PANALFA DONGWON INDIA LTD. Vs. CC

JUDGEMENT

(1.) The appeal is at the instance of the importer M/s. Panalfa Dongwon India Ltd. The challenge is against the order passed by the Commissioner (Appeals) dated 29.8.2002. The issue arising for consideration is whether lump sum royalty of US 6,50,000 payable as consideration for (i) training of personnel, (ii) furnishing of technical information and (iii) utilisationn of intellectual property rights and royalty of 2.5% on the net selling price of each licensed product manufactured and sold are required to be added to the invoice value of the capital goods, raw materials etc. imported by the appellant under Rule 9(1)(c) of the Customs Valuation Rules, 1988.

(2.) The appellant company was formed on a joint venture agreement dated 3.2.1996 between M/s. Panalfa Investment Pvt. Ltd. New Delhi, M/s. DCM Daewoo Motors Ltd. New Delhi and M/s. Dongwon Metals Industries Co. Ltd. Korea. Pursuant to the joint venture agreement the appellant was set up to manufacture, assemble and sell complete exhaust systems, including catalytic converter. The parties have entered into an agreement of Cooperation and Technical Licence. Under the terms of the agreement the appellant was licensed to design, manufacture, quality control and sell exhaust systems of Cielo model car and components and parts thereof. M/s. Dongwon, party to the agreement, had granted the right and licence to design, manufacture, use and sell the licensed product. Technical assistance was in the form of technical knowledge, know -how etc. used by Dongwon pertaining to the manufacture, use and sale of the licensed product. The agreement provides for payment of lump sum royalty of 6,50,000 US as consideration by the appellant for (i) training of personnel, (ii) furnishing of technical information and (iii) utilisation of the intellectual property rights. Running royalty @ 2.5% on the net selling price of each licensed product sold was also payable.

(3.) Appellant had imported one capital item of equipment, i.e. break strength test machine valued at US 931.21 from the collaborator. All other imported capital goods have been procured from other unrelated parties. Raw materials such as aluminised steel sheets, aluminised steel pipes, bellows etc. were imported from Daewoo Corporation, Dongbu Steel Co. Ltd. and Dongwon Metal Industries Co. Ltd. Under an ex parte order dated 25.8.2000 the Deputy Commissioner of Customs accepted the invoice value of the imported capital goods and raw materials after enhancing it by 20 %. On appeal this order was set aside by the Commissioner (Appeals) and the matter was remanded back to the Deputy Commissioner of Customs for re -adjudication on the ground of violation of principles of natural justice.