Customs, Excise and Gold Tribunal - Tamil Nadu
Vestas Rrb India Ltd. vs Cc on 13 October, 2000
Equivalent citations: 2001(94)ECR280(TRI.-CHENNAI)
ORDER
K. Sreedharan, J. (President)
1. Appellant, M/s. VESTAS RRB India Ltd., New Delhi was a joint venture between VESTAS Wind Systems, Denmark and RRB Consultants and Engineers Pvt. Ltd. Appellant company was set up for the manufacture of wind electric generators;. In order to manufacture, supply and maintain the wind electric generators of VESTAS Type V27-225 KW, appellant entered into a technology transfer and financial collaboration agreement with M/s. VESTAS, a company in Denmark. Equity participation of VESTAS in the appellant company was increased to 49%. Technology transfer was to cover--
(a) manufacture of VESTAS type V27-225KW wind electric generators of requisite specification;
(b) to erect and commission the wind electric generators so manufactured; and
(c) to maintain the wind electric generators for its entire life.
Pursuant to the agreement entered into between the appellant and the firm in Denmark parts of wind electric generators were imported. For clearing those parts Bills of Entry Nos. 28409 and 28411 dated 10.8.1993 were filed. Along with these Bills of Entry, copy of the technology transfer and financial collaboration agreement, RBI approval, Duty Exemption Certificate and certificate issued by the exporter regarding invoice value were produced. Issue was taken up by Special Valuation Branch and made provisional assessment. Extra duty deposit of 5% on the capital goods, machinery and equipments etc. and 10% on components and raw materials, and 20% on warranty and after sales service and spares was ordered to be deposited pending finalisation. In the investigation, the appellant contended that the proposal of the department to load the value of the goods imported by adding 1.5 million DKK paid for transfer of technical know-how, in terms of the agreement is not warranted and that the appellant had not paid any royalty to the firm in Denmark as provided in the contract. The adjudicating authority came to the conclusion that technical services if paid by the appellant to the foreign supplier is to be added to the total value of imports. Accordingly, the said 1.5 million DKK was added to the value of the goods imported, namely, DKK 3, 43, 82, 457.
2. Appellant challenged the above findings and conclusions arrived at by the adjudicating authority, namely, Deputy Commissioner of Customs, Special Valuation Branch, in appeal before the Commissioner of Customs (Appeals). Commissioner by order dated 31.3.2000 remitted the matter to the adjudicating authority after upholding the addition of the amount paid towards technical service charges and holding that royalty paid by the appellant to the foreign collaborator is addable to the assessable value. Operative portion of the order of the appellate authority reads:
The order of the lower authority is, therefore, set aside and the matter remanded for de novo consideration and it is found necessary to include the royalty, at the appropriate time when it would be possible for computation of the loading factor with full degree of accuracy. Till such time, all the assessments which have been finalised vide the Order-in-Original would accordingly continue to remain provisional and bonds, guarantees, securities with reference to such Bills of Entry given by the appellant would continue to be kept alive by them.
Aggrieved by this order, appellant has come up in appeal.
3. Learned Counsel representing the appellant raised two points for our consideration--
(1) whether the departmental authorities were justified in loading lump-sum payment of 1.5 million DKK to the transaction value of the imported goods; and (2) whether the appellate authority was justified in directing the primary authority to make assessment including royalty payable by the appellant as and when it is so paid.
4. A sum of 1.5 million DKK was payable by the appellant to VESTAS RRB, a Danish firm in terms of clause 9.2 of the contract entered into between the parties. The technology so transferred relates to supply of total technical documentation and specification required for assembly and testing of VESTAS type V27-225KW wind electric generators. This information was necessary to assemble and test the VESTAS type wind electric generator. Whether fee so paid for by the appellant for getting adequate know-how to assemble and test the various components imported, can be included in the value of the goods imported is the question that arises for consideration. Assembly and test of the electric generators is to take place after the import. If one can assemble and test the generators without technical know-how, the payment of the fee for getting the technical know-how cannot form part of assessable value. On importing those parts, unlike the facts in the case decided by the Supreme Court in Commissioner of Customs v. Essar Gujarat Ltd. , there was no impediment in assembling the part and testing it or in running it. On account of this factual position, the adjudicating authority rightly came to the conclusion that the principle stated by Their Lordships in Mis. Essar Gujarat is not having any relevance in deciding the issue before him. However, he took the view that the decision of the Tribunal in the case of Commissioner of Customs, Mumbai v. Himson Textile Engg. Industries Ltd. 1997 (93) ELT 301 : 1997 (71) ECR 83 (T) applies to the facts on hand. In Himson Textile Engg. case this Tribunal took the view that without the transfer of technical know-how mere import of the parts and components will be of no use to the importer and so to achieve their objectives they had to pay not only the price of the goods imported but also fee for obtaining technical know-how, royalty and manufacturing etc. For arriving at this conclusion this Tribunal placed reliance on the decision of the Supreme Court in Essar Gujarat case. This Tribunal did not place reliance on Supreme Court decision in Union of India v. Mahindra and Mahindra on the ground that the latter decision in Essar Gujarat is the one which is more appropriate.
5. Decision of this Tribunal in Himson Textile Engg. was questioned before the Supreme Court in Himson Textiles Engg. Industries Ltd. v. Commissioner of Customs, Mumbai . Supreme Court reversed the decision of this Tribunal and remanded the matter for fresh decision in the light of the principle stated by Their Lordships in Mahindra & Mahindra and Maruti Udyog Ltd. .
6. In the instant case, payment of 1.5 million DKK had nothing to do with the value of the wind electric generators. They could be assembled or worked without the know-how for which the lump sum payment was effected. The know-how obtained was in relation to post import activities. In other words, the lump sum payment of 1.5 million DKK had no connection whatsoever on the import of the capital goods imported. Therefore, the facts on hand cannot justify loading of price shown in the invoices by adding the above mentioned lump sum payment of 1.5 million DKK to the assessable value. Contrary view taken by the authorities below are unsustainable.
7. Adjudicating authority in paragraph 1CI of the Order-in-Original came to the specific finding that payment of royalty is in no way related to the imported goods and, therefore, not includible in the invoice value. That finding in favour of the appellant herein was not questioned by the department before the Commissioner (Appeals). In the appeal filed by the present appellant challenging the inclusion of 1.5 million DKK to the assessable value of the imported goods, appellate authority, for reasons best known to her, interfered with the said finding and directed the adjudicating officer to include royalty at the appropriate time for computation of the loading factor making all future assessments provisional. In appeal filed by the assessee, the Commissioner was not at all justified in reversing that part of the order of the primary authority which was in favour of the appellant before him. On this short ground, we set aside the order passed by the Appellant Commissioner regarding royalty payable by the appellant to the foreign collaborator.
8. In view of what has been stated above, the orders passed by the adjudicating authority and the appellate authority are set aside with consequential relief, if any.