TMI Blog2000 (7) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... er system . As per the contract between the appellants and M/s. Southwire Company, the latter would provide engineering services (Item-P under agreement dated 11-1-1994), operational training in USA (Item-Q), user licence (Item-R) and field services and start-up assistance (Item-U). These items were covered by engineering and service charges mentioned in invoice No. 1599-C ibid and the amount payable for these charges by the appellants was US $ 15 lakhs as already noted. The jurisdictional Assistant Commissioner of Customs ordered for inclusion of this amount in the value of the imported capital goods for the purpose of determining the assessable value of the goods under Section 14 of the Customs Act, 1962. The Assistant Commissioner passed the order after reaching a finding to the effect that the conditions of the contract mentioned as Items - P, Q, R, and U signified a transfer of technology/know-how accompanying the importation of the goods and the same was a condition of sale since it was impossible for the importer to use the goods for manufacturing activity without such technology/know-how. The appeal filed by the party against the order of the Assistant Commissioner was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the entire amount of US $ 15 lakhs charged by M/s. Southwire Company was liable to be included in the assessable value of the goods. Ld. DR has, further, relied on the decision of the Apex Court in Essar Gujarat Ltd. (Supra) in support of his contention that the amounts charged for the user licence and for the technical services rendered by M/s. Southwire Company were includible in the assessable value of the imported goods. DR has also relied on the decisions of the Tribunal in the cases of CC, Mumbai v. Himson Textile Engg. Indus. Ltd. [1997 (93) E.L.T. 301], and Mukund Ltd. v. CC, Mumbai [1999 (112) E.L.T. 479]. He has prayed for rejecting the appeal. 5. We have carefully considered the rival submissions and the case law cited before us. We note that the importation of the machinery equipments was made by the appellants as part of a project for the manufacture of electrolytic copper rods by making use of M/s. Southwise Company s technology of what was called Continuous Casting and Rolling Copper Rod System." This factual position is clear from para (8) of the Statement of Facts in the appeal memorandum extracted below :- On 15-11-1995, TDT approached the Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (for above 4 Items) N/A 50,000 USD TOTAL : USD 1,500,000 USD 1,500,000 Sincerely, SOUTHWIRE COMPANY Sd/- GEORGE C. WARD ASSISTANT TO THE EXECUTIVE VICE PRESIDENT. Though, in the earlier part of the above letter, M/s. Southwire Company stated that the price of technology was included in the cost of the main equipment itself, they brought the value of technology under items P, Q, R, and U and satated the value thereof as US $ 50,000 in latter part of the letter. This version of M/s. Southwire Company appears to be unreliable on account of the contradiction inherent in it. A material fact was, however, brought out clearly in the letter (vide emphasised portion). M/s. Southwire Company stated in the letter that a technology transfer had indirectly taken place by way of System Engineering and Field Services. This admission on the part of M/s. Southwire Company has been rightly noted and considered by the lower authorities. 6. On a careful perusal of the conditions P, Q, U and R of the contract between the appellants and M/s. Southwire Company, we find that the appellant's project for the manufacture of electrolytic copper rods base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants abroad. Such a training programme cannot, in our view, be considered to add anything to the value of the imported machinery/equipments. We would draw support to this view from the decision of the Apex Court in Essar Gujarat Ltd. (Supra) wherein the court held that a sum of DM 2,200,000 charged by the foreign technical collaborators for theoretical and practical training was not liable to be added to the value of the imported plant. 8. In the case of Essar Gujarat Ltd. (Supra), M/s. Essar Gujarat Ltd. (in short, Essar) wanted to set up an iron plant based on the Direct Reduction process of M/s. Midrex International B.V., USA (in short, Midrex), at Hazira in Gujarat, India. Essar entered into a contract with M/s. Teviot Investments Ltd. (in short, TIL) for purchase of a Direct Reduction Iron plant (DRI plant) installed at Emden, West Germany. The said plant, which had been procured by TIL as a second-hand item, was based on the Midrex DR process for manufacture of sponge iron. One of the conditions of the contract was that Essar had to obtain transfer of the process licence from Midrex. Essar, therefore, entered into an agreement with Midrex, whereunder the latter granted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The question which arose before the Supreme Court was whether the above amounts were liable to be added to the invoice price of the plant (which was imported by Essar in terms of the aforesaid agreements) to arrive at the transaction value of the plant. The Court, after considering the provisions of Rule 9 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 as well as the provisions of Section 14 of the Customs Act and also after examining the intention of the parties as brought out by the agreements aforesaid, held that the amount of DM 2,000,000 paid by Eassar for the process licence free as also the amount of DM 10,100,000 paid by Essar towards cost of technical services should be added to the value of the imported plant. The amount paid for theoretical and practical training outside India was, however, held to be excludible from the assessable value of the imported plant. The order of the Apex Court to include the amount paid as licence fee in the assessable value of the imported plant was based on the finding that it was essential for Essar to have the licence from Medrix to operate the plant and use Medrix technology for producing sponge iron in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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