Custom, Excise & Service Tax Tribunal
Sulzer Pumps (India) Ltd vs Commissioner Of Customs (Import), ... on 17 June, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. C/563/04 (Arising out of Order-in-Appeal No. 60/2004-MCH dated 27.2.2004 passed by Commissioner of Customs (Appeals), Mumbai.) For approval and signature: Honble Mr P.G. Chacko, Member (Judicial) Honble Mr. S.K.Gaule, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Sulzer Pumps (India) Ltd Appellant (Represented by: None) Vs Commissioner of Customs (Import), Mumbai Respondent (Represented by: Dr T. Tiju, SDR) CORAM:
Honble Mr P.G. Chacko, Member (Judicial) Honble Mr. S.K.Gaule, Member (Technical) Date of Hearing : 17.06.2010 Date of Decision: 17.06.2010 ORDER NO..
Per: P.G. Chacko
1. This appeal arises for hearing out of turn at the instance of the appellant inasmuch as their application for early disposal of the appeal was granted by this Bench vide Order dated 17.7.09. However, today, there is no representation for the appellant despite notice, nor any request for adjournment. In the above circumstances, we take up this appeal for disposal.
2. The learned SDR representing the Revenue has given us an account of the facts of this case. We have also examined the records.
3. M/s Sulzer Pumps (India) Ltd (formerly known as Khimline Pumps Ltd), the appellant herein, had obtained technical know-how from M/s Sulzer Brothers Ltd, Winterthur, Switzerland, for the manufacture, in India, of pumps for industrial application as per the Collaboration Agreement dated 09.03.1984. Such know-how related to the design, manufacturing and sale of the said goods. In consideration of the transfer of the know-how, the Indian company paid lump sum of SFr 3,33,000 net of Indian taxes, levies, duties etc. Later on, under another agreement called Licence Agreement dated 18.12.98 between the appellant and M/s Sulzer Pump Ltd, Winterthur, Switzerland, the appellant paid lump sum of S Fr 28,48,000 for transfer of know-how by the Swiss company. Under this agreement, the appellant also became liable to pay royalty @5% on the net domestic sale price and @8% on the export sale price, for a period of seven years from the date of commencement of commercial production. Under a different agreement, the appellant procured components for pumps from M/s Zulzer Weise GmbH, a German company. The supplier (German company) was an associate of M/s Sulzer Pumps Ltd, Switzerland. Considering the ostensible relationship between the companies, the Special Valuation Branch of the department proposed to load the assessable value of the goods imported by the appellant. Accordingly, the technical know-how fee paid by the appellant to the foreign collaborators was ordered to be apportioned and the proportionate portions to be added to the declared value of the imports made from time to time. This proposal, as contained in the order of the Deputy Commissioner of Customs, was challenged by the party before the Commissioner (Appeals), but without much success. The appeal preferred to this Tribunal by the assessee was allowed by way of remand. The learned Commissioner (Appeals), pursuant to our remand order dated 10.12.2002, passed fresh order holding that the know-how fee paid by the appellant to their foreign collaborator was includible in the assessable value of the goods under Rule 9 (1) (c) of the Customs Valuation Rules, 1988. The Appellate Commissioners order is presently under challenge in the assessees appeal.
4. After a perusal of the relevant agreements, we find no nexus between the know-how fee and the components imported by the appellant. Under Rule 9 (1) (c), licence fee of the above kind could be added to the transaction value only where it is related to the imported goods and the importer/buyer is required to pay the same directly or indirectly as a condition of the sale of the goods being valued. A perusal of the agreement indicates that there was no such relationship between the licence fee (know-how fee) paid by the appellant and the component imported by them. The fee so paid was a consideration for technical know-how for manufacture of pumps. We have also found no provision in any of the agreements suggesting that the payment of technical know-how fee by the appellant to the foreign collaborators was made as a condition of sale of the components by the German company to the appellant. On these facts, which are apparent from the record, the decision of the lower authorities to include the technical know-how fee in the assessable value of the components under Rule 9 (1) (c) appears to be unsustainable in law. This Tribunal has consistently held, in similar cases, that any technical know-how fee/licence fee/royalty would not be addable to the transaction value of any imported raw material or capital goods under Rule 9 (1) (c) of the Customs Valuation Rules, 1988 in the absence of nexus between the imported goods and the payment of such amount and in the absence of any contractual provision making payment of the fee a condition of sale of the goods being valued. Several such decisions of this Tribunal were upheld by the Honble Supreme Court - in the case of Commissioner of Customs vs Ferodo India Pvt Ltd 2008 (224) ELT 23 (SC).
5. In the result, the impugned order is set aside and this appeal is allowed.
(Dictated in Court.) (S.K.Gaule) Member (Technical) (P.G. Chacko) Member (Judicial) rk 4