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8. It is the contention of the appellant that the job had been awarded to M/s. Merichem Company Houston, Texas. U.S.A. under two separate agreements; viz. (a) One Agreement for "Know-How, Process Package and Other Services" against a consolidated Lump-Sum payment of - US $ 262,552.00 comprised of (i) $ 148,000.00 under the head of "Basic Design and Engineering Package" (Referred to as BDEP) both for the FCC, LPG and FCC Gasoline and (ii) $ 114,55.00 {which includes $ 57,452.00 for production of FCC, LPG and $ 57,100.00 for production of FCC Gasoline.} under the head of "Know-How/Engineering of Unit" and (b) The other Agreement was for "Supply of equipments and Other Services". The payment released against this agreement were - Lump-Sum $ 580,100.00 for "Equipments" and $ 311,778.00 for the "Services" to be rendered by them against this agreement, so that the total came to US $ 891,878.00 and for this total amount, the Invoice was drawn and accounted for in the making of the Bill of Entry placed for assessment but assessed provisionally with 1% extra duty as cash security for the provisional duty bond and now, ordered for final assessment with addition of extra amount to the declared value.

9. We note that the appellant IOCL entered into an agreement dated 15.09.1999 with M/s. Merichem Company, USA for supply of the equipments for the FCC, LPG and FCC gasoline Treater Unit at the refinery of IOCL, 20 of 36 located at Haldia and Barauni, wherein the total value of imported good supplied under the contract was US $ 891878. For the purpose the appellant entered into a separate technical knowhow agreement dated 15.09.1999 for transfer of commercial rights and license in favour of IOCL, for utilising licensed processes and to render engineering services, technical assistance, supervision etc. with a total financial implication of US $ 262552. The department finalized the assessment of the bills of entry by adding the value of basic design and engineering package and license fee for technology. Technology transfer in proportion to the value of imported and indigenous goods in the total supply contract being in the ratio of 40 to 60, thereby adding US dollar 105021 to the total contractual supply value of US $ 891878. The appellant therefore submitted that the department imputes the supply of equipment as dependent upon "Knowhow, Process Package and Other Services", as if this agreement imposed a condition for the supply of agreement. They emphasized that in actuality the three agreements were separate and did not have any inter-dependency. The confidentially agreement entered into between the parties was exclusively for the security of patented technology of the licensor. Payment of design and drawings neither had any contribution in the manufacture of imported equipments nor this agreement imposed any compulsion for the purchase of equipment from the supplier of Knowhow, Process Package and Other Services. They further submitted that well before the import of materials was completed they were required to be put to use as commissioning of production was possible only after more than a year of import when the setting up of the unit could be completed and production commissioned. Therefore, the charges apportioned towards the Knowhow, Process Package factually bear the character of post importation charges.

10. It has been pointed out that in case of international transaction of purchase of patented technology, it is a standard international practice that the vendor always ensures proper safeguard for patented right on use of such technology and binds the purchaser by an agreement for maintaining confidentiality as well as for use of the technology for the purpose. As for Basic Design aspects it was submitted that they relate to the respective parts of the unit and do not speak of anything relating to the structural design of any of the required equipment. The Basic Engineering data provided is actually with regard to the equipments and instruments. Regarding process description, they were said to be relating to the unit for achieving the underlying objective and had nothing specifically therein relating to the proprietary of the required equipments. As per standard industrial practice, any expert Process Technologist, for the purpose of manufacture of final product, has to provide engineering drawing of the plant, including the layout with reference to the functions intended to be rendered at an optimal for achieving the final process performance of the plant. Thus, in the instant Know-how Technology Agreement such mechanical aids had been stated and accordingly, the equipments were purchased by the appellant. The language and situation as contained in clear words in the Rule 9(1)(c) and 9(1)(e), were not met with in the instant case, so as to order the addition of the licnece fees in respect of Know-how with 24 of 36 the assessable value of the equipments. The appellant categorically stated that it was not obligatory for them to purchase the equipments only from the said vendor as was clearly apparent from the preamble of the Agreement for Supply of Equipments. Further, in the Know-how Agreement, there is no condition that the equipment imported by the appellant are only to be used or to be imported from M/s. Merichem Company, USA, rather they only have suggested some equipments required for the designed unit.