TMI Blog2007 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy, while Part-B provides for supply of equipment as a part of necessary plant and machinery and equipment for manufacture of polyester oriented yarn. Part-A stipulates lumpsum payment of US $14,00,000 by the respondent to the said companies for supply of licence, knowhow and technology. Under Part-B of the said Agreement, however, price of foreign equipments are said to be US $34,86,000.00 + DM 12,00,000.00 + J. Yen 88,50,00,000.00. 2.Pursuant to and in furtherance of the said collaboration Agreement, the respondent herein had imported plant and machinery manufactured by the said companies. The Assistant Commissioner of Customs, Special Valuation Branch, in its order dated 28th May, 1999, opined that the amount of consideration mentioned in both parts of the Agreement should be added together, having regard to the fact that the same forms part of an integrated contract, the value of knowhow estimated at US $ 40,00,000.00 must be added to the value of the equipment, on the premise that payment thereof was a pre-condition for sale of the equipments under Part-B. An appeal was preferred thereagainst by the respondent before the Commissioner of Customs. The appellate authority, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs duty in terms of Section 12 of the Act is to be levied at such rates as may be specified under the Customs Tariff Act or any other law for the time being in force on the goods imported into, or exported from, India. Section 14 of the said Act provides for valuation of goods for purposes of assessment in respect of duty of customs chargeable on any goods by reference to their value. A legal fiction is created in relation to the value of such goods stating that, "the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where — (a) the seller and the buyer have no interest in the business of each other; or (b) one of them has no interest in the business of the other,and the price is the sole consideration for the sale or offer for sale." 6.Section 14(1A) provides that price referred to in sub-section (1) of Section 14 in respect of imported goods shall be determined in accordance with the Rules made in this behalf. 7.The Central Government, in exercise of its powers conferred upon it under Section 156 of the Act, made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereto would apply for construction thereof. They are statutory in nature being integral part of the Rules themselves. The relevant portion of Interpretative Note to Rule 4 reads as under : "The value of imported goods shall not include the following charges or costs, provided that they are distinguished from the price actually paid or payable for the imported goods : (a) Charges for construction, erection, assembly, maintenance or technical assistance, undertaken after importation on imported goods such as industrial plant, machinery or equipment; (b) The cost of transport after importation; (c) Duties and taxes in India." 11.What would, therefore, be excluded for computing the assessable value for the purpose of levy of custom duty, inter alia, has clearly been stated therein, namely, any amount paid for post-importation activities. The said provision, in particular, also apply to any amount paid for post-importation technical assistance. What is necessary, therefore, is a separate identifiable amount charged for the same. On the Revenue's own showing, the sum of US $ 14,00,000.00 was required to be paid by way of remuneration towards services to be offered by the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment at its works and/or the works of its manufacturers, quality, quantity, workmanship, finishing, and packing in accordance with the inspection method deemed as proper and authentic for Equipment." 15.Knowhow, being process knowhow, is covered by the patent held by M/s. Samsung. The payment of US $ 14,00,000.00 also entitles the respondent to sub-licence the knowhow to any other party, subject, of course, to the approval of M/s. Samsung. 16.Reliance has been placed by Mr. Radhakrishnan on a decision of this Court in Essar Gujarat Limited (supra). In that case, the licence fee was paid to the supplier of the plant and machinery for a licence to operate the plant which was in reality nothing but was held to be an additional price payable for the plant itself and was, therefore, held to be includible in its assessable value. It is in the afore-mentioned fact situation, this Court held : "12.Reading all these agreements together, it is not possible to uphold the contention of Mr. Salve that the pre-condition of obtaining a licence from Midrex was not a condition of sale, but a clause inserted to protect EGL. Without a licence from Midrex, the plant would be of no use to EGL. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detail drawing, erection, commissioning and performance guarantee test. The payment made in foreign exchange towards supervision charges during design, erection and commissioning will necessarily have to form part of the assessable value of the imported goods and the value thereof will include not only the price paid for design and engineering but also for supervision charges. This will follow from Rule 9 of the Valuation Rules which provides for addition of certain costs and services to the transaction value. Rule 9(1)(e) covers all other payments actually made or to be made as a condition of sale of imported goods by the buyer to the seller." 19.However, TISCO (supra), this Court took note of interpretative note to Rule 4 and held: "….The part of the Interpretative Note to Rule 4 relied on by the Tribunal has been couched in a negative form and is accompanied by a proviso. It means that the charges or costs described in clauses (a), (b) and (c) are not to be included in the value of imported goods subject to satisfying the requirement of the proviso that the charges were distinguishable from the price actually paid or payable for the imported goods. This part of the Interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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