citing precedent cases, the Tribunal held that such fees were not addable to the invoice price of imported goods under Rule 9 (1) (c).

Issue 2: Interpretation of the Technical Collaboration Agreement
The Tribunal extensively analyzed the provisions of the Technical Collaboration Agreement between the parties. The Agreement granted the licensee rights to manufacture, sell, and maintain licensed products in specific regions. It detailed the transfer of technical know-how, training, and assistance from the licensor to the licensee. The Tribunal emphasized that the payment of the technical know-how fee was specifically for the transfer of know-how and assistance related to the licensed products, not the components/parts imported by the appellants. The Agreement did not establish a direct link between the fee and the imported goods, leading to the conclusion that the fee was not part of the assessable value.

Issue 3: Applicability of Rule 9 (1) (c) of the Customs Valuation Rules
The Tribunal referred to Rule 9 (1) (c) of the Customs Valuation Rules, which deals with the inclusion of certain expenses in the assessable value of imported goods. By analyzing the Agreement and past decisions, the Tribunal determined that the technical know-how fee in question did not meet the criteria for inclusion under Rule 9 (1) (c). The Tribunal's decision was based on the understanding that the fee was payment for technical assistance related to manufacturing the licensed products, not a component of the transaction value of the imported components/parts. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants.

In conclusion, the Tribunal's detailed analysis of the Technical Collaboration Agreement, application of Rule 9 (1) (c), and examination of the relationship between the technical know-how fee and the imported components/parts led to the decision that the fee was not includible in the assessable value. The judgment clarified the distinction between fees for technical assistance and the transaction value of imported goods, providing clarity on customs valuation rules in such scenarios.