Customs, Excise and Gold Tribunal - Delhi
Mando Brake Systems India Ltd. vs Cc on 3 September, 2003
Equivalent citations: 2004(91)ECC633, 2004(163)ELT333(TRI-DEL)
ORDER
K.K. Usha, J. (President)
1. In this appeal at the instance of the importer challenge is against the order passed by the Commissioner of Customs (Appeals) Chennai dated 28.2.2003. The issue arising in this case for consideration is whether the technical licence fee can be loaded to the value of the goods imported by the appellant.
2. The appellant is a joint venture company established with the objective of manufacture, fabrication, assembly and sale of fully automotive brake systems and related components. It entered into a Licence and Technical Assistance Agreement (LTAA) with Mando Machinery corporation, Korea. As per the terms of the agreement the appellant was to pay total sum of US$ 4,50,000 to Mando, Korea as consideration for "the rights and technical information granted, disclosed and furnished by" Mando, Korea. The sum was to be paid in four instalments. The agreement also provided for payment of royalty at 3% of the net ex-factory sale price of the licensed product. Since we are not concerned in this appeal with the payment of royalty, it is not necessary to go into the details of the same.
3. As per definition of the term "Technical Information" contained in Article 1.2 of the Agreement, Technical Information means 'technical knowledge, know-how, drawings, specifications, manufacturing information, data and experience of the Licensor, whether patented or not, as far as they are related to the manufacture. The term 'Licensed Product' has been defined to include:-
(a) Caliper Disc Brake
(b) Drum Brake
(c) Vacuum Brake Booster
(d) Brake Master Cylinder, and
(e) Brake Proportioning valve
4. There was no provision in the Agreement regarding purchase of machinery or other items from the collaborator. The appellant imported goods coming under the following three category -
(a) Capital goods (plant and Machinery)
(b) Consumables (Oil and Grease) and
(c) components and Parts of the Brake system
5. Deputy Commissioner who passed the original order of assessment held that - (1) supplier and the appellants are related in terms of Rule 2(2) of Customs Valuation Rules, 1988 (2) relationship has influenced the invoice value of the imports and (3) lump sum fee of US$ 4,50,000 relating to Technical Information was includible in the assessable value of the imported goods. Both the Revenue as well as the party took up the matter before the Tribunal which under Final Order No. 278-312 dated 18.3.2002 remanded the matter for fresh consideration by the Commissioner (Appeals). After remand, under the impugned order the Commissioner (Appeals) took the view that the appellant and exporter are related but the transaction value was not being rejected on the basis of relationship or mutuality of interest but she added technical licence fee to the assessable value of the goods imported by invoking Rule 9(1) of the Customs Valuation Rules, 1988.
6. It is contended on behalf of the appellant that the appellant and its supplier are not related within the meaning of Rule 2(2) of the Customs Valuation rules as conditions required for holding them related persons are not available in the facts of the case. We do not think it is necessary for us to go into this issue in this appeal since the Commissioner (Appeals) had rejected the transaction value not on the above ground as mentioned earlier. We will therefore confine ourselves to the issue whether inclusion of the licence fee in the invoice value of the import mae in the impugned order in terms of Rule 9(1) of the Customs Valuation Rules is justified.
7. It is contended on behalf of the appellant that there is no relationship whatsoever to the payment of the licence fee with the goods imported and that this case is fully covered by the Larger Bench decision of this Tribunal in S.D. Technical Services Vs. CC, New Delhi 2003-TaxindiaOnline-14-CESTAT-Del. Learned Departmental Representative, on the other hand quoted the decision of the Commissioner to contend that in the present case the ratio of the decision the Supreme Court in Essar Gujarat 1996 (88) ELT 609 has to be applied.
8. We find merit in the contentions raised by the appellant. On going through the terms of the agreement it is clear that the licence obtained was for manufacture of five items referred in the earlier portion of the order. Lump sum payment of US$ 4,50,000 as licence fee is directly connected with the manufacture of the above product in India. It has no relation whatsoever to the Capital Goods, Consumables and components and Parts imported by the appellant. Larger Bench of This Tribunal had occasion to consider a similar issue in detail with reference to various decisions of the Supreme Court as well as Tribunal in S.D. Technical Services 2003-Taxindiaonline-14-CESTAT-Del, In the above case there was an agreement between the parties under which the appellants were given the right to manufacture and assemble in India licensed equipment for use in railway locomotives and rolling stock with the technical know-how supplied by the foreign collaborator. Appellant imported few sets of complete air brake distributors in CKD condition and otherwise. Revenue proposed to add technical know-how fee to the value of the goods imported. It was held that technical know-how relates to manufacture of the licensed product in India and that even if the brake distributors, door closer etc. could be assembled with the goods, it will not become licensed equipment in terms of the agreement in respect of which technical know-how has been granted. Following the ratio of the decision of this Tribunal in Collector of Customs, Bombay Vs. Maruti Udyog Ltd. Gurgaon 1987 (28) ELT 390 which was affirmed by the Supreme Court in 1989 (41) ELT A61, Larger Bench took the view that licence fee cannot be added to the goods imported. It was also held that the decision of the Supreme Court in Essar Gujarat Ltd. (supra) will not be applicable to the facts of the case. Appellant is fully justified in pointing out that the Tribunal decision in CC, Mumbai Vs. Himson Engineering Industries Ltd. 1997 (93) ELT 301 was later set aside by the Supreme Court and, therefore, the Commissioner (Appeals) should not have placed reliance on that decision. We are not able to accept the reason given by the Commissioner to reject the above contention. It is true that the Supreme Court in Himson Textiles Engr. Industries Ltd. Vs. CC, Mumbai 2000 (117) 535 remanded the matter for fresh consideration, but a reading of the above order would clearly show that the Apex Court has taken the view that the ratio of CC, Ahmedabad Vs. Essar Gujarat Ltd. 1996 (88) ELT 609 (SC) will not be applicable in the fats of the case and that in remand proceedings the Commissioner has to take into consideration the decision of the Tribunal in CC, Bombay Vs. Maruti Udyog Ltd. 1987 (28) ELT 390 which was approved by the Supreme Court.
9. In the light of the above we hold that the authorities below have erred in including the licence fee to the assessable value of the goods imported by the appellant. The order impugned is therefore set aside and the appeal stands allowed.