Mitsuba Sical India Ltd. Vs. Cc - Court Judgment

Excerpt:
1. this is an appeal against order in appeal dated 29.9.2003 passed by the commissioner (appeals), chennai. the brief facts of the case are as follows. the revenue proceeded against the appellant m/s. mitsuba sical india ltd. on the ground that the appellant and m/s. mitsuba corporation, japan who are foreign suppliers of the imported goods are related to each other as per rule 2(2)(i), (ii) and (iv) of the customs valuation rules, 1988. the original authority held that technical fee amounting to us $ 30,000 for the viper motor and link system and us $ 80,000 for fan motor should be added to the transaction value and also the royalty amount paid or payable on all items may be added to transaction value of the respective components. the appellant approached the commissioner (appeals) who upheld the order of the original authority. aggrieved over the decision of the commissioner (appeals), the appellant has come before this tribunal for relief.2. shri section murugappan, learned counsel appeared for the appellant and smt. r. bhagyadevi, learned sdr for the revenue.3. the learned counsel invited our attention to the technical assistance agreement entered into between the appellant and the foreign supplier and emphasized the point that technical know-how fee and royalties are not related to the goods imported. the technical know-how fee is only in respect of the products to be manufactured by the appellant in india. in any case payment of technical know-how fee and royalty is not a condition of sale of the imported goods. hence as per rule 9(1)(c) of the customs valuation rules, 1988, these charges are not includible in the assessable value. he maintained that the finding of the commissioner (appeals) has absolutely no basis. in this connection he relied upon the a number of case laws decided by the tribunal. he cited the following case laws:ferodo indioa (p) ltd. v. cc, mumbai (2) panaifa dongwon india ltd. v. cc, mumbai reported in 2003 (56) rlt 962 (cegat-lb) : 2003 (110) ecr 197 (t-lb).herbiger india pvt. ltd. v. cc, mumbai reported in 2003 (56) rlt 965 (cegat-lb) : 2003 (109) ecr 352 (t-lb). (4) polar marmo agglomerates ltd. v. cc, new delhi reported in 2003 (56) rlt 967 (cegat-lb) : 2003 (109) ecr 384 (t-lb). (5) sd technical service v. cc, new delhi reported in 2003 (56) rlt 970 (cegat-lb) : 2003 (109) ecr 387 (t-lb).4. learned sdr reiterated the contentions in the order in original and the order in appeal.5. we have gone through the case records carefully and considered the submissions of both sides. technical assistance agreement is only for the manufacture of certain products in india by the appellant. these products are viper motor and link system and fan motor. the royalty amount is also relatable only to the products to be manufactured in india by the appellant. after going through the agreement, we do not find any clause according to which payment of technical know-how fee and royalty is a condition of sale of the items to be imported. hence the inference drawn by the commissioner (appeals) is wrong. the argument that without technical know-how, the imported components cannot be used is not at all relevant here. as per rule 9(1)(c) of the customs valuation rules, 1988 which reads as under: in determining the transaction value, there shall be added to the price actually paid or payable for the imported goods 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.a clear reading of the above rules reveals that royalties and licence fee should be related to the imported goods and payment of the same should be a condition of sale of the goods being valued. in the present case, royalties and technical know-how fee are related only to the products to be manufactured in india and not to the imported goods.hence the case laws cited by the appellant are very relevant. the order in appeal has no merits and hence we allow the appeal with consequential relief if any.

Judgment:
1. This is an appeal against order in Appeal dated 29.9.2003 passed by the Commissioner (Appeals), Chennai. The brief facts of the case are as follows. The Revenue proceeded against the appellant M/s. Mitsuba Sical India Ltd. on the ground that the appellant and M/s. Mitsuba Corporation, Japan who are foreign suppliers of the imported goods are related to each other as per Rule 2(2)(i), (ii) and (iv) of the Customs Valuation Rules, 1988. The original authority held that technical fee amounting to US $ 30,000 for the Viper Motor and Link system and US $ 80,000 for Fan Motor should be added to the transaction value and also the royalty amount paid or payable on all items may be added to transaction value of the respective components. The appellant approached the Commissioner (Appeals) who upheld the order of the original authority. Aggrieved over the decision of the Commissioner (Appeals), the appellant has come before this Tribunal for relief.

2. Shri Section Murugappan, learned Counsel appeared for the appellant and Smt. R. Bhagyadevi, learned SDR for the Revenue.

3. The learned Counsel invited our attention to the technical assistance agreement entered into between the appellant and the foreign supplier and emphasized the point that technical know-how fee and royalties are not related to the goods imported. The technical know-how fee is only in respect of the products to be manufactured by the appellant in India. In any case payment of technical know-how fee and royalty is not a condition of sale of the imported goods. Hence as per Rule 9(1)(c) of the Customs Valuation Rules, 1988, these charges are not includible in the assessable value. He maintained that the finding of the Commissioner (Appeals) has absolutely no basis. In this connection he relied upon the a number of case laws decided by the Tribunal. He cited the following case laws:Ferodo Indioa (P) Ltd. v. CC, Mumbai (2) Panaifa Dongwon India Ltd. v. CC, Mumbai reported in 2003 (56) RLT 962 (CEGAT-LB) : 2003 (110) ECR 197 (T-LB).Herbiger India Pvt. Ltd. v. CC, Mumbai reported in 2003 (56) RLT 965 (CEGAT-LB) : 2003 (109) ECR 352 (T-LB).

(4) Polar Marmo Agglomerates Ltd. v. CC, New Delhi reported in 2003 (56) RLT 967 (CEGAT-LB) : 2003 (109) ECR 384 (T-LB).

(5) SD Technical Service v. CC, New Delhi reported in 2003 (56) RLT 970 (CEGAT-LB) : 2003 (109) ECR 387 (T-LB).

4. Learned SDR reiterated the contentions in the order in Original and the Order in Appeal.

5. We have gone through the case records carefully and considered the submissions of both sides. Technical assistance agreement is only for the manufacture of certain products in India by the appellant. These products are Viper Motor and Link system and Fan Motor. The royalty amount is also relatable only to the products to be manufactured in India by the appellant. After going through the agreement, we do not find any clause according to which payment of technical know-how fee and royalty is a condition of sale of the items to be imported. Hence the inference drawn by the Commissioner (Appeals) is wrong. The argument that without technical know-how, the imported components cannot be used is not at all relevant here. As per Rule 9(1)(c) of the Customs Valuation Rules, 1988 which reads as under: In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods 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.

A clear reading of the above rules reveals that royalties and licence fee should be related to the imported goods and payment of the same should be a condition of sale of the goods being valued. In the present case, royalties and technical know-how fee are related only to the products to be manufactured in India and not to the imported goods.

Hence the case laws cited by the appellant are very relevant. The order in Appeal has no merits and hence we allow the appeal with consequential relief if any.