Commissioner Of Customs vs M/S Ferodo India Pvt. Ltd on 21 February, 2008
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).